CONVERTIBLE DEBENTURE AND WARRANTS PURCHASE AGREEMENT
Between
MW Medical, Inc.
and
the Investors Signatory Hereto
CONVERTIBLE DEBENTURE AND WARRANTS PURCHASE AGREEMENT dated
as of July 14, 1999 (the "Agreement"), between the Investors
signatory hereto (each an "Investor" and together the
"Investors"), and MW Medical, Inc., a corporation organized and
existing under the laws of the State of Nevada (the "Company").
WHEREAS, the parties desire that, upon the terms and
subject to the conditions contained herein, the Company shall
issue and sell to the Investors, and the Investors shall
purchase in the aggregate, (i) $3,500,000 principal amount of
Convertible Debentures and (ii) Warrants to purchase up to
350,000 shares of the Common Stock (as defined below) at a price
per share of $2.75.
WHEREAS, such investments will be made in reliance upon the
provisions of Section 4(2) ("Section 4(2)") and/or 4(6) of the
United States Securities Act and/or Regulation D ("Regulation
D") and the other rules and regulations promulgated thereunder
(the "Securities Act"), and/or upon such other exemption from
the registration requirements of the Securities Act as may be
available with respect to any or all of the investments in
securities to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1. "Capital Shares" shall mean the Common Stock
and any shares of any other class of common stock whether now or
hereafter authorized, having the right to participate in the
distribution of earnings and assets of the Company.
Section 1.2. "Capital Shares Equivalents" shall mean any
securities, rights, or obligations that are convertible into or
exchangeable for or give any right to subscribe for any Capital
Shares of the Company or any Warrants, options or other rights
to subscribe for or purchase Capital Shares or any such
convertible or exchangeable securities.
Section 1.3. "Closing" shall mean each closing of the
purchase and sale of the Convertible Debentures and Warrants
pursuant to Section 2.1.
NY:71728.2 1
Section 1.4. "Closing Date" shall mean the date on which all
conditions to each Closing have been satisfied (as defined in
Section 2.1 (b) hereto) and the Closing shall have occurred.
Section 1.5. "Common Stock" shall mean the Company's common
stock, $0.001 par value per share.
Section 1.6. "Conversion Shares" shall mean the shares of
Common Stock issuable upon conversion of the Convertible Debenture
and any shares of Common Stock issued as interest upon the
Convertible Debenture.
Section 1.7. "Convertible Debenture(s)" shall mean the
$3,500,000 principal amount of 8% Convertible Debentures due July
31, 2000, in the form of Exhibit A hereto. In the event that the
Company shall exercise its option to cause the exchange of the
Convertible Debentures for Convertible Preferred Stock as set
forth in the form of Convertible Debenture, then from and after
the date of such exchange, the term "Convertible Debenture"
shall apply to such shares of Convertible Preferred Stock.
Section 1.8. "Damages" shall mean any loss, claim, damage,
judgment, penalty, deficiency, liability, costs and expenses
(including, without limitation, reasonable attorney's fees and
disbursements and reasonable costs and expenses of expert
witnesses and investigation).
Section 1.9. "Effective Date" shall mean the date on which
the SEC first declares effective a Registration Statement
registering the resale of the Registrable Securities as set forth
in the Registration Rights Agreement.
Section 1.10. "Escrow Agent" shall have the meaning set forth
in the Escrow Agreement.
Section 1.11. "Escrow Agreement" shall mean the Escrow
Agreement in substantially the form of Exhibit D hereto executed
and delivered contemporaneously with this Agreement.
Section 1.12. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
Section 1.13. "Legend" shall mean the legend set forth in
Section 9.1.
Section 1.14. "Market Price" on any given date shall mean the
average of the three lowest closing bid prices on the Principal
Market (as reported by Bloomberg L.P.) of the Common Stock on
any three Trading Days during the twenty-two (22) Trading Day
period ending on the Trading Day immediately prior to the date
for which the Market Price is to be determined.
Section 1.15. "Material Adverse Effect" shall mean any effect
on the business, operations, properties, prospects, stock price or
financial condition of the Company that is material and adverse
to the Company and its subsidiaries and affiliates, taken as a
whole, and/or any condition, circumstance, or situation that
would prohibit or otherwise interfere with the ability of the
Company to enter into and perform any of its obligations under
this Agreement, the Registration Rights Agreement, the Escrow
Agreement, the Certificate of Designations or the Warrants in
any material respect.
NY:71728.2 2
Section 1.16. "Outstanding" when used with reference to
shares of Common Stock or Capital Shares (collectively the
"Shares"), shall mean, at any date as of which the number of such
Shares is to be determined, all issued and outstanding Shares, and
shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such
Shares; provided, however, that "Outstanding" shall not mean any
such Shares then directly or indirectly owned or held by or for
the account of the Company.
Section 1.17. "Person" shall mean an individual, a
corporation, a partnership, an association, a trust or other
entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
Section 1.18. "Principal Market" shall mean the American
Stock Exchange, the New York Stock Exchange, the NASDAQ National
Market, or the NASDAQ Small-Cap Market or the OTC Bulletin
Board, whichever is at the time the principal trading exchange
or market for the Common Stock, based upon share volume.
Section 1.19. "Purchase Price" shall mean the principal
amount of the Convertible Debenture.
Section 1.20. "Registrable Securities" shall mean the
Conversion Shares and the Warrant Shares until (i) the
Registration Statement has been declared effective by the SEC,
and all Conversion Shares and Warrant Shares have been disposed
of pursuant to the Registration Statement, (ii) all Conversion
Shares and Warrant Shares have been sold under circumstances
under which all of the applicable conditions of Rule 144 (or
any similar provision then in force) under the Securities Act
("Rule 144") are met, (iii) all Conversion Shares and Warrant
Shares have been otherwise transferred to holders who may trade
such shares without restriction under the Securities Act, and
the Company has delivered a new certificate or other evidence of
ownership for such securities not bearing a restrictive legend
or (iv) such time as, in the opinion of counsel to the Company,
all Conversion Shares and Warrant Shares may be sold without any
time, volume or manner limitations pursuant to Rule 144(k) (or
any similar provision then in effect) under the Securities Act.
Section 1.21. "Registration Rights Agreement" shall mean the
agreement regarding the filing of the Registration Statement for
the resale of the Registrable Securities, entered into between
the Company and the Investor as of the first Closing Date in the
form annexed hereto as Exhibit C.
Section 1.22. "Registration Statement" shall mean a
registration statement on Form SB-2 or S-1 (if use of such form
is then available to the Company pursuant to the rules of the SEC
and, if not, on such other form promulgated by the SEC for which
the Company then qualifies and which counsel for the Company shall
deem appropriate, and which form shall be available for the
resale by the Investors of the Registrable Securities to be
registered thereunder in accordance with the provisions of this
Agreement, the Registration Rights Agreement and in accordance
with the intended method of distribution of such securities),
for the registration of the resale by the Investor of the
Registrable Securities under the Securities Act.
Section 1.23. "Regulation D" shall have the meaning set forth
in the recitals of this Agreement.
Section 1.24. "SEC" shall mean the Securities and Exchange
Commission.
NY:71728.2 3
Section 1.25. "SEC Documents" means the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1998 and
Quarterly Report on Form 10-QSB for the quarter ended March 31,
1999.
Section 1.26. "Section 4(2)" and "Section 4(6)" shall have
the meanings set forth in the recitals of this Agreement.
Section 1.27. "Securities Act" shall have the meaning set
forth in the recitals of this Agreement.
Section 1.28. "Shares" shall have the meaning set forth in
Section 1.16.
Section 1.29. "Trading Day" shall mean any day during which
the Principal Market shall be open for business.
Section 1.30. "Warrants" shall mean the Warrants
substantially in the form of Exhibit B to be issued to the
Investors hereunder.
Section 1.31. "Warrant Shares" shall mean all shares of
Common Stock or other securities issued or issuable pursuant to
exercise of the Warrants.
ARTICLE II
Purchase and Sale of Convertible Debenture and Warrants
Section 2.1. Investment.
(a) Upon the terms and subject to the conditions set forth
herein, the Company agrees to sell, and the Investors, severally
and not jointly, agree to purchase Convertible Debentures with a
principal amount of $3,000,000 in accordance with the commitments
set forth on the signature pages hereto, together with the
Warrants, at the Purchase Price on the initial Closing Date as
follows:
(i) Upon execution and delivery of this
Agreement, each Investor shall deliver to the Escrow
Agent immediately available funds in their proportionate
amount of the Purchase Price as set forth on the signature
pages hereto, and the Company shall deliver the Convertible
Debenture certificates and the Warrants to the Escrow
Agent, in each case to be held by the Escrow Agent
pursuant to the Escrow Agreement.
(ii) Upon satisfaction of the conditions set
forth in Section 2.1(b), the first Closing ("Closing")
shall occur at the offices of the Escrow Agent at
which the Escrow Agent (x) shall release the Convertible
Debentures and the Warrants to the Investors and
(y) shall release the Purchase Price (after
NY:71728.2 4
all fees have been paid as set forth in the Escrow
Agreement), pursuant to the terms of the Escrow Agreement.
(b) The first Closing is subject to the satisfaction of
the following conditions:
(i) acceptance and execution by the Company and by
the Investors, of this Agreement and all Exhibits
hereto;
(ii) delivery into escrow by each Investor of
immediately available funds in the amount of the
Purchase Price of the Convertible Debentures
purchased at the first Closing and the Warrants,
as more fully set forth in the Escrow Agreement;
(iii) all representations and warranties of the
Investors contained herein shall remain true and
correct as of the Closing Date (as a condition to
the Company's obligations);
(iv) all representations and warranties of the Company
contained herein shall remain true and correct as of the
Closing Date (as a condition to the Investors' obligations);
(v) the Company shall have obtained all permits and
qualifications required by any state for the offer and sale
of the Convertible Debentures and Warrants, or shall have
the availability of exemptions therefrom;
(vi) the sale and issuance of the Convertible Debentures
and the Warrants hereunder, and the proposed issuance by the
Company to the Investors of the Common Stock underlying the
Convertible Debentures and the Warrants upon the conversion
or exercise thereof shall be legally permitted by all laws
and regulations to which the Investors and the Company are
subject and there shall be no ruling, judgment or writ of any
court prohibiting the transactions contemplated by this Agreement;
(vii) delivery of the original fully executed Convertible
Debenture certificates and Warrants certificates to the Escrow
Agent;
(viii) delivery to the Escrow Agent of an opinion of
Xxxxxxx X. Cane, counsel to the Company, in the form of
Exhibit E hereto;
(ix) delivery to the Escrow Agent of the Irrevocable
Instructions to Transfer Agent in the form attached hereto
as Exhibit F; and delivery to the Escrow Agent of the
Registration Rights Agreement.
The First Closing shall be deemed to have occurred on July 20,
1998.
(c) The Company further agrees to sell, and Roseworth Group,
Ltd., Balmore Funds, S.A. and Austost Anstalt Xxxxxx each
further agree to purchase additional Convertible Debentures at
the Purchase Price equal to the commitment amount for the second
Closing set
NY:71728.2 5
forth on the signature pages hereto on the date specified by
the Company which is no earlier than ten (10) Trading Days
following the Effective Date as follows:
(i) Within three Trading Days of receipt of notice
from the Company that the Registration Statement has been
declared effective by the SEC and the Company desires such
Investors to purchase the remaining Convertible Debentures,
each such Investor shall deliver to the Escrow Agent
immediately available funds in the amount of the Purchase
Price for the additional Convertible Debentures, and the
Company shall deliver further certificates representing such
Convertible Debentures to the Escrow Agent, to be held by the
Escrow Agent pursuant to the Escrow Agreement.
(ii) Upon satisfaction of the conditions set forth in
Section 2.1(b) (ii) through (vii), other than with respect to
the Warrants, and if the average daily trading value of the
Common Stock has been at least $50,000 for the prior twenty (20)
Trading Days, an additional Closing shall occur at the offices
of the Escrow Agent at which the Escrow Agent (x) shall release
the Convertible Debentures to the participating Investors and (y)
shall release the Purchase Price (after all fees have been paid
as set forth in the Escrow Agreement) to the Company, pursuant
to the terms of the Escrow Agreement.
Section 2.2. Liquidated Damages. The parties hereto
acknowledge and agree that the sum payable pursuant to the
Registration Rights Agreement for late registration and the sum
payable pursuant to the Convertible Debentures for late delivery
of Common Stock certificates shall constitute liquidated damages
and not penalties. The parties further acknowledge that (a) the
amount of loss or damages likely to be incurred is incapable
or is difficult to precisely estimate, (b) the amount specified
in such provisions bear a reasonable proportion and are not
plainly or grossly disproportionate to the probable loss likely
to be incurred by the Investor in connection with the failure
of the Company to timely cause the registration of the
Registrable Securities or to deliver stock certificates upon any
conversion, and (c) the parties are sophisticated businesses and
have been represented by sophisticated and able legal and financial
counsel and negotiated this Agreement at arm's length.
ARTICLE III
Representations and Warranties of Investor
Each Investor, severally and not jointly, represents and
warrants to the Company that:
Section 3.1. Intent. The Investor is entering into this
Agreement for its own account and not with a view to or for
sale in connection with any distribution of the Common Stock.
The Investor has no present arrangement (whether or not legally
binding) at any time to sell the Convertible Debenture, the
Warrants, any Conversion Shares or Warrant Shares to or through
any person or entity; provided, however, that by making the
representations herein, the Investor does not agree to hold such
securities for any minimum or other specific term and reserves
the
NY:71728.2 6
right to dispose of the Conversion Shares and Warrant Shares
at any time in accordance with federal and state securities laws
applicable to such disposition.
Section 3.2. Sophisticated Investor. The Investor is a
sophisticated investor (as described in Rule 506(b)(2)(ii) of
Regulation D) and an accredited investor (as defined in Rule 501
of Regulation D), and Investor has such experience in business
and financial matters that it has the capacity to protect its
own interests in connection with this transaction and is capable
of evaluating the merits and risks of an investment in the
Convertible Debenture, the Warrants and the underlying Common
Stock. The Investor has been represented by counsel of its
choice. The Investor acknowledges that an investment in the
Convertible Debenture, the Warrants and the underlying Common
Stock is speculative and involves a high degree of risk.
Section 3.3. Authority. This Agreement and each agreement
attached as an Exhibit hereto which is required to be executed by
Investor has been duly authorized and validly executed and
delivered by the Investor and is a valid and binding agreement
of the Investor enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies or by other equitable principles
of general application.
Section 3.4. Not an Affiliate. The Investor is not an
officer, director or "affiliate" (as that term is defined in Rule
405 of the Securities Act) of the Company.
Section 3.5. Absence of Conflicts. The execution and
delivery of this Agreement and each agreement which is attached
as an Exhibit hereto and executed by the Investor in connection
herewith, and the consummation of the transactions contemplated
hereby and thereby, and compliance with the requirements hereof
and thereof by the Investor, will not violate any law, rule,
regulation, order, writ, judgment, injunction, decree or award
binding on Investor or (a) violate any provision of any
indenture, instrument or agreement to which Investor is a party
or is subject, or by which Investor or any of its assets is
bound; (b) conflict with or constitute a material default
thereunder; (c) result in the creation or imposition of any lien
pursuant to the terms of any such indenture, instrument or
agreement, or constitute a breach of any fiduciary duty owed by
Investor to any third party; or (d) require the approval of any
third-party (which has not been obtained) pursuant to any
material contract, agreement, instrument, relationship or legal
obligation to which Investor is subject or to which any of its
assets, operations or management may be subject.
Section 3.6. Disclosure; Access to Information. The Investor
has received all documents, records, books and other information
pertaining to Investor's investment in the Company that have
been requested by the Investor.
Section 3.7. Manner of Sale. At no time was Investor
presented with or solicited by or through any leaflet, public
promotional meeting, television advertisement or any other form
of general solicitation or advertising.
ARTICLE IV
Representations and Warranties of the Company
NY:71728.2 7
The Company represents and Warrants to the Investors that,
except as set forth on the Disclosure Schedule prepared by the
Company and attached hereto:
Section 4.1. Organization of the Company. The Company is a
corporation duly incorporated and existing in good standing
under the laws of the State of Nevada and has all requisite
corporate authority to own its properties and to carry on its
business as now being conducted. The Company does not have any
subsidiaries and does not own more that fifty percent (50%) of
or control any other business entity except as described in the
SEC Documents. The Company is duly qualified and is in good
standing as a foreign corporation to do business in every
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, other
than those in which the failure so to qualify would not have a
Material Adverse Effect.
Section 4.2. Authority. (i) The Company has the requisite
corporate power and corporate authority to conduct its business
as now conducted, to enter into and perform its obligations
under this Agreement, the Registration Rights Agreement, the
Escrow Agreement, and the Warrants and to issue the Convertible
Debentures, the Conversion Shares, the Warrants and the Warrant
Shares pursuant to their respective terms, (ii) the execution,
issuance and delivery of this Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Convertible Debentures and
the Warrants by the Company and the consummation by it of the
transactions contemplated hereby have been duly authorized by
all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or
stockholders is required, and (iii) this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the
Convertible Debentures and the Warrants have been duly executed
and delivered by the Company and at the Closing shall constitute
valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally
the enforcement of, creditors' rights and remedies or by other
equitable principles of general application. The Company has
duly and validly authorized and reserved for issuance shares of
Common Stock sufficient in number for the conversion of the
Convertible Debentures and for the exercise of the Warrants.
The Company understands and acknowledges the potentially
dilutive effect to the Common Stock of the issuance of the
Conversion Shares. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the
Convertible Debentures and Warrant Shares upon exercise of the
Warrants in accordance with this Agreement and the Convertible
Debentures is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company and
notwithstanding the commencement of any case under 11 U.S.C.
101 et seq. (the "Bankruptcy Code"). The Company shall not seek
judicial relief from its obligations hereunder except pursuant
to the Bankruptcy Code. In the event the Company is a debtor
under the Bankruptcy Code, the Company hereby waives to the
fullest extent permitted any rights to relief it may have under
11 U.S.C. 362 in respect of the conversion of the Convertible
Debentures and the exercise of the Warrants. The Company
agrees, without cost or expense to the Investors, to take or
consent to any and all action necessary to effectuate relief
under 11 U.S.C. 362.
Section 4.3. Capitalization. The authorized capital stock
of the Company consists of 100,000,000 shares of Common Stock,
$0.001 par value per share, of which 16,723,929 shares
NY:71728.2 8
are issued and outstanding as of July 14, 1999. Except as set
forth in the SEC Documents, there are no outstanding Capital
Shares Equivalents nor any agreements or understandings pursuant
to which any Capital Shares Equivalents may become outstanding.
The Company is not a party to any agreement granting registration
or anti-dilution rights to any person with respect to any of its
equity or debt securities. All of the outstanding shares of
Common Stock of the Company have been duly and validly authorized
and issued and are fully paid and non-assessable and have been
issued pursuant to valid exemptions from registration under the
Securities Act and all applicable state "blue sky" laws.
Section 4.4. Common Stock. The Company has registered its
Common Stock pursuant to Section 12(b) or (g) of the Exchange Act
and is in full compliance with all reporting requirements of the
Exchange Act, and the Company is in compliance with all
requirements for the continued listing or quotation of its
Common Stock, and such Common Stock is currently listed or
quoted on, the Principal Market. As of the date hereof, the
Principal Market is the OTC Bulletin Board and the Company has
not received any notice regarding, and to its knowledge there is
no threat, of the termination or discontinuance of the
eligibility of the Common Stock for such listing.
Section 4.5. SEC Documents. The Company has made available
to the Investors true and complete copies of the SEC Documents.
The Company has not provided to the Investors any information that,
according to applicable law, rule or regulation, should have
been disclosed publicly prior to the date hereof by the Company,
but which has not been so disclosed. As of their respective
dates, the SEC Documents complied in all material respects with
the requirements of the Exchange Act, and rules and regulations
of the SEC promulgated thereunder and the SEC Documents did not
contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC
Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with
respect thereto at the time of such inclusion. Such financial
statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or
(ii) in the case of unaudited interim statements, to the extent
they exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and
the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited interim statements, to
normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations
or liabilities of any kind (whether accrued, absolute,
contingent or otherwise, and whether due or to become due) that
would have been required to be reflected in, reserved against or
otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected
in, reserved against or otherwise described in the financial
statements or the notes thereto included in the SEC Documents or
was not incurred in the ordinary course of business consistent
with the Company's past practices since the last date of such
financial statements.
NY:71728.2 9
Section 4.6. Exemption from Registration; Valid Issuances.
Subject to the accuracy of the Investors' representations in
Article III, the sale of the Convertible Debentures, the Conversion
Shares, the Warrants and the Warrant Shares will not require
registration under the Securities Act and/or any applicable
state securities law. When issued and paid for in accordance
with the Warrants and validly converted in accordance with the
terms of the Convertible Debentures, the Conversion Shares and
the Warrant Shares will be duly and validly issued, fully paid,
and non-assessable. Neither the sales of the Convertible
Debentures, the Conversion Shares, the Warrants or the Warrant
Shares pursuant to, nor the Company's performance of its
obligations under, this Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Convertible Debentures or
the Warrants will (i) result in the creation or imposition by
the Company of any liens, charges, claims or other encumbrances
upon the Convertible Debentures, the Conversion Shares, the
Warrants or the Warrant Shares or, except as contemplated
herein, any of the assets of the Company, or (ii) entitle the
holders of Outstanding Capital Shares to preemptive or other
rights to subscribe for or acquire the Capital Shares or other
securities of the Company. The Convertible Debentures, the
Conversion Shares, the Warrants and the Warrant Shares shall not
subject the Investors to personal liability to the Company or
its creditors by reason of the possession thereof.
Section 4.7. No General Solicitation or Advertising in Regard
to this Transaction. Neither the Company nor any of its affiliates
nor, to the knowledge of the Company, any person acting on its
or their behalf (i) has conducted or will conduct any general
solicitation (as that term is used in Rule 502(c) of Regulation
D) or general advertising with respect to the sale of the
Convertible Debentures or the Warrants, or (ii) made any offers
or sales of any security or solicited any offers to buy any
security under any circumstances that would require registration
of the Convertible Debentures, the Conversion Shares, the
Warrants or the Warrant Shares under the Securities Act.
Section 4.8. No Conflicts. The execution, delivery and
performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby, including
without limitation the issuance of and payment of interest upon
the Convertible Debentures, the Conversion Shares, the Warrants
and the Warrant Shares, do not and will not (i) result in a
violation of the Company's Certificate of Incorporation or By-
Laws or (ii) conflict with, or constitute a material default (or
an event that with notice or lapse of time or both would become
a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material
agreement, indenture or instrument, or any "lock-up" or similar
provision of any underwriting or similar agreement to which the
Company is a party, or (iii) result in a violation of any
federal, state or local law, rule, regulation, order, judgment
or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any material
property or asset of the Company is bound or affected, nor is
the Company otherwise in violation of, conflict with or default
under any of the foregoing (except in each case for such
conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not have, individually or
in the aggregate, a Material Adverse Effect). The business of
the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for
possible violations that either singly or in the aggregate would
not have a Material Adverse Effect. The Company is not required
under any Federal, state or local law, rule or regulation to
obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the
Convertible Debentures
NY:71728.2 10
or the Warrants in accordance with the terms hereof (other than
any SEC or state securities filings that may be required to be
made by the Company subsequent to Closing, any registration
statement that may be filed pursuant hereto); provided that, for
purposes of the representation made in this sentence, the Company
is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investors herein.
Section 4.9. No Material Adverse Change. Since March 31,
1999, no Material Adverse Effect has occurred or exists with
respect to the Company. No material supplier has given notice,
oral or written, that it intends to cease or reduce the volume
of its business with the Company from historical levels.
Section 4.10. No Undisclosed Events or Circumstances. Since
March 31, 1999, no event or circumstance has occurred or exists
with respect to the Company or its businesses, properties,
prospects, operations or financial condition, that, under any
applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which
has not been so publicly announced or disclosed in writing to
the Investors.
Section 4.11. No Integrated Offering. Other than pursuant
to an effective registration statement under the Securities Act,
or pursuant to the issuance or exercise of employee stock options,
or pursuant to its discussion with the Investors in connection
with the transactions contemplated hereby, the Company has not
issued, offered or sold the Convertible Debentures, the Warrants
or any shares of Common Stock (including for this purpose any
securities of the same or a similar class as the Convertible
Debentures, the Warrants or Common Stock, or any securities
convertible into a exchangeable or exercisable for the
Convertible Debentures or Common Stock or any such other
securities) within the six-month period next preceding the date
hereof, and the Company shall not permit any of its directors,
officers or affiliates directly or indirectly to take, any
action (including, without limitation, any offering or sale to
any Person of the Convertible Debentures, Warrants or shares of
Common Stock), so as to make unavailable the exemption from
Securities Act registration being relied upon by the Company for
the offer and sale to Investors of the Convertible Debentures
(and the Conversion Shares) or the Warrants (and the Warrant
Shares) as contemplated by this Agreement.
Section 4.12. Litigation and Other Proceedings. There are no
lawsuits or proceedings pending or, to the knowledge of the
Company, threatened, against the Company or any subsidiary, nor
has the Company received any written or oral notice of any such
action, suit, proceeding or investigation, which could
reasonably be expected to have a Material Adverse Effect. No
judgment, order, writ, injunction or decree or award has been
issued by or, to the knowledge of the Company, requested of any
court, arbitrator or governmental agency which could result in a
Material Adverse Effect.
Section 4.13. No Misleading or Untrue Communication. The
Company and, to the knowledge of the Company, any person
representing the Company, or any other person selling or offering
to sell the Convertible Debentures or the Warrants in connection
with the transaction contemplated by this Agreement, have not made,
at any time, any oral communication in connection with the offer or
sale of the same which contained any untrue statement of a
material fact or omitted to state any material fact necessary in
order to make the statements, in the light of the circumstances
under which they were made, not misleading.
NY:71728.2 11
Section 4.14. Material Non-Public Information. The Company
has not disclosed to the Investors any material non-public
information that (i) if disclosed, would reasonably be expected
to have a material effect on the price of the Common Stock or (ii)
according to applicable law, rule or regulation, should have
been disclosed publicly by the Company prior to the date hereof
but which has not been so disclosed.
Section 4.15. Insurance. The Company and each subsidiary
maintains property and casualty, general liability, workers'
compensation, environmental hazard, personal injury and other
similar types of insurance with financially sound and reputable
insurers that is adequate, consistent with industry standards
and the Company's historical claims experience. The Company has
not received notice from, and has no knowledge of any threat by,
any insurer (that has issued any insurance policy to the Company)
that such insurer intends to deny coverage under or cancel,
discontinue or not renew any insurance policy presently in force.
Section 4.16. Tax Matters.
(a) The Company and each subsidiary has filed all Tax Returns
which it is required to file under applicable laws; all such Tax
Returns are true and accurate and has been prepared in
compliance with all applicable laws; the Company has paid all
Taxes due and owing by it or any subsidiary (whether or not such
Taxes are required to be shown on a Tax Return) and have
withheld and paid over to the appropriate taxing authorities all
Taxes which it is required to withhold from amounts paid or
owing to any employee, stockholder, creditor or other third
parties; and since December 31, 1998, the charges, accruals and
reserves for Taxes with respect to the Company (including any
provisions for deferred income taxes) reflected on the books of
the Company are adequate to cover any Tax liabilities of the
Company if its current tax year were treated as ending on the
date hereof.
(b) No claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax returns that
the Company or any subsidiary is or may be subject to taxation
by that jurisdiction. There are no foreign, federal, state or
local tax audits or administrative or judicial proceedings
pending or being conducted with respect to the Company or any
subsidiary; no information related to Tax matters has been
requested by any foreign, federal, state or local taxing
authority; and, except as disclosed above, no written notice
indicating an intent to open an audit or other review has been
received by the Company or any subsidiary from any foreign,
federal, state or local taxing authority. There are no material
unresolved questions or claims concerning the Company's Tax
liability. The Company (A) has not executed or entered into a
closing agreement pursuant to 7121 of the Internal Revenue
Code or any predecessor provision thereof or any similar
provision of state, local or foreign law; or (B) has not agreed
to or is required to make any adjustments pursuant to 481 (a)
of the Internal Revenue Code or any similar provision of state,
local or foreign law by reason of a change in accounting method
initiated by the Company or any of its subsidiaries or has any
knowledge that the IRS has proposed any such adjustment or
change in accounting method, or has any application pending with
any taxing authority requesting permission for any changes in
accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real
property holding corporation within the meaning of 897(c)(2)
of the Internal Revenue Code during the applicable period
specified in 897(c)(1)(A)(ii) of the Internal Revenue Code.
NY:71728.2 12
(c) The Company has not made an election under 341(f) of
the Internal Revenue Code. The Company is not liable for the
Taxes of another person that is not a subsidiary of the Company
under (A) Treas. Reg. 1.1502-6 (or comparable provisions of
state, local or foreign law), (B) as a transferee or successor,
(C) by contract or indemnity or (D) otherwise. The Company is
not a party to any tax sharing agreement. The Company has not
made any payments, is obligated to make payments or is a party
to an agreement that could obligate it to make any payments that
would not be deductible under 280G of the Internal Revenue
Code.
(d) For purposes of this Section 4.16:
"IRS" means the United States Internal Revenue
Service.
"Tax" or "Taxes" means federal, state, county, local,
foreign, or other income, gross receipts, ad valorem,
franchise, profits, sales or use, transfer,
registration, excise, utility, environmental,
communications, real or personal property, capital
stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated
and other taxes of any kind whatsoever (including,
without limitation, deficiencies, penalties, additions
to tax, and interest attributable thereto) whether
disputed or not.
"Tax Return" means any return, information report or
filing with respect to Taxes, including any schedules
attached thereto and including any amendment thereof.
Section 4.17. Property. Neither the Company nor any of its
subsidiaries owns any real property. Each of the Company and
its subsidiaries has good and marketable title to all personal
property owned by it, free and clear of all liens, encumbrances
and defects except such as do not materially affect the value of
such property and do not materially interfere with the use made
and proposed to be made of such property by the Company; and to
the Company's knowledge any real property and buildings held
under lease by the Company as tenant are held by it under valid,
subsisting and enforceable leases with such exceptions as are
not material and do not interfere with the use made and intended
to be made of such property and buildings by the Company. The
Company's present facilities are adequate for the Company's
reasonably foreseeable needs.
Section 4.18. Intellectual Property. Each of the Company
and its subsidiaries owns or possesses adequate and enforceable
rights to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights,
copyright applications, licenses, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar
rights and proprietary knowledge (collectively, "Intangibles")
necessary for the conduct of its business as now being conducted.
To the Company's knowledge, except as disclosed in the SEC
Documents neither the Company nor any of its subsidiaries is
infringing upon or in conflict with any right of any other
person with respect to any Intangibles. Except as disclosed in
the SEC Documents, no adverse claims have been asserted by any
person to the ownership or use of any Intangibles and the Company
has no knowledge of any basis for such claim.
Section 4.19. Internal Controls and Procedures. The Company
maintains books and records and internal accounting controls
which provide reasonable assurance that (i) all transactions to
which
NY:71728.2 13
the Company or any subsidiary is a party or by which its
properties are bound are executed with management's
authorization; (ii) the recorded accounting of the Company's
consolidated assets is compared with existing assets at regular
intervals; (iii) access to the Company's consolidated assets is
permitted only in accordance with management's authorization;
and (iv) all transactions to which the Company or any
subsidiary is a party or by which its properties are bound are
recorded as necessary to permit preparation of the financial
statements of the Company in accordance with U.S. generally
accepted accounting principles.
Section 4.20. Payments and Contributions. Neither the
Company, any subsidiary, nor any of its directors, officers or,
to its knowledge, other employees has (i) used any Company funds
for any unlawful contribution, endorsement, gift, entertainment or
other unlawful expense relating to political activity; (ii) made
any direct or indirect unlawful payment of Company funds to any
foreign or domestic government official or employee; (iii)
violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any
bribe, rebate, payoff, influence payment, kickback or other
similar payment to any person with respect to Company matters.
Section 4.21. Related Party Transactions. The Company is not a
party to any agreement or transaction with any of its officers,
directors, greater than 5% shareholders or any Affiliate (as
defined in SEC Rule 405) of any of said persons that would
require disclosure under Item 404 of Regulation S-K that is not
disclosed in the SEC Documents.
Section 4.22. Permits and Licenses. The Company holds all
necessary permits and licenses to conduct its business as
presently conducted, except that the FDA has not yet approved
the Company's product for sale in the United States. All of such
permits and licenses are in full force and effect and the
Company is not in material violation of any thereof.
Section 4.23. No Misrepresentation. The representations and
warranties of the Company contained in this Agreement, any
schedule, annex or exhibit hereto and any agreement, instrument
or certificate furnished by the Company to the Investors
pursuant to this Agreement, do not contain any untrue statement
of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.
ARTICLE V
Covenants of the Investors
Each Investor, severally and not jointly, covenants with
the Company that:
Section 5.1. Compliance with Law. The Investor's trading
activities with respect to shares of the Company's Common Stock
will be in compliance with all applicable state and federal
securities laws, rules and regulations and rules and regulations
of the Principal Market on which the Company's Common Stock is
listed.
NY:71728.2 14
ARTICLE VI
Covenants of the Company
Section 6.1. Registration Rights. The Company shall cause
the Registration Rights Agreement to remain in full force and
effect and the Company shall comply in all material respects
with the terms thereof.
Section 6.2. Reservation of Common Stock. As of the date
hereof, the Company has reserved and the Company shall continue
to reserve and keep available at all times, free of preemptive
rights, shares of Common Stock for the purpose of enabling the
Company to issue the Conversion Shares and the Warrant Shares
pursuant to any conversion of the Convertible Debentures or
exercise of the Warrants. The number of shares so reserved from
time to time, as theretofore increased or reduced as hereinafter
provided, may be reduced by the number of shares actually
delivered pursuant to any conversion of the Convertible
Debentures or exercise of the Warrants and the number of shares
so reserved shall be increased or decreased to reflect potential
increases or decreases in the Common Stock that the Company may
thereafter be obligated to issue by reason of adjustments to the
Warrants.
Section 6.3. Listing of Common Stock. The Company hereby
agrees to maintain the listing of the Common Stock on a Principal
Market, and as soon as reasonably practicable following the
Closing to list the Conversion Shares and the Warrant Shares
on the Principal Market. The Company further agrees, if the
Company applies to have the Common Stock traded on any other
Principal Market, it will include in such application the
Conversion Shares and the Warrant Shares, and will take such
other action as is necessary or desirable in the opinion of the
Investors to cause the Conversion Shares and Warrant Shares to be
listed on such other Principal Market as promptly as possible.
The Company will take all action to continue the listing and
trading of its Common Stock on a Principal Market (including,
without limitation, maintaining sufficient net tangible assets)
and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the
Principal Market and shall provide Investors with copies of any
correspondence to or from such Principal Market which questions
or threatens delisting of the Common Stock, within three (3)
Trading Days of the Company's receipt thereof, until the
Investors have disposed of all of their Registrable Securities.
Section 6.4. Exchange Act Registration. The Company will
cause its Common Stock to continue to be registered under Section
12(b) or (g) of the Exchange Act, will use its best efforts to
comply in all respects with its reporting and filing obligations
under the Exchange Act, and will not take any action or file any
document (whether or not permitted by the Exchange Act or the
rules thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations
under said Act until the Investors have disposed of all of their
Registrable Securities.
Section 6.5. Legends. The certificates evidencing the
Registrable Securities shall be free of legends, except as set
forth in Article IX.
NY:71728.2 15
Section 6.6. Corporate Existence; Conflicting Agreements.
The Company will take all steps necessary to preserve and
continue the corporate existence of the Company. The Company shall
qualify to do business as a foreign corporation in the State of
California within twenty (20) days of the first Closing. The
Company shall not enter into any agreement, the terms of which
agreement would restrict or impair the right or ability of the
Company to perform any of its obligations under this Agreement
or any of the other agreements attached as exhibits hereto.
Section 6.7. Consolidation; Merger. The Company shall not,
at any time after the date hereof, effect any merger or
consolidation of the Company with or into, or a transfer of all
or substantially all of the assets of the Company to, another
entity (a "Consolidation Event") unless the resulting successor
or acquiring entity (if not the Company) assumes by written
instrument or by operation of law the obligation to deliver to
the Investors such shares of stock and/or securities as the
Investors are entitled to receive pursuant to this Agreement
and the Convertible Debenture.
Section 6.8. Issuance of Convertible Debentures and Warrant
Shares. The sale of the Convertible Debentures and the Warrants
and the issuance of the Warrant Shares pursuant to exercise of
the Warrants and the Conversion Shares upon conversion of the
Convertible Debentures shall be made in accordance with the
provisions and requirements of Section 4(2), 4(6) or Regulation
D and any applicable state securities law. The Company shall
make any necessary SEC and "blue sky" filings required to be
made by the Company in connection with the sale of the
Securities to the Investors as required by all applicable laws,
and shall provide a copy thereof to the Investors promptly after
such filing.
Section 6.9. Limitation on Future Financing. The Company agrees
that it will not enter into any sale of its securities or any
Capital Shares Equivalents at a discount to the then-current bid
price until 180 days after the effective date of the Registration
Statement except for any sales (i) of up to 3,000,000 shares
of Common Stock pursuant to the exercise of options granted or to
be granted under an employee benefit plan, (ii) pursuant to any
compensatory plan for a full-time employee or key consultant, or
(iii) with the prior approval of a majority in interest of the
Investors in connection with a strategic partnership or other
business transaction, the principal purpose of which is not simply
to raise money. If any of Roseworth Group, Ltd., Balmore Funds,
S.A. or Austost Anstalt Xxxxxx shall wrongfully fail to purchase
additional Convertible Debentures at the second Closing, then
such defaulting Investor(s) shall have no rights pursuant to this
Section 6.9.
ARTICLE VII
Survival; Indemnification
Section 7.1. Survival. The representations, warranties and
covenants made by each of the Company and each Investor in this
Agreement, the annexes, schedules and exhibits hereto and in
each instrument, agreement and certificate entered into and
delivered by them pursuant to this Agreement, shall survive the
Closing and the consummation of the transactions contemplated
hereby. In the event of a breach or violation of any of such
representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made
NY:71728.2 16
shall have all rights and remedies for such breach or violation
available to it under the provisions of this Agreement,
irrespective of any investigation made by or on behalf of such
party on or prior to the Closing Date.
Section 7.2. Indemnity. (a) The Company hereby agrees to
indemnify and hold harmless the Investors, their respective
Affiliates and their respective officers, directors, partners
and members (collectively, the "Investor Indemnitees"), from and
against any and all Damages, and agrees to reimburse the Investor
Indemnitees for all reasonable out-of-pocket expenses (including
the reasonable fees and expenses of legal counsel), in each case
promptly as incurred by the Investor Indemnitees and to the
extent arising out of or in connection with:
(i) any misrepresentation, omission of fact or breach
of any of the Company's representations or warranties
contained in this Agreement, the annexes, schedules or
exhibits hereto or any instrument, agreement or certificate
entered into or delivered by the Company pursuant to this
Agreement; or
(ii) any failure by the Company to perform in any
material respect any of its covenants, agreements,
undertakings or obligations set forth in this Agreement,
the annexes, schedules or exhibits hereto or any instru-
ment, agreement or certificate entered into or delivered by
the Company pursuant to this Agreement; or
(iii) any action instituted against the Investors,
or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of an
Investor, with respect to any of the transactions
contemplated by this Agreement.
(b) Each Investor, severally and not jointly, hereby agrees
to indemnify and hold harmless the Company, its Affiliates and
their respective officers, directors, partners and members
(collectively, the "Company Indemnitees"), from and against any
and all Damages, and agrees to reimburse the Company Indemnitees
for reasonable all out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel), in each case
promptly as incurred by the Company Indemnitees and to the
extent arising out of or in connection with:
(i) any misrepresentation, omission of fact, or
breach of any of the Investor's representations or
warranties contained in this Agreement, the annexes,
schedules or exhibits hereto or any instrument, agreement
or certificate entered into or delivered by the Investor
pursuant to this Agreement; or
(ii) any failure by the Investor to perform in any
material respect any of its covenants, agreements,
undertakings or obligations set forth in this Agreement or
any instrument, certificate or agreement entered into or
delivered by the Investor pursuant to this Agreement.
Section 7.3. Notice. Promptly after receipt by either party
hereto seeking indemnification pursuant to Section 7.2 (an
"Indemnified Party") of written notice of any investigation, claim,
proceeding or other action in respect of which indemnification
is being sought (each, a "Claim"),
NY:71728.2 17
the Indemnified Party promptly shall notify the party from whom
indemnification pursuant to Section 7.2 is being sought (the
"Indemnifying Party") of the commencement thereof; but the
omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the
Indemnified Party, except to the extent that the Indemnifying
Party is actually prejudiced by such omission or delay. In
connection with any Claim as to which both the Indemnifying
Party and the Indemnified Party are parties, the Indemnifying
Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the
Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense
of such Claim, and the Indemnifying Party shall bear the reasonable
fees, out-of-pocket costs and expenses of such separate legal
counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-
pocket costs and expenses, (y) the Indemnified Party reasonably
shall have concluded that representation of the Indemnified
Party and the Indemnifying Party by the same legal counsel would
not be appropriate due to actual or, as reasonably determined by
legal counsel to the Indemnified Party, potentially differing
interests between such parties in the conduct of the defense of
such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party, or (z) the
Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of
such Claim. If the Indemnified Party employs separate legal
counsel in circumstances other than as described in clauses (x),
(y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party.
Except as provided above, the Indemnifying Party shall not, in
connection with any Claim in the same jurisdiction, be liable
for the fees and expenses of more than one firm of legal counsel
for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior
written consent of the Indemnified Party (which consent shall
not unreasonably be withheld), settle or compromise any Claim or
consent to the entry of any judgment that does not include an
unconditional release of the Indemnified Party from all
liabilities with respect to such Claim or judgment.
Section 7.4. Direct Claims. In the event one party hereunder
should have a claim for indemnification that does not involve a
claim or demand being asserted by a third party, the Indemnified
Party promptly shall deliver notice of such claim to the
Indemnifying Party. If the Indemnified Party disputes the
claim, such dispute shall be resolved by mutual agreement of the
Indemnified Party and the Indemnifying Party or by binding
arbitration conducted in accordance with the procedures and
rules of the American Arbitration Association as set forth in
Article X. Judgment upon any award rendered by any arbitrators
may be entered in any court having competent jurisdiction
thereof.
ARTICLE VIII
Due Diligence Review
Section 8.1. Due Diligence Review. Subject to Section 8.2,
the Company shall make available for inspection and review by the
Investors, advisors to and representatives of the Investors (who
may or may not be affiliated with the Investors and who are
reasonably acceptable to the
NY:71728.2 18
Company), any underwriter participating in any disposition of the
Registrable Securities on behalf of the Investors pursuant to the
Registration Statement, any such registration statement or
amendment or supplement thereto or any blue sky, Nasdaq or other
filing, all proposed filings with the SEC, and all other corporate
documents and properties of the Company as may be reasonably
necessary for the purpose of such review, and cause the Company's
officers, directors and employees to supply all such information
reasonably requested by the Investors or any such
representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in
response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after
the filing and effectiveness of the Registration Statement for
the sole purpose of enabling the Investors and such
representatives, advisors and underwriters and their respective
accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the
Registration Statement.
Section 8.2. Non-Disclosure of Non-Public Information.
(a) From and after the filing of the Registration
Statement, the Company shall not disclose material non-public
information to the Investors, advisors to or representatives of
the Investors unless prior to disclosure of such information the
Company identifies such information as being non-public
information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to
accept such non-public information for review. Other than
disclosure of any comment letters received from the SEC staff
with respect to the Registration Statement, the Company may, as
a condition to disclosing any non-public information hereunder,
require the Investors' advisors and representatives to enter
into a confidentiality agreement in form and content reasonably
satisfactory to the Company and the Investors.
(b) The Company will promptly notify the advisors and
representatives of the Investors and, if any, underwriters, of
any event or the existence of any circumstance of which it
becomes aware, constituting material information (whether or not
requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if
not disclosed in the prospectus included in the Registration
Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated
therein in order to make the statements, therein in light of the
circumstances in which they were made, not misleading.
ARTICLE IX
Legends; Transfer Agent Instructions
Section 9.1. Legends. Unless otherwise provided below, each
certificate representing Registrable Securities will bear the
following legend or equivalent (the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS
AND HAVE
NY:71728.2 19
BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM SUCH
REGISTRATION.
Section 9.2. Transfer Agent Instructions. Upon the execution
and delivery hereof, the Company is issuing to the transfer agent
for its Common Stock (and to any substitute or replacement transfer
agent for its Common Stock upon the Company's appointment of any
such substitute or replacement transfer agent) instructions
substantially in the form of Exhibit F hereto. Such instructions
shall be irrevocable by the Company from and after the date hereof
or from and after the issuance thereof to any such substitute or
replacement transfer agent, as the case may be.
Section 9.3. No Other Legend or Stock Transfer Restrictions.
No legend other than the one specified in Section 9.1 has been or
shall be placed on the share certificates representing the
Registrable Securities and no instructions or "stop transfer
orders," "stock transfer restrictions," or other restrictions
have been or shall be given to the Company's transfer agent
with respect thereto other than as expressly set forth in
this Article IX.
Section 9.4. Investors' Compliance. Nothing in this Article
shall affect in any way each Investor's obligations to comply with
all applicable securities laws upon resale of the Common Stock.
ARTICLE X
Choice of Law; Arbitration
Section 10.1. Governing Law/Arbitration. This Agreement
shall be governed by and construed in accordance with the laws
of the State of New York applicable to contracts made in New
York by persons domiciled in New York City and without regard to
its principles of conflicts of laws. Any dispute under this
Agreement shall be submitted to arbitration under the American
Arbitration Association (the "AAA") in New York City, New York,
and shall be finally and conclusively determined by the decision
of a board of arbitration consisting of three (3) members
(hereinafter referred to as the "Board of Arbitration") selected
according to the rules governing the AAA. The Board of
Arbitration shall meet on consecutive business days in New York
City, New York, and shall reach and render a decision in writing
(concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the losing
party is required to pay to the other party in respect of a claim
filed. In connection with rendering its decisions, the Board of
Arbitration shall adopt and follow the laws of the State of New
York unless the matter at issue is the corporation law of the
company's state of incorporation, in which event the corporation
law of such jurisdiction shall govern such issue. To the extent
practical, decisions of the Board of Arbitration shall be rendered
no more than thirty (30) calendar days following commencement of
proceedings
NY:71728.2 20
with respect thereto. The Board of Arbitration shall
cause its written decision to be delivered to all parties involved
in the dispute. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on the
parties to the dispute, and entitled to be enforced to the fullest
extent permitted by law and entered in any court of competent
jurisdiction. The Board of Arbitration shall be authorized and is
hereby directed to enter a default judgment against any party
failing to participate in any proceeding hereunder within the time
periods set forth in the AAA rules. The non-prevailing party to
any arbitration (as determined by the Board of Arbitration) shall
pay the expenses of the prevailing party, including reasonable
attorney's fees, in connection with such arbitration. Any party
shall be entitled to obtain injunctive relief from a court in any
case where such relief is available.
ARTICLE XI
Assignment
Section 11.1. Assignment. Neither this Agreement nor any
rights of the Investors or the Company hereunder may be assigned
by either party to any other person. Notwithstanding the
foregoing, (a) the provisions of this Agreement shall inure to the
benefit of, and be enforceable by, any permitted transferee of any
of the Convertible Debentures or Warrants purchased or acquired
by any Investor hereunder with respect to the Convertible
Debentures or Warrants held by such person, and (b) upon the
prior written consent of the Company, which consent shall not
unreasonably be withheld or delayed, each Investor's interest
in this Agreement may be assigned at any time, in whole or in
part, to any other person or entity (including any Affiliate
of the Investor) who agrees to make the representations and
warranties contained in Article III and who agrees to be bound
by the terms of this Agreement.
ARTICLE XII
Notices
Section 12.1. Notices. All notices, demands, requests,
consents, approvals, and other communications required or
permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) hand delivered, (ii) deposited in
the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service
with charges prepaid, or (iv) transmitted by facsimile, addressed
as set forth below or to such other address as such party shall
have specified most recently by written notice. Any notice or
other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number
designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the
first business day following such delivery (if delivered other
than on a business day during normal business hours where such
notice is to be received) or (b) on the first business day
following the date of sending by reputable courier service,
fully prepaid, addressed to such address, or (c) upon actual
receipt of such mailing, if mailed. The addresses for such
communications shall be:
NY:71728.2 21
If to the Company: MW Medical, Inc.
0000 X. Xxxxxxx Xxxxx
Xxxxxxxx Xxxxxx, XX 00000
Attention: Xxx Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy to (shall not
constitute notice): Xxxxxxx X. Cane, Esq.
000 Xxxxxxxxxx Xxxxxx Xxxxx,
XX-0000
Xxx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
if to the Investors: As set forth on the signature
pages hereto
with a copy to: Xxxxxx X. Xxxxx, Esq.
(shall not constitute notice) Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 12.1 by giving
written notice of such changed address or facsimile number to
the other party hereto as provided in this Section 12.1.
ARTICLE XIII
Miscellaneous
Section 13.1. Counterparts/ Facsimile/ Amendments. This
Agreement may be executed in multiple counterparts, each of
which may be executed by less than all of the parties and shall
be deemed to be an original instrument which shall be enforceable
against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument.
Except as otherwise stated herein, in lieu of the original
documents, a facsimile transmission or copy of the original
documents shall be as effective and enforceable as the original.
This Agreement may be amended only by a writing executed by all
parties.
Section 13.2. Entire Agreement. This Agreement, the
agreements attached as Exhibits hereto, which include, but are not
limited to the Convertible Debentures, the Warrants, the Escrow
Agreement, and the Registration Rights Agreement, set forth the
entire agreement and understanding of the parties relating to
the subject matter hereof and supersedes all prior and
22
contemporaneous agreements, negotiations and understandings
between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits
to this Agreement are incorporated herein by this reference and
shall constitute part of this Agreement as is fully set forth
herein.
Section 13.3. Severability. In the event that any provision
of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective
if it materially changes the economic benefit of this Agreement
to any party.
Section 13.4. Headings. The headings used in this Agreement
are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 13.5. Number and Gender. There may be one or more
Investors parties to this Agreement, which Investors may be natural
persons or entities. All references to plural Investors shall
apply equally to a single Investor if there is only one
Investor, and all references to an Investor as "it" shall apply
equally to a natural person.
Section 13.6. Reporting Entity for the Common Stock. The
reporting entity relied upon for the determination of the trading
price or trading volume of the Common Stock on any given Trading
Day for the purposes of this Agreement shall be Bloomberg, L.P.
or any successor thereto. The written mutual consent of the
Investors and the Company shall be required to employ any other
reporting entity.
Section 13.7. Replacement of Certificates. Upon (i) receipt
of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of a certificate representing
the Convertible Debentures or any Conversion Shares or Warrants
or any Warrant Shares and (ii) in the case of any such loss,
theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form
to the Company (which shall not include the posting of any bond)
or (iii) in the case of any such mutilation, on surrender and
cancellation of such certificate, the Company at its expense
will execute and deliver, in lieu thereof, a new certificate of
like tenor.
Section 13.8. Fees and Expenses. Each of the Company and the
Investors agrees to pay its own expenses incident to the
performance of its obligations hereunder, except that the
Company shall pay the fees, expenses and disbursements of
Xxxxxxx Xxxxxx & Green, P.C., counsel to Roseworth Group, Ltd.
and Escrow Agent for all of the Investors, in an amount equal to
$15,000, all as set forth in the Escrow Agreement.
Section 13.9. Brokerage. Each of the parties hereto
represents that it has had no dealings in connection with this
transaction with any finder or broker who will demand payment of
any fee or commission from the other party except for JWGenesis
Financial Services Corp., whose fee shall be paid by the Company.
The Company on the one hand, and the Investors, on the other hand,
agree to indemnify the other against and hold the other harmless
from any and all liabilities to any person claiming brokerage
commissions or finder's fees on account of services purported to
have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated
hereby.
NY:71728.2 23
Section 13.10. Publicity. The Company agrees that it will
not issue any press release or other public announcement of the
transactions contemplated by this Agreement without the prior
consent of the Investors, which shall not be unreasonably
withheld nor delayed by more than two (2) Trading Days from
their receipt of such proposed release. No release shall name
the Investors without their express consent.
IN WITNESS WHEREOF, the parties hereto have caused this
Purchase Agreement to be executed by the undersigned, thereunto
duly authorized, as of the date first set forth above.
MW Medical, Inc.
By: \s\ Xxx Xxxxxxx President CEO
-------------------------------------
Roseworth Group, Ltd.
By: \s\ Hans Grassner
-------------------------------------
Xxxx Xxxxxxx, Director
Principal Amount subscribed for:
First Closing $750,000
Second Closing $250,000
Address for notices:
C/o Xx. Xxxxxxxx & Partners
Xxxxxxxxxxxx 00
XX-0000 Xxxxx, Xxxxxxxxxxxxx
Fax: 000-00-00-0000-000
Balmore Funds, S.A.
By: \s\ Francois Morax
-------------------------------------
Francois Morax
Authorized Signatory
Principal Amount subscribed for:
First Closing $375,000
Second Closing $125,000
Address for notices:
Trident Xxxxxxxx
Road Town, Tortola
British Virgin Islands
Fax: 000-000-0000
[signatures continued]
NY:71728.2 24
[MW Medical, Inc. signature page continued]
Austost Anstalt Xxxxxx
By: \s\ Xxxxxx Xxxxx
-------------------------------------
Xxxxxx Xxxxx,
Authorized Signatory
Principal Amount subscribed for:
First Closing $375,000
Second Closing $125,000
Address for notices:
Xxxxxxxxxxx 000
0000 Xxxxxxxxxx
Xxxxx, Xxxxxxxxxxxxx
Fax:000-000-000-000
Markham Holdings, Ltd.
By: \s\ X.X. Xxxxxx
-------------------------------------
X.X. Xxxxxx
Authorized Signatory
Principal Amount subscribed for: $250,000
Address for notices:
00 Xxxx Xxxxx, X. X. Xxx 000
Xxxxxxxxx
Fax:000-000-00000
[signatures continued]
NY:71728.2 25
[signatures continued]
VMR High Octane Fund, Ltd.
By: \s\ Xxxxxxx Xxxx
-------------------------------------
Xxxxxxx Xxxx
Authorized Signatory
Principal Amount subscribed for: $750,000
Address for notices:
C/o HWR Services
Xxxxxxxxx Xxxxxxxx
X.X. Xxx 00
Xxxx Xxxx, Xxxxxxx
Xxxxxxx Virgin Islands
Fax:011-
Strategic Group, Ltd.
By: \s\ Xxxxxxx Xxxxx
-------------------------------------
Xxxxxxx Xxxxx,
Authorized Signatory
Principal Amount subscribed for: $250,000
Address for notices:
Xxxxx 00/00 Xxxxxxxx Xxxxx
00 Xxxx Xxxxxx, X.X. Xxx 000
Xxxxxxxxx
Fax:000-000-00000
[signatures continued]
\s\ Xxxx X. Xxxxxxx
-------------------------------------
Xxxx X. Xxxxxxx
Principal Amount subscribed for: $250,000
Address for notices:
Fax:
NY:71728.2 27
