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CONVERTIBLE DEBENTURE AND WARRANT PURCHASE AGREEMENT
By and Among
Global Strategic Holdings, Ltd.
Successway Holdings Limited
Xxxxxxx, Inc.
Turbo International Ltd.
and
Empyrean Diagnostics, Ltd.
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Dated as of July 9, 1998
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TABLE OF CONTENTS
Page
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ARTICLE I CERTAIN DEFINITIONS...........................................1
ARTICLE II PURCHASE OF UNITS.............................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES................................4
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES...............................8
ARTICLE V CONDITIONS PRECEDENT TO CLOSING..............................13
ARTICLE VI TERMINATION..................................................15
ARTICLE VII MISCELLANEOUS................................................16
Appendix A Purchasers and Allocations
Exhibit A Form of Convertible Debenture
Exhibit B Form of Warrant
Exhibit C Form of Opinion of Xxxxxx Law, counsel for the Company
Exhibit D Conversion Procedures
Exhibit E Escrow Agreement
Schedule 3.1(a) Subsidiaries
Schedule 3.1(c) Capitalization
Schedule 3.1(g) Litigation
This CONVERTIBLE DEBENTURE AND WARRANT PURCHASE AGREEMENT is made as of
July 9, 1998 (this "AGREEMENT") by and between Empyrean Diagnostics, Ltd. a
Wyoming corporation (the "COMPANY"), and Global Strategic Holdings, Ltd., a
Guernsey corporation, Successway Holdings Limited, a British Virgin Islands
corporation, and Xxxxxxx, Inc., an Israeli corporation, and Turbo International,
Ltd., a Bahamas Corporation, (referred to individually and collectively herein
as the "PURCHASER").
WHEREAS, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to acquire certain of the Company's 0% Convertible Debentures,
due July 9, 2001 (the "CONVERTIBLE DEBENTURES" or the "DEBENTURES" and Warrants
to purchase shares of the Company's common stock (the "WARRANTS").
IN CONSIDERATION of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1. CERTAIN DEFINITIONS. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"AFFILIATE" means, with respect to any Person, any Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person. For the purposes of this definition, "CONTROL" (including, with
correlative meanings, the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York are authorized or required by law or other government actions to close.
"CLOSING" shall have the meaning set forth in SECTION 2.1(b).
"CLOSING DATE" shall have the meaning set forth in SECTION 2.1(b).
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder as in effect on the date hereof.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's common stock, without par value.
"DEBENTURES" means the 0% Convertible Debentures of the Company, due June
30, 2001, an example of which is attached hereto as Exhibit A.
"DISCLOSURE DOCUMENTS" means the disclosure package, including but not
limited to the Company's Business Plan dated July 9, 1998, the Company's
"Company Profile" dated June 1, 1998, capitalization information, pending or
threatened litigation or action, and required consents, delivered to the
Purchaser in connection with the offering by the Company of the Debentures and
the Schedules to this Agreement furnished by or on behalf of the Company
pursuant to Section 3.1.
"ESCROW AGREEMENT" means the Escrow Agreement dated July 9, 1998 and
attached as Exhibit E.
"ESCROW AGENT" means Xxxxxx Gottbetter & Xxxxxxxx LLP.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in or on such asset or the
revenues or income thereon or therefrom.
"MATERIAL ADVERSE EFFECT" shall have the meaning set forth in SECTION
3.1(a).
"NASD" means the National Association of Securities Dealers, Inc.
"PER SHARE CONSIDERATION" shall have the meaning set forth in SECTION
2.1(a).
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"PREFERRED STOCK" shall have the meaning set forth in the recitals hereto.
"PURCHASE PRICE" shall have the meaning set forth in SECTION 2.1(a).
"PURCHASER" shall mean one, some or all of the persons or entities who are
acquiring securities of the Company pursuant to this Agreement, as the context
requires.
"REQUIRED APPROVALS" shall have the meaning set forth in SECTION 3.1(f).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SUBSIDIARIES" shall have the meaning set forth in SECTION 3.1(a).
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"UNDERLYING SHARES" means the shares of Common Stock into which the
Debentures are convertible in accordance with the terms hereof and the
Debenture, as well the shares of Common Stock issuable upon exercise of the
Warrants in accordance with the terms hereof and the Warrant.
"UNITS" means one Debenture and 1164.41 Warrants to purchase shares of
Common Stock.
ARTICLE II
PURCHASE OF UNITS
SECTION 2.1. PURCHASE OF UNITS; CLOSING.
(a) Subject to the terms and conditions herein set forth, the Company
shall issue and sell to the Purchaser, and the Purchaser shall purchase
from the Company on the Closing Date 600 Units, each unit consisting of one
Debenture, which shall have the respective rights, preferences and
privileges set forth in EXHIBIT A (the "DEBENTURE", and 1164.41 Warrants,
in the form as set forth in Exhibit B, to purchase Common Stock of the
Company, at a price per Unit of US$1,000.00 (the "PER UNIT CONSIDERATION").
The Per Unit Consideration multiplied by the number of Units to be
purchased by the Purchaser hereunder is hereinafter referred to as the
"PURCHASE PRICE." The Company shall allocate and issue the Debentures and
Warrants among the individuals comprising Purchaser in accordance with
Appendix 1.
(b) The closing of the purchase and sale of the Units (the "CLOSING")
shall take place al the offices of Xxxxxx, Gottbetter & Xxxxxxxx, LLP,
immediately following the execution hereof, or at such other time and/or
place as the Purchaser and the Company may agree, PROVIDED, however, in no
case shall the Closing take place later than the fifth day after the last
of the conditions listed in ARTICLE V is satisfied or waived by the
appropriate party. The date of the Closing is hereinafter referred to as
the "CLOSING DATE".
(c) At the Closing, (i) the Company shall deliver to the Purchaser (A)
one or more Debentures purchased hereunder, registered in the name of the
Purchaser, (B) all documents, instruments and writings required to have
been delivered at or prior to Closing by the Company pursuant to this
Agreement, and (C) the Warrant Document evidencing the Warrants, and (ii)
the Purchaser shall deliver to the Company (A) the Purchase Price as
determined pursuant to this ARTICLE I in United States dollars in
immediately available funds by wire transfer to an account designated in
writing by the Company prior to the Closing and (B) all documents,
instruments and writings required to have been delivered at or prior to
Closing by the Purchaser pursuant to this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Purchaser as follows:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. The Company has no subsidiaries other than
as set forth in Schedule 3.1 (a) (collectively, the "SUBSIDIARIES"). Each
of the Subsidiaries is a corporation, duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, with the full corporate power and authority to own and use
its properties and assets and to carry on its business as currently
conducted. Each of the Company and the Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to
be so qualified or in good standing, as the case may be, could not
reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the results of operations, assets, prospects, or
financial condition of the Company and the Subsidiaries, taken as a whole
(a "MATERIAL ADVERSE EFFECT") .
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated hereby and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of this Agreement by
the Company and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on the
part of the Company. Each of this Agreement has been duly executed and
delivered by the Company and constitutes the 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 or similar
laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application.
(c) CAPITALIZATION. The authorized, issued and outstanding capital
stock of the Company and each of the Subsidiaries is set forth in Schedule
3.1(c). No shares of Common Stock are entitled to preemptive or similar
rights. Except as specifically disclosed in the Disclosure Documents, there
are no outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or, except as a
result of the purchase and sale of the Units hereunder, securities, rights
or obligations convertible into or exchangeable for, or giving any person
any right to subscribe for or acquire any shares of Common Stock, or
contracts, commitments, understandings, or arrangements by which the
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Company or any Subsidiary is or may become bound to issue additional shares
of Common Stock, or securities or rights convertible or exchangeable into
shares of Common Stock. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate of
incorporation, bylaws or other charter documents.
(d) ISSUANCE OF UNITS. The Units have been duly and validly authorized
for issuance, offer and sale pursuant to this Agreement and, when issued
and delivered as provided hereunder against payment in accordance with the
terms hereof, shall be valid and binding obligations of the Company
enforceable in accordance with their terms. The Company has and at all
times while the Units are outstanding will maintain an adequate reserve of
shares of Common Stock to enable it to perform its obligations under this
Agreement and the Debentures and the Warrants. When issued in accordance
with the terms hereof and the Debentures and the Warrants, the Underlying
Shares will be duly authorized, validly issued, fully paid and
nonassessable.
(e) NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i)
conflict with or violate any provision of its certificate of incorporation
or bylaws or (ii) subject to obtaining the consents referred to in SECTION
3.1(f), 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 agreement, indenture or instrument to which the Company is a party,
or (iii) to the knowledge of the Company result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company is subject
(including Federal and state securities laws and regulations), or by which
any property or asset of the Company is bound or affected, except in the
case of each of clauses (ii) and (iii), such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as
would not, individually or in the aggregate, have a Material Adverse
Effect. The business of the Company is not being conducted in violation of
any law, ordinance or regulation of any governmental authority, except for
violations which, individually or in the aggregate, do not have a Material
Adverse Effect.
(f) CONSENTS AND APPROVALS. Neither the Company nor any Subsidiary is
required to obtain any consent, waiver, authorization or order of, or make
any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of this Agreement, other
than the making of the applicable blue-sky filings under state securities
laws, and other than, in all cases, where the failure to obtain such
consent, waiver, authorization or order, or to give or make such notice or
filing, would not materially impair or delay the ability of the Company to
effect the Closing and deliver to the Purchaser the Units free and clear of
all liens (collectively, the "REQUIRED APPROVALS").
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(g) LITIGATION; PROCEEDINGS. Except as specifically disclosed in the
Disclosure Documents and Schedule 3.1(g), there is no action, suit, notice
of violation, proceeding or investigation pending or, to the best knowledge
of the Company, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal,
State, county, local or foreign) which (i) relates to or challenges the
legality, validity or enforceability of this Agreement or the Units (ii)
could, individually or in the aggregate, have a Material Adverse Effect or
(iii) could, individually or in the aggregate, materially impair the
ability of the Company to perform fully on a timely basis its obligations
under this Agreement.
(h) NO DEFAULT OR VIOLATION. Neither the Company nor any Subsidiary
(i) is in default under or in violation of any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound, except such conflicts or
defaults as do not have a Material Adverse Effect, (ii) is in violation of
any order of any court, arbitrator or governmental body, except for such
violations as do not have a Material Adverse Effect, or (iii) is in
violation of any statute, rule or regulation of any governmental authority
which could (individually or in the aggregate) (x) adversely affect the
legality, validity or enforceability of this Agreement, (y) have a Material
Adverse Effect or (z) adversely impair the Company's ability or obligation
to perform fully on a timely basis its obligations under this Agreement.
(i) CERTAIN FEES. No fees or commission will be payable by the Company
to any broker, finder, investment banker or bank with respect to the
consummation of the transactions contemplated hereby; except that upon
Closing, the Company will pay to GEM Advisors, Inc. an unallocated expense
allotment of US $10,000 and a fee equal to 2% of the Purchase Price.
(j) DISCLOSURE DOCUMENTS. The Disclosure Documents do not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(k) PRIVATE OFFERING. Neither the Company nor any Person acting on its
behalf has taken or will take any action (including, without limitation,
any offering of any securities of the Company under circumstances which
would require the integration of such offering with the offering of the
Units under the Securities Act) which might subject the offering, issuance
or sale of the Units to the registration requirements of Section 5 of the
Securities Act.
(l) NOT A REPORTING COMPANY; ELIGIBILITY TO USE EXEMPTION UNDER 504b.
The Company is not subject to the reporting requirements of Section 18 or
Section 15d of the Exchange Act. The Company has not sold more than
$250,000 of securities in the last twelve months. The Company is eligible
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to issue securities exempt from registration pursuant to Rule 504 of
Regulation D promulgated under the Securities Act. It is the intent of the
parties that the sale of the Debentures and Warrants and the conversion of
the Debentures to Common Stock shall be made in reliance upon the exemption
from registration provided by Rule 504, but that the issuance of the Common
Stock upon exercise of the Warrants shall not be in reliance upon Rule 504,
and such stock shall be restricted stock unless it is sold pursuant to a
registration statement under the Securities Act.
Section 3.2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Each
Purchaser hereby represents and warrants to the Company as follows:
(a) ORGANIZATION; AUTHORITY. The Purchaser is a corporation duly and
validly existing and in good standing under the laws of the jurisdiction of
its incorporation. The Purchaser has the requisite power and authority to
enter into and to consummate the transactions contemplated hereby and
otherwise to carry out its obligations hereunder and thereunder. The
purchase of the Units by the Purchaser hereunder has been duly authorized
by all necessary action on the part of the Purchaser. Each of this
Agreement has been duly executed and delivered by the Purchaser or on its
behalf and constitutes the valid and legally binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights generally and to general principles of equity.
(b) INVESTMENT INTENT. The Purchaser is acquiring the Units and the
Underlying Shares for its own account (and/or on behalf of managed accounts
who are purchasing solely for their own accounts for investment) for
investment purposes only and not with a view to or for distributing or
reselling such Units or Underlying Shares or any part thereof or interest
therein, without prejudice, however, to the Purchaser's right, subject to
the provisions of this Agreement, at all times to sell or otherwise dispose
of all or any part of such Units or Underlying Shares in compliance with
applicable State securities laws and under an exemption from registration
under Rule 504 of the Securities Act.
(c) PURCHASER STATUS. At the time the Purchaser (and any account for
which it is purchasing) was offered the Units, it (and any account for
which it is purchasing) was, and at the date hereof, it (and any account
for which it is purchasing) is, and at the Closing Date, it (and any
account for which it is purchasing) will be, an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(d) EXPERIENCE OF PURCHASER. The Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the
merits and risks of the prospective investment in the Units, and has so
evaluated the merits and risks of such investment.
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(e) ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. The Purchaser is
able to bear the economic risk of an investment in the Units and, at the
present time, is able to afford a complete loss of such investment.
(f) PROHIBITED TRANSACTIONS. The Units to be purchased by the
Purchaser are not being acquired, directly or indirectly, with the assets
of any "employee benefit plan", within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended.
(g) ACCESS TO INFORMATION. The Purchaser acknowledges receipt of the
Disclosure Documents and further acknowledges that it has been afforded (i)
the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms
and conditions of the offering of the Units and the merits and risks of
investing in the Units; (ii) access to information about the Company and
the Company's financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate
its investment in the Common Stock; and (iii) the opportunity to obtain
such additional information which the Company possesses or can acquire
without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the Units and to verify the
accuracy and completeness of the information contained in the Disclosure
Documents. Purchaser hereby acknowledges that it has received from the
Company all of the information it has requested and answers to all
questions which it has asked of the Company, and that it is satisfied that
it has received all information about the Company which is necessary to
making its decision whether to invest in the Company.
(h) RELIANCE. The Purchaser understands and acknowledges that (i) the
Units are being offered and sold, and the Underlying Shares are being
offered, to it without registration under the Securities Act in a private
placement chat is exempt from the registration provisions of the Securities
Act and (ii) the availability of such exemption, depends in part on, and
that the Company will rely upon the accuracy and truthfulness of, the
foregoing representations and the Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that the Purchaser makes no
representation or warranty with respect to the transactions contemplated hereby
other than those specifically set forth in Article III herein.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
SECTION 4.1. MANNER OF OFFERING. To the extent, if any, that United States
securities laws apply to the sale of the Units or the conversion of the
Debentures to Common Stock, such transactions shall be done in reliance upon the
8
exemption from registration provided by Rule 504(b) of Regulation D of the
Securities Act. The Units, the Debentures, the Warrants and the Common Stock
into which the Debentures are convertible will be exempt from restrictions on
transfer, and will carry no restrictive legend. Accordingly, the Company will
use its best efforts to insure that no actions are taken that would jeopardize
the availability of the exemption with respect to these transactions. It is the
intent of the parties chat the sale of the Common Stock upon exercise of the
Warrants shall not be in reliance upon Rule 504, and such stock shall be
restricted stock unless it is sold pursuant to a registration statement under
the Securities Act.
SECTION 4.2. FURNISHING OF INFORMATION. As long as the Purchaser owns Units
or Underlying Shares, the Company will promptly furnish to it all annual and
quarterly reports comparable to those required by Section 13(a) or 15(d) of the
Exchange Act.
SECTION 4.3. NOTICE OF CERTAIN EVENTS. The Company shall (i) advise the
Purchaser promptly after obtaining knowledge thereof, and, if requested by the
Purchaser, confirm such advice in writing, of (A) the issuance by any state
securities commission of any stop order suspending the qualification or
exemption from qualification of the Units or the Common Stock for offering or
sale in any jurisdiction, or the initiation of any proceeding for such purpose
by any state securities commission or other regulatory authority, or (B) any
event that makes any statement of a material fact made in the Disclosure
Documents untrue or that requires the making of any additions to or changes in
the Disclosure Documents in order to make the statements therein, in the light
of the circumstances under which they are made, not misleading, (ii) use its
best efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption from qualification of the Units or the Common Stock
under any stair securities or Blue Sky laws, and (iii) if at any time any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the Units or the
Common Stock under any such laws, use its best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time.
SECTION 4.4. COPIES AND USE OF DISCLOSURE DOCUMENTS. During the thirty day
period immediately following the Closing, the Company shall furnish the
Purchaser, without charge, as many copies of the Disclosure Documents, and any
amendments or supplements thereto, as the Purchaser may reasonably request. The
Company consents to the use of the Disclosure Documents, and any amendments and
supplements thereto, by the Purchaser in connection with resales of the Units or
the Underlying Shares other than pursuant to an effective registration
statement.
SECTION 4.5. MODIFICATION TO DISCLOSURE DOCUMENTS; ADDITIONAL INFORMATION.
If any event shall occur as a result of which, in the reasonable judgment of the
Company or the Purchaser, it becomes necessary or advisable to amend or
supplement the Disclosure Documents in order to make the statements therein, in
the light of the circumstances at the time the Disclosure Documents were
delivered to the Purchaser, not misleading, or if it is necessary to amend or
supplement the Disclosure Documents to comply with applicable law, the Company
shall promptly prepare an appropriate amendment or supplement to the Disclosure
Documents (in form and substance reasonably satisfactory to the Purchaser) so
that (i) as so amended or supplemented the Disclosure Documents will not include
9
an untrue statement of material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to Purchaser, not misleading and (ii) the
Disclosure Documents, together with additional information provided by the
Company, will comply with applicable law pertaining to requirements of
disclosure in connection with the sale of securities. Company and Purchaser
agree to cooperate to ensure that all necessary information is provided to
subsequent purchasers.
SECTION 4.6. BLUE SKY LAWS. The Company shall cooperate with the Purchaser
in connection with the qualification of the Units and the Underlying Shares
under the securities or Blue Sky laws of such jurisdictions as the Purchaser may
request and to continue such qualification at all times through the third
anniversary of the Closing Date; PROVIDED, HOWEVER, that neither the Company nor
its Subsidiaries shall be required in connection therewith to qualify as a
foreign corporation where they are not now so qualified.
SECTION 4.7. INTEGRATION. The Company shall not, and shall use its best
efforts to ensure that its Affiliates shall not, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Units and/or the Common Stock underlying the Debentures in a manner that
would require the registration under the Securities Act of the sale of the Units
to the Purchaser.
SECTION 4.8. FURNISHING OF RULE 144A MATERIALS. The Company shall, for so
long as any of the Units or Underlying Shares remain outstanding and during any
period in which it is not subject to Section 13 or 15(d) of the Exchange Act,
make available to any registered holder of Units or Underlying Shares in
connection with any sale thereof and any prospective purchaser of such Units or
Underlying Shares from such Person, the following information in accordance with
Rule 144A(d)(4) under the Securities Act a brief statement of the nature of the
business of the Company and the products and services it offers and the
Company's most recent audited balance sheet and profit and loss and retained
earnings statements, and similar audited financial statements for such part of
the two preceding fiscal years as the Company has been in operation.
SECTION 4.9. SOLICITATION. The Company shall not solicit any offer to buy
or sell the Units or Underlying Shares by means of any form of general
solicitation or advertising.
SECTION 4.10. SUBSEQUENT FINANCIAL STATEMENTS. The Company shall furnish to
the Purchaser, promptly after they are filed with the Commission, a copy of all
financial statements for any period subsequent to the period covered by the
financial statements included in the Disclosure Documents.
SECTION 4.11. PROHIBITION ON CERTAIN ACTIONS.
(a) The Company shall not directly or indirectly, without the prior
consent of the Purchaser, offer, sell, grant any option to purchase, or
otherwise dispose (or announce any offer, sale, grant or any option to
purchase or other disposition) of any of its or its Affiliates equity or
equity-equivalent securities (a "Subsequent Sale") for a period of 180 days
10
after Closing Date, except (i) the granting of options to employees,
officers and directors under, and the issuance of shares upon exercise of
options granted under, any stock option plan heretofore adopted by the
Company; (ii) shares issued upon exercise of any currently outstanding
warrants and upon conversion of any currently outstanding convertible
preferred stock disclosed in SCHEDULE 3.1, (iii) shares of Common Stock
issued upon conversion of Debentures or exercise of Warrants in accordance
herewith, (iv) issuances of securities in a firm commitment underwritten
public offering, and (v) issuances of securities as consideration for a
merger, consolidation or sale of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of which is not
to raise equity capital) or in connection with the disposition or
acquisition of a business, product, or license by the Company.
(b) From the date hereof through the Closing Date, the Company shall
not and shall cause the Subsidiaries not to, without the consent of the
Purchaser, (i) amend its Certificate of Incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Purchaser;
(ii) split, combine or reclassify its outstanding capital stock; (iii)
declare, authorize, set aside or pay any dividend or other distribution
with respect to the Common Stock; (iv) redeem, repurchase or offer to
repurchase or otherwise acquire shares of its Common Stock; or (v) enter
into any agreement with respect to any of the foregoing.
SECTION 4.12. LISTING OF UNDERLYING SHARES. The Company shall use its best
efforts to cause the Common Stock issuable upon conversion of the Debentures to
be approved for listing on the NASD Electronic Bulletin Board (or other national
securities exchange or market on which the Common Stock is listed) no later than
the first day after which Debentures may be converted hereunder by the
Purchaser, and shall provide to the Purchaser evidence of such listing.
SECTION 4.13. CONVERSION PROCEDURES. EXHIBIT D attached hereto sets forth
the procedures with respect to the conversion of the Debentures. In the event
that the Company and the Escrow Agent receive a properly executed Conversion
Notice (the "Conversion Notice") along with other documentation required by the
Conversion Notice, if any, and fail to deliver or cause to be delivered to the
holder of the Debentures ("Holder") identified in the Conversion Notice a
certificate(s) representing the shares of Common Stock into which the Shares
identified on the Conversion Notice have been converted (the "Converted Shares")
within five days of the later of (i) the receipt by the Company of the
Conversion Notice or (ii) the receipt by the Escrow Agent of the Conversion
Notice (a "Conversion Default"), the Company shall be obligated to pay to the
Holder in cash or certified check 1% of the value of the Converted Shares based
on the Per Share Market Value of the Common Stock on the "'Date to Effect
Conversion" as set forth in the Conversion Notice (the "Conversion Penalty") for
each Business Day such Conversion Default continues. The Company shall pay the
Conversion Penalty to the Holder on the third Business Day of each month
following the month in which such Conversion Penalty may have accrued, by check
delivered to the address for notice of such Holder set forth herein or as may
have been property changed pursuant to the terms herein.
11
SECTION 4.14. REGISTRATION OF UNDERLYING SHARES. So long as any Debentures
remain outstanding, the Company agrees not to file a Form 10 registration
statement with the Securities Exchange Commission (the "SEC"), without first
having registered the issuance of the Debenture Underlying Shares under the
Securities Act, and qualified such issuances in such states of the United States
as the holders of the Debentures shall reasonably request. If the Company shall
propose to file with the SEC any registration statement other than a Form 10
which would cause, or have the effect of causing, the Company to become subject
to the reporting requirements of Section 13 or 15 (d) of the Exchange Act (a
"Reporting Issuer") or to take any other action the effect of which would be to
cause the Underlying Shares to be issued upon conversion of any then outstanding
Debentures to be restricted securities (as such term is defined in Rule 144
promulgated under the Securities Act), the Company agrees to give written
notification of such to the Holders of the Debentures then outstanding at least
two weeks prior to such filing or taking of the proposed action. If any
Debentures are outstanding at the end of such notice period, the Company agrees
to file a registration statement on Form S-1 or SB-2, or such other form of
registration statement in which the Debenture Underlying Shares may be included,
and to include in such registration statement the Underlying Shares issuable
upon conversion of any then outstanding Debentures so as to permit the public
resale thereof. All costs and expenses of registration shall be borne by the
Company.
Notwithstanding the foregoing, if the Company for any reason shall become a
Reporting Issuer, or shall have taken any action the effect of which would be to
cause the Underlying Shares to be issued upon conversion of any then outstanding
Debentures to be restricted securities (as such term is defined in Rule 144
promulgated under the Securities Act), the Company agrees to immediately file
with the SEC and cause to become effective a registration statement which would
permit the public resale of such Underlying Shares in such states of the United
States as the Holders thereof shall reasonably request. All costs and expenses
of such registration shall be borne by the Company.
If (but without any obligation to do so under this Agreement) the Company
proposes to register (including for this purpose a registration effected by the
Company for shareholders other than the Holders) any of its stock or other
securities under the Securities Act in connection with the public offering of
such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the issuance of the Underlying Shares, or a registration of an offering
of securities, the underwriter of which objects to registration of additional
securities), the Company shall, at such time, promptly give each Holder of
Debentures or Warrants written notice of such registration. Upon the written
request of each Holder of Debentures or Warrants given within twenty days after
mailing of such notice by the Company, the Company shall cause to be registered
under such registration statement such issuances of Common Stock upon conversion
of Debentures or exercise of Warrants as each such Holder has requested to be
registered.
SECTION 4.15. ESCROW. The Company agrees to enter into the escrow agreement
attached hereto as Exhibit E (the "Escrow Agreement"), and to issue into said
Escrow certificates to be held by the Escrow Agent (as defined in the Escrow
12
Agreement), registered in the name of the Purchaser and without any restrictive
legend of any kind, representing a number of shares equal to that number of
shares which would be issued if the full amount of the Debenture were converted
at the current prevailing Conversion Price (the "Issuable Number") times 200%
("Debenture Escrow Shares") plus the number of shares equal to the number of
issued warrants ("Warrant Escrow Shares"); rounded up to the nearest even 10,000
shares ("Escrow Shares"). Such certificates shall be in denominations of 10,000
shares. If at any time while any of the Debenture remain outstanding the then
current Conversion Price is such that the number of shares in escrow (the
"Escrow Shares") is less than 150% of the then Issuable Number plus the Warrant
Escrow Shares, additional certificates (registered in the name of the Purchaser
and without any restrictive legend of any kind, in 10,000 share denominations
and rounded to the nearest even 10,000 share amount) shall be issued by the
Company into the escrow so that the total number of Escrow Shares is at least
200% of the Issuable Number plus the Warrant Escrow Shares.
SECTION 4.16. SHORT SELLING. Purchaser and its Affiliates agree not to
engage in any short sales, swaps, purchase of puts, or other hedging activities
involving the Common Stock or other securities of the Corporation. However,
Purchaser may engage in short sales within three days preceding conversion where
the shares issuable upon conversion are used to cover the short sale.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
SECTION 5.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER. The
obligation of the Purchaser to purchase the Units is subject to the satisfaction
or waiver by the Purchaser, at or prior to the Closing, of each of the following
conditions:
(a) LEGAL OPINION. The Purchaser shall have received the legal
opinion, addressed to it and dated the Closing Date, of Xxxxxx Law, counsel
for the Company, substantially in the form of EXHIBIT C.
(b) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained herein 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 that
representations and warranties that are made as of a specific date need be
true in all material respects only as of such date);
(c) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and compiled 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;
13
(d) NO MATERIAL ADVERSE EFFECT. Since the date of the financial
statements included in the Disclosure Documents, no event which had a
Material Adverse Effect shall have occurred which is not disclosed in the
Disclosure Documents;
(e) NO PROHIBITIONS. The purchase of and payment for the Units (and
upon conversion therefore, the Underlying Shares) hereunder (i) shall not
be prohibited or enjoined (temporarily or permanently) by any applicable
law or governmental regulation and (ii) shall not subject the Purchaser to
any penalty, or in its reasonable judgment, other onerous condition under
or pursuant to any applicable law or governmental regulation that would
materially reduce the benefits to the Purchaser of the purchase of the
Units or the Underlying Shares (provided, however, that such regulation,
law or onerous condition was not in effect in such form at the date of this
Agreement);
(f) COMPANY CERTIFICATES. The Purchaser shall have received a
certificate, dated the Closing Date, signed by the Secretary or an
Assistant Secretary of the Company and certifying (i) that attached thereto
is a true, correct and complete copy of (A) the Company's Certificate of
Incorporation, as amended to the date thereof, (B) the Company's By-Laws,
as amended to the date thereof, and (C) resolutions duly adopted by the
Board of Directors of the Company authorizing the execution and delivery of
this Agreement and the issuance and sale of the Units and the Underlying
Shares and (ii) the incumbency of officers executing this Agreement;
(g) NO SUSPENSIONS OF TRADING IN COMMON STOCK. Trading in the Common
Stock shall not have been suspended by the Commission or the NASD or other
exchange or market on which the Common Stock is listed or quoted (except
for any suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company);
(h) REQUIRED APPROVALS. All Required Approvals shall have been
obtained; and
(i) DELIVERY OF AGREEMENTS. The Company shall have delivered to the
Escrow Agent signed copies of the Purchase Agreement, Escrow Agreement,
Escrow Shares, and Wiring Instructions.
SECTION 5.2. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to issue and sell the Units hereunder is subject to
the satisfaction or waiver by the Company, at or to the Closing, of each of the
following conditions:
(a) ACCURACY OF THE PURCHASER'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Purchaser 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 that representations and
warranties that are made as of a specific date need be true in all material
respects only as of such date);
14
(b) PERFORMANCE BY THE PURCHASER. The Purchaser shall have performed,
satisfied and compiled in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed,
satisfied or complied with by it at or prior to the Closing; and
(c) NO PROHIBITIONS. The sale of the Units (and upon conversion
thereof, the Underlying Shares) hereunder (i) shall not be prohibited or
enjoined (temporarily or permanently) by any applicable law or governmental
regulation and (ii) shall not subject the Company to any penalty, or in its
reasonable judgment, any other onerous condition under or pursuant to any
applicable law or governmental regulation that would materially reduce the
benefits to the Company of the sale of Units or the Underlying Shares to
the Purchaser (provided, however, that such regulation, law or onerous
condition was not in effect in such form at the date of this Agreement).
(d) DELIVERY OF CONSIDERATION. The Purchaser shall have delivered to
the Escrow Agent signed copies of the Purchase Agreement, Escrow Agreement
and the Purchase Price.
ARTICLE VI
TERMINATION
SECTION 6.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated at any time prior to Closing by the mutual consent of the Company and
the Purchaser.
SECTION 6.2. TERMINATION BY THE COMPANY OR THE PURCHASER. This Agreement
may be terminated prior to Closing by either the Company or the Purchaser, by
giving written notice of such termination to the other party, if:
(a) the Closing shall not have occurred by June 21, 1998; PROVIDED
THAt the terminating party is not then in material breach of its
obligations under this Agreement in any manner that shall have caused the
failure referred to in this paragraph (a);
(b) there shall be in effect any statute, rule, law or regulation that
prohibits the consummation of the Closing or if the consummation of the
Closing would violate any non-appealable final judgment, order, decree,
ruling or injunction of any court of or governmental authority having
competent jurisdiction; or
(c) there shall have been an amendment to Regulation D or an
interpretive release promulgated or issued thereunder, which, in the
reasonable judgment of the terminating party, would materially adversely
affect the transactions contemplated hereby.
15
SECTION 6.3. TERMINATION BY THE COMPANY. This Agreement may be terminated
prior to Closing by the Company, by giving notice of such termination to the
Purchaser, if the Purchaser has materially breached any representation,
warranty, covenant or agreement contained in this Agreement and such breach is
not cured within five business days following receipt by the Purchaser of notice
of such breach.
SECTION 6.4. TERMINATION BY THE PURCHASER. This Agreement may be terminated
prior to Closing by the Purchaser, by giving notice of such termination to the
Company, if:
(a) the Company has breached any representation, warranty, covenant or
agreement contained in this Agreement and such breach is not cured within
five business days following receipt by the Company of notice of such
breach;
(b) there has occurred an event, since the date of the financial
statements included in the Company's Disclosure Documents which could
reasonably be expected to have a Material Adverse Effect; or
(c) trading in the Common Stock has been suspended by the Commission
or the NASD or other exchange or market on which the Common Stock is listed
or quoted (except for any suspension of trading of limited duration solely
to permit dissemination of material information regarding the Company).
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. FEES AND EXPENSES. Each party shall pay the fees and expenses
of its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company shall pay all
stamp and other taxes and duties levied in connection with the issuance of the
Units (and upon conversion thereof, the Underlying Shares) pursuant hereto. The
Purchaser shall be responsible for its own tax liability that may arise as a
result of the investment hereunder or the transactions contemplated by this
Agreement. Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company shall pay (i) all
costs, expenses, fees and all taxes incident to and in connection with: (A) the
preparation, printing and distribution of the Disclosure Documents and all
amendments and supplements thereto (including, without limitation, financial
statements and exhibits), and all preliminary and final Blue Sky memoranda and
all other agreements, memoranda, correspondence and other documents prepared and
delivered in connection herewith (B) the issuance and delivery of the Debentures
and, upon conversion thereof, the Underlying Shares, (C) the qualification of
the Debentures and, upon conversion thereof, the Underlying Shares for offer and
sale under the securities or Blue Sky laws of the several states (including,
without limitation, the fees and disbursements of the Purchasers' counsel
16
relating to such registration or qualification), (D) furnishing such copies of
the Disclosure Documents and all amendments and supplements thereto, as may
reasonably be requested for use in connection, with resales of the Debentures
and, upon conversion thereof, the Underlying Shares, and (E) the preparation of
certificates for the Debentures and, upon conversion thereof, the Underlying
Shares (including, without limitation, printing and engraving thereof), (ii) all
fees and expenses of the counsel and accountants of the Company and (iii) all
expenses and listing fees in connection with the application for quotation of
the Underlying Shares in the NASD over-the-counter market.
SECTION 7.2. ENTIRE AGREEMENT; AMENDMENTS. This Agreement together with the
Exhibits, Annexes and Schedules hereto, contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
SECTION 7.3. NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) 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: With copies to:
Empyrean Diagnostics, Ltd. Xxxxxx Law
0000 Xxxx Xxxx Xxxxxx Xxxxx, Xxxxx 000 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000 Xxx Xxxxxxx, XX 00000
Attention: Xx. Xxxxxxx Xxxxxx Attention: Xxxxxx X. Xxxxxx
Tel: 000-000-0000 Tel: 000 000-0000
Fax: 000-000-0000 Fax: 000 000-0000
If to the Purchaser:
Per Schedule of Purchasers and Allocations,
Appendix A
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
SECTION 7.4. AMENDMENTS; WAIVERS. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchaser, or, in the case of a waiver,
17
by the party against whom enforcement of any such waiver is sought. No waiver 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 provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
SECTION 7.5. HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
SECTION 7.6. SUCCESSORS AND ASSIGNS. This Agreement shall he binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. Neither the Company nor the Purchaser may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other.
The assignment by a party of this Agreement or any rights hereunder shall not
affect the obligations of such party under this Agreement.
SECTION 7.7. NO THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
SECTION 7.8. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof.
SECTION 7.9. SURVIVAL. The representations and warranties of the Company
and the Purchaser contained in ARTICLE III and the agreements and covenants of
the parties contained in ARTICLE IV and this ARTICLE VII shall survive the
Closing (or any earlier termination of this Agreement) and any conversion of
Debentures hereunder.
SECTION 7.10. COUNTERPART SIGNATURES. This Agreement may be executed in two
or more counterparts, all of which when taken together shall be considered one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood that
both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
SECTION 7.11. PUBLICITY. The Company and the Purchaser shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and neither party shall
issue any such press release or otherwise make any such public statement without
the prior written consent of the other, which consent shall not be unreasonably
withheld or delayed.
18
SECTION 7.12. SEVERABILITY. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
SECTION 7.13. REMEDIES. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, the
Purchaser will be entitled to specific performance of the obligations of the
Company under this Agreement and the Company will be entitled to specific
performance of the obligations of the Purchaser hereunder with respect to the
subsequent transfer of Debentures or Warrants and the Underlying Shares. Each of
the Company and the Purchaser agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of any breach of its obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
IN WITNESS WHEREOF, time parties hereto have caused this Agreement to be
duly executed as of the date first indicated above.
[SIGNATURE PAGE FOLLOWS]
19
Empyrean Diagnostics, Ltd. Global Strategic Holdings, Ltd.
By: /s/ Xxxxxxx Xxxxxx By: /s/ Xxxxxxxx X. Xxxx
------------------------------- -------------------------------
Xxxxxxx Xxxxxx, President & CEO
Name: Xxxxxxxx X. Xxxx
-----------------------------
Title: Director
----------------------------
Successway Holdings Limited Xxxxxxx, Inc.
By: /s/ Xxxxxx Xx By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------- -------------------------------
Name: Xxxxxx Xx Name: Xxxxxxx Xxxxxxxxx
----------------------------- -----------------------------
Title: Title: Director
---------------------------- ----------------------------
Turbo International, Ltd.
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------
Name: Xxxxxx Xxxxxxxx
-----------------------------
Title: President
----------------------------
20
VOID AFTER 5:00 P.M., NEW YORK TIME ON JULY 9, 2001
WARRANT TO PURCHASE 662,910 SHARES OF COMMON STOCK
-----------------------------------
WARRANT TO PURCHASE COMMON STOCK
OF
EMPYREAN DIAGNOSTICS, LTD.
-----------------------------------
THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE PURSUANT TO THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS
REGISTERED UNDER THE ACT OR AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE.
FOR VALUE RECEIVED, Empyrean Diagnostics Ltd., a Wyoming corporation (the
"Company"), grants the following rights to Global Strategic Holdings, Ltd.
("Holder"):
ARTICLE 1.
DEFINITIONS.
As used herein, the following terms shall have the following meanings,
unless the context shall otherwise require:
(a) "Common Stock" shall mean the common stock, without par value, of
the Company.
(b) "Corporate Office" shall mean the office of the Company (or its
successor) at which at any particular time its principal business shall be
administered.
(c) "Exercise Date" shall mean any date upon which the Holder shall
give the Company a Notice of Exercise.
(d) "Exercise Price" shall mean the price to be paid to the Company
for each share of Common Stock to be purchased upon exercise of this Warrant in
accordance with the terms hereof which shall be:
$0.75425 per share from January 9, 1999 to July 9, 1999
$0.90510 per share from July 10, 1999 to July 9, 2000
$1.05595 per share from July 10, 2000 to July 9, 2001
(e) "Expiration Date" shall mean 5:00 p.m. (New York time) on July 9,
2001.
(f) "Purchase Agreement" shall mean that certain Convertible Debenture
and Warrant Purchase Agreement dated July 9, 1998, pursuant to which this
Warrant has been issued.
(g) "SEC" shall mean the United States Securities and Exchange
Commission.
(h) "Transfer Agent" shall mean the Company's transfer agent or its
authorized successor.
(i) "Underlying Shares" shall mean the shares of the Common Stock
issuable upon exercise of the Warrant.
ARTICLE 2.
EXERCISE AND AGREEMENTS.
2.1 EXERCISE OF WARRANT. This Warrant shall entitle Holder to purchase up
to 662,910 shares of Common Stock (the "Shares") at the Exercise Price. This
Warrant shall be exercisable at any time and from time to time on or after
January 9, 1999 and prior to the Expiration Date (the "Exercise Period"). This
Warrant and the right to purchase Shares hereunder shall expire and become void
at the Expiration Date.
2.2 MANNER OF EXERCISE.
(a) Holder may exercise this Warrant at any time and from time to time
during the Exercise Period, in whole or in part (but not in denominations of
fewer than 10,000 Shares, except upon an exercise of this Warrant with respect
to the remaining balance of Shares purchasable hereunder at the time of
exercise), by delivering to the Escrow Agent and the Company (as defined in an
escrow agreement dated of the same date between the Company and the Holder) (i)
a duly executed Notice of Exercise in substantially the form attached as
Appendix 1 hereto and (ii) a bank cashiers, certified check, or wire transfer
for the aggregate Exercise Price of the Shares being purchased.
(b) From time to time upon exercise of this Warrant, in whole or part,
in accordance with its terms, the Escrow Agent will deliver stock certificates
to the Holder representing the number of Shares being purchased pursuant to such
exercise, subject to adjustment as described herein.
2
(c) Promptly following any exercise of this Warrant, if the Warrant
has not been fully exercised and has not expired, the Company will deliver to
the Holder a new Warrant for the balance of the Shares covered hereby.
2.3 TERMINATION. All rights of the Holder in this Warrant, to the extent
they have not been exercised, shall terminate on the Expiration Date.
2.4 NO RIGHTS PRIOR TO EXERCISE. Prior to its exercise pursuant to Section
2.2 above, this Warrant shall not entitle the Holder to any voting or other
rights as Holder of Shares.
2.5 ADJUSTMENTS. In case of any reclassification, capital reorganization,
stock dividend or other change of outstanding shares of Common Stock, or in case
of any consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization, stock dividend or other change of outstanding shares or Common
Stock), or in case of any sale or conveyance to another corporation of the
property of the Company as, or substantially as, an entirety (other than a
sale/leaseback, mortgage or other financing transaction), the Company shall
cause effective provision to be made so that the Holder shall have the right
thereafter, by exercising this Warrant, to purchase the kind and number of
shares of stock or other securities or property (including cash) receivable upon
such reclassification, capital reorganization, stock dividend or other change,
consolidation, merger, sale or conveyance as the Holder would have been entitled
to receive had the Holder exercised this Warrant in full immediately before such
reclassification, capital reorganization, stock dividend or other change,
consolidation, merger, sale or conveyance. Any such provision shall include
provision for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 2.5. The foregoing
provisions shall similarly apply to successive reclassifications, capital
reorganizations, stock dividends and other changes of outstanding shares of
Common Stock and to successive consolidations, mergers, sales or conveyances.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon exercise
or conversion of this Warrant and the number of Shares to be issued shall be
rounded down to the nearest whole Share. If a fractional Share interest arises
upon any exercise or conversion of the Warrant, the Company shall eliminate such
fractional Share interest by paying Holder the amount computed by multiplying
the fractional interest by the closing bid price of a full Share on the date of
the Notice of Exercise.
2.7 ESCROW. The Company agrees to enter into the escrow agreement attached
to the Purchase Agreement hereto as Exhibit E (the "Escrow Agreement"), and to
issue into said escrow certificates to be held by the Escrow Agent (as defined
in the Escrow Agreement), registered in the name of the Holder and without any
restrictive legend of any kind, representing a number of shares of Common Stock
(in 10,000 share certificates) equal to the number of shares of this Warrant
("Escrow Shares").
3
ARTICLE 3.
REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder as follows:
(a) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant shall, upon issuance, be duly authorized,
validly issued, fully-paid and nonassessable, and free of any liens and
encumbrances except for restrictions on transfer provided for herein or under
applicable federal and state securities laws, and not subject to any pre-emptive
rights.
(b) The Company is a corporation duly organized and validly existing
under the laws of the State of Wyoming, and has the full power and authority to
issue this Warrant and to comply with the terms hereof. The execution, delivery
and performance by the Company of its obligations under this Warrant, including,
without limitation, the issuance of the Shares upon any exercise of the Warrant
have been duly authorized by all necessary corporate action. This Warrant has
been duly executed and delivered by the Company and is a valid and binding
obligation of the Company, enforceable in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization
or similar laws affecting enforceability of creditors' rights generally and
except as the availability of the remedy of specific enforcement, injunctive
relief or other equitable relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
(c) The Company is not subject to or bound by any provision of any
certificate or articles of incorporation or by-laws, mortgage, deed of trust,
lease, note, bond, indenture, other instrument or agreement, license, permit,
trust, custodianship, other restriction or any applicable provision of any law,
statute, rule, regulation, judgment, order, writ, injunction or decree of any
court, governmental body, administrative agency or arbitrator which could
prevent or be violated by or under which there would be a default (or right of
termination) as a result of the execution, delivery and performance by the
Company of this Warrant.
(d) The Company is not subject to the reporting requirements of
Section 13 or Section 15d of the Exchange Act. The Company has not sold more
than $750,000 of securities in the last twelve months. The Company is eligible
to issue securities exempt from registration pursuant to Rule 504 of Regulation
D promulgated under the Securities Act.
4
ARTICLE 4.
SECURITIES LAW COMPLIANCE.
The Shares will be acquired for Purchaser's own account for investment and
not with a view to, or for resale in connection with, any distribution of the
Shares within the meaning of the Securities Act of 1933. Purchaser acknowledges
that it is aware that the issuance of the Shares upon exercise of this Warrant
has not been registered pursuant to the Securities Act of 1933 (the "Act"), nor
is it intended that they be registered, and the Purchaser has no right to
require that they be registered, under the Act or under any state securities
laws. The Purchaser agrees that the Shares may not be sold in the absence of
registration unless such sale is exempt from registration under the Act and any
applicable state securities laws. The Purchaser also acknowledges that he shall
be responsible for compliance with all conditions on transfer imposed by any
Commissioner of Securities of any state and for any expenses incurred by the
Company for legal or accounting services in connection with reviewing such
proposed transfer or issuing opinions in connection therewith. The certificate
for the Shares shall bear the following restrictive legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OF THE UNITED STATES OF AMERICA
(THE "ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
("STATE ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED FOR
VALUE, DIRECTLY OR INDIRECTLY, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE ACT AND COMPLIANCE WITH APPLICABLE
STATE ACTS, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
UNDER APPLICABLE STATE ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO
THE SATISFACTION OF THE COMPANY.
If (but without any obligation to do so under this Agreement) the Company
proposes to register (including for this purpose a registration effected by the
Company for shareholders other than the Holders) any of its stock or other
securities under the Securities Act in connection with the public offering of
such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the issuance of the Underlying Shares, or a registration of an offering
of securities, the underwriter of which objects to registration of additional
securities), the Company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within twenty days after mailing of such notice by the Company, the Company
shall cause to be registered under such registration statement such Underlying
Shares as each such Holder has requested to be registered.
5
ARTICLE 5.
MISCELLANEOUS.
5.1 TRANSFER. This Warrant may not be transferred or assigned, in whole or
in part, at any time, except in compliance with applicable federal and state
securities laws by the transferor and the transferee (including, without
limitation, the delivery of an investment representation letter and a legal
opinion reasonably satisfactory to the Company), provided that this Warrant may
nat be transferred or assigned such that either the Holder or any transferee
will, following such transfer or assignment, hold a Warrant for the right to
purchase fewer than 5,000 Shares.
5.2 TRANSFER PROCEDURE. Subject to the provisions of Section 5.1, Holder
may transfer or assign this Warrant by giving the Company notice setting forth
the name, address and taxpayer identification number of the transferee or
assignee, if applicable (the "Transferee") and surrendering this Warrant to the
Company for reissuance to the Transferee (and the Holder, in the event of a
transfer or assignment of this Warrant in part). (Each of the persons or
entities in whose name any such new Warrant shall be issued are herein referred
to as a Holder").
5.3 LOSS, THEFT, DESTRUCTION OR MUTILATION. If this Warrant shall became
mutilated or defaced or be destroyed, lost or stolen, the Company shall execute
and deliver a new Warrant in exchange for and upon surrender and cancellation of
such mutilated or defaced Warrant or, in lieu of and in substitution for such
Warrant so destroyed, last or stolen, upon the Holder filing with the Company
evidence satisfactory to it that such Warrant has been so mutilated, defaced,
destroyed, last or stolen. However, the Company shall be entitled, as a
condition to the execution and delivery of such new Warrant, to demand indemnity
satisfactory to it and payment of the expenses and charges incurred in
connection with the delivery of such new Warrant. Any Warrant so surrendered to
the Company shall be canceled.
5.4 NOTICES. All notices and other communications from the Company to the
Holder or vice versa shall be deemed delivered and effective when given
personally, by facsimile transmission and confirmed in writing or mailed by
first-class registered or certified mail, postage prepaid at such address and/or
facsimile number as may have been furnished to the Company or the Holder, as the
case may be, in writing by the Company or the Holder from time to time.
5.5 WAIVER. This Warrant and any term hereof may be changed, waived, or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
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5.6 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to its
principles regarding conflicts of law.
Dated: 7/15/98 Empyrean Diagnostics, Ltd.
-----------------------------
Attest: [illegible] By: /s/ Xxxxxxx Xxxxxx
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Xxxxxxx Xxxxxx, President & CEO
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