EXHIBIT 99.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
November 8, 2002, among Viragen, Inc., a Delaware corporation (the "Company"),
and the purchasers identified on the signature pages hereto (each, including
its successors and assigns, a "Purchaser" and collectively the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act") and Rule 506 promulgated thereunder, the Company
desires to issue and sell to the Purchasers, and the Purchasers, severally and
not jointly, desire to purchase from the Company, 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 Purchasers agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in
this Agreement: (a) capitalized terms that are not otherwise defined herein
have the meanings given to such terms in the Debenture (as defined herein), and
(b) the following terms have the meanings indicated in this Section 1.1:
"Actual Minimum" means, as of any date, the maximum aggregate
number of shares of Common Stock then issued or potentially issuable
in the future pursuant to the Transaction Documents, including any
Underlying Shares issuable upon exercise or conversion in full of all
Warrants and Debentures, ignoring any conversion or exercise limits
set forth therein, and assuming that: (a) any previously unconverted
Debentures are held until the second anniversary of the Second Closing
Date or, if earlier, until maturity, and all interest thereon is
accreted to the principal amount of Debentures, and (b) the Closing
Bid Price at all times on and after the date of determination equals
100% of the actual Closing Bid Price on the Trading Day immediately
prior to the date of determination.
"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 under the Securities Act.
"Capital Shares" shall mean the Common Stock and any shares
of any other class of common stock whether now or hereafter
authorized, having the right to participate in the distribution of
earnings and assets of the Company.
"Capital Shares Equivalents" shall mean any securities,
rights, or obligations that are convertible into or exchangeable for
or give any right to subscribe for or purchase, directly or
indirectly, any Capital Shares of the Company or any warrants, options
or other rights to subscribe for or purchase, directly or indirectly,
Capital Shares or any such convertible or exchangeable securities.
"Closing" means the First and Second Closings of the purchase
and sale of the Securities pursuant to Section 2.1.
"Closing Bid Price" means on any particular date (a) the
closing bid price per share of Common Stock on such date on the
Principal Market or the OTC Bulletin Board (as reported by Bloomberg
L.P. at 4:15 PM (New York time), or (b) if there is no such price on
such date, then the closing bid price on the Principal Market or the
OTC Bulletin Board on the date nearest preceding such date (as
reported by Bloomberg L.P. at 4:15 PM (New York time) for the closing
bid price for regular session trading on such day), or (c) if the
shares of Common Stock are not then reported on the Principal Market
or the OTC Bulletin Board, then the average of the "Pink Sheet" quotes
for the relevant conversion period, as determined in good faith by the
Purchasers, or (c) if the shares of Common Stock are not then publicly
traded the fair market value of a share of Common Stock as determined
by an appraiser selected in good faith by the Purchasers of a majority
in interest of the principal amount of Debentures then outstanding.
"Closing Date(s)" means the date of the First Closing and
Second Closing.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par
value $0.01 per share, and any securities into which such common stock
may hereinafter been reclassified into.
"Company Counsel" means Xxxxxx and Xxxx P.A., outside counsel
to the Company.
"Debentures" means the 5% Secured Convertible Debentures due
2 years from their date of issuance, unless otherwise set forth
therein, issued by the Company to the Purchasers hereunder, in the
form of Exhibit A.
"Disclosure Schedules" shall have the meaning ascribed to
such term in Section 3.1.
"Effective Date" means the date that the Registration
Statement is first declared effective by the Commission.
"Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.
"Escrow Agreement" shall mean the Escrow Agreement in
substantially the form of Exhibit F hereto executed and delivered
contemporaneously with this Agreement.
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"First Closing" means the Closing pursuant to Section 2.1(a),
which Closing shall occur within 5 days of the date hereof.
"GAAP" shall have the meaning ascribed to such term in
Section 3.1(h).
"Liens" shall have the meaning ascribed to such term in
Section 3.1(a).
"Losses" means any and all losses, claims, damages,
liabilities, settlement costs and expenses, including without
limitation costs of preparation and reasonable attorneys' fees.
"Material Adverse Effect" shall have the meaning assigned to
such term in Section 3.1(b).
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company,
"Principal Market" shall initially mean the American Stock
Exchange, and shall include the New York Stock Exchange, the NASDAQ
National Market, the OTC Bulletin Board or the NASDAQ Small-Cap
Market, whichever is at the time the principal trading exchange or
market for the Common Stock, based upon share volume.
"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.
"Purchasers' Counsel" means Xxxxxxx Xxxxxxxxx LLP with
offices at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the First Closing Date, among the Company and the
Purchasers, in the form of Exhibit B.
"Required Approvals" shall have the meaning ascribed to such
term in Section 3.1(e).
"Required Minimum" means, as of any date, the maximum
aggregate number of shares of Common Stock then issued or potentially
issuable in the future pursuant to the Transaction Documents,
including any Underlying Shares issuable upon exercise or conversion
in full of all Warrants and Debentures, ignoring any conversion or
exercise limits set forth therein, and assuming that (a) any
previously unconverted Debentures are held until the second
anniversary of the Second Closing Date or, if earlier, until maturity,
and all interest thereon is accreted to principal, and (b) the Closing
Bid Price at all times on and after the date of determination equals
75% of the actual Closing Bid Price on the Trading Day immediately
prior to the date of determination.
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"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.
"Second Closing" means the Closing pursuant to Section
2.1(b), which Closing shall occur within 5 days of the Effective Date.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(h).
"Securities" means the Debentures, the Warrants and the
Underlying Shares.
"Securities Act" means the Securities Act of 1933, as
amended.
"Security Agreement" shall mean the Bond and Floating Charge
and all documents to be delivered in connection therewith pursuant to
Section 2.2(a)(v).
"Subscription Amount" as to each Purchaser, the principal
amount of Debentures purchased hereunder.
"Subsidiary" means any subsidiary of the Company that is
required to be listed in Schedule 3.1(a).
"Trading Day" shall mean any day during which the Principal
Market shall be open for business.
"Transaction Documents" means this Agreement, the Debentures,
the Warrants, the Escrow Agreement, the Security Agreement, the
Registration Rights Agreement, the Instructions to Transfer Agent and
any other documents or agreements executed in connection with the
transactions contemplated hereunder.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of the Debentures and upon exercise of the Warrants.
"Underlying Shares Registration Statement" or "Registration
Statement" means a registration statement meeting the requirements set
forth in the Registration Rights Agreement and covering the resale of
the Underlying Shares by the Purchasers.
"Warrants" means collectively the Common Stock purchase
warrants, in the form of Exhibit C delivered to the Purchasers at the
First Closing, the terms of each Warrant which are set forth in
Section 2.2(a)(ii).
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ARTICLE II
PURCHASE AND SALE
2.1 Upon the terms and subject to the conditions set forth
herein, the Company agrees to sell, and the Purchasers agree to purchase,
severally and not jointly, the Debentures together with the Warrants at the
purchase price of up to $1,950,000.00 ("Purchase Price") as follows:
(a) First Closing. Within 5 Trading Days of the
date hereof, the Purchasers shall purchase, severally and not
jointly, in the aggregate, up to $975,000 principal amount of
Debentures, together with the Warrants. Each Purchaser shall
deliver to the Escrow Agent via wire transfer or a certified
check immediately available funds the Subscription Amount
applicable to the First Closing and the Company shall deliver
to the Escrow Agent the Debentures evidencing said principal
amount and the Warrants issuable at the First Closing.
(b) Second Closing. Within 5 Trading Days of
written notice to the Purchasers from the Company that the
Registration Statement has been declared effective, the
Purchasers shall purchase, severally and not jointly, in the
aggregate, up to $975,000 principal amount of Debentures and
the Company shall sell such principal amount of Debentures.
The Purchasers shall deliver to the Escrow Agent immediately
available funds in the amount of the Purchase Price, and the
Company shall deliver the Debentures evidencing said
principal sum to the Escrow Agent, to be held and distributed
by the Escrow Agent pursuant to the Escrow Agreement.
(c) Each Closing. Upon satisfaction of the
conditions set forth in Section 2.2, each Closing shall occur
at the offices of the Escrow Agent, or such other location as
the parties shall mutually agree.
2.2 Conditions to Closing.
(a) At or prior to each Closing, the Company shall
deliver or cause to be delivered to the Escrow Agent the following:
(i) Debentures in the Subscription Amount
indicated below such Purchaser's name on the signature page
of this Agreement, registered in the name of such Purchaser;
(ii) 5 Warrants (as to the first Closing only)
registered in the name of each such Purchaser with the
following terms:
(A) a Warrant to purchase up to such
Purchaser's pro-rata share of
604,500 shares of Common Stock
with a term of 3 years and an
exercise price of $0.20 per
Warrant Share, subject to
adjustment therein;
(B) a Warrant to purchase such
Purchaser's pro-rata share of
604,500 shares of Common Stock
(except that, with respect to
Alpha Capital AG's Warrant issued
hereunder, in addition to its
pro-rata share of 604,500 shares,
such Warrant shall be
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increased by 140,000 Warrant
Shares such that the aggregate
number of Warrant Shares issuable
under this subsection shall equal
744,500) with a term of 3 years
and an exercise price of $0.25 per
Warrant Share, subject to
adjustment therein;
(C) a Warrant to purchase such
Purchaser's pro-rata share of
604,500 shares of Common Stock
with a term of 3 years and an
exercise price of $0.30 per
Warrant Share, subject to
adjustment therein;
(D) a Warrant to purchase such
Purchaser's pro-rata share of
1,625,000 shares of Common Stock
with a term of 3 years and an
exercise price of $0.40 per
Warrant Share, subject to
adjustment therein, which Warrants
shall include a forced exercise
provision in the event the Closing
Bid Price of the Common Stock
exceeds $.50 for 10 consecutive
Trading Days, subject to certain
other conditions included therein;
and
(E) a Warrant to purchase such
Purchaser's pro-rata share of
1,300,000 shares of Common Stock
with a term of 3 years and an
exercise price of $0.60 per
Warrant Share, subject to
adjustment therein, which warrants
shall include a forced exercise
provision in the event the Closing
Bid Price of the Common Stock
exceeds $.75 for 10 consecutive
Trading Days, subject to certain
other conditions included therein;
(iii) the legal opinion of Company Counsel, in
the form of Exhibit D attached hereto, addressed to the
Purchasers;
(iv) the Escrow Agreement duly executed by the
Company (as to the First Closing only);
(v) the Bond and Floating Charge in the form
annexed hereto as Exhibit G duly executed by Viragen
(Scotland) Ltd. which is to be a first ranking charge and all
other documents and instruments required to grant a floating
charge with no competing or adverse entries against Viragen
(Scotland) Ltd. in Scottish form to the Purchasers' (as to
the First Closing only);
(vi) the Registration Rights Agreement duly
executed by the Company (as to the First Closing only);
(vii) the Subsidiary Guarantee duly executed by
the Subsidiaries in the form annexed hereto as Exhibit H; and
(viii) the Transfer Agent Instructions executed by
the Company and delivered to and acknowledged by the
Company's transfer agent in the form annexed hereto as
Exhibit E.
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(b) At or prior to the Closings, each Purchaser shall
deliver or cause to be delivered to the Escrow Agent the following:
(i) the Subscription Amount indicated below
such Purchaser's name on the signature page of this
Agreement, in United States dollars and in immediately
available funds, by wire transfer;
(ii) the Escrow Agreement duly executed by such
Purchaser (as to the First Closing only); and
(iii) the Registration Rights Agreement duly
executed by such Purchaser (as to the First Closing only).
(c) All representations and warranties of the other
party contained herein shall remain true and correct as of the
applicable Closing Date.
(d) There shall have been no Material Adverse Effect (as
defined in Section 3.1(b)) with respect to the Company since the date
hereof.
(e) From the date hereof to each Closing Date, trading
in the Common Stock shall not have been suspended by the Commission
(except for any suspension of trading of limited duration agreed to by
the Company, which suspension shall be terminated prior to the
applicable Closing), and, at any time prior to each Closing Date,
trading in securities generally as reported by Bloomberg Financial
Markets shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are
reported by such service, or on the Principal Market, nor shall a
banking moratorium have been declared either by the United States or
New York State authorities, nor shall there have occurred any material
outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case,
in the reasonable judgment of the Purchasers, makes it impracticable
or inadvisable to purchase the Debentures at the applicable Closing.
(f) The Company shall have filed with the Commission the
Registration Statement registering all of the Underlying Shares and
such Registration Statement shall have been declared effective by the
Commission as to all such securities and been maintained effective
since such date (as to the Second Closing only).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set
forth under the corresponding section of the disclosure schedules attached
hereto (the "Disclosure Schedules"), the Company hereby makes the following
representations and warranties to the Purchasers:
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(a) Subsidiaries. The Company has no direct or indirect
subsidiaries. The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and
clear of any lien, charge, security interest, encumbrance, right of
first refusal or other restriction (collectively, "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. If the Company has no subsidiaries,
then references in the Transaction Documents to the Subsidiaries will
be disregarded.
(b) Organization and Qualification. Each of the Company
and the Subsidiaries 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 the Subsidiaries is duly qualified to do 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: (i) adversely affect the
legality, validity or enforceability of any Transaction Document, (ii)
have or result in or be reasonably likely to have or result in a
material 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) adversely
impair the Company's ability to perform fully on a timely basis its
obligations under any of the Transaction Documents (any of (i), (ii)
or (iii), a "Material Adverse Effect").
(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 hereunder or
thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the
transactions contemplated hereby or thereby have been duly authorized
by all necessary action on the part of the Company and no further
consent or action is required by the Company. Each of the Transaction
Documents has been (or upon delivery will be) 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, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and general principles of equity.
Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation,
by-laws or other organizational or charter documents.
(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
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Company's or any Subsidiary's certificate or articles of
incorporation, bylaws or other organizational or charter documents, or
(ii) subject to obtaining the Required Approvals (as defined below),
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
result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. Neither the Company
nor any Subsidiary is 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 filings required under Section 4.8, (ii)
the filing with the Commission of the Underlying Shares Registration
Statement, (iii) the application(s) to each applicable Principal
Market for the listing of the Underlying Shares for trading thereon in
the time and manner required thereby, and (iv) applicable Blue Sky
filings (collectively, the "Required Approvals").
(f) Issuance of the Securities. The Securities are duly
authorized and, when issued and paid for in accordance with the
applicable Transaction Documents, will be duly and validly issued,
fully paid and non assessable, free and clear of all Liens. The
Company has reserved from its duly authorized capital stock a number
of shares of Common Stock for issuance of the Underlying Shares at
least equal to the Required Minimum on the date hereof.
(g) Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock of the Company is set
forth in the Disclosure Schedules attached hereto. 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 a result of the
purchase and sale of the Securities, there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or 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 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. The issuance and sale of the Securities will
not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the
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Purchasers) 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 two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the
foregoing materials being collectively referred to herein as the "SEC
Reports") on a timely basis or has received 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
Purchasers 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 ("GAAP"),
except as may be otherwise specified in such financial statements or
the notes thereto, 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) 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 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 or similar plans.
(j) Litigation. There is no action, suit, inquiry,
notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company,
any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory
authority
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(federal, state, county, local or foreign) (collectively, an "Action")
which: (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities
or (ii) 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. The
Company does not have pending before the Commission any request for
confidential treatment of information. 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.
(k) 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 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, except in each case as could
not, individually or in the aggregate, have or result in a Material
Adverse Effect.
(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) 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 could
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.
(n) 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 the business of the Company and the
Subsidiaries and good and marketable title in all personal property
owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for
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
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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.
(o) 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 have a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). 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. 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.
(p) 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. A list of the Company's insurance contracts and policies are
set forth on the Disclosure Schedules. The Company has delivered to
the Purchasers, prior to the First Closing, such contracts and
policies. To the best of Company's knowledge, such insurance contracts
and policies are accurate and complete. Neither the Company nor any
Subsidiary has any 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.
(q) Transactions With Affiliates and Employees. 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.
(r) 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
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assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
(s) Solvency/Indebtedness. Based on the financial
condition of the Company as of each Closing Date: (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). The
Company has no knowledge of any facts or circumstances which lead it
to believe that it will file for reorganization or liquidation under
the bankruptcy or reorganization laws of any jurisdiction within one
year from the First Closing Date. The SEC Documents and Schedule
3.1(s) attached hereto set forth as of the date hereof all outstanding
secured and unsecured Indebtedness of the Company or any Subsidiary,
or for which the Company or any Subsidiary has commitments. For the
purposes of this Agreement, "Indebtedness" shall mean (a) any
liabilities for borrowed money or amounts owed in excess of $25,000
(other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent
obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's balance sheet (or the
notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business; and (c) the present value of any lease
payments in excess of $25,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.
(t) 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, and the Company has not taken any
action that would cause any Purchaser to be liable for any such fees
or commissions. The Company agrees that the Purchasers shall have no
obligation with respect to any fees or with respect to any claims made
by or on behalf of any Person for fees of the type contemplated by
this Section with the transactions contemplated by this Agreement.
(u) Private Placement. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
3.2(b)-(f), the offer, issuance and sale of the Securities to the
Purchasers as contemplated hereby are exempt from the registration
requirements of the Securities Act. The issuance and sale of the
Securities hereunder
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does not contravene the rules and regulations of the Principal Market
and no shareholder approval is required for the Company to fulfill its
obligations under the Transaction Documents.
(v) Listing and Maintenance Requirements. The Company
has not, in the 12 months preceding the date hereof, received notice
from any Principal Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance
with the listing or maintenance requirements of such Principal Market.
The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing
and maintenance requirements.
(w) Registration Rights. 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.
(x) Application of Takeover Protections. The Company and
its Board of Directors have 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 Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under
the Transaction Documents, including without limitation as a result of
the Company's issuance of the Securities and the Purchasers' ownership
of the Securities.
(y) Seniority. As of the date of this Agreement, no
indebtedness of the Company is senior to the Debentures in right of
payment, whether with respect to interest or upon liquidation or
dissolution, or otherwise, other than indebtedness secured by purchase
money security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior only
as to the property covered thereby).
(z) Disclosure. The Company confirms that neither it nor
any other Person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that
constitutes or might constitute material, nonpublic information. The
Company understands and confirms that the Purchasers will rely on the
foregoing representations in effecting transactions in securities of
the Company. All disclosure provided to the Purchasers regarding the
Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf
of the Company with respect to the representations and warranties made
herein are true and correct with respect to such representations and
warranties 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. The Company acknowledges and agrees
that no Purchaser
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makes or has made any representations or warranties with respect to
the transactions contemplated hereby.
(aa) Tax Status. The Company and each of its Subsidiaries
has made or filed all federal, state and foreign income and all other
tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company
and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on
such returns, reports and declarations, except those being contested
in good faith and has set aside on its books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There
are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company
know of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, statue or local tax.
None of the Company's tax returns is presently being audited by any
taxing authority.
(bb) Acknowledgment Regarding Purchasers' Purchase of
Securities. The Company acknowledges and agrees that the Purchasers
are acting solely in the capacity of arm's length purchasers with
respect to this Agreement and the transactions contemplated hereby.
The Company further acknowledges that no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Purchaser or any of
their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to the Purchasers' purchase of
the Securities. The Company further represents to each Purchaser that
the Company's decision to enter into this Agreement has been based
solely on the independent evaluation of the Company and its
representatives.
(cc) No General Solicitation or Advertising in Regard to
this Transaction. Neither the Company nor, to the knowledge of the
Company, any of its directors or officers (i) has conducted or will
conduct any general solicitation (as that term is used in Rule 502(c)
of Regulation D) or general advertising with respect to the sale of
the Debentures or the Warrants, or (ii) made any offers or sales of
any security or solicited any offers to buy any security under any
circumstances that would require registration of the Debentures, the
Underlying Shares or the Warrants under the Securities Act or made any
"directed selling efforts" as defined in Rule 902 of Regulation S.
(dd) No Disagreements with Accountants and Lawyers. There
are no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the accountants and
lawyers formerly or presently employed by the Company and the Company
is current with respect to any fees owed to its accountants and
lawyers.
-15-
3.2 Representations and Warranties of the Purchasers. Each
Purchaser hereby, for itself and for no other Purchaser, represents and
warrants to the Company as follows:
(a) Organization; Authority. Such Purchaser 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 Transaction Documents and otherwise
to carry out its obligations thereunder. The purchase by such
Purchaser of the Securities hereunder has been duly authorized by all
necessary action on the part of such Purchaser. Each of this
Agreement, and the Registration Rights Agreement has been duly
executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against it
in accordance with its terms.
(b) Investment Intent. Such Purchaser 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
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
Securities pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws. Nothing
contained herein shall be deemed a representation or warranty by such
Purchaser to hold Securities for any period of time. Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its
business. Such Purchaser does not have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the
Securities.
(c) Purchaser Status. At the time such Purchaser was
offered the Securities, it was, and at the date hereof it is, and on
each date on which it exercises any Warrants or converts any
Debentures, it will be an "accredited investor" as defined in Rule
501(a) under the Securities Act. Such Purchaser has not been formed
solely for the purpose of acquiring the Securities. Such Purchaser is
not a registered broker-dealer under Section 15 of the Exchange Act.
(d) Experience of such Purchaser. Such 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 Securities, and has so evaluated the merits and
risks of such investment. Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is
able to afford a complete loss of such investment.
(e) General Solicitation. Such Purchaser 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.
-16-
(f) Reliance. Such Purchaser understands and
acknowledges that: (i) the Securities are being offered and sold to it
without registration under the Securities Act in a private placement
that is exempt from the registration provisions of the Securities Act
and (ii) the availability of such exemption depends in part on, and
the Company will rely upon the accuracy and truthfulness of, the
foregoing representations and such Purchaser hereby consents to such
reliance.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance
with state and federal securities laws. In connection with any
transfer of Securities other than pursuant to an effective
registration statement, to the Company, to an Affiliate of a
Purchaser, to an entity managed by a Purchaser 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. As a condition of transfer, any
such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as
is required by this Section 4.1(b), of the following legend on any
certificate evidencing Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [EXERCISABLE] [CONVERTIBLE]] HAVE 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 MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
-17-
The Company acknowledges and agrees that a Purchaser may from
time to time pledge pursuant to a bona fide margin agreement or grant
a security interest in some or all of the Securities and, if required
under the terms of such arrangement, such Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties. Such
a pledge or transfer would not be subject to approval of the Company
and no legal opinion of the pledgee, secured party or pledgor shall be
required in connection therewith. Further, no notice shall be required
of such pledge. At the appropriate Purchaser'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 Underlying Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)):
(i) while a registration statement (including the Underlying Shares
Registration Statement) covering the resale of such security is
effective under the Securities Act, or (ii) following any sale of such
Underlying Shares pursuant to Rule 144, or (iii) if such Underlying
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 pronouncements issued by the
Staff of the Commission). If all or any portion of a Debenture or
Warrant is converted or exercised (as applicable) at a time when there
is an effective registration statement to cover the resale of the
Underlying Shares, or if such Underlying Shares may be sold under Rule
144(k) or if such legend is not otherwise required under applicable
requirements of the Securities Act (including judicial interpretations
thereof) then such Underlying Shares shall be issued free of all
legends. The Company agrees that following the Effective Date or at
such time as such legend is no longer required under this Section
4.1(c), it will, no later than three Trading Days following the
delivery by a Purchaser to the Company or the Company's transfer agent
of a certificate representing Underlying Shares issued with a
restrictive legend, deliver or cause to be delivered to such Purchaser
a certificate representing such Underlying Shares that are 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.
(d) In addition to such Purchaser's other available
remedies, the Company shall pay to a Purchaser, in cash, as liquidated
damages and not as a penalty, for each $1,000 of Underlying Shares
(based on the Closing Bid Price of the Common Stock on the date such
Securities are submitted to the Company's transfer agent) subject to
this Section 4.1(c), $20 per Trading Day (increasing to $40 per
Trading Day 3 Trading Days after such damages have begun to accrue)
for each Trading Day after such third Trading Day until such
certificate is delivered.
-18-
4.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Securities will result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market
conditions. The Company further acknowledges that its obligations under the
Transaction Documents, including without limitation its obligation to issue the
Underlying Shares pursuant to the Transaction Documents, are unconditional and
absolute and not subject to any right of set off, counterclaim, delay or
reduction, regardless of the effect of any such dilution or any claim that the
Company may have against any Purchaser and regardless of the dilutive effect
that such issuance may have on the ownership of the other stockholders of the
Company.
4.3 Furnishing of Information. As long as any Purchaser owns
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. Upon the request of any Purchaser, the Company shall deliver to
such Purchaser a written certification of a duly authorized officer as to
whether it has complied with the preceding sentence. As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to
such laws, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) such information as is required for
the Purchasers to sell the Securities 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 Securities without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144.
4.4 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 Purchasers, or
that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Principal Market.
4.5 Reservation and Listing of Securities.
(a) The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in an amount equal to 150% of the number
required to fulfill its obligations in full under the Transaction
Documents (the "Reserved Amount"). In order to ensure that the Company
has authorized a sufficient amount of shares to meet the Reserved
Amount at all times, the Company must deliver to the Purchaser at the
end of every month a list detailing (1) the current amount of shares
authorized by the Company and reserved for the Purchaser; and (2)
amount of shares issuable upon conversion of the Debentures and upon
exercise of the Warrants and as payment of interest accrued on the
Debentures for one year. If the Company fails to provide such list
within five (5) business days of the end of each month, the Company
shall pay the Standard Liquidated Damages Amount in cash.
(b) If, on any date, the number of authorized but
unissued (and otherwise unreserved) shares of Common Stock is less
than 125% of (i) the Actual Minimum on
-19-
such date, minus (ii) the number of shares of Common Stock previously
issued pursuant to the Transaction Documents, then the Board of
Directors of the Company shall use its best efforts to amend the
Company's certificate or articles of incorporation to increase the
number of authorized but unissued shares of Common Stock to at least
the Required Minimum at such time (minus the number of shares of
Common Stock previously issued pursuant to the Transaction Documents),
as soon as possible and in any event not later than the 60th day after
such date; provided that the Company will not be required at any time
to authorize a number of shares of Common Stock greater than the
maximum remaining number of shares of Common Stock that could possibly
be issued after such time pursuant to the Transaction Documents.
(c) The Company shall: (i) in the time and manner
required by each Principal Market, prepare and file with such
Principal Market an additional shares listing application covering a
number of shares of Common Stock at least equal to the greater of (A)
the Required Minimum on each Closing Date and (B) the Required Minimum
on the date of such application, (ii) take all steps necessary to
cause such shares of Common Stock to be approved for listing on each
Principal Market as soon as possible thereafter, (iii) provide to the
Purchasers evidence of such listing, and (iv) maintain the listing of
such Common Stock on each such Principal Market or another Principal
Market.
(d) If, on any date, the number of shares of Common
Stock previously listed on a Principal Market is less than 125% of the
Actual Minimum on such date, then the Company shall take the necessary
actions to list on such Principal Market, as soon as reasonably
possible, a number of shares of Common Stock at least equal to the
Required Minimum on such date; provided that the Company will not be
required at any time to list a number of shares of Common Stock
greater than the maximum number of shares of Common Stock that could
possibly be issued pursuant to the Transaction Documents.
(e) The Company shall not effectuate a reverse split of
the Common Stock without the prior written consent of the Purchasers.
4.6 Conversion and Exercise Procedures. The form of Election to
Purchase included in the Warrants and the forms of Conversion Notice included
in the Debentures set forth the totality of the procedures required in order to
exercise the Warrants or convert the Debentures. No additional legal opinion or
other information or instructions shall be necessary to enable the Purchasers
to exercise their Warrants or convert their Debentures. The Company shall honor
exercises of the Warrants and conversions of the Debentures and shall deliver
Underlying Shares in accordance with the terms, conditions and time periods set
forth in the Transaction Documents.
4.7 Future Financings. From the date hereof until after the
Effective Date, other than as contemplated by this Agreement, neither the
Company nor any Subsidiary shall (i) incur, issue, create, guarantee, assume or
otherwise become liable on account of any indebtedness or (ii) increase any
amounts owing or to which such Person is liable under any existing obligations
or (iii) issue or sell any Capital Shares or Capital Shares Equivalents.
Notwithstanding anything herein to the contrary, the 6 month period set forth
in this Section 4.7 shall be extended for the
-20-
number of Trading Days during such period in which (i) trading in the Common
Stock is suspended by any Trading Market, 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 Purchasers for the resale of the
Underlying Shares.
4.8 Securities Laws Disclosure; Publicity. The Company shall,
within 1 Trading Day after the First Closing Date, issue a press release or
file a Current Report on Form 8-K reasonably acceptable to the Purchasers
disclosing all material terms of the transactions contemplated hereby. The
Company and the Purchasers shall consult with each other in issuing any press
releases with respect to the transactions contemplated hereby. Notwithstanding
the foregoing, other than in any registration statement filed pursuant to the
Registration Rights Agreement and filings related thereto, the Company shall
not publicly disclose the name of any Purchaser or the terms of the Agreement,
or include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Principal Market, without the prior written consent of
such Purchaser, except to the extent such disclosure is required by law or
Principal Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure.
4.9 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing representations in effecting
transactions in securities of the Company.
4.10 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
trade payables, capital lease obligations, and accrued expenses in the ordinary
course of the Company's business and prior practices), to redeem any Company
equity or equity-equivalent securities or to settle any outstanding litigation.
4.11 Reimbursement. If any Purchaser becomes involved in any
capacity in any Proceeding by or against any Person who is a stockholder of the
Company, solely as a result of such Purchaser's acquisition of the Securities
under this Agreement and without causation by any other activity, obligation,
condition or liability pertaining to such Purchaser and not to the transactions
contemplated by this Agreement, the Company will reimburse such Purchaser 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. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same
terms and conditions to any Affiliates of the Purchasers who are actually named
in such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of the
Purchasers and any such Affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, the Purchasers and any such Affiliate and any such Person. The Company
also agrees that neither the Purchasers nor any such Affiliates, partners,
directors, agents, employees or controlling persons
-21-
shall have any liability to the Company or any Person asserting claims on
behalf of or in right of the Company solely as a result of acquiring the
Securities under this Agreement.
4.12 Indemnification of Purchasers. The Company will indemnify and
hold the Purchasers and their directors, officers, shareholders, partners,
employees and agents (each, a "Purchaser 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 that any such Purchaser
Party may suffer or incur as a result of or relating to: (a) any
misrepresentation, breach or inaccuracy, or any allegation by a third party
that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in
this Agreement or in the other Transaction Documents; or (b) any cause of
action, suit or claim brought or made against such Purchaser Party and arising
solely out of or solely resulting from the execution, delivery, performance or
enforcement of this Agreement or any of the other Transaction Documents and
without causation by any other activity, obligation, condition or liability
pertaining to such Purchaser and not to the transactions contemplated by this
Agreement. The Company will reimburse such Purchaser 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.
4.13 Shareholders Rights Plan. In the event that a shareholders
rights plan is adopted by the Company, no claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
the plan or in any way could be deemed to trigger the provisions of such plan
by virtue of receiving Securities under the Transaction Documents.
4.14 Participation in Future Financing. From the date hereof until
12 months after the Effective Date, the Company shall not effect a financing of
its Capital Shares or Capital Shares Equivalents (a "Subsequent Financing")
unless (i) the Company delivers to each of such Purchasers, at least ten (10)
Trading Days prior to the Closing of such Subsequent Financing, a written
notice (the "Subsequent Financing Notice") of its intention to effect such
Subsequent Financing, which Subsequent Financing Notice shall describe in
reasonable detail the proposed terms of such Subsequent Financing, the amount
of proceeds intended to be raised thereunder, the Person with whom such
Subsequent Financing is proposed to be effected, and attached to which shall be
a term sheet or similar document relating thereto and (ii) such Purchaser shall
not have notified the Company by 6:30 p.m. (New York City time) on the tenth
(10th) Trading Day after its receipt of the Subsequent Financing Notice of its
willingness to provide (or to cause its designee to provide), subject to
completion of mutually acceptable documentation, all or part of such financing
to the Company on the same terms set forth in the Subsequent Financing Notice.
If the Purchasers shall fail to so notify the Company of their willingness to
participate in the Subsequent Financing, the Company may effect the remaining
portion of such Subsequent Financing on the terms and to the Persons set forth
in the Subsequent Financing Notice; provided that the Company must provide the
Purchasers with a second Subsequent Financing Notice, and the Purchasers will
again have the right of first refusal set forth above in this Section 4.16, if
the Subsequent Financing subject to the initial Subsequent Financing Notice is
not consummated for any reason on the terms set forth in such Subsequent
Financing Notice within thirty (30) Trading Days after the date of the initial
Subsequent Financing Notice with the Person identified in the
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Subsequent Financing Notice.
4.15 Breach of Representations and Warranties and Covenants by the
Company. If the Company breaches any of the representations, warranties or
covenants set forth in Articles III and IV, and in addition to any other
remedies available to the Purchasers pursuant to this Agreement, the Company
shall pay to the Purchasers liquidated damages of three percent (3%) of the
outstanding amount of the Debentures per month plus accrued and unpaid interest
on the Debentures, prorated for partial months, in cash ("Standard Liquidated
Damages Amount"), until such breach is cured.
ARTICLE V
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by the Company
or any Purchaser, by written notice to the other parties, if the First Closing
has not been consummated by the third business day following the date of this
Agreement; provided that no such termination will affect the right of any party
to xxx for any breach by the other party (or parties).
5.2 Fees and Expenses. The Company has agreed to reimburse
$15,000 to the Purchasers as reimbursement for the Purchasers' legal fees and
expenses incurred in connection with the preparation and negotiation of the
Transaction documents. Except as expressly set forth in the Transaction
Documents to the contrary, 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 transfer agent fees, stamp taxes and other taxes and duties levied in
connection with the issuance of any Securities.
5.3 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.
5.4 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 5:30 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 5:30 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 addresses for such notices and
communications are those set forth on the signature pages hereof, or such other
address as may be designated in writing hereafter, in the same manner, by such
Person. Set forth on the Disclosure Schedule is a list of names and contact
information for the Company's Board of Directors, executive officers, key
employees (including
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organization chart of the Company), corporate counsel, including, if
applicable, in-house counsel, the Company's outside counsel (including
securities counsel, if different than corporate counsel), the Company's
accountants and the Company's transfer agent. The Company hereby represents
that it has no present intent to change the information set forth in such list.
5.5 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 each of the Purchasers 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.
5.6 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.
5.7 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 Purchasers. Any Purchaser
may assign its rights under this Agreement and the Registration Rights
Agreement to any Person to whom such Purchaser assigns or transfers any
Securities.
5.8 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 Sections 4.8.
5.9 Governing Law; Venue; Waiver of Jury Trial. 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 hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
New York, borough of Manhattan, 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 any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or 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
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permitted by law. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions
of this Agreement, then the prevailing party in such action or proceeding shall
be reimbursed by the other party for its attorneys fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
action or proceeding.
5.10 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closings and the delivery,
exercise and/or conversion of the Securities, as applicable.
5.11 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.
5.12 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.
5.13 Rescission and Withdrawal Right. Notwithstanding anything to
the contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser 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
Purchaser 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.
5.14 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.
5.15 Remedies. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each
of the Purchasers 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
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action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.16 Payment Set Aside. To the extent that the Company makes a
payment or payments to any Purchaser pursuant to any Transaction Document or a
Purchaser 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.
5.17 Usury. To the extent it may lawfully do so, the Company
hereby agrees not to insist upon or plead or in any manner whatsoever claim,
and will resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time hereafter in
force, in connection with any claim, action or proceeding that may be brought
by any Purchaser in order to enforce any right or remedy under any Transaction
Document. Notwithstanding any provision to the contrary contained in any
Transaction Document, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for payments in the
nature of interest shall not exceed the maximum lawful rate authorized under
applicable law (the "Maximum Rate"), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of them, when
aggregated with any other sums in the nature of interest that the Company may
be obligated to pay under the Transaction Documents exceed such Maximum Rate.
It is agreed that if the maximum contract rate of interest allowed by law and
applicable to the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the new maximum
contract rate of interest allowed by law will be the Maximum Rate of interest
applicable to the Transaction Documents from the effective date forward, unless
such application is precluded by applicable law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to
any Purchaser with respect to indebtedness evidenced by the Transaction
Documents, such excess shall be applied by such Purchaser to the unpaid
principal balance of any such indebtedness or be refunded to the Company, the
manner of handling such excess to be at such Purchaser's election.
5.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall
be responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the
Purchasers 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
Purchaser 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
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Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
5.19 Liquidated Damages. The Company's obligations to pay any
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
liquidated damages and other amounts have been paid notwithstanding the fact
that the instrument or security pursuant to which such liquidated damages or
other amounts are due and payable shall have been canceled.
***********************
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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.
VIRAGEN, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President and
Chief Financial Officer
Address for Notice:
000 XX 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
(which shall not constitute
notice) Xxxxx X. Xxxxxxxxx, Esq.
Xxxxxx & Xxxx, P.A.
000 X. Xxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxx Xxxxxxxxxx, XX 00000
(000) 000-0000
(000) 000-0000 (Direct)
(000) 000-0000 (Fax)
xxxxxxxxxx@xxxxxx.xxx
Secretary (Xxxxxxx) xxxxxx@xxxxxx.xxx
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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PURCHASERS SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
PALISADES EQUITY FUND L.P. Address for Notice:
C/o PEF Advisors, LLC
0000 Xxxxxxxxx Xxxxx
By: /s/ Xxxxxx Xxxxxxx Suite B220
----------------------------- Xxxxxxx, Xxxxxxx 00000
Name: Xxxxxx Xxxxxxx Attn: Fund Manager
Title: General Partner
Subscription Amount: $375,000 First Closing, $375,000 Second Closing
BRISTOL INVESTMENT FUND, LTD. Address for Notice:
c/o Bristol DLP, LLC
0000 Xxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
By: /s/ Xxxx Xxxxxxx Attn: Xxx Xxxx, Esq.
----------------------------- Fax: (000) 000-0000
Name: Xxxx Xxxxxxx
Title: Director
Subscription Amount: $300,000 First Closing, $300,000 Second Closing
ALPHA CAPITAL AG Address for Notice:
Xxxxxxxxxxx 00
Furstentum 9490
By: /s/ Xxxxxx Xxxxxxxx Vaduz, Liechtenstein
----------------------------- Fax: 000-000 000 0000
Name: Xxxxxx Xxxxxxxx Attn: Director
Title: Director
Subscription Amount: $300,000 First Closing, $300,000 Second Closing
With a copy to:
(which shall not constitute
notice) Xxxxxxx Xxxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
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