EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
June 23, 2004, among Generex Biotechnology Corporation, a Delaware corporation
(the "COMPANY"), and the investors identified on the signature pages hereto
(each, an "INVESTOR" and collectively, the "INVESTORS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below)
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
each Investor, and each Investor, severally and not jointly, desires to purchase
from the Company certain securities of the Company, as more fully described in
this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:
"ACTION" means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
any Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock exchange or
trading facility.
"ADDITIONAL INVESTMENT RIGHTS" means the additional investment
rights in the form of Exhibit B, which are issuable to the Investors on the
Closing Date.
"ADDITIONAL INVESTMENT RIGHTS SHARES" means the shares of
Common Stock issuable upon exercise of Additional Investment Rights.
"AFFILIATE" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed under Rule
144.
"AVAILABLE UNDERSUBSCRIPTION AMOUNT" shall have the meaning
set forth in Section 4.4.
"BASIC AMOUNT" shall have the meaning set forth in
Section 4.4.
"BUSINESS DAY" means any day except Saturday, Sunday and any
day which is a federal legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other governmental
action to close.
"CLOSING" means the closing of the purchase and sale of the
Securities pursuant to Article II.
"CLOSING DATE" means the Business Day immediately following
the date on which all the conditions set forth in Sections 5.1 and 5.2 hereof
are satisfied.
"CLOSING WARRANTS" means the common stock purchase warrants in
the form of Exhibit A, which are issuable to the Investors at the Closing.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par
value $.001 per share, and any securities into which such common stock may
hereafter be reclassified.
"COMMON STOCK EQUIVALENTS" means any securities of the Company
or any Subsidiary which entitle the holder thereof to acquire Common Stock at
any time, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"COMPANY COUNSEL" means Xxxxxx Xxxxxxx Xxxxxx and Xxxxxxx,
LLC.
"EFFECTIVE DATE" means the date that the Registration
Statement required by Section 2(a) of the Registration Rights Agreement is first
declared effective by the Commission.
"EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
"INVESTMENT AMOUNT" means, with respect to each Investor, the
investment amount indicated below such Investor's name on the signature page of
this Agreement.
"LIEN" means any lien, charge, encumbrance, security interest,
right of first refusal or other restrictions of any kind.
"PARTICIPATION PERIOD" shall have the meaning set forth in
Section 4.4.
"PER UNIT PURCHASE PRICE" equals the greater of (a) 85% of the
closing bid price of the Common Stock on the Trading Day immediately preceding
the Closing Date and (b) $1.19.
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"PERSON" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"REFUSED SECURITIES" shall have the meaning set forth in
Section 4.4.
"REGISTRATION BLOCKOUT PERIOD" shall have the meaning set
forth in Section 4.4.
"REGISTRATION STATEMENT" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement and
covering the resale by the Investors of the Shares, the Warrant Shares and the
Additional Investment Rights Shares.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Investors, in the form of Exhibit C hereto.
"RULE 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECURITIES" means the Shares, the Additional Investment
Rights, the Additional Investment Rights Shares, the Warrants and the Warrant
Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means the shares of Common Stock issuable to the
Investors on the Closing Date pursuant to this Agreement.
"SUBSEQUENT PLACEMENT" means any direct or indirect offer,
sale, grant of any option to purchase, or other disposition (or announcement of
any offer, sale, grant or any option to purchase or disposition) of any Common
Stock or Common Stock Equivalent, including, without limitation, pursuant to a
private placement, an equity line of credit or a shelf registration statement.
"SUBSIDIARY" means any subsidiary of the Company as set forth
in the SEC Reports.
"TRADING DAY" means (i) a day on which the Common Stock is
traded on a Trading Market, or (ii) if the Common Stock is not listed on a
Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i) or (ii) hereof, then Trading Day shall mean
a Business Day.
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"TRADING MARKET" means whichever of the New York Stock
Exchange, the American Stock Exchange, the NASDAQ National Market, the NASDAQ
SmallCap Market or OTC Bulletin Board on which the Common Stock is listed or
quoted for trading on the date in question.
"TRANSACTION DOCUMENTS" means this Agreement, the Additional
Investment Rights, the Warrants, the Registration Rights Agreement, and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.
"UNDERSUBSCRIPTION AMOUNT" shall have the meaning set forth in
Section 4.4.
"UNITS" means the detachable Securities issuable to the
Investors at the Closing, each comprised of one Share, a Closing Warrant
entitling the holder to acquire four-fifths of a share of Common Stock, and one
Additional Investment Right.
"WARRANTS" means: (i) the Closing Warrants, and (ii) the
Common Stock purchase warrants in the form of Exhibit B, which are issuable to
the Investors upon exercise of the Additional Investment Rights.
"WARRANT SHARES" means the shares of Common Stock issuable
upon exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Investor, and
each Investor shall, severally and not jointly, purchase from the Company, the
Units representing such Investor's Investment Amount. The Closing shall take
place at the offices of Xxxxx Xxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx,
XX 00000 on the Closing Date or at such other location or time as the parties
may agree.
2.2 Closing Deliveries. (a) At the Closing, the Company shall deliver
or cause to be delivered to each Investor the following:
(i) a certificate evidencing a number of Shares equal
to such Investor's Investment Amount divided by the Per Unit Purchase Price,
registered in the name of such Investor;
(ii) a Closing Warrant, registered in the name of
such Investor, pursuant to which such Investor shall have the right to acquire
the number of shares of Common Stock equal to eighty percent (80%) of the number
of Shares issuable to such Investor pursuant to Section 2.2(a)(i);
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(iii) an Additional Investment Right, registered in
the name of such Investor, pursuant to which such Investor shall have the right
to acquire detachable units comprised of Additional Investment Rights Shares and
Warrants to purchase additional shares of Common Stock equal to the number of
Shares and Warrant Shares issued or issuable to such Investor at Closing under
Section 2.2(a)(i) and (ii);
(iv) the legal opinion of Company Counsel, in agreed
form, addressed to the Investors; and
(v) this Agreement and the Registration Rights
Agreement, duly executed by the Company.
(b) At the Closing, each Investor shall deliver or cause to be
delivered to the Company the following:
(i) its Investment Amount, in United States dollars
and in immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose; and
(ii) this Agreement and the Registration Rights
Agreement, duly executed by such Investor.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to each Investor:
(a) Subsidiaries. The Company has no direct or indirect
Subsidiaries other than those set forth in the SEC Reports. Except as disclosed
in the SEC Reports, the Company owns, directly or indirectly, all of the capital
stock of each Subsidiary free and clear of any and all Liens, and all the issued
and outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company and
each Subsidiary is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and each Subsidiary is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity 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, individually or in the aggregate, have
or reasonably be expected to result in (i) a material and adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material and adverse effect on the results of operations, assets, prospects,
business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) an adverse impairment to the Company's
ability to perform on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT").
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(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
(d) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that 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 (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) 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 or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not
required to obtain any consent, waiver, authorization or order of, give any
notice to, 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 the Transaction
Documents, other than (i) the filing with the Commission of one or more
Registration Statements in accordance with the requirements Registration Rights
Agreement, (ii) any filings required by state securities laws, (iii) the filings
required in accordance with Section 4.5, (iv) the NASDAQ letter specified in
Article V, and (v) those that have been made or obtained prior to the date of
this Agreement.
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(f) Issuance of the Securities. The Securities have been duly
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable pursuant to
this Agreement, the Additional Investment Rights and the Warrants in order to
issue the Shares, the Additional Investment Rights Shares and the Warrant Shares
(as applicable).
(g) Capitalization. Schedule 3.1(g) sets forth (i) the
authorized, issued and outstanding capital stock of the Company as of the date
therein specified, (ii) the shares of Common Stock reserved for issuance upon
the exercise of outstanding options, and the average exercise price thereof,
(iii) the shares of Common Stock reserved for issuance upon exercise of
outstanding warrants, and the average exercise price thereof, and (iv) the
authorized, issued and outstanding shares of preferred stock on such date for
all authorized classes of preferred stock, $0.001 par value per share
(collectively, the "PREFERRED STOCK"). All of the outstanding shares of the
Common Stock and Preferred Stock have been duly and validly authorized and are
fully-paid and non assessable. Except as disclosed in this Agreement, the
Registration Rights Agreement and/or the SEC Reports, there are no options,
warrants, 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. No securities of the Company are entitled to
preemptive or similar rights, and no Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by the Transaction Documents. Except as set forth
in Schedule 3.1(g), the issue and sale of the Securities will not, immediately
or with the passage of time, obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Investors) and will not
result in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under such securities.
(h) SEC Reports; Financial Statements. The Company has filed
all reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was required by
law to file such reports) (the foregoing materials being collectively referred
to herein as the "SEC REPORTS" and, together with the Schedules to this
Agreement (if any), the "DISCLOSURE MATERIALS") on a timely basis or has timely
filed a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. The Company has delivered
to the Investors a copy of all SEC Reports filed within the 10 days preceding
the date hereof. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
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("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto, or in the case of unaudited interim financial statements, to
the extent that they may exclude footnotes or may be condensed or summary
statement, and fairly present in all material respects the financial position of
the Company and its consolidated Subsidiaries as of and for 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, immaterial, year-end
audit adjustments.
(i) Press Releases. The press releases disseminated by the
Company during the two (2) years preceding the date of this Agreement taken as a
whole do 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.
(j) Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
The Company does not have pending before the Commission any request for
confidential treatment of information.
(k) Litigation. There is no Action which (i) adversely affects
or challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) except as set forth in the SEC Reports,
could, if there were an unfavorable decision, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor any director or officer thereof, is or has
been the subject of any Action involving a claim of violation of or liability
under federal or state securities laws or a claim of breach of fiduciary duty.
There has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or any
current or former director or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.
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(l) Labor Relations. No material labor dispute exists or, to
the knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(m) Compliance. Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is 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 (whether or not such default or violation has been waived), (ii) is in
violation of any order affecting the Company or such Subsidiary of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect. The Company is in compliance with the applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules and
regulations thereunder, except where such noncompliance could not have or
reasonably be expected to result in a Material Adverse Effect.
(n) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except where the
failure to possess such permits would not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect ("MATERIAL
PERMITS"), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.
(o) Title to Assets. The Company and the Subsidiaries have
good and marketable title in fee simple to all real property owned by them that
is material to their respective businesses and good and marketable title in all
personal property owned by them that is material to their respective businesses,
in each case free and clear of all Liens, except such as are described in the
SEC Reports or Liens as do not materially affect the value of such property and
do not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries. Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance, except as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
(p) Patents and Trademarks. The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
other similar rights that are necessary or material for use in connection with
their respective businesses as described in the SEC Reports and which the
failure to so have could, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect (collectively, the
"INTELLECTUAL PROPERTY RIGHTS"). Except as set forth in Schedule 3.1(p), neither
the Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary violates or
infringes upon the rights of any Person. Except as set forth in the SEC Reports,
to the knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights.
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(q) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. The Company has no reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant increase in cost.
(r) Transactions With Affiliates and Employees. Except as set
forth in the SEC Reports, none of the officers or directors of the Company and,
to the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(s) Internal Accounting Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act rules 13a-14 and 15d-14) for the Company and designed such
disclosure controls and procedures to ensure that material information relating
to the Company, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company's Form 10-K or 10-Q, as the case may be, is being prepared.
The Company's certifying officers have evaluated the effectiveness of the
Company's controls and procedures in accordance with Item 307 of Regulation S-K
under the Exchange Act for the Company's most recently ended fiscal quarter or
fiscal year-end (such date, the "EVALUATION DATE"). The Company presented in its
most recently filed Form 10-K or Form 10-Q the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in the Company's internal controls (as such
term is defined in Item 308(c) of Regulation S-K under the Exchange Act) or, to
the Company's knowledge, in other factors that would significantly affect the
Company's internal controls.
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(t) Solvency. Based on the financial condition of the Company
as of the Closing Date (and assuming that the Closing shall have occurred), (i)
the Company's fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature; (ii) the
Company's assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
(u) Certain Fees. No brokerage or finder's fees or commissions
are or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by this Agreement. The Investors
shall have no obligation with respect to any fees or with respect to any claims
(other than such fees or commissions owed by an Investor pursuant to written
agreements executed by such Investor which fees or commissions shall be the sole
responsibility of such Investor) made by or on behalf of other Persons for fees
of a type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.
(v) Certain Registration Matters. Assuming the accuracy of the
Investors' representations and warranties set forth in Section 3.2(b)-(e), no
registration under the Securities Act is required for the offer and sale of the
Securities by the Company to the Investors under the Transaction Documents. The
Company has not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have not
been satisfied.
(w) Listing and Maintenance Requirements. Except as specified
in the SEC Reports, the Company has not, in the two years preceding the date
hereof, received notice from any Trading Market to the effect that the Company
is not in compliance with the listing or maintenance requirements thereof. The
Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with the listing and maintenance
requirements for continued listing of the Common Stock on the Trading Market.
The issuance and sale of the Securities under the Transaction Documents does not
contravene the rules and regulations of the Trading Market on which the Common
Stock is currently listed or quoted (including Rule 4350 of the Nasdaq Stock
Market if the Trading Market is the Nasdaq National or Nasdaq SmallCap Market),
and no approval of the shareholders of the Company thereunder is required for
the Company to issue and deliver to the Investors the maximum number of
Securities contemplated by Transaction Documents, including such as may be
required pursuant to Nasdaq Rule 4350, except as has been previously obtained.
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(x) Investment Company. The Company is not, and is not an
Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(y) Application of Takeover Protections. Except as set forth
in Schedule 3.1(y), the Company has taken all necessary action, if any, in order
to render inapplicable any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company's Certificate of Incorporation
(or similar charter documents) or the laws of its state of incorporation that is
or could become applicable to the Investors as a result of the Investors and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Company's issuance of
the Securities and the Investors' ownership of the Securities.
(z) No Additional Agreements. The Company does not have any
agreement or understanding with any Investor with respect to the transactions
contemplated by the Transaction Documents other than as specified in the
Transaction Documents.
(aa) Disclosure. The Company confirms that neither it nor any
Person acting on its behalf has provided any of the Investors or their agents or
counsel with any information that the Company believes constitutes material,
non-public information. The Company understands and confirms that the Investors
will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All disclosure provided to the
Investors regarding the Company, its business and the transactions contemplated
hereby, furnished by or on behalf of the Company (including the Company's
representations and warranties set forth in this Agreement) are true and correct
and 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.
3.2 Representations and Warranties of the Investors. Each Investor
hereby, for itself and for no other Investor, represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Investor is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations thereunder. The execution, delivery and performance by such
Investor of the transactions contemplated by this Agreement has been duly
authorized by all necessary corporate or, if such Investor is not a corporation,
such partnership, limited liability company or other applicable like action, on
the part of such Investor. Each of this Agreement and the Registration Rights
Agreement has been duly executed by such Investor, and when delivered by such
Investor in accordance with terms hereof, will constitute the valid and legally
binding obligation of such Investor, enforceable against it in accordance with
its terms.
12
(b) Investment Intent. Such Investor is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Investor's right at all times to
sell or otherwise dispose of all or any part of such Securities in compliance
with applicable federal and state securities laws. Subject to the immediately
preceding sentence, nothing contained herein shall be deemed a representation or
warranty by such Investor to hold the Securities for any period of time. Such
Investor is acquiring the Securities hereunder in the ordinary course of its
business. Such Investor does not have any agreement or understanding, directly
or indirectly, with any Person to distribute any of the Securities.
(c) Investor Status. At the time such Investor was offered the
Securities, it was, and at the date hereof it is, and on each date on which it
exercises the Warrants it will be, an "accredited investor" as defined in Rule
501(a) under the Securities Act. Such Investor is not a registered broker-dealer
under Section 15 of the Exchange Act.
(d) General Solicitation. Such Investor is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
(e) Access to Information. Such Investor acknowledges that it
has reviewed the Disclosure Materials and 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 Shares and the merits and risks of investing in the Securities;
(ii) access to information about the Company and the Subsidiaries and their
respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(f) Limited Ownership. The purchase by such Investor of the
Securities issuable to it at the Closing (including the underlying shares of
Common Stock that would be issuable in respect of such Securities and including
any Securities issuable under the terms of the Additional Investment Rights
issued or issuable to such Investor) will not result in such Investor
(individually or together with other Person with whom such Investor has
identified, or will have identified, itself as part of a "group" in a public
filing made with the Commission involving the Company's securities) acquiring,
or obtaining the right to acquire, in excess of 19.999% of the Common Stock or
the voting power of the Company on a post transaction basis that assumes that
the Closing shall have occurred. Such Investor does not presently intend to,
alone or together with others, make a public filing with the Commission to
disclose that it has (or that it together with such other Persons have)
acquired, or obtained the right to acquire, as a result of the Closing (when
added to any other securities of the Company that it or they then own or have
the right to acquire), in excess of 19.999% of the Common Stock or the voting
power of the Company on a post transaction basis that assumes that the Closing
shall have occurred.
13
(g) Independent Investment Decision. Such Investor has
independently evaluated the merits of its decision to purchase Securities
pursuant to this Agreement, such decision has been independently made by such
Investor and such Investor confirms that it has only relied on the advice of its
own business and/or legal counsel and not on the advice of any other Investor's
business and/or legal counsel in making such decision. If such Investor is other
than Omicron Master Trust, such Investor represents and warrants that Xxxxx Xxxx
LLP has not acted as its legal counsel in connection with the transaction
contemplated by this Agreement. Such Investor understands that its investment in
the Securities involves a high degree of risk. Such Investor 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 securities.
(h) Reliance on Exemptions. Such Investor understands that the
Securities are being offered and sold to it in reliance on Regulation D and that
the Company is relying upon the truth and accuracy of, and such Investor's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Investor set forth herein in order to determine the
availability of Regulation D and the eligibility of such Investor to acquire
such Securities.
(i) No Governmental Review. Such Investor understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness of suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(j) Residency. Such Investor certifies that it resides or has
a bona fide place of business at its address set forth below such Investor's
name on its signature page to this Agreement.
The Company acknowledges and agrees that each Investor does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 (a) Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of the
Securities other than pursuant to an effective registration statement, to the
Company, to an Affiliate of an Investor or in connection with a pledge as
contemplated in Section 4.1(b), the Company may require the transferor thereof
to provide to the Company an opinion of counsel selected by the transferor, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act.
14
(b) Certificates evidencing the Securities will contain the
following legend, until such time as they are not required under Section 4.1(c):
[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE
SECURITIES HAVE NOT BEEN REGISTERED] WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY. [THESE SECURITIES AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES]
[THESE SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that an Investor may from
time to time pledge, and/or grant a security interest in some or all of the
Securities pursuant to a bona fide margin agreement in connection with a bona
fide margin account and, if required under the terms of such agreement or
account, such Investor may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject to
approval or consent of the Company and no legal opinion of legal counsel to the
pledgee, secured party or pledgor shall be required in connection with the
pledge, but such legal opinion may be required in connection with a subsequent
transfer following default by the Investor transferee of the pledge. No notice
shall be required of such pledge. At the appropriate Investor's expense, the
Company will execute and deliver such reasonable documentation as a pledgee or
secured party of Securities may reasonably request in connection with a pledge
or transfer of the Securities including the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.
(c) Certificates evidencing the Shares, Warrant Shares and
Additional Investment Rights Shares shall not contain any legend (including the
legend set forth in Section 4.1(b)): (i) following a sale of such Securities
pursuant to an effective registration statement (including the Registration
Statement), or (ii) following a sale of such Shares, Warrant Shares or
Additional Investment Rights Shares pursuant to Rule 144, or (iii) while such
Shares, Warrant Shares or Additional Investment Rights Shares are eligible for
sale under Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
15
pronouncements issued by the Staff of the Commission). Following such time as
restrictive legends are not required to be placed on certificates representing
Shares, Warrant Shares or Additional Investment Rights Shares, the Company will,
no later than three Trading Days following the delivery by an Investor to the
Company or the Company's transfer agent of a certificate representing Shares,
Warrant Shares or Additional Investment Rights Shares containing a restrictive
legend, deliver or cause to be delivered to such Investor a certificate
representing such Shares, Warrant Shares or Additional Investment Rights Shares
that is free from all restrictive and other legends. The Company may not make
any notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this Section.
4.2 Furnishing of Information. As long as any Investor owns the
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Investor owns Securities, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish to
the Investors and make publicly available in accordance with Rule 144(c) such
information as is required for the Investors to sell the Shares, Warrant Shares
and the Additional Investment Rights Shares under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request, all to the extent required from time to time to enable such
Person to sell such Shares, Warrant Shares and Additional Investment Rights
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144.
4.3 Integration. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, 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 Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Investors, or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market.
4.4 Subsequent Registrations; Subsequent Placements.
(a) From the Closing Date through and including the Effective
Date, the Company will not file a registration statement (other than on a Form
S-8 and pursuant to the Registration Rights Agreement) with the Commission with
respect to any securities of the Company (the "REGISTRATION BLOCKOUT PERIOD").
(b) Prior to the first year anniversary of the Effective Date
(the "PARTICIPATION PERIOD"), the Company will not engage in or consummate any
Subsequent Placement, except in accordance with this Section 4.4(b):
(i) The Company shall deliver to each Investor a
written notice (the "OFFER") of any proposed Subsequent Placement (the
securities issuable in connection with such proposed Subsequent Placement, the
"OFFERED SECURITIES"), which Offer shall (w) identify and describe the Offered
Securities, (x) describe the price and other terms upon which they are to be
16
issued, sold or exchanged, and the number or amount of the Offered Securities to
be issued, sold or exchanged and (z) offer to issue and sell to or exchange with
each Investor (A) a pro rata portion of fifty percent (50%) of the Offered
Securities, based on such Investor's pro rata portion of the aggregate
Investment Amount paid by the Investors for all of the Units purchased hereunder
(the "BASIC AMOUNT"), and (B) with respect to each Investor that elects to
purchase its Basic Amount, any additional portion of the Offered Securities
attributable to the Basic Amounts of other Investors as such Investor shall
indicate it will purchase or acquire should the other Investors subscribe for
less than their Basic Amounts (the "UNDERSUBSCRIPTION AMOUNT").
(ii) To accept an Offer, in whole or in part, an
Investor must deliver a written notice to the Company prior to the end of the
fifth (5) Trading Day from receipt of the Offer (the "OFFER ACCEPTANCE PERIOD"),
setting forth the portion of the Investor's Basic Amount that such Investor
elects to purchase and, if such Investor shall elect to purchase all of its
Basic Amount, the Undersubscription Amount, if any, that such Investor would
purchase (in either case, the "NOTICE OF ACCEPTANCE"). If the Basic Amounts
subscribed for by all Investors are less than the total of all of the Basic
Amounts, then each Investor who has set forth an Undersubscription Amount in its
Notice of Acceptance shall be entitled to purchase, in addition to the Basic
Amounts subscribed for, the Undersubscription Amount it has subscribed for;
provided, however, that if the Undersubscription Amounts subscribed for exceed
the difference between the total of all the Basic Amounts and the Basic Amounts
subscribed for (the "AVAILABLE UNDERSUBSCRIPTION AMOUNT"), each Investor who has
subscribed for any Undersubscription Amount shall be entitled to purchase that
portion of the Available Undersubscription Amount as the Basic Amount of such
Investor bears to the total Basic Amounts of all Investors that have subscribed
for Undersubscription Amounts.
(iii) The Company shall have fourteen (14) days from
the expiration of the Offer Acceptance Period to issue, sell or exchange all or
any part of such Offered Securities as to which a Notice of Acceptance has not
been given by the Investors (the "REFUSED SECURITIES"), but only upon terms and
conditions (including, without limitation, unit prices and interest rates) that
are not more favorable to the acquiring Person or Persons than those set forth
in the Offer.
(iv) In the event the Company shall propose to sell
less than all the Refused Securities (any such sale to be in the manner and on
the terms specified in Section 4.4(b)(iii) above), then each Investor may, at
its sole option and in its sole discretion, reduce the number or amount of the
Offered Securities specified in its Notice of Acceptance to an amount that shall
be not less than the number or amount of to Offered Securities that the Investor
elected to purchase pursuant to Section 4.4(b)(ii) above multiplied by a
fraction, (i) the numerator of which shall be the number or amount of Offered
Securities the Company actually proposes to issue, sell or exchange (including
prior to such reduction) and (ii) the denominator of which shall be the original
amount of the Offered Securities. In the event that any Investor so elects to
reduce the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have
again been offered to the Investors in accordance with Section 4.4(b)(i) above.
17
(v) Upon the closing of the issuance, sale or
exchange of all or less than all of the Refused Securities, the Investors shall
acquire from the Company, and the Company shall issue to the Investors, the
number or amount of Offered Securities specified in the Notices of Acceptance,
as reduced pursuant to Section 4.4(b) the Investors have so elected, upon the
terms and conditions specified in the Offer. The purchase by the Investors of
any Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and the Investors of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance to the
Investors and the Company and their respective counsel.
(vi) The Company agrees that within twenty five (25)
days of delivering the Offer hereunder, it shall either (i) publicly announce
the closing of the Subsequent Placement that is the subject of the Offer, or
(ii) send notice to each Investor of the abandonment and termination of the
proposed Subsequent Placement, in which event the Company must immediately
terminate and abandon such proposed Subsequent Placement; provided, that if the
Company has not performed either of (i) or (ii) above, any Investor shall have
the right to send the Company a binding notice terminating any such proposed
Subsequent Placement by the Company.
(c) Each of the Registration Blockout Period and Participation
Period shall be extended for the number of Trading Days during such periods in
which (i) trading in the Common Stock is suspended by any Trading Market or the
Commission, or (ii) following the Effective Date, the Registration Statement is
not effective or the prospectus included in the Registration Statement may not
be used by the Investors for the resale of the Registrable Securities (as
defined in the Registration Rights Agreement).
(d) The right of participation contained in Section 4.4(b)
shall not apply, and the Company shall not be required to deliver an Offer, as a
result of a Subsequent Placement of (i) shares of Common Stock or Common Stock
Equivalents to consultants, employees, officers, or directors of the Company, as
compensation for their services to the Company pursuant to arrangements approved
by the Board of Directors of the Company, (ii) the issuance of the Securities
pursuant to the Transaction Documents, (iii) shares of Common Stock issued and
sold in a firm commitment underwritten public offering (which shall not include
an equity line of credit, shelf takedown, or similar financing arrangement)
resulting in net proceeds to the Company of in excess of $15,000,000, (iv)
shares of Common Stock issued as consideration for the acquisition of another
company or business in which the shareholders of the Company do not have an
ownership interest, which acquisition has been approved by the Board of
Directors of the Company, (v) to the extent that the inclusion of one or more
Investors in a Subsequent Placement would result in a violation of the rules of
the primary Trading Market on which the Common Stock is then traded (vi) the
issuance of securities in connection with a joint venture, licensing agreement
or other similar strategic transactions, in each case, where the primary purpose
is not the raising of capital or (vii) the issuance of securities upon the
exercise or conversion of any Common Stock Equivalents issued by the Company
prior to the date of this Agreement (but will apply to any amendments,
modifications and any exchanges thereof).
18
4.5 Securities Laws Disclosure; Publicity. By 8:30 a.m. (New York City
time) on Trading Day immediately following the Closing Date, the Company shall
issue a press release reasonably acceptable to the Investors disclosing the
transactions contemplated hereby and file a Current Report on Form 8-K
disclosing the material terms of the transactions contemplated hereby. In
addition, the Company will make such other filings and notices in the manner and
time required by the Commission and the Trading Market on which the Common Stock
is listed. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Investor, or include the name of any Investor in any
filing with the Commission (other than the Registration Statement and any
exhibits to filings made in respect of this transaction in accordance with
periodic filing requirements under the Exchange Act) or any regulatory agency or
Trading Market, without the prior written consent of such Investor, except to
the extent such disclosure is required by law or Trading Market regulations, in
which case the Company shall provide the Investors with prior notice of such
disclosure.
4.6 Limitation on Issuance of Future Priced Securities. During the six
months following the Closing Date, the Company shall not issue any "Future
Priced Securities" as such term is described by NASD IM-4350-1.
4.7 Indemnification of Investors. In addition to the indemnity provided
in the Registration Rights Agreement, the Company will indemnify and hold the
Investors and their directors, officers, shareholders, partners, employees and
agents (each, an "INVESTOR PARTY") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation (collectively, "LOSSES") that any
such Investor Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.
4.8 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Investor
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Investor
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Investor shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.9 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of
indebtedness in accordance with the terms thereof and payment trade payables and
accrued expenses in the ordinary course of the Company's business and prior
practices), to redeem any Common Stock or Common Stock Equivalents.
19
ARTICLE V.
5.1 Conditions Precedent to the Obligations of the Investors to
Purchase Securities on the Closing Date. The obligation of each Investor to
acquire Securities at the Closing is subject to the satisfaction or waiver by
such Investor, at or before the Closing, of each of the following conditions:
(a) 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 as though made
on and as of such date;
(b) Performance. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by it at or prior to the Closing;
(c) 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 that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(d) Adverse Changes. Since the date of execution of this
Agreement, no event or series of events shall have occurred that reasonably
would be expected to have or result in a (i) an adverse effect on the legality,
validity or enforceability of any Transaction Document, or (ii) a material and
adverse effect on the results of operations, assets, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole;
(e) No Suspensions of Trading in Common Stock; Listing.
Trading in the Common Stock shall not have been suspended by the Commission or
any Trading Market (except for any suspensions of trading of not more than one
Trading Day solely to permit dissemination of material information regarding the
Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for trading on
a Trading Market;
(f) Nasdaq Listing. The Nasdaq Stock Market shall have waived
application of the 15 day prior notice contained in NASD Marketplace Rule
4370(17)(D) or such timeframe shall have expired without objection; and
(g) Timing. The Closing shall have occurred no later than July
16, 2004.
5.2 Conditions Precedent to the Obligations of the Company to sell
Securities on the Closing Date. The obligation of the Company to sell Securities
at the Closing is subject to the satisfaction or waiver by the Company, at or
before the Closing, of each of the following conditions:
20
(a) Representations and Warranties. The representations and
warranties of each Investor 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 on and as of such date;
(b) Performance. Each Investor shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by such Investor at or prior to the Closing;
(c) 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 that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(d) Nasdaq Listing. The Nasdaq Stock Market shall have waived
application of the 15 day prior notice contained in NASD Marketplace Rule
4370(17)(D) or such timeframe shall have expired without objection; and
(e) Timing. The Closing shall have occurred no later than July
16, 2004.
ARTICLE VI.
MISCELLANEOUS
6.1 Fees and Expenses. At the Closing, the Company shall reimburse
Omicron Master Trust $15,000, less monies already advanced, in connection with
its diligence and legal fees concerning the transactions contemplated by the
Transaction Documents (Omicron Master Trust may deduct such amount from the
Investment Amount deliverable to the Company at Closing), it being understood
that Xxxxx Xxxx LLP, the attorneys for such Investor, has not rendered any legal
advice to the Company or to any other Investor in connection with the
transactions contemplated hereby and that the Company and each other Investor
has relied for such matters on the advice of its own counsel. Except as
specified in the immediately preceding sentence, each Investor and the Company
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 the Transaction
Documents. The Company shall pay all stamp and other taxes and duties levied in
connection with the sale of the Securities.
6.2 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, 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, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
21
6.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as follows:
If to the Company: Generex Biotechnology Corporation
00 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attention: Xxxx X. Xxxxxxx
Facsimile: (000) 000-0000
With a copy to: Xxxxxx Xxxxxxx Xxxxxx & Xxxxxxx, LLC
0000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Esquire
Facsimile: (000) 000-0000
If to an Investor: To the address set forth under such Investor's name
on the signature pages hereof;
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
6.4 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 the Company and the Investors holding no less than ? interest of the
outstanding Securities or, in the case of a waiver, 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 subsequent default 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.
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6.5 Construction. 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. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
6.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign any
or all of its rights under this Agreement to any Person to whom such Investor
assigns or transfers any Securities, provided such transferee agrees in writing
to be bound, with respect to the transferred Securities, by the provisions
hereof that apply to the "Investors."
6.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.7 (as to each
Investor Party).
6.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of 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. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "NEW
YORK COURTS"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) 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 contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its attorney's fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.
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6.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery of the Securities.
6.10 Execution. 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) with the same force and effect as if such facsimile signature page
were an original thereof.
6.11 Severability. If any provision of this Agreement is held to 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
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
6.12 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Investor exercises a right, election, demand
or option under a Transaction Document and the Company does not timely perform
its related obligations within the periods therein provided, then such Investor
may rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights.
6.13 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
6.14 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Investors and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
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.
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6.15 Payment Set Aside. To the extent that the Company makes a payment
or payments to any Investor pursuant to any Transaction Document or an Investor
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
6.16 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose.
6.17 Limitation of Liability. Notwithstanding anything herein to the
contrary, the Company acknowledges and agrees that the liability of an Investor
arising directly or indirectly, under any Transaction Document of any and every
nature whatsoever shall be satisfied solely out of the assets of such Investor,
and that no trustee, officer, other investment vehicle or any other Affiliate of
such Investor or any investor, shareholder or holder of shares of beneficial
interest of such a Investor shall be personally liable for any liabilities of
such Investor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
GENEREX BIOTECHNOLOGY CORPORATION
By: Xxxx X. Xxxxxxxx
------------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Executive Vice-President, General Counsel
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANk
SIGNATURE PAGES FOR INVESTORS FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
CITYPLATZ LIMITED
By: /s/ Xxxxxx Xxxxx
-----------------------------------
Name: Xxxxxx Xxxxx
Title: Director
Investment Amount: $1,250,000
Address for Notice:
27
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
OMICRON MASTER TRUST
By: /s/ Xxxxx Xxxxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Managing Partner
Investment Amount: $1,000,000
Address for Notice:
28
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
IROQUOIS CAPITAL, LP
By: /s/ Xxxxxx Xxxxxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Partner
Investment Amount: $500,000
Address for Notice:
29
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
By: /s/ Xxxxxx Xxxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxxx
Investment Amount: $250,000
Address for Notice:
30
