Exhibit 2
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
THIS AGREEMENT, dated as of June 18, 2002, is by and between
BIO-PLEXUS, INC., a Delaware corporation (the "Company"), ComVest Venture
Partners, L.P., a Delaware limited partnership, in its capacity as
administrative agent to the Investors ("ComVest"), and the individuals and/or
entities that are signatories to this Agreement (together, the "Investors" and
individually, an "Investor").
WHEREAS, the Company desires to offer and sell (the "Offering") in a
private placement transaction (the "Private Placement") exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), twenty-five (25) Units (the "Initial Units") (subject to an
increase of another ten (10) Units to cover over-allotments), each Unit
(together, the "Units" and individually, a "Unit") consisting of a (i) $100,000
Senior Subordinated 7% Non-Convertible Promissory Note (together, the "Notes"
and individually, a "Note"), to be in the form of Exhibit A annexed hereto and
made a part hereof, and (ii) warrants to purchase fifty-thousand (50,000) shares
of common stock, par value $.001 per share (the "Common Stock"), of the Company
(together, the "Warrants" and individually, a "Warrant"), to be in the form of
Exhibit B annexed hereto and made a part hereof;
WHEREAS, the aggregate purchase price (the "Aggregate Purchase Price")
of the Units shall be Two Million Five Hundred Thousand Dollars ($2,500,000)
(subject to an increase of an additional One Million Dollars ($1,000,000) to
cover over-allotments);
WHEREAS, repayment of the Notes will be secured by a first perfected
priority interest (the "Security Interest") in certain collateral of the
Company, pursuant to the terms and conditions of a Security Agreement (the
"Security Agreement"), dated as of even date herewith, by and among the Company,
each of the Investors, and ComVest venture Partners, L.P., a Delaware limited
partnership ("ComVest"), as administrative agent for the Investors;
WHEREAS, the Investors desire to appoint ComVest as administrative
agent for the Investors, to act on their behalf for purposes of administering
the Security Interest and with respect to all other matters expressly set forth
below or in the Security Agreement;
WHEREAS, each of the Investors has been placed by Commonwealth
Associates, L.P. ("Commonwealth"), pursuant to the terms and conditions of a
Placement Agent Agreement, dated as of even date herewith, by and between the
Company and Commonwealth (the "Placement Agent Agreement"), pursuant to which
Commonwealth is entitled to receive warrants (the "Agent Warrants") to purchase
the number of shares of Common Stock equal to ten percent (10%) of the Common
Stock or securities convertible into Common Stock sold by the Company, during
the term of the Placement Agent Agreement or for a period of one (1)-year
thereafter, to a third party (the "Introduced Party") that was introduced by
Commonwealth to the Company prior to the Initial Closing Date or rightful
termination of the Offering;
WHEREAS, the Company entered into an Advisory Agreement, dated June
2002, with Commonwealth, pursuant to which Commonwealth agreed to act as a
financial advisor to the Company in exchange for a warrant to purchase one
million (1,000,000) shares of Common Stock (the "Advisory Warrant");
WHEREAS, the Investors severally (and not jointly and severally)
agree, upon the terms and subject to the conditions hereinafter set forth, to
purchase the number of Units set forth opposite the name of each Investor on
Schedule A annexed hereto and made a part hereof.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
SECTION 1. Purchase and Sale of Units.
1.1 Description of Purchase. Subject to, and upon the terms and
conditions of this Agreement and the acceptance of the Company, the Investors
herewith severally (and not jointly and severally) subscribe for and shall
purchase the number of Units set forth opposite the name of each of the
Investors on Schedule A annexed hereto and made a part hereof (the "Purchase
Amount"). The Notes, shares of Common Stock issuable upon conversion of the
Notes (the "Conversion Shares"), the Warrants and the shares of Common Stock
issuable upon exercise of the Warrants (the "Warrant Shares") are hereinafter
referred to as the "Investor Securities."
1.2 Description of Notes. The Notes issued to each of the Investors,
together with all of the Notes sold in the Offering:
(a) shall bear interest at the rate of seven percent (7%) per
annum, which interest shall accrue through the earlier of the Maturity Date (as
defined below) or the date on which the Note is converted;
(b) shall be payable, as to principal, together with all interest
accrued thereon, on a date which shall be the earlier of (i) thirty (30) months
following the Initial Closing Date (as defined below); or (ii) the date on which
the Company consummates a merger, combination or sale of all or substantially
all of the assets of the Company; or (iii) upon the acquisition of more than
fifty percent (50%) of the voting power or interest of the Company by the
purchase by a single entity or person or Section 13D Group (the "Maturity
Date"), unless previously converted in accordance with the terms of the Notes.
For the purposes of this Section 1.2(b), "Section 13D Group" shall mean any
group existing pursuant to Section 13(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act");
(c) (i) except for up to One Million Dollars ($1,000,000) in
aggregate principal amount of additional notes sold by the Company on or after
the date hereof (together, the "Additional Notes" and individually, an
"Additional Note"), which shall rank equally with the Notes, each of the Notes
shall be senior to all other indebtedness for money borrowed of the Company,
and, together with such Additional Notes, shall be secured by a first perfected
priority lien and security interest in all of the assets and properties of the
Company, including, without limitation, all letters patents, patent
applications, trademarks, tradenames, copyrights, trade secrets and other
intellectual property owned or leased by the Company or any of its affiliates,
together with all proceeds and products thereof (the "Collateral"), pursuant to
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a Security Agreement by and among the Company, as debtor, and the Investors, as
secured parties, in the form of Exhibit C annexed hereto and made a part hereof
(the "Security Agreement"); provided, however, that each Investor hereby
expressly acknowledges that the Company owns real estate located in Vernon,
Connecticut (the "Mortgagee Collateral"), which is subject to a mortgage (the
"Mortgage"), which is secured by a first perfected priority lien and security
interest in favor of the Mortgagee, and that, with respect to the Mortgage, the
Notes and the Additional Notes shall be secured by a second perfected lien and
security interest in the Mortgagee Collateral, pursuant to the terms and
conditions of a Mortgage and Security Agreement by and between the Company and
each of the Investors, in the form of Exhibit D annexed hereto and made a part
hereof (the "Mortgage Agreement").
(ii) Notwithstanding the foregoing, each Investor hereby
expressly permits the Company to establish a revolving credit facility (the
"Credit Facility") with an institutional lender (th3e "Lender") for a maximum of
Two Million Dollars ($2,000,000), and acknowledges that in the event the Company
establishes such a Credit Facility, repayment of the Credit Facility will be
secured by a first perfected priority lien and security interest in favor of the
Lender in (i) all existing and future accounts receivable of the Company and its
direct and indirect subsidiaries (whether existing at the time of closing with
the Lender or thereafter organized or acquired by the Company), and (ii) all
inventory and proceeds of such accounts receivable (the "Lender Collateral"), as
set out in more detail in the Security Agreement. The Investors hereby expressly
acknowledge that, solely in the event of the foregoing, the Investors' first
priority perfected lien and security interest in the Lender Collateral shall
become subordinate only to the Lender's first priority perfected lien and
security interest in the Lender's Collateral, so that repayment of the Notes and
the Additional Notes shall be secured by a second perfected lien and security
interest only with respect to the Lender Collateral;
(d) shall not be convertible into shares of Common Stock except
in the manner described in Section 1.3 below;
(e) shall be subject to prepayment by the Company, in whole or in
part, at any time prior to the Maturity Date, and must be repaid from the
proceeds of any issuance of securities by the Company (other than issuances of
Common Stock upon the exercise of stock options), in each case upon fifteen (15)
days prior written notice to the holders of the Notes, subject at all times to
such holders' right to convert the Notes as provided therein at any time prior
to the date fixed for prepayment. In the event of prepayment of a Note or Notes,
the Company shall incur and be responsible to pay to the holder or holders of
the Note(s), as the case may be, a prepayment penalty, calculated as follows:
Repayment Date Price
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(following issuance of the Notes)
June 18, 2002 through December 18, 200 100% of the principal amount of the Note(s)
December 19, 2002 through June 18, 2003 105% of the principal amount of the Note(s)
June 19, 2003 through December 18, 2003 110% of the principal amount of the Note(s)
December 19, 2003 through December 18, 2004 115% of the principal amount of the Note(s); and
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(f) shall be on terms no less favorable to the holders of the
Additional Notes.
1.3 Conversion Rights.
(a) Optional Conversion. The Notes shall provide that, at the
option of the holder or holders of the Notes, as the case may be, the Notes
shall be convertible into shares of Common Stock in the event the Company (i)
fails to pay such Note or Notes when due, whether on the Maturity Date or upon
an event of default under the Note or Notes, or (ii) fails to meet the
Performance Milestones (as defined below). In such event, each holder shall have
the right to convert his Note into shares of Common Stock at a conversion price
(the "Optional Conversion Price") equal to a fifteen percent (15%) discount to
the average closing bid price for the five (5) trading days immediately
following the later of (i) the date of such event of default or failure to meet
the Performance Milestones (as defined below), and (ii) the date of the issue of
any press release relating to the event of default, subject to customary
anti-dilution and other adjustments, as set forth in the Notes. For the purposes
hereof, "Performance Milestones" shall mean the milestones set forth in the
following table:
December 31, 2002 December 31, 2003
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Revenues $8,500,000 $18,500,000
EBITDA ($2,300,000) $2,400,000
(b) Automatic Conversion. The Notes shall provide that the
Company shall have the right automatically to convert the Notes into shares of
Common Stock at a conversion price equal to the lower of (i) One Dollar ($1.00)
per share or (ii) the average closing price for the five (5) trading days
immediately prior to the initial closing (the "Automatic Conversion Price"),
provided as follows: (i) that the average closing bid price for the Common Stock
has equaled or exceeded three (3) times the Automatic Conversion Price for a
period of twenty (20) consecutive trading days, and (ii) that the Conversion
Shares are trading on a national securities exchange or the NASDAQ SmallCap or
National Market System, and all such securities are fully registered for resale
or fully tradeable under Rule 144 and not subject to any lock-up provisions, and
(iii) that the aggregate amount of the Notes that may be converted in any thirty
(30)-day period shall be limited to the number of Conversion Shares as shall
equal ten (10) times the average daily trading volume during the thirty (30)-day
period immediately prior to any notice of conversion as set forth in the Notes.
1.4 Description of Warrants. The Warrants shall:
(a) entitle each Investor to purchase fifty thousand
(50,000) shares of Common Stock per Unit purchased by such Investor, at a per
share exercise price (the "Exercise Price") equal to One Dollar ($1.00);
(b) be exercisable for a term of thirty (30) months from the
Initial Closing Date;
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(c) be subject to the Company's right to redeem fifty
percent (50%) of any Warrant (i.e., twenty-five thousand (25,000) Warrant Shares
per Unit) at a price of One Cent ($.01) per Warrant Share, which right shall be
triggered in the event the Notes are repaid in full within six (6) months of the
Initial Closing Date. The Exercise Price shall be subject to customary
anti-dilution and other adjustments, as set forth in the Warrants.
SECTION 2. Closing Date, Use of Proceeds, Disbursement of
Proceeds and Designation of Administrative Agent.
(a) Closing Date. The closing of the sale of the Units to
the Investors shall take place on or before 5:00 p.m. (New York City time) on
July 1, 2002 (such date to be called the "Initial Closing Date"), at the offices
of Xxxxxxxxx Traurig LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the
"Initial Closing"). After the Initial Closing, the Company may continue to offer
and sell Units to other purchasers, up to a maximum of One Million Dollars
($1,000,000) of Notes until 5:00 p.m. (New York City time) on July 31, 2002,
when this Offering of all Units shall terminate (the "Outside Closing").
(b) The first net proceeds to the Company from the sale of
the Units shall be utilized by the Company to pay to Commonwealth a cash fee
equal to eight percent (8%) of the gross proceeds of the Private Placement. In
addition, the Company shall reimburse Commonwealth for its actual out-of-pocket
expenses incurred in connection with the Private Placement, including, without
limitation, the reasonable fees and disbursements of Commonwealth's counsel and
due diligence expenses.
(c) The Investors hereby expressly agree that ComVest shall
be authorized to execute a disbursement letter (the "Disbursement Letter") on
behalf of the Investors, authorizing the disbursement of the proceeds of the
Offering pursuant to the instructions contained in the Disbursement Letter,
which shall also be executed by the Company.
(d) The Investors hereby expressly agree that ComVest shall
be deemed the Administrative Agent (the "Administrative Agent") to act on behalf
of the Investors for purposes of administering the Security Interest and with
respect to all matters expressly set forth herein and/or in the Security
Agreement, including, without limitation, the execution of the Security
Agreement on behalf of each of the Investors, in its capacity as Administrative
Agent.
SECTION 3. Company Information.
3.1 Company Information. Information about the Company's
capitalization, management team, and business operations is available in its
recent filings with the Securities and Exchange Committee, including its Form
10-K for the period ending December 31, 2001 and its Form 10-Q for the fiscal
quarter ending March 31, 2002.
3.2 Risk Factors. These risk factors should be carefully
reviewed by the Investors prior to making an investment decision as to the
Units. The Units, and the Conversion Shares and Warrant Shares underlying the
Units, being offered by the Company on the terms and conditions set forth
herein, involve a high degree of risk and represent a highly speculative
investment.
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The Company needs to obtain additional financing. The
Company is in the process of attempting to raise additional
capital to fund operations. It recently substa3ntially
reduced its monthly net usage of cash through a combination
of reduction of expenses in the latter half of 2001 and an
increase in both product and sales royalty revenues. The
Company believes that it has sufficient funds to support
operations into the third quarter of 2002. If the Company is
unable to raise additional funds as required, it may to
reduce the scope of, or cease, its operations.
The Company has experienced a history of losses and any
future profitability is uncertain. The Company was
incorporated in 1987 and it has not yet made a profit. It
cannot guarantee that it will ever be profitable.
Furthermore, the Company may incur additional losses. As of
March 31, 2002, the Company had an accumulated deficit of
approximately $89,619,000 and the Company cannot assure
investors that it will ever achieve profitability of
positive operating cash flow. The relatively limited history
of operations, the nature of the Company's business and the
Company's limited marketing and manufacturing experience
make the prediction of future operating results difficult
and highly unreliable. The Company's future prospects,
therefore, must be evaluated in light of the substantial
risks, expenses, delays and difficulties normally
encountered by companies in the medical device industry,
which is characterized by an increasing number of
participants and intense competition. The Company cannot
assure the Investors that it will be able to market its
products at prices and in quantities that will generate a
profit. In addition, the Company cannot assure the Investors
that it can avoid delays and expenses in developing new
products, problems with production and marketing or other
unexpected difficulties.
The Company received a "Going Concern" opinion from its
accountants at the end of 2001. the Company requires
additional capital to fund its operations during the latter
part of 2002. Due to recurring losses from operations, and
the uncertainty surrounding the Company's ability to attract
additional financing to support current and anticipated
levels of operations, the Company's independent public
accountant's audit option, dated February 1, 2002, states
that these matters raise doubt about the Company's ability
to continue as a going concern.
The Company's success depends on greater commercial
acceptance, which the Company cannot predict. The Company's
future depends on the success of its current safety medical
products, which depends primarily on healthcare
professionals accepting the Company's products as reliable,
accurate and cost-effective replacements for traditional
medical products. The Company cannot predict the extent that
the market will continue to accept its safety blood
collection needles and related accessory products that are
marketed under the Company's Puncture-Guard(R) and
Drop-It(R) trademarks. Although the Company continues to
focus on developing additional safety medical products
featuring its patented internal blunting technology to
respond to the needs of healthcare professionals, the
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Company cannot guarantee that it will be able to develop
additional safety medical products or in a way that is
cost-effective.
The Company's manufacturing is subject to certain risks. The
Company may face unexpected technical problems in trying to
transfer product ideas from the development stage to the
manufacturing stage. These technical problems could delay
the Company's plans for new product releases. In addition,
the Company's manufacturing processes involve proprietary
molds, machinery and systems to manufacture its safety
needles and related accessory products, which the Company's
manufacturing personnel must continuously monitor and
update, especially as the Company develops more products.
Although the Company has extensive experience in
manufacturing its first product line, it may have limited
experience in producing subsequent product lines.
Manufacturing companies sometimes have problems in ramping
up production levels for new products, such as quality
control, compliance with FDA Regulations, and production
yields. Problems in scaling up production of the Company's
Winged Set product line could have a material adverse effect
on the Company. In addition, if the Company cannot increase
production rates, a backlog could develop, which could cause
the Company to lose new customers. In order to be
profitable, the Company must manufacture greater quantities
of products than it has to date, and it must do this more
efficiently than it has to date.
Reliance on certain suppliers. Only a few third-party
vendors make some of the Company's components. The Company
may not be able to meet the demand for its products if one
or more of these vendors cannot supply the Company with the
needed components. The Company purchases other important
components from single suppliers, so that problems with such
suppliers could seriously impact the Company's production
schedules. Shortages could also occur from some suppliers,
which could create delays in product shipments and have a
material impact on operations. The Company owns the molds
that are used by its suppliers to manufacture the Company's
components.
Reliance on single manufacturing facility. The Company's
Vernon, Connecticut facility is its only manufacturing
facility. If this facility becomes damaged or closed due to
fire or other causes, it would present serious consequences
adversely impacting the Company's operations.
The Company may not be successful in defending its
proprietary rights.The Company's commercial success depends
partly on its trade secrets, know-how, trademarks, patents
and other proprietary rights. The Company has obtained
patent protection for its proprietary technology in the
United States and internationally, but it cannot assure the
Investors that third parties will not challenge its patents
or that they will not be invalidated or designed around, or
that they will provide a commercially significant level of
protection. Furthermore, once issued, a patent is not always
valid or enforceable, and a patent holder may still infringe
the patent rights of others. If the Company's key patents
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are invalidated or expire, this could lead to increased
competition and would adversely affect the Company's
operations. Litigation may be necessary to enforce the
Company's patents, trade secrets or know-how, or to
determine the enforceability, scope and validity of the
proprietary rights of others. It would be a substantial
expense to the Company and a diversion of the time and
efforts of the Company's personnel to defend and prosecute
intellectual property suits and related legal and
administrative proceedings. Furthermore, the Company cannot
assure the Investors that it will be able to maintain the
confidentiality of its trade secrets or know-how, or that
others may not develop or acquire trade secrets or know-how
that are similar to the Company's.
The Company competes against larger entities that sell
safety medical products. The Company's success depends on
its ability to establish and maintain a competitive position
in the safety medical products market, particularly with
respect to its Puncture-Guard safety needles and related
products. The Company expects that manufacturers of
conventional medical products will compete intensely to
maintain their markets and revenues. Some of these
manufacturers currently offer products that may be perceived
as less expensive to operate, and which include a broader
range of applications than the products the Company offers
and expects to offer in the future. The Company cannot
assure the Investors that competitive pressures will not
result in price reductions of its products, which could
adversely affect the Company's profitability. In addition,
healthcare professionals may choose to maintain their
current method of blood collection, which may not rely on
self-blunting needle technology. The Company also faces
competition from manufacturers of alternative safety medical
products intended for similar use. Many of the Company's
competitors have substantially greater capital resources and
research and development staffs and facilities than the
Company's. The Company's products may become obsolete or
non-competitive if rapid technological changes or
developments occur. The Company may need to make substantial
investments in and commit significant resources to product
improvements and developments in order to stay competitive
and successfully introduce new products. The Company cannot
assure the Investors that it will have the resources
necessary to make such investments. If the Company does have
the required resources, it cannot assure the Investors that
it will be able to respond adequately to technological or
market changes.
The Company depends on key members of its staff and must
retain and recruit qualified individuals if it is to become
competitive. The Company's success depends on its ability to
retain certain scientific, technical, regulatory and
managerial personnel. If the Company loses key personnel, it
could have a materially adverse effect on its business.
Competition for qualified personnel is intense and the
Company cannot assure the Investors that it will be
successful in recruiting or retaining such personnel in the
future.
The Company's products are regulated by the United States
Food and Drug Administration (FDA). The FDA regulates the
Company's products in the United States as medical devices.
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The process of obtaining United States regulatory approval
and clearances may be lengthy, expensive and uncertain.
Commercial distribution of the Company's products in foreign
countries may be subject to varying governmental regulation
that may delay or restrict the marketing of the Company's
products in those countries. In addition, other regulatory
authorities may impose limitations on the use of the
Company's products. FDA enforcement policy strictly
prohibits the marketing of FDA-cleared or approved medical
devices for unapproved uses. The Company's manufacturing
operations are subject to compliance with Good Manufacturing
Practices regulations of the FDA and similar foreign
regulations. These regulations include controls over design,
testing, production, labeling, documentation and storage of
medical devices. Enforcement of these regulations has
increased significantly in the last several years and the
FDA has stated publicly that compliance will be more
strictly monitored in the future. The Company's facilities
and manufacturing processes, as well as those of current and
future third party suppliers, will be subject to periodic
inspections by the FDA and other regulatory authorities.
Failure to comply with these and other regulatory
requirements could result in, among other measures, warning
letters, fines, injunctions, civil penalties, recall or
seizure of products, total or partial suspension of
production, refusal of the government to grant clearance or
approval for devices, withdrawal of clearances or approvals,
or criminal prosecution, which would have an adverse effect
on the Company's business.
Significant stockholders exercise influence over the
Company. A group of stockholders own approximately 69% of
the Common Stock, as set forth in the Company's Schedule
13D, dated June 4, 2002. As a result, this group can control
the outcome of stockholder votes. Examples of stockholder
votes include those for election of directors, changes in
the Company's Certificate of Incorporation or By-Laws, and
approving certain mergers or other similar transactions.
The Company's stock price is volatile and investing in the
Units involves a high degree of risk. The market price of
the Common Stock has fluctuated significantly and as a
result, it can be "volatile." Future announcements
concerning the Company's competitors, including operating
results, technological innovations or new commercial
products, government regulations, developments concerning
proprietary rights, or litigation could have a material
adverse effect on the market price of the Common Stock.
Furthermore, the stock market has, from time to time,
experienced extreme price and volume fluctuations, which may
adversely affect the market price of the Company's common
stock. Some of these fluctuation have particularly affected
companies in the medical device industry and they have often
been unrelated to the operating performance of such
companies. In addition, general economic, political and
market conditions may also adversely affect the market price
of the Common Stock. The Company cannot assure the Investors
that the trading price of the Common Stock will remain at or
near its current level.
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The Common Stock has been delisted by the NASDAQ SmallCap
Stock Market. The Common Stock was delisted from the Nasdaq
SmallCap Stock Market on March 6, 2001. The delisting was a
result of the Company's failure to meet Nasdaq's
requirements for continued listing. The Company did not
appeal the delisting and is not currently eligible for
listing on The New York Stock Exchange or the American Stock
Exchange. The Common Stock began trading on the NASD's OTC
Bulletin Board under the symbol "BPXS" on July 27, 2001.
SECTION 4. Representations and Warranties of the Company to the
Investors. The Company hereby represents and warranties as follows:
(a) Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has all requisite corporate power and authority to own and
lease its property, to carry on its business as presently conducted and as
proposed to be conducted, and to carry out the transactions contemplated by this
Agreement. The Company has furnished to counsel to the Investors true and
complete copies of its Certificate of Incorporation and Bylaws, each as amended
to date and currently in effect.
(b) Reservation of Securities. The securities underlying the
Units, when issued and delivered against payment therefor in accordance with the
provisions of the Notes and Warrants, will be duly and validly issued, fully
paid and non-assessable and free and clear of all liens or other encumbrances
with respect to the issuance thereof.
(c) Authority for Agreement. The execution, delivery and
performance by the Company of this Agreement, the Notes and the Warrants, and
the consummation by the Company of the transactions contemplated hereby and
thereby, have been duly authorized by all requisite action on the part of the
Company. This Agreement has been, and the Notes and Warrants when executed, will
have been, duly executed and delivered by the Company, and constitute valid and
binding obligations of the Company, enforceable in accordance with their terms.
The execution, delivery and performance of this Agreement, and the Notes and
Warrants and the compliance with their provisions by the Company will not:
(i) violate any provision of law, statute, ordinance,
rule or regulation or any ruling, writ, injunction, order, judgment or
decree of any court, administrative agency or other governmental body
where such violation would have a material adverse effect on the
business, results of operations, or condition (financial or otherwise)
or prospects of the Company (a "Material Adverse Effect");
(ii) conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute (with due notice
or lapse of time, or both) a default (or give rise to any right of
termination, cancellation or acceleration) under (A) any agreement,
document, instrument, contract, understanding, arrangement, note,
indenture, mortgage or lease to which the Company is a party or under
which the Company or any of its assets is bound or affected where such
default would have a Material Adverse Effect, (B) the Company's
Certificate of Incorporation or (C) the Company's Bylaws; or
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(iii) result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets
of the Company, other than as contemplated by this Agreement.
(d) Capitalization. Immediately prior to the Closing, the
authorized capital stock of the Company shall consist of Twenty-Five Million
(25,000,000) shares of Common Stock and Five Million (5,000,000) shares of
Preferred Stock of the Company (the "Capital Stock"), of which Eleven Million
Five Hundred Sixty-Nine Thousand One Hundred Ninety-One (11,569,191) shares of
Common Stock are issued and outstanding and no shares of Preferred Stock are
issued or outstanding. All of the issued and outstanding shares of Capital Stock
have been duly authorized and validly issued and are fully paid and
nonassessable. Except for the transactions contemplated by this Agreement and as
set forth on Schedule 4(d) hereof, (i) there are no warrants, options,
convertible securities or other rights (contingent or otherwise) to purchase or
acquire any shares of capital stock of the Company that is outstanding, (ii) the
Company does not have an obligation (contingent or otherwise) to issue any
subscription, warrant, option, convertible security or other such right or to
issue or distribute to holders of any shares of its capital stock any evidences
of indebtedness or assets of the Company and (iii) the Company does not have an
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any shares of its capital stock or any interest therein or to pay any dividend
or make any other distribution in respect thereof. All of the issued and
outstanding shares of capital stock of the Company have been offered, issued and
sold by the Company in compliance with applicable federal and state securities
laws.
(e) Subsidiaries, etc. The Company has no subsidiaries and
does not own or control, directly or indirectly, any shares of capital stock of
any other corporation or any interest in any association, trust, partnership,
joint venture or other non-corporate business enterprise.
(f) Consents and Approvals. No authorization, consent,
approval or other order of, or declaration to or filing with, any governmental
agency or body (other than filings required to be made under applicable federal
and state securities laws) is required for the valid authorization, execution,
delivery and performance by the Company of this Agreement or the issuance and
sale of the Units. The Company has obtained all other consents that are
necessary to permit the consummation of the transactions contemplated hereby,
except for notices required or permitted to be filed with certain state and
federal securities commissions, which notices will be filed on a timely basis.
Based on the representations of the Investors set forth in Section 5 of this
Agreement and the conduct of the Company, the offer, sale and issuance of the
Units will be in compliance with applicable federal and state securities laws.
(g) Brokers. Except for placement agent fees as set forth in
Section 2 hereof, no person or entity has or will have, as a result of the
transactions contemplated by this Agreement, any right, interest or claim
against or upon the Company or the Investors for any commission, fee or other
compensation as a finder or broker because of any act or omission by the Company
or by any agent of the Company.
(h) Transactions with Affiliates. Except as set forth on
Schedule 4(h) hereof, the Company has no agreements or transactions with any
officers, directors, stockholders or other affiliates of the Company with
respect to the payment of any fees or other amounts (other than salaries,
director fees and reimbursements in the ordinary course of business) or the
issuance of any equity securities.
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(i) Absence of Changes. Except as set forth in Schedule 4(i)
hereof and the transactions contemplated by this Agreement, since March 31,
2002, the Company has not incurred any liabilities or obligations, direct or
contingent, not in the ordinary course of business, or entered into any
transaction not in the ordinary course of business, which is material to the
business of the Company, and there has not been any change in the Capital Stock
of, or any incurrence of long-term debt by, the Company, or any issuance of
options, warrants or other rights to purchase the Capital Stock of the Company,
nor is the Company aware of any prospective adverse change in the condition
(financial or otherwise), net worth, results of operations, business, key
personnel or properties which would be material to the business or financial
condition of the Company, and the Company has not become a party to, and neither
the business nor the property of the Company has become the subject of, any
material litigation whether or not in the ordinary course of business.
(j) Title. Except as set forth on Schedule 4(j) hereof, the
Company has good and marketable title to all properties and assets owned by it,
free and clear of all liens, charges, encumbrances or restrictions; all of the
material leases and subleases under which the Company is the lessor or sublessor
of properties or assets or under which the Company holds properties or assets as
lessee or sublessee are in full force and effect, and the Company is not in
default in any material respect with respect to any of the terms or provisions
of any of such leases or subleases, and no material claim has been asserted by
anyone adverse to rights of the Company as lessor, sublessor, lessee or
sublessee under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company to continued possession of the leased or
subleased premises or assets under any such lease or sublease. The Company owns
or leases all such properties as are necessary to its operations.
(k) Proprietary Rights. The Company owns or possesses
exclusive and enforceable rights to use all patents, patent applications,
trademarks, service marks, copyrights, trade secrets, processes, formulations,
technology or know-how used in the conduct of its business (the "Proprietary
Rights"). The Company has not received any notice of any claims, nor does it
have any knowledge of any threatened claims, and knows of no facts which would
form the basis of any claim, asserted by any person to the effect that the sale
or use of any product or process now used or offered by the Company or proposed
to be used or offered by the Company infringes on any patents or infringes upon
the use of any such Proprietary Rights of another person and, to the best of the
Company's knowledge, no others have infringed the Company's Proprietary Rights.
The Company has not performed an infringement search, nor has it received a
legal opinion of any counsel with respect to its patents and patent
applications.
(l) Litigation. There is no material action, suit,
investigation, customer complaint, claim or proceeding at law or in equity by or
before any arbitrator, governmental instrumentality or other agency now pending
or, to the knowledge of the Company, threatened against the Company (or basis
therefor known to the Company), the adverse outcome of which would have a
Material Adverse Effect. The Company is not subject to any judgment, order,
writ, injunction or decree of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign which have a Material Adverse Effect.
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(m) Taxes. The Company has filed or has obtained extensions
for the filing of all Federal, state, local and foreign tax returns which are
required to be filed by it or otherwise met its disclosure obligations to the
relevant agencies and all such returns are true and correct in all material
respects. The Company has paid or adequately provided for all tax liabilities of
the Company as reflected on such returns or pursuant to any assessments received
by it or which it is obligated to withhold from amounts owing to any employee,
creditor or third party. The Company has properly accrued all taxes required to
be accrued by GAAP consistently applied.
(n) Insurance. The Company has in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
(o) Employee Matters. Neither the Company nor any of its
employees is subject to any collective bargaining agreement. No petition for
certification or union election is pending with respect to the employees of the
Company and no union or collective bargaining unit has sought such certification
or recognition with respect to the employees of the Company. There are no
strikes, slowdowns, work stopages or controversies pending or, to the best
knowledge of the Company after due inquiry, threatened between the Company and
its employees, other than employee grievances arising in the normal course of
business which could reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect. The Company is not a party to any
employment contract other than as set forth on Schedule 4(h) hereof.
(p) Registration Rights. Except as set forth on Schedule
4(p) hereof, and the transactions contemplated by this Agreement, the Company
has not granted or agreed to grant any registration rights to any person or
entity.
(q) Financial Statements. The Company has made available to
each Investor its audited balance sheet and statement of operations as of
December 31, 2001, and an unaudited balance sheet and statement of operations
for the period ending March 31, 2002 (together, the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated. The Financial Statements fairly present the financial condition and
operating results of the Company as of the dates, and for the periods, indicated
therein, subject to normal year-end audit adjustments. Except as set forth in
the Financial Statements and on the Disclosure Schedules hereto, the Company has
no material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to December 31, 2001, and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in the Financial Statements, which, in both cases, individually or
in the aggregate are not material to the financial condition or operating
results of the Company.
(r) Environmental Laws. The Company is not in violation of
any applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.
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(s) Permits. The Company has all franchises, permits,
licenses and any similar authority necessary for the conduct of its business and
the sale of its products, the lack of which could have a Material Adverse Effect
on the business, properties, prospects or financial condition of the Company.
The Company is not in default in any material respect under any such franchises,
permits, licenses or other similar authority.
(t) SEC Filings. The Company has timely filed and made
available to the Investors true and correct copies of each report, registration
statement (on a form other than Form S-8) and definitive proxy statement filed
by the Company with the United States Securities and Exchange Commission between
December 31, 2001 and the date of this Agreement (collectively, the "SEC
Reports"). The SEC Reports (i) at the time filed, complied as to form in all
material respects with the requirements of applicable securities laws and other
applicable laws and (ii) did not, at the time they were filed (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such SEC Reports or necessary to make the
statements in such SEC Reports, in light of the circumstances under which they
were made, not misleading.
SECTION 5. Representations and Warranties of the Investors to the
Company. Each Investor represents and warrants to the Company as follows:
(a) Investment. The Investor is purchasing the Units, and
the securities underlying the Units, for investment for the account of the
Investor and not for the account of any other person, and not with a view toward
resale or other distribution thereof. The Investor understands that the Units,
and the securities underlying the Units, have not been registered under the
Securities Act and applicable state securities laws and, therefore, cannot be
resold unless they are subsequently registered under the Securities Act and
applicable state securities laws or unless an exemption from such registration
is available. The Investor further understands and agrees that, until so
registered or transferred pursuant to the provisions of Rule 144 under the
Securities Act, such securities shall bear a legend, prominently stamped or
printed thereon, reading substantially as follows:
"These securities, AND ANY SHARES OF CAPITAL STOCK OF
THE COMPANY THAT MAY BE ACQUIRED UPON THE CONVERSION OR
EXERCISE OF THESE SECURITIES, have not been registered
under the Securities Act of 1933, as amended (the
"Securities Act"), or applicable state securities laws.
these SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NEITHER THESE SECURITIES NOR ANY SHARES OF CAPITAL
STOCK OF THE COMPANY THAT MAY BE ACQUIRED UPON THE
CONVERSION OR EXERCISE OF THESE SECURITIES, MAY BE SOLD
OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OF THEM UNDER THE SECURITIES ACT AND ANY
14
OTHER APPLICABLE STATE SECURITIES LAWS, OR RECEIPT BY
THE COMPANY OF AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT.
NEITHER THESE SECURITIES NOR ANY SHARES OF CAPITAL
STOCK OF THE COMPANY THAT MAY BE ACQUIRED UPON THE
CONVERSION OR EXERCISE OF THESE SECURITIES, MAY BE
TRANSFERRED EXCEPT UPON THE CONDITIONS SPECIFIED HEREIN
AND IN THE SECURITIES PURCHASE AGREEMENT, DATED AS OF
jUNE 18, 2002 (THE "PURCHASE AGREEMENT"), AND NO
TRANSFER OF THESE SECURITIES OR ANY SUCH SHARES SHALL
BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS
SHALL HAVE BEEN COMPLIED WITH. tHE TRANSFERABILITY OF
THESE SECURITIES AND ANY SHARES OF CAPITAL STOCK OF THE
COMPANY THAT MAY BE ACQUIRED UPON THE CONVERSION OR
EXERCISE OF THESE SECURITIES IS SUBJECT TO THE TRANSFER
RESTRICTIONS SET FORTH HEREIN AND TO THE RESTRICTIONS
SET FORTH IN THE PURCHASE AGREEMENT, A COPY OF WHICH
WILL BE PROVIDED TO THE HOLDER HEREOF UPON WRITTEN
REQUEST TO THE COMPANY."
Such legend shall be removed when such securities may be sold pursuant to Rule
144(k).
(b) Authority. The Investor has full power and authority to
enter into and to perform this Agreement in accordance with its terms.
(c) Information and Sophistication. The Investor
acknowledges that it has received all the information it has requested from the
Company and considers necessary or appropriate for deciding to acquire the
Units. The Investor represents that it has had the opportunity to review all
documents of the Company as the Investor reasonably requested, upon the
execution and delivery by the Investor of a confidentiality agreement with
respect to such documents. The Investor represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Note and Warrant and to obtain any
additional information necessary to verify the accuracy of the information given
to the Investor. The Investor further represents that its has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of this investment.
(d) Status as an Accredited Investor. The Investor is an
"Accredited Investor," as that term is defined in Rule 501 of Regulation D
promulgated under the Securities Act, by virtue of the following (please check
all that apply):
(i) ____ A natural person whose individual net worth
(assets less liabilities), or joint net worth with his or her spouse,
exceeds One Million Dollars ($1,000,000).
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(ii) ____ A natural person whose individual income was
in excess of Two Hundred Thousand Dollars ($200,000), or whose joint
income with his or her spouse was in excess of Three Hundred Thousand
Dollars ($300,000), each of the two (2) most recent years, and who has
a reasonable expectation of reaching the same income level for the
current year.
(iii) ____ A bank, insurance company, registered
investment company, business development company, small business
investment company, or employee benefit plan.
(iv) ____ A savings and loan association, credit union,
or similar financial institution, or a registered broker or dealer.
(v) ____ A private business development company.
(vi) ____ An organization described in Section
501(c)(3) of the Internal Revenue Code with assets in excess of Five
Million Dollars ($5,000,000).
(vii) ____ A corporation, Massachusetts or similar
business trust, or partnership with assets in excess of Five Million
Dollars ($5,000,000).
(viii) ____ A trust with assets in excess of Five
Million Dollars ($5,000,000).
(ix) ____ A director or an executive officer of the
Company.
(x) ____ An entity in which all of the equity owners
are accredited investors.
(xi) ____ A self-directed XXX, Xxxxx, or similar plan
of which the individual directing the investments qualifies as an
"accredited investor" under one or more of items (i)-(x), above. Also
check the item(s) [(i)-(x)] that applies.
The Company reserves the right to request additional information from the
Investor to verify the information represented by the Investor herein.
(e) Ability to Bear Economic Risk. The Investor acknowledges
that investment in the Units, and in the securities underlying the Units,
involves a high degree of risk and represents that it is able, without
materially impairing its financial condition, to hold the Units, and the
securities underlying the Units, for an indefinite period of time and to suffer
a complete loss of its investment.
(f) Stop Transfer Order. The Investor acknowledges that the
Company may place a stop transfer order with its registrar and stock transfer
agent, if any, covering all certificates representing the Units, and any
securities underlying the Units.
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(g) Further Limitations on Disposition. Without in any way
limiting the representations set forth above, the Investor further agrees not to
make any disposition of all or any portion of the Units, or the securities
underlying the Units, unless and until:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or
(ii) The Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, and if reasonably requested by the Company, the Investor
shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not
require registration under the Act.
(iii) Notwithstanding the provisions of paragraphs (i)
and (ii) above, no such registration statement or opinion of counsel
shall be necessary for a transfer by the Investor to a stockholder or
partner (or retired partner) of the Investor, if all transferees agree
in writing to be subject to the terms hereof to the same extent as if
they were the Investor hereunder.
SECTION 6. Registration Rights.
6.1 Initial registration rights. The Company shall file a
registration statement on Form S-3 (the "Registration Statement") covering the
Warrants, the Conversion Shares, the shares of Common Stock underlying the Agent
Warrants (the "Agent Warrant Shares"), and the shares of Common Stock underlying
the Advisory Warrant (the "Advisory Warrant Shares") within three (3) months
after the Initial Closing. In addition, the Company shall use its best efforts
to cause the Registration Statement to become effective within three (3) months
after such filing. For the purposes of this Article 6, the Warrant Shares,
Conversion Shares, the Agent Warrant Shares and the Advisory Warrant Shares
shall be referred to as the "Registrable Securities."
6.2 Piggyback registration rights.
(a) At any time that the Company proposes to file a Company
registration statement (a "Company Registration Statement"), either for its own
account or for the account of a shareholder or shareholders, covering the
disposition of securities of the Company, the Company shall give the Investors
written notice of its intention to do so and of the intended method of sale (the
"Registration Notice") within a reasonable time prior to the anticipated filing
date of the Company Registration Statement effecting such Registration. Each
Investor may request inclusion of any or all of such Investor's Registrable
Securities in such Company Registration by delivering to the Company, within ten
(10) Business Days after receipt of the Registration Notice, a written notice
(the "Piggyback Notice") stating the number of Registrable Securities proposed
to be included and that such shares are to be included in any underwriting only
on the same terms and conditions as the shares of Common Stock otherwise being
sold through underwriters or otherwise under such Company Registration
Statement; provided that no Investor will be required to make any representation
17
other than as to title to its Registrable Securities or will be required to give
any indemnity substantially more unfavorable to such Investor than is given
herein or in each case as may reasonably be required by the underwriter pursuant
to applicable law. The Company shall use its best efforts to cause all
Registrable Securities specified in the Piggyback Notice to be included in the
Company Registration Statement and any related offering, all to the extent
required to permit the sale by the Investors of such Registrable Securities in
accordance with the method of sale applicable to the other shares of Common
Stock included in such Company Registration Statement; provided, however, that
if, at any time after giving written notice of its intention to register any
securities and prior to the effective date of the Company Registration Statement
filed in connection with such registration, the Company shall determine for any
reason not to register or to delay registration of such securities, the Company
may, at its election, give written notice of such determination to each Investor
of Registrable Securities and, thereupon:
(i) in the case of a determination not to register,
shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its
obligation to pay any expenses in connection therewith), and
(ii) in the case of a delay in registering, shall be
permitted to delay registering any Registrable Securities for the same
period as the delay in registering such other securities.
(d) The Company's obligation to include Registrable Securities
in a Company Registration Statement pursuant to Section 6.2(a) shall be subject
to the following limitations:
(i) the Company shall not be required to include any
Registrable Securities in the Company Registration Statement filed in
connection with an initial public offering having gross proceeds in
excess of Ten Million Dollars ($10,000,000); provided that no
securities are included in such Registration Statement for the account
of any other security holders.
(ii) The Company shall not be obligated to include any
Registrable Securities in a registration statement filed on Form X-0,
Xxxx X-0 or such other similar successor forms then in effect under
the Securities Act.
(iii) If a Company Registration Statement involves an
underwritten offering and the managing underwriter advises the Company
in writing that, in its opinion, the number of securities requested to
be included in such Company Registration Statement exceeds the number
which can be sold in such offering without adversely affecting the
offering, the Company will include in such Company Registration
Statement the number of such securities which the Company is so
advised can be sold in such offering without adversely affecting the
offering, determined in the following priority:
(A) first, the securities proposed by the Company
to be sold for its own account,
18
(B) second, any Registrable Securities requested
to be included in such offering pro rata among the Investors
thereof requesting such Registration on the basis of the number
of shares of Registrable Securities requested to be included by
such Investors.
SECTION 7. Lock-Up. On or before the Initial Closing, the Company
shall cause each of its executive officers, directors and each of the
individuals and entities set forth on Schedule 7 hereof, to agree that, until
the Warrant Shares are fully registered and freely tradable pursuant to Section
6 hereof (the "Lock-Up Period"), such executive officers, directors and
controlling persons will not directly or indirectly sell, offer to sell,
contract to sell, grant any option to purchase or otherwise transfer or dispose
of (other than to donees who agree to be similarly bound) any securities of the
Company held by it.
SECTION 8. Conditions to Closing.
8.1 Conditions of the Investors' Obligations at the Initial
Closing. The obligations of each Investor to the Company under this Agreement
are subject to the fulfillment, on or before the Initial Closing, of each of the
following conditions, unless otherwise waived:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 4 hereof shall be true and
correct in all material respects on and as of the Initial Closing with the same
effect as though such representations and warranties had been made on and as of
the date of the Initial Closing.
(b) Performance. The Company shall have performed and
complied with all covenants, agreements, obligations and conditions contained in
this Agreement that are required to be performed or complied with by it on or
before the Initial Closing.
(c) Compliance Certificate. The President of the Company
shall deliver to the Investors at the Initial Closing a Compliance Certificate
certifying that the conditions specified in Sections 8.1(a) and (b) have been
fulfilled.
(d) Consents; Qualifications. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by this Agreement. All
authorizations, approvals or permits, if any, of any governmental authority or
regulatory body of the United States or of any state that are required in
connection with the lawful issuance and sale of the Units shall be obtained and
effective as of the Initial Closing.
(e) Opinion of Company CounselThe Investors shall have
received from Xxxx and Xxxxx, P.C., counsel for the Company, an opinion, dated
as of the Initial Closing, in substantially the form of Exhibit E annexed
hereto.
(f) Reservation of Conversion Shares and Warrant Shares. The
Conversion Shares and the Warrant Shares shall gave been duly authorized and
reserved for issuance upon conversion of the Notes or exercise or the Warrants,
as applicable.
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(g) No Outstanding Debt. Except as may be set forth in the
disclosure schedules hereto, the Company shall have no outstanding debt, other
than (i) as set forth in the Company's Form 10-K for the period ending December
31, 2001 and the Company's Form 10-Q for the period ending March 31, 2002, and
(ii) the Company's accounts payable, trade payable and capital lease obligations
incurred in the ordinary course of business.
(h) No Material Adverse Changes. There have been no material
adverse changes, in the sole discretion of the Investors, in the operations or
financial situation of the Company or in the capital stock markets in general.
(i) Due Diligence. The Investors shall, in their sole
discretion, have completed their legal, intellectual property and financial due
diligence and the results of such due diligence shall, in the sole discretion of
the Investors, be acceptable to the Investors and their legal counsel.
8.2 Conditions of the Investors' Obligations at the
Outside Closing. The obligations of each Investor to the Company under this
Agreement are subject to the fulfillment, on or before the Outside Closing, of
each of the following conditions, unless otherwise waived:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 4 hereof shall be true and
correct in all material respects on and as of the Outside Closing with the same
effect as though such representations and warranties had been made on and as of
the date of the Outside Closing.
(b) Performance. The Company shall have performed and
complied with all covenants, agreements, obligations and conditions contained in
this Agreement that are required to be performed or complied with by it on or
before the Outside Closing.
(c) Compliance Certificate. The President of the Company
shall deliver to the Investors at the Outside Closing a Compliance Certificate
certifying that the conditions specified in Sections 8.2(a) and (b) have been
fulfilled.
(d) Opinion of Company CounselThe Investors shall have
received from Xxxx and Xxxxx, P.C., counsel for the Company, an opinion, dated
as of the Initial Closing, in substantially the form of Exhibit E annexed
hereto.
8.3 Conditions to the Company's Obligations at Closing. The
obligations of the Company to each Investor under this Agreement are subject to
the fulfillment, on or before the applicable Closing, of each of the following
conditions, unless otherwise waived:
(a) Representations and Warranties. The representations and
warranties of each Investor contained in Section 5 hereof shall be true and
correct in all material respects on and as of the applicable Closing with the
same effect as though such representations and warranties had been made on and
as of the applicable Closing.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed by the Investors on or prior to the
applicable Closing shall have been performed or complied with in all material
respects.
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SECTION 9. Covenants of the Company.
9.1 Affirmative and Negative Covenants. So long as the Notes
remain outstanding, unpaid or unconverted, the Company covenants and agrees
that, without the prior written consent of at least a majority-in-interest of
the Investors:
(a) it will not grant, suffer or permit any lien or security
interest to be placed upon or against the assets of the Company, except as
provided in Section 1.2(c) above;
(b) it will not merge into or enter into any corporate
combination with any entity, or sell, assign or convey all or any of its
patents, patent applications, Intellectual Property or proprietary technology;
(c) it will not sell or issue any of its capital stock
resulting in a majority of the voting power of all classes of its capital stock
to be with any person or group, as defined in Section 13d(3) under the General
Rules and regulations under the Exchange Act; and
(d) it will not:
(i) incur any obligation for borrowed money in excess
of One Hundred Thousand Dollars ($100,000);
(ii) enter into one or more capital equipment leases in
the aggregate amount of One Hundred Thousand Dollars ($100,000); or
(iii) make any loan or advance to any officer, director
or employee of or consultant to the Company.
(e) it will utilize the net proceeds from the sale of the
Units first to satisfy its obligation to Commonwealth of a fee equal of not more
than eight percent (8%) of the gross proceeds of the Private Placement, plus
actual out-of-pocket expenses incurred by Commonwealth in connection with the
private Placement, including, without limitation, the reasonable fees and
disbursements of Commonwealth's counsel, and due diligence expenses.
(f) So long as the Notes remain outstanding, unpaid or
unconverted, the Company shall deliver to the Investors, at the end of each
calendar quarter, a summary report in reasonable detail, setting forth the
expenditure of all cash during the preceding calendar quarter. Such report shall
be accompanied by a condensed unaudited financial statement of the Company. The
first such report shall be due within fifteen (15) days after the end of the
first calendar quarter which ends after the Initial Closing. Each subsequent
report shall be due within fifteen (15) days after the end of each subsequent
calendar quarter.
SECTION 10. Miscellaneous.
(a) Successors and Assigns. Except as otherwise expressly
provided herein, this Agreement shall bind and inure to the benefit of the
Company and the Investors and the permitted successors and assigns of the
21
Investors and the permitted successors and assigns of the Company.
(b) Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior and contemporaneous arrangements or understandings,
whether written or oral, with respect thereto, which are merged herewith and
integrated herewith. No representations or warranties are made other than as
specifically provided herein, and any and all representations and warranties not
specifically contained herein are disclaimed.
(c) Amendments. The terms and provisions of this Agreement
may be amended, modified or waived in accordance with Section 8 of the Security
Agreement by and among the Company, the Investors and ComVest as administrative
agent for the Investors, dated as of even date herewith. The terms of this
Agreement may be amended, modified or waived only in writing and only if signed
by the Company and ComVest as administrative agent for the Investors, in
accordance with the preceding sentence.
(d) Survival of Representations and Warranties. All
agreements, representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the closing of the transactions
contemplated hereby for a period of two (2) years from the Initial Closing;
provided, however, that all representations and warranties contained in Sections
4(b), 4(d), 4(j), 4(k) and 4(m) shall survive the execution and delivery of this
Agreement and the closing of the transactions contemplated hereby in perpetuity.
(e) Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
by hand, sent via a reputable nationwide overnight courier service or mailed by
first class certified or registered mail, return receipt requested, postage
prepaid:
If to the Company, at 000 Xxxxxxxxx Xxxx, Xxxxxx,
Xxxxxxxxxxx 00000, Attn: President, Facsimile No. (000) 000-0000, with
a copy to: Xxxx and Xxxxx, P.C., at Xxx Xxxxx Xxxxxx, Xxxxxxxx,
Xxxxxxxxxxx 00000, Attn: Xxxxx X. Xxxxxxxxx, Esq., Facsimile No. (860)
240-1002, or at such other address or addresses as may have been
furnished in writing by the Company to the Investor; or
If to the Investors, at the address as set forth on Schedule
A annexed hereto and made a part hereof, or at such other address or
addresses as may have been furnished to the Company in writing by the
Investors.
Notices provided in accordance with this Section 10(e) shall be deemed delivered
upon personal delivery, one (1) business day after being sent via a reputable
nationwide overnight courier service, or two business days after deposit in the
mail.
(f) Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties on separate counterparts
22
each of which, when so executed and delivered, shall be an original but all of
which together shall constitute one and the same instrument.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to contracts made and to be performed wholly therein, without giving
effect to principles of choice of law. Any action or proceeding arising out of
or relating to this Agreement shall be commenced in a federal or state court
having competent jurisdiction in the State of New York, and for the purpose of
any such action on proceeding each of the Company and the Investor and any
assignee of the Investors submit to the personal jurisdiction of the State of
New York.
(h) Section Headings. The section headings are for the
convenience of the parties and in no way alter, modify, amend, limit, or
restrict the contractual obligations of the parties.
(i) Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
[the remainder of this page intentionally left blank]
23
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
COMPANY:
BIO-PLEXUS , INC.
By: /s/ Xxxx X. Xxxx
------------------
Name: Xxxx X. Xxxx
Title: President
24
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
ADMINISTRATIVE AGENT:
COMVEST VENTURE PARTNERS, L.P.
By: /s/ Xxx Xxxxx
-----------------------------------
Name: Xxx Xxxxx
Title: Chief Financial Officer
25
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
INVESTORS:
If an entity:
------------
By:__________________________________
Name:________________________________
Title:_______________________________
ID Number:___________________________
Address:_____________________________
Telephone Number:____________________
Copy of Notices to:__________________
__________________
__________________
__________________
If an individual:
----------------
/s/ Xxxxxx Xxxxxx
---------------------------
Name: Xxxxxx Xxxxxx
---------------------
(print)
SS Number: ---------
Address: ---------
---------
Telephone Number: ---------
Copy of Notices to:
26
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
INVESTORS:
If an entity: RMC Capital, LLC
------------
By: /s/ Xxxxxxx Xxxx
Name: Xxxxxxx Xxxx
Title: President
ID Number: 00-0000000
Address: 00 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Telephone Number: -------------------
cv Copy of Notices to:__________________
__________________
__________________
__________________
If an individual:
----------------
-------------------------------
Name: ________________________
(print)
SS Number: ___________________
Address: ___________________
___________________
Telephone Number: ___________________
Copy of Notices to:__________________
__________________
__________________
__________________
27
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
INVESTORS:
If an entity:
------------
By:__________________________________
Name:________________________________
Title:_______________________________
ID Number:___________________________
Address:_____________________________
Telephone Number:____________________
Copy of Notices to:__________________
__________________
__________________
__________________
If an individual:
----------------
/s/ Xxxx Xxxxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxxxx
-----------------------------
(print)
/s/ Xxxxxxxxx Xxxxxxxxx
-----------------------------------
Name: Xxxxxxxxx Xxxxxxxxx
-----------------------------
(print)
SS Number: ___________________
Address: ___________________
___________________
Telephone Number: ___________________
Copy of Notices to:__________________
__________________
__________________
__________________
28
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
INVESTORS:
If an entity: Xxxxx X. Xxxx Spousal Trust
-----------
By: /s/ Xxxx Xxxxx
--------------
Name: Xxxx Xxxxx
----------
Title: Trustee
-------
ID Number:___________________________
Address:_____________________________
Telephone Number:____________________
Copy of Notices to:__________________
__________________
__________________
__________________
If an individual:
----------------
-------------------------------
Name: ________________________
(print)
SS Number: ___________________
Address: ___________________
___________________
Telephone Number: ___________________
Copy of Notices to:__________________
__________________
__________________
__________________
29
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
INVESTORS:
If an entity: Harvard Investments, Inc.
------------
By: /s/ Xxxxx X. Xxxxxxxxx
Name: Xxxxx X. Xxxxxxxxx
Title:President
ID Number:00-0000000
Address: 000 X. Xxxxxxxxxx Xxxxx Xx., #000
Xxxxxxxxxx, XX 00000
Telephone Number:
Copy of Notices to: __________________
__________________
__________________
__________________
If an individual:
----------------
-------------------------------
Name: ________________________
(print)
SS Number: ___________________
Address: ___________________
___________________
Telephone Number: ___________________
Copy of Notices to:__________________
__________________
__________________
__________________
30
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
INVESTORS:
If an entity:
------------
By:__________________________________
Name:________________________________
Title:_______________________________
ID Number:___________________________
Address:_____________________________
Telephone Number:____________________
Copy of Notices to:__________________
__________________
__________________
__________________
If an individual:
----------------
/s/ Xxxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxx
-----------------------------
(print)
SS Number: ___________________
Address: ___________________
___________________
Telephone Number: ___________________
Copy of Notices to:__________________
__________________
__________________
__________________
31
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
INVESTORS:
If an entity:
------------
By:__________________________________
Name:________________________________
Title:_______________________________
ID Number:___________________________
Address:_____________________________
Telephone Number:____________________
Copy of Notices to:__________________
__________________
__________________
__________________
If an individual:
----------------
/s/ Xxxxx Xxxxxx
-------------------------------------
Name: Xxxxx Xxxxxx
-----------------------------
(print)
SS Number: ___________________
Address: ___________________
___________________
Telephone Number: ___________________
Copy of Notices to:__________________
__________________
__________________
__________________
32
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
INVESTORS:
If an entity:
------------
By:__________________________________
Name:________________________________
Title:_______________________________
ID Number:___________________________
Address:_____________________________
Telephone Number:____________________
Copy of Notices to:__________________
__________________
__________________
__________________
If an individual:
----------------
/s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
-----------------------------
(print)
SS Number: ___________________
Address: ___________________
___________________
Telephone Number: ___________________
Copy of Notices to:__________________
__________________
__________________
__________________
33
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
INVESTORS:
If an entity:
------------
By:__________________________________
Name:________________________________
Title:_______________________________
ID Number:___________________________
Address:_____________________________
Telephone Number:____________________
Copy of Notices to:__________________
__________________
__________________
__________________
If an individual:
----------------
/s/ Xxxx X. Xxxx
-------------------------------------
Name: Xxxx X. Xxxx
-----------------------------
(print)
SS Number: ___________________
Address: ___________________
___________________
Telephone Number: ___________________
Copy of Notices to:__________________
__________________
__________________
__________________
34
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
INVESTORS:
If an entity: RFJM Partners, LLC
------------
By: /s/ Xxxxxxx Xxxxxxxxx
Name: Xxxxxxx Xxxxxxxxx
Title: Managing Member
ID Number: 00-0000000
Address: 000 Xxxxx Xxxxxx, Xxx 000
Xxx Xxxx, XX 00000
Telephone Number:
--------------
Copy of Notices to:_________________
__________________
__________________
__________________
SS Number: ___________________
Address: ___________________
___________________
Telephone Number: ___________________
Copy of Notices to:__________________
__________________
__________________
__________________
35
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
INVESTORS:
If an entity:
------------
By:__________________________________
Name:________________________________
Title:_______________________________
ID Number:___________________________
Address:_____________________________
Telephone Number:____________________
Copy of Notices to:__________________
__________________
__________________
__________________
If an individual:
----------------
/s/ Xxxxxx X. Och
-------------------------------------
Name: Xxxxxx X. Och
-----------------------------
(print)
SS Number: ___________________
Address: ___________________
___________________
Telephone Number: ___________________
Copy of Notices to:__________________
__________________
__________________
__________________
36
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
INVESTORS:
If an entity:Chesed Congregations of America
------------
By: /s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: President
ID Number:___________________________
Address:_____________________________
Telephone Number:____________________
Copy of Notices to: __________________
__________________
__________________
__________________
If an individual:
----------------
-------------------------------------
Name:
-----------------------------
(print)
SS Number: ___________________
Address: ___________________
___________________
Telephone Number: ___________________
Copy of Notices to:__________________
__________________
__________________
__________________
37
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
INVESTORS:
If an entity: Xxxx Ventures, LLC
------------
By: /s/ Xxxxxx X. Xxxx, Xx.
Name:Xxxxxx X. Xxxx, Xx.
Title: Manager
ID Number: 00-0000000
Address: 000 Xxxx Xxxxxx Xxxx
Xxxxxx, XX 00000
Telephone Number:
--------------
Copy of Notices to:_________________
__________________
__________________
__________________
SS Number: ___________________
Address: ___________________
___________________
Telephone Number: ___________________
Copy of Notices to:__________________
__________________
__________________
__________________
38
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
INVESTORS:
If an entity: Lay Ventures, L.P.
------------
By: /s/ X. Xxxxx Lay
Name: X. Xxxxx Lay
Title: General Partner
ID Number: 95-04560140
Address: 00 Xxxxxxxxxx Xxxx
Xxxxxxx Xxxxx, XX 00000
Telephone Number:
--------------
Copy of Notices to:X. Xxxxx Lay
00 Xxxxxxxxxx Xxxx
Xxxxxxx Xxxxx, XX 00000
SS Number: ___________________
Address: ___________________
___________________
Telephone Number: ___________________
Copy of Notices to:__________________
__________________
__________________
__________________
39
SCHEDULE A
Name of Investor Number of Units Principal Amount of Note Number of Warrants
ComVest Venture Partners, L.P. 10.6 $1,060,000 530,000
Xxxxxx Xxxxxx 3.33 $333,333 166,667
RMC Capital LLC 3.33 $333,333 166,667
Xxxx and Xxxxxxxxx Xxxxxxxxx 1 $100,000 50,000
Xxxxx Xxxxx Trust TTEE Xxxxx 1 $100,000 50,000
X. Xxxx Spousal Trust
Harvard Investments, Inc. .33 $33,333 16,667
Xxxxxxx Xxxxxx .33 $33,333 16,667
Xxxxx Xxxxxx .16 $16,667 8,333
Xxxxx Xxxxxxx .033 $3,333 1,667
Xxxx Xxxx .16 $16,667 8,333
RFJM Partners, LLC .70 $70,000 35,000
Xxxxxx Xxx 1 $100,000 50,000
Chesed Congregations of 1 $100,000 50,000
America
Xxxx Ventures LLC 1.83 $183,333 91,667
Lay Ventures, LP .16 $16,667 8,333
TOTALS 25 $2,513,333 1,250,000
40
EXHIBIT A
FORM OF NOTE
SEE EXHIBIT 3 TO AMENDMENT NO. 1 TO THE SCHEDULE 13D,
FILED BY COMVEST ON JUNE 28, 2002
41
EXHIBIT B
FORM OF WARRANT
SEE EXHIBIT 4 TO AMENDMENT NO. 1 TO THE SCHEDULE 13D,
FILED BY COMVEST ON JUNE 28, 2002
42
EXHIBIT C
SECURITY AGREEMENT
SEE EXHIBIT 5 TO AMENDMENT NO. 1 TO THE SCHEDULE 13D,
FILED BY COMVEST ON JUNE 28, 2002
43
EXHIBIT D
MORTGAGE AGREEMENT
SEE EXHIBIT 6 TO AMENDMENT NO. 1 TO THE SCHEDULE 13D,
FILED BY COMVEST ON JUNE 28, 2002
44
EXHIBIT E
FORM OF LEGAL OPINION
EXECUTED COPY ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF COMVEST
45
