June 2, 1998
Electropharmacology, Inc.
0000 XX 00xx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxx 00000
Attention: Xx. Xxxx Xxx
Re: Asset Purchase Agreement dated as of May 27, 1998
("Purchase Agreement") between Electropharmacology,
Inc., a Delaware corporation, as seller ("EPi"), and
ADM Tronics Unlimited, Inc., a New Jersey
corporation, and AA Northvale Medical Associates,
Inc., its wholly owned subsidiary, as purchaser
(collectively "ADM")
Gentlemen:
Reference is made to (i) the Purchase Agreement and (ii) that certain
Secured Promissory Note of EPi, dated December 15, 1997 (the "Note"), in the
original principal amount of $672,750.89, which is held by Xxxxx, Day, Xxxxxx &
Xxxxx ("JDRP"). Capitalized terms not otherwise defined herein shall have the
meanings assigned to such terms in the Purchase Agreement. The Note is secured
by a security agreement and UCC-1 Financing Statement No.980000037102, filed
February 19, 1998 in the office of the Secretary of State of the State of
Florida (the "Financing Statement"). The security agreement and Financing
Statement grant JDRP a security interest in a number of the Devices that EPi is
selling to ADM pursuant to the Purchase Agreement. The parties to this letter
agreement ("Agreement") intend hereby to set forth their agreement, subject to
the conditions and upon the terms set forth herein, to provide for the issuance
by EPi of the number of its shares of common stock, par value $.01 per share
("EPi Shares"), to JDRP as set forth herein in exchange for JDRP's cancellation
of the Note.
The parties accordingly agree as follows:
1. Transactions at the Closing of the Purchase Agreement.
(a) Upon the terms and subject to the conditions set forth
herein, at the Closing EPi shall deliver to JDRP the number of EPi Shares
determined by dividing $100,000 by the average of the closing sales prices of
the EPi Shares as reported on the NASDAQ OTC Bulletin Board for the twenty
trading days immediately preceding the Effective Date. The EPi Shares shall be
issued in the name of JDRP.
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(b) Upon the terms and subject to the conditions set forth
herein, and in reliance upon the representations and warranties contained
herein, at the Closing JDRP shall deliver to EPi (A) the Note, marked
"canceled," (B) a receipt ("Receipt") acknowledging payment in full of JDRP
invoices (commencing with the oldest outstanding invoice) in an amount equal to
$750,000 less the accrued and unpaid interest on the Note through the Closing
Date and (C) a fully-executed release of the Financing Statement on State of
Florida form UCC-3.
2. Representations and Warranties of EPi. EPi hereby represents and
warrants to JDRP as of the date hereof (except as otherwise provided) and as of
the Closing Date as follows:
(a) EPi is a corporation duly organized and validly existing
under the laws of the State of Delaware. EPi has full corporate power and
authority to carry on its business as it is currently being conducted and to
own, lease and use the properties owned, leased and used by it. EPi is duly
qualified or licensed to do business in each jurisdiction where the nature of
its business requires such qualification.
(b) As of the Closing Date, the EPi Shares will (i) have been
duly authorized, (ii) be validly issued and registered in the name of JDRP, and
(iii) upon delivery of the Receipt and the canceled EPi Note, be fully paid and
non-assessable.
(c) Each document filed by EPi with the SEC since January 1,
1996 pursuant to (i) the Act or (ii) the Securities Exchange Act of 1934
("Exchange Act") (x) complied in all material respects with the applicable
requirements of the Act or Exchange Act, as applicable, and (y) did not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(d) The execution and delivery of this Agreement and the
Purchase Agreement has been duly authorized by all necessary corporate action on
the part of EPi. No other approval on the part of EPi is necessary to authorize
the execution or delivery of this Agreement or the Purchase Agreement. Except as
set forth in the Purchase Agreement, no other approvals are necessary to
authorize the performance by EPi of its obligations under this Agreement or the
Purchase Agreement. EPi has full corporate power and authority to enter into
this Agreement and to perform its obligations hereunder and under the Purchase
Agreement, and this Agreement and the Purchase Agreement constitute the valid
and legally binding obligations of EPi enforceable in accordance with their
respective terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, rearrangement, reorganization or similar debtor relief legislation
affecting the rights of creditors generally.
3. Representations and Warranties of JDRP. JDRP hereby represents and
warrants to EPi as of the date hereof and as of the Closing Date as follows:
(a) The EPi Shares are being acquired by JDRP for its own
account and not with a view to or for sale or other disposition in connection
with any distribution of all of the EPi Shares, or any part thereof, in any
transaction that would be in violation of the Act or the securities laws of
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any state, without prejudice, however, to the rights of JDRP at all times to
sell or otherwise dispose of all or any part of the EPi Shares under an
effective registration statement under the Act or under an exemption from such
registration available under the Act.
(b) JDRP represents that it is capable of evaluating the
merits and risks of an investment in the EPi Shares and has such knowledge,
experience and skill in financial and business matters that it is capable of
evaluating the merits and risks of the investment in EPi and the suitability of
the EPi Shares as an investment and can bear the economic risk of an investment
in the EPi Shares. No guarantees have been made or can be made with respect to
the future value, if any, of the EPi Shares, or the profitability or success of
the business of EPi.
(c) JDRP understands that the EPi Shares will not have been
registered pursuant to the Act or any applicable state securities laws, that the
EPi Shares will be characterized as "restricted securities" under federal
securities laws, and that under such laws and applicable regulations the EPi
Shares cannot be sold or otherwise disposed of without registration under the
Act or an exemption therefrom. In this connection, JDRP represents that it is
familiar with Rule 144 promulgated under the Act, as currently in effect, and
understands the resale limitations imposed thereby and by the Act. Stop transfer
instructions may be issued to the transfer agent for securities of EPi (or a
notation may be made in the appropriate records of EPi) in connection with the
EPi Shares, but only to the extent customary for securities which are
"restricted securities."
4. Registration of EPi Shares.
(a) As soon as practicable following the date hereof, EPi
shall use its reasonable best efforts to effect a registration under the Act of
all the EPi Shares by means of a "shelf" registration statement pursuant to Rule
415 under the Act if EPi is eligible therefore (as well as necessary amendments
or supplements thereto) or any other effective registration statement ("EPi
Registration Statement"). As expeditiously as possible after the date hereof,
EPi shall prepare and file with the SEC the EPi Registration Statement and use
all reasonable efforts to have the EPi Registration Statement declared effective
under the Act as promptly as practicable after such filing.
(b) EPi agrees, with respect to the EPi Registration
Statement, to: (i) furnish to JDRP, promptly after filing, copies of the
Registration Statement and any amendments or supplements thereto and any
prospectus forming a part thereof; (ii) notify JDRP promptly, after receipt of
notice thereof, of the time when the Registration Statement becomes effective or
when any amendment or supplement or any prospectus forming a part of the
Registration Statement has been filed; (iii) notify JDRP promptly of any request
by the SEC for the amending or supplementing of the Registration Statement or
prospectus or for additional information and promptly deliver to JDRP copies of
any comments received from the SEC; (iv) notify JDRP at any time when a
prospectus relating thereto is required to be delivered under the Act of the
happening of any event as a result of which the Registration Statement would
contain an untrue statement of a material fact or omit to state any material
fact required to be stated herein or necessary to make the statements therein
not misleading; (v) take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) required to be taken under any
applicable state securities laws in connection
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with the issuance of EPi Shares to JDRP and JDRP shall furnish all information
concerning JDRP as may be reasonably requested in connection with any such
action; and (vi) prepare and file with the SEC such amendments and supplements
to the Registration Statement and each prospectus forming a part thereof as may
be necessary to keep the Registration Statement continuously effective for the
period of time necessary to permit JDRP to dispose of all its EPi Shares,
provided, however, that EPi shall not be required to keep its Registration
Statements effective if all of the EPi Shares held by JDRP could be sold without
restriction pursuant to the provisions of Rule 144(k) under the Act. EPi shall
pay all registration, filing and NASD fees and all fees and expenses of
complying with securities or "blue sky" laws and shall be responsible for the
fees and disbursements of its counsel and independent public accountants in
connection with the registration of the EPi Shares. JDRP shall pay for
underwriting discounts and commissions customarily paid by sellers of
securities.
5. Conditions to Closing. The obligations of JDRP to cancel the Note,
release the Financing Statement and issue the Receipt are subject to the
satisfaction on or prior to the Closing of the following conditions:
(a) all representations and warranties of EPi contained in
this Agreement shall be true and correct as of the Closing Date as though made
anew as of the Closing Date;
(b) EPi shall have delivered the EPi Shares to JDRP; and
(c) JDRP shall have received the Shares of ADM to which it is
entitled pursuant to Section 1.5(a)(i) of the Purchase Agreement (the "ADM
Shares") and the conditions to the Closing set forth in Section 6.1(e) of the
Purchase Agreement shall have been satisfied.
6. Limitation on Amount of ADM Shares Sold. EPi covenants and agrees
with JDRP that it will not sell any of the Shares of ADM received by it pursuant
to the terms of the Purchase Agreement until the earlier of (a) the date after
which JDRP has sold all of the Shares received by it pursuant to the terms of
the Purchase Agreement or (b) any date after which the selling restrictions set
forth in Section 1.6 of the Purchase Agreement are no longer in effect.
7. Survival and Indemnification Provisions. All representations and
warranties contained in this Agreement shall be deemed to be material and to
have been relied upon by the parties hereto, and shall survive the Closing
subject to the limitations set forth below.
(a) EPi shall indemnify and hold harmless JDRP, each of its
partners and employees, from and against any and all losses, claims, damages or
liabilities related to, caused by or arising from the untruthfulness or
inaccuracy of any representation or warranty of EPi or the breach of any
covenant or agreement of EPi contained in this Agreement.
(b) EPi shall indemnify and hold harmless JDRP, each of its
partners and employees, from and against any and all losses, claims, damages or
liabilities to which JDRP or any such partner or employee may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of
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any material fact contained in any registration statement under which the EPi
Shares were registered under the Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading,
and EPi shall reimburse JDRP, and each partner and employee thereof, for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, however, that EPi shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to EPi through an instrument duly executed by or
on behalf of JDRP, specifically stating that it is for use in the preparation
thereof.
(c) Claims for indemnification under this paragraph 7 may be
brought at any time within the applicable statute of limitations.
8. Releases of Claims. In consideration of the transactions
contemplated by this Agreement, EPi, on its own behalf, and on behalf of its
respective affiliates, hereby gives a general release and discharge of JDRP and
all of its partners, employees, agents, heirs, successors, and assigns, from any
and all claims, duties, causes of action, liabilities, damages, expenses, or
injuries, which EPi has had, now has or may ever have in any way relating to,
arising from, caused by, or connected with acts, omissions, facts or events
occurring from the beginning of time through and including the Closing Date.
9. Further Assurances. EPi shall execute and deliver such additional
documents and take such additional actions as JDRP may reasonably deem to be
advisable or necessary in order to consummate the transactions contemplated by
this Agreement and the Purchase Agreement and to vest more fully in JDRP the
ownership of and rights to the Shares and the EPi Shares and the other rights
granted to JDRP hereunder and under the Purchase Agreement.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT
REGARD TO CONFLICT OF LAW PRINCIPLES.
11. ENTIRE AGREEMENT. THIS AGREEMENT AND THE PURCHASE AGREEMENT SET
FORTH THE ENTIRE AGREEMENT OF THE PARTIES HERETO RELATED TO THE SUBJECT MATTERS
HEREOF.
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This Agreement may be executed in any number of counterparts,
each of which shall be an original, and together these counterparts shall
constitute one instrument.
Very truly yours,
Xxxxx, Day, Xxxxxx & Xxxxx
By: /s/ Xxxxxxx X. Xxxxxxxxx
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Agreed and accepted:
ELECTROPHARMACOLOGY, INC.
By: /s/ Xxxx Xxx
------------------------
Name: Xxxx Xxx
------------------------
Title: Chairman & CEO
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