EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
April ___, 2005, by and among AVITAR, INC., a Delaware corporation (the
"Company"), and the Buyers listed on Schedule I attached hereto (individually, a
"Buyer" or collectively "Buyers").
WITNESSETH:
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act");
WHEREAS, the Company has authorized the following series of its
Preferred Stock, $0.001 par value per share (the "Series E Preferred Stock"),
which shall be convertible into shares of the Company's Common Stock, par value
$0.01 per share (the "Common Stock") (as converted, the "Conversion Shares"), in
accordance with the terms of the Company Certificate of Designations,
Preferences, and Rights of the Series E Convertible Preferred Shares (the
"Certificate of Designations");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase up to $750,000 of Series E
Preferred Stock (the "Series E Preferred Shares"), which shall be convertible
into shares of the Company's common stock (the "Common Stock") (as converted,
the "Conversion Shares"), of$375,000 shall be funded on the second (2nd)
business day following the date hereof (the "First Closing") and $375,000 shall
be funded two (2) business days prior to the date the registration statement
(the "Registration Statement") is filed pursuant to the Investor Registration
Rights Agreement dated the date hereof with the United States Securities and
Exchange Commission (the "SEC") (the "Second Closing") (individually referred to
as a "Closing" collectively referred to as the "Closings"), for a total purchase
price of $750,000, (the "Purchase Price") in the respective amounts set forth
opposite each Buyer(s) name on Schedule I ( the "Subscription Amount"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Warrant (the
"Warrant");
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement (the "Investor Registration Rights Agreement") pursuant to which the
Company has agreed to provide certain registration rights under the 1933 Act and
the rules and regulations promulgated there under, and applicable state
securities laws and Irrevocable Transfer Agent Instructions (the "Irrevocable
Transfer Agent Instructions"); and
WHEREAS, each installment will be funded by the Buyer(s) from an escrow
account pursuant to the terms of an Escrow Agreement (the "Escrow Agreement").
This Agreement, the Certificate of Designations, the Warrant, the Investor
Registration Rights Agreement and Irrevocable Transfer Agent Instructions are
collectively referred to herein as the "Transaction Documents."
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s)hereby agree
as follows:
1. PURCHASE AND SALE OF SERIES E PREFERRED STOCK .
(a) Purchase of Series E Preferred Stock. Subject to the satisfaction (or
waiver) of the terms and conditions of this Agreement, each Buyer agrees,
severally and not jointly, to purchase at Closing (as defined herein below) and
the Company agrees to sell and issue to each Buyer, severally and not jointly,
at Closing, Series E Preferred Stock in amounts corresponding with the
Subscription Amount set forth opposite each Buyer's name on Schedule I hereto.
Upon execution hereof by a Buyer, the Buyer shall wire transfer the Subscription
Amount set forth opposite his name on Schedule I in same-day funds payable to
"Xxxxx Xxxxxxxx, Esq., as Escrow Agent for Avitar, Inc./Cornell Capital
Partners, LP ", which Subscription Amount shall be held in escrow pursuant to
the terms of the Escrow Agreement (as hereinafter defined) and disbursed in
accordance therewith.
(b) Closing Date. The First Closing of the purchase and sale of the Series E
Preferred Stock shall take place at 10:00 a.m. Eastern Standard Time on the
second (2nd) business day following the date hereof, subject to notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
6 and 7 below (or such other date as is mutually agreed to by the Company and
the Buyer(s)) (the "First Closing Date") and the Second Closing of the purchase
and sale of the Series E Preferred Stock shall take place two(2) business days
prior to the date the Registration Statement is filed with the SEC, subject to
notification of satisfaction of the conditions to the Second Closing set forth
herein and in Sections 6 and 7 below (or such other date as is mutually agreed
to by the Company and the Buyer(s)) (the "Second Closing Date") (collectively
referred to a the "Closing Dates"). The Closings shall occur on the Closing Date
at the offices of Yorkville Advisors, LLC, 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx
Xxxx, Xxx Xxxxxx 00000 (or such other place as is mutually agreed to by the
Company and the Buyer(s)).
(c) Form of Payment. Subject to the satisfaction of the terms and conditions of
this Agreement, on each Closing Date, (i) the Escrow Agent shall, upon receipt
of funds fro the Buyer(s) deliver to the Company in accordance with the terms of
the Escrow Agreement such aggregate proceeds for the Series E Preferred Stock to
be issued and sold to such Buyer(s) at each Closing minus the discount of the
Buyer(s) and the fees referenced in Section 4(g) herein by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions, and (ii) the Company shall deliver to each Buyer Series E
Preferred Stock which such Buyer(s) is purchasing in amounts indicated opposite
such Buyer's name on Schedule I, duly executed on behalf of the Company.
(d) Right of Redemption. The Company shall have the right to redeem upon three
(3) calendar days prior written notice to the Buyer(s), all or any part of the
Series E Preferred Stock at a redemption price of one hundred twenty percent
(120%) of the amount redeemed. The redemption price, in immediately available
funds, shall accompany the written notice. The redemption shall not apply to any
Series E Preferred Stock that is the subject of a pending Conversion Notice.
(e) Warrants. The Buyer(s) shall receive a warrant to purchase seventy five
thousand (75,000) shares of Common Stock of the Company (the "Warrant"). The
Warrant shall be exercisable on a "cash basis" and have an exercise price of one
hundred five percent (105%) of the Closing Bid Price of the Company's Common
Stock, as quoted by Bloomberg, LP, on the Closing Date. The Warrant shall have
"piggy-back" and demand registration rights and shall survive for three (3)
years from the Closing Date.
(f) Conversion of Series Preferred Stock. The Buyer(s) shall be entitled, at
their option, to convert the Series E Preferred Stock of the Company into shares
of the Company's Common Stock, par value $0.01 per share, at any time from the
date hereof, at a conversion price equal to the lower of (i) the Closing Bid
Price of the Company's Common Stock, as quoted by Bloomberg, LP, on the trading
day immediately preceding the First Closing or (ii) eighty percent (80%) of the
average of the three lowest Closing Bid Price of the Company's Common Stock on
its principal exchange or market, as quoted by Bloomberg, LP, for the ten (10)
trading days immediately preceding conversion. Such Series E Preferred Stock
shall automatically convert into shares of the Company's Common Stock at the
lower of either conversion price described above on the second (2nd) anniversary
of the date hereof. In the event a Buyer effectuates a partial conversion of the
Series E Preferred Stock the Company shall promptly, but in no event later than
five (5) business day from the date of conversion, issue to the Buyer a Series E
Preferred Stock certificate reflecting the Series E Preferred Stock owned by the
Buyer minus the converted amount.
(g) Limitation on Conversion. In no event shall a Buyer effectuate a conversion
of the Series E Preferred Stock which shall cause the Buyer to own in excess of
nineteen and 9/10 percent (19.9%) of the then outstanding Common Stock of the
Company immediately prior the Closing Dates without the approval of the
shareholders of the Company in accordance with the rules of the American Stock
Exchange (the "AMEX"). In the event that the conversion of the Series E
Preferred Stock would result in the issuance of more than 19.9% of the Company's
outstanding Common Stock, then only such portion of the Series E Preferred Stock
that can be converted without violating the forgoing limit shall be converted
and the Buyer(s) shall retain the unconverted portion. The Company shall, within
60 days of such event, seek shareholder approval to issue such additional Common
Stock as may be required to honor the conversion. If the shareholders do not
approve such issuance or the Company fails to seek such approval within such
time frame, the Company shall be obligated to redeem the unconverted portion of
the Series E Preferred Stock at the redemption price described in Section 1(d)
hereof.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, severally and not jointly, that:
(a) Investment Purpose. Each Buyer is acquiring the Series E Preferred Stock
and, upon conversion of Series E Preferred Stock, the Buyer will acquire the
Conversion Shares then issuable, for its own account for investment only and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that by making the representations herein, such
Buyer reserves the right to dispose of the Conversion Shares at any time in
accordance with or pursuant to an effective registration statement covering such
Conversion Shares or an available exemption under the 1933 Act.
(b) Accredited Investor Status. Each Buyer is an "Accredited Investor" as that
term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on Exemptions. Each Buyer understands that the Series E Preferred
Stock are being offered and sold to it in reliance on specific exemptions from
the registration requirements of United States federal and state securities laws
and that the Company is relying in part upon the truth and accuracy of, and such
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
(d) Information. Each Buyer and its advisors (and his or, its counsel), if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and information he deemed material to making an
informed investment decision regarding his purchase of the Series E Preferred
Stock and the Conversion Shares, which have been requested by such Buyer. Each
Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and its management. Neither such inquiries nor any
other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer's right to
rely on the Company's representations and warranties contained in Section 3
below. Each Buyer understands that its investment in the Series E Preferred
Stock and the Conversion Shares involves a high degree of risk. Each Buyer is in
a position regarding the Company, which, based upon employment, family
relationship or economic bargaining power, enabled and enables such Buyer to
obtain information from the Company in order to evaluate the merits and risks of
this investment. Each Buyer has sought such accounting, legal and tax advice, as
it has considered necessary to make an informed investment decision with respect
to its acquisition of the Series E Preferred Stock and the Conversion Shares.
(e) No Governmental Review. Each Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Series E Preferred Stock or the
Conversion Shares, or the fairness or suitability of the investment in the
Series E Preferred Stock or the Conversion Shares, nor have such authorities
passed upon or endorsed the merits of the offering of the Series E Preferred
Stock or the Conversion Shares.
(f) Transfer or Resale. Each Buyer understands that except as provided in the
Investor Registration Rights Agreement: (i) the Series E Preferred Stock have
not been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, or (B) such Buyer shall have delivered to
the Company an opinion of counsel, in a generally acceptable form, to the effect
that such securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration requirements;
(ii) any sale of such securities made in reliance on Rule 144 under the 1933 Act
(or a successor rule thereto) ("Rule 144") may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of
such securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 0000 Xxx) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC there under; and (iii)
neither the Company nor any other person is under any obligation to register
such securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption there under. The Company reserves
the right to place stop transfer instructions against the shares and
certificates for the Conversion Shares.
(g) Legends. Each Buyer understands that the certificates or other instruments
representing the Series E Preferred Stock and or the Conversion Shares shall
bear a restrictive legend in substantially the following form (and a stop
transfer order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company within two (2)
business days shall issue a certificate without such legend to the holder of the
Conversion Shares upon which it is stamped, if, unless otherwise required by
state securities laws, (i) in connection with a sale transaction, provided the
Conversion Shares are registered under the 1933 Act or (ii) in connection with a
sale transaction, after such holder provides the Company with an opinion of
counsel, in form reasonably acceptable to the Company and its counsel, to the
effect that a public sale, assignment or transfer of the Conversion Shares may
be made without registration under the 1933 Act.
(h) Authorization, Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and is a valid and
binding agreement of such Buyer enforceable in accordance with its terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(i) Receipt of Documents. Each Buyer and his or its counsel has received and
read in their entirety: (i) this Agreement and each representation, warranty and
covenant set forth herein, the Investor Registration Rights Agreement, and the
Escrow Agreement; (ii) all due diligence and other information necessary to
verify the accuracy and completeness of such representations, warranties and
covenants; (iii) the Company's Form 10-KSB for the fiscal year ended September
30, 2004; (iv) the Company's Form 10-QSB for the fiscal quarter ended December
31, 2004 and (v) answers to all questions each Buyer submitted to the Company
regarding an investment in the Company; and each Buyer has relied on the
information contained therein and has not been furnished any other documents,
literature, memorandum or prospectus.
(j) Due Formation of Corporate and Other Buyers. If the Buyer(s) is a
corporation, trust, partnership or other entity that is not an individual
person, it has been formed and validly exists and has not been organized for the
specific purpose of purchasing the Series E Preferred Stock and is not
prohibited from doing so.
(k) No Legal Advice From the Company. Each Buyer acknowledges, that it had the
opportunity to review this Agreement and the transactions contemplated by this
Agreement with his or its own legal counsel and investment and tax advisors.
Each Buyer is relying solely on such counsel and advisors and not on any
statements or representations of the Company or any of its representatives or
agents for legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any
jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that, except
as set forth in the SEC Documents (as defined herein): (a) Organization and
Qualification. The Company and its subsidiaries are corporations duly organized
and validly existing in good standing under the laws of the jurisdiction in
which they are incorporated, and have the requisite corporate power to own their
properties and to carry on their business as now being conducted. Each of the
Company and its subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries taken as a whole.
(b) Authorization, Enforcement, Compliance with Other Instruments. (i) The
Company has the requisite corporate power and authority to enter into and
perform this Agreement, the Investor Registration Rights Agreement, the Escrow
Agreement and any related agreements, and to issue the Series E Preferred Stock
and the Conversion Shares in accordance with the terms hereof and thereof, (ii)
the execution and delivery of this Agreement, the Investor Registration Rights
Agreement, the Escrow Agreement, the Irrevocable Transfer Agent Instructions (as
defined herein) and any related agreements by the Company and the consummation
by it of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Series E Preferred Stock, the Conversion Shares
and the reservation for issuance and the issuance of the Conversion Shares
issuable upon conversion or exercise thereof, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its stockholders, (iii) this
Agreement, the Investor Registration Rights Agreement, the Escrow Agreement, the
Irrevocable Transfer Agent Instructions and any related agreements have been
duly executed and delivered by the Company, (iv) this Agreement, the Investor
Registration Rights Agreement, the Escrow Agreement, the Irrevocable Transfer
Agent Instructions and any related agreements constitute the valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies.
(c) Capitalization. The authorized capital stock of the Company consists of
300,000,000 shares of Common Stock, par value $0.01 per share and 5,000,000
shares of Preferred Stock. As of the date hereof the Company has 154,272,893
shares of Common Stock and 44,530 shares of Preferred Stock issued and
outstanding. All of such outstanding shares have been validly issued and are
fully paid and nonassessable. Except as disclosed in the SEC Documents (as
defined in Section 3(f)), no shares of Common Stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company. Except as disclosed in the SEC Documents, as of the
date of this Agreement, (i) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities and (iii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except pursuant to the Registration Rights
Agreement) and (iv) there are no registration statements pending nor is the
Company aware of any reason why they will not be able to file a registration
statement pursuant to the registration Rights Agreements dated the date hereof.
There are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Series E Preferred
Stock as described in this Agreement. The Company has furnished to the Buyer
true and correct copies of the Company's Certificate of Incorporation, as
amended and as in effect on the date hereof (the "Certificate of
Incorporation"), and the Company's By-laws, as in effect on the date hereof (the
"By-laws"), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto
other than stock options issued to employees and consultants.
(d) Issuance of Securities. The Series E Preferred Stock are duly authorized
and, upon issuance in accordance with the terms hereof, shall be duly issued,
fully paid and nonassessable, are free from all taxes, liens and charges with
respect to the issue thereof. The Conversion Shares issuable upon conversion of
the Series E Preferred Stock have been duly authorized and reserved for
issuance. Upon conversion or exercise in accordance with the Series E Preferred
Stock the Conversion Shares will be duly issued, fully paid and nonassessable.
(e) No Conflicts. Except as disclosed in the SEC Documents, the execution,
delivery and performance of this Agreement, the Investors Registration Rights
Agreement and the Escrow Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby will not (i) result in a
violation of the Certificate of Incorporation, any certificate of designations
of any outstanding series of preferred stock of the Company or the By-laws or
(ii) conflict with or constitute a default (or an event which 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
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of AMEX on which the Common Stock is
quoted) applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound or
affected. Except as disclosed in the SEC Documents, neither the Company nor its
subsidiaries is in violation of any term of or in default under its Certificate
of Incorporation or By-laws or their organizational charter or by-laws,
respectively, or any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries. The business of the
Company and its subsidiaries is not being conducted, and shall not be conducted
in violation of any material law, ordinance, or regulation of any governmental
entity. Except as specifically contemplated by this Agreement and as required
under the 1933 Act and any applicable state securities laws, the Company is not
required 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 or contemplated by this
Agreement or the Registration Rights Agreement in accordance with the terms
hereof or thereof. Except as disclosed in the SEC Documents, all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company and its subsidiaries are unaware of any
facts or circumstance, which might give rise to any of the foregoing.
(f) SEC Documents: Financial Statements. Since January 1, 2002, the Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC under of the Securities Exchange Act of 1934, as
amended (the "1934 Act") (all of the foregoing filed prior to the date hereof or
amended after the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference
therein, being hereinafter referred to as the "SEC Documents"). The Company has
delivered to the Buyers or their representatives, or made available through the
SEC's website at xxxx://xxx.xxx.xxx., true and complete copies of the SEC
Documents. As of their respective dates, the financial statements of the Company
disclosed in the SEC Documents (the "Financial Statements") complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, 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 may 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 its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer which is not included in the SEC Documents, including, without
limitation, information referred to in this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(g) 10(b)-5. The SEC Documents do not include any untrue statements of material
fact, nor do they omit to state any material fact required to be stated therein
necessary to make the statements made, in light of the circumstances under which
they were made, not misleading.
(h) Absence of Litigation. Except as disclosed in the SEC Documents, there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
against or affecting the Company, the Common Stock or any of the Company's
subsidiaries, wherein an unfavorable decision, ruling or finding would (i) have
a material adverse effect on the transactions contemplated hereby, (ii)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a material adverse effect on the business, operations,
properties, financial condition or results of operation of the Company and its
subsidiaries taken as a whole.
(i) Acknowledgment Regarding Buyer's Purchase of the Series E Preferred Stock .
The Company acknowledges and agrees that the Buyer(s) is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that the
Buyer(s) is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Buyer(s) or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Buyer's purchase
of the Series E Preferred Stock or the Conversion Shares. The Company further
represents to the Buyer that the Company's decision to enter into this Agreement
has been based solely on the independent evaluation by the Company and its
representatives.
(j) No General Solicitation. Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the 0000 Xxx) in connection with the offer or sale of the Series E Preferred
Stock or the Conversion Shares.
(k) No Integrated Offering. Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of the Series E Preferred
Stock or the Conversion Shares under the 1933 Act or cause this offering of the
Series E Preferred Stock or the Conversion Shares to be integrated with prior
offerings by the Company for purposes of the 1933 Act.
(l) Employee Relations. Neither the Company nor any of its subsidiaries is
involved in any labor dispute nor, to the knowledge of the Company or any of its
subsidiaries, is any such dispute threatened. None of the Company's or its
subsidiaries' employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees are good.
(m) Intellectual Property Rights. The Company and its subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service xxxx registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. The Company and its subsidiaries do not have any knowledge of any
infringement by the Company or its subsidiaries of trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service xxxx registrations, trade secret or other similar rights of
others, and, to the knowledge of the Company there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license, service names,
service marks, service xxxx registrations, trade secret or other infringement;
and the Company and its subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing.
(n) Environmental Laws. The Company and its subsidiaries are (i) in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
(o) Title. Any real property and facilities held under lease by the Company and
its subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
(p) Insurance. The Company and each of its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its subsidiaries are engaged. Neither the
Company nor any such subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a whole.
(q) Regulatory Permits. The Company and its subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
(r) Internal Accounting Controls. The Company and each of its subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
and (iii) the recorded amounts for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
(s) No Material Adverse Breaches, etc. Except as set forth in the SEC Documents,
neither the Company nor any of its subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company's officers has or is expected in
the future to have a material adverse effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries. Except as set forth in the SEC Documents, neither
the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company's officers, has or is
expected to have a material adverse effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.
(t) Tax Status. The Company and each of its subsidiaries has made and filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and (unless and only to the
extent that the Company and each of its subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) has paid all taxes and other governmental assessments and charges that
are material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.
(u) Certain Transactions. Except as set forth in the SEC Documents, and except
for arm's length transactions pursuant to which the Company makes payments in
the ordinary course of business upon terms no less favorable than the Company
could obtain from third parties and other than the grant of stock options
disclosed in the SEC Documents, none of the officers, directors, or employees of
the Company is presently a party to any transaction with the Company (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
(v) Rights of First Offer. So long as any shares of Series E Preferred Stock are
outstanding, if the Company intends to raise additional capital by the issuance
or sale of capital stock of the Company at a price per share less than the
securities being offered to the Buyer pursuant to this Agreement, including
without limitation shares of any class of common stock, any class of preferred
stock, options, warrants or any other securities convertible or exercisable into
shares of common stock (whether the offering is conducted by the Company,
underwriter, placement agent or any third party) the Company shall be obligated
to offer to the Buyer such issuance or sale of capital stock, by providing in
writing the principal amount of capital it intends to raise and outline of the
material terms of such capital raise, prior to the offering such issuance or
sale of capital stock to any third parties including, but not limited to,
current or former officers or directors, current or former shareholders and/or
investors of the Company, underwriters, brokers, agents or other third parties.
The Buyer shall have ten (10) business days from receipt of such notice of the
sale or issuance of capital stock to accept or reject all or a portion of such
capital raising offer. 4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts timely to satisfy each
of the conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.
(b) Form D. The Company agrees to file a Form D with respect to the Conversion
Shares as required under Regulation D and to provide a copy thereof to each
Buyer promptly after such filing. The Company shall, on or before the Closing
Date, take such action as the Company shall reasonably determine is necessary to
qualify the Conversion Shares, or obtain an exemption for the Conversion Shares
for sale to the Buyers at the Closing pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or prior to
the Closing Date.
(c) Reporting Status. Until the earlier of (i) the date as of which the Buyer(s)
may sell all of the Conversion Shares without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the date
on which (A) the Buyer(s) shall have sold all the Conversion Shares and (B) none
of the Series E Preferred Stock are outstanding (the "Registration Period"), the
Company shall file in a timely manner all reports required to be filed with the
SEC pursuant to the 1934 Act and the regulations of the SEC there under, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations there under
would otherwise permit such termination.
(d) Use of Proceeds. The Company will use the proceeds from the sale of the
Series E Preferred Stock for general corporate and working capital purposes.
(e) Reservation of Shares. The Company shall take all action reasonably
necessary to at all times have authorized, and reserved for the purpose of
issuance, such number of shares of Common Stock as shall be necessary to effect
the issuance of the Conversion Shares. If at any time the Company does not have
available such shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all of the Conversion Shares of the Company shall
call and hold a special meeting of the shareholders within thirty (30) days of
such occurrence, for the sole purpose of increasing the number of shares
authorized. The Company's management shall recommend to the shareholders to vote
in favor of increasing the number of shares of Common Stock authorized.
Management shall also vote all of its shares in favor of increasing the number
of authorized shares of Common Stock.
(f) Listings or Quotation. The Company shall promptly secure the listing or
quotation of the Conversion Shares upon each national securities exchange,
automated quotation system or The National Association of Securities Dealers
Inc.'s Over-The-Counter Bulletin Board, the AMEX or other market, if any, upon
which shares of Common Stock are then listed or quoted (subject to official
notice of issuance) and shall use its best efforts to maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Conversion
Shares from time to time issuable under the terms of this Agreement. The Company
shall maintain the Common Stock's authorization for quotation in the over-the
counter market.
(g) Fees and Expenses. Each of the Company and the Buyer(s) shall pay all costs
and expenses incurred by such party in connection with the negotiation,
investigation, preparation, execution and delivery of this Agreement, the Escrow
Agreement, and the Investor Registration Rights Agreement. The Buyer(s) shall be
entitled to a ten percent (10%) discount on the Purchase Price.
In addition, the Company shall pay to Yorkville Advisors
Management, LLC a structuring fee of Fifteen Thousand Dollars ($15,000), of
which $5,000 was previously paid and the remaining balance of $10,000 shall be
paid and deducted from the gross proceeds of the First Closing. This fee shall
be deemed fully earned on the date hereof.
(h) Corporate Existence. So long as any of the Series E Preferred Stock remain
outstanding, the Company shall not directly or indirectly consummate any merger,
reorganization, restructuring, consolidation, sale of all or substantially all
of the Company's assets or any similar transaction or related transactions (each
such transaction, a "Sale of the Company") unless, prior to the consummation of
a Sale of the Company, the Company makes appropriate provision to insure that,
upon the consummation of such Sale of the Company, each of the holders of the
Series E Preferred Stock will thereafter have the right to acquire and receive
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
Series E Preferred Stock had such Sale of the Company not taken place. In any
such case, the Company will make appropriate provision with respect to such
holders' rights and interests to insure that the provisions of this Section 4(h)
will thereafter be applicable to the Series E Preferred Stock.
(i) Transactions With Affiliates. So long as any Series E Preferred Stock are
outstanding, the Company shall not, and shall cause each of its subsidiaries not
to, enter into, amend, modify or supplement, or permit any subsidiary to enter
into, amend, modify or supplement any agreement, transaction, commitment, or
arrangement with any of its or any subsidiary's officers, directors, person who
were officers or directors at any time during the previous two (2) years,
stockholders who beneficially own five percent (5%) or more of the Common Stock,
or Affiliates (as defined below) or with any individual related by blood,
marriage, or adoption to any such individual or with any entity in which any
such entity or individual owns a five percent (5%) or more beneficial interest
(each a "Related Party"), except for (a) customary employment arrangements and
benefit programs on reasonable terms, (b) any investment in an Affiliate of the
Company, (c) any agreement, transaction, commitment, or arrangement on an
arms-length basis on terms no less favorable than terms which would have been
obtainable from a person other than such Related Party, (d) any agreement
transaction, commitment, or arrangement which is approved by a majority of the
disinterested directors of the Company, for purposes hereof, any director who is
also an officer of the Company or any subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment, or arrangement. "Affiliate" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a ten percent (10%) or more equity interest in that person or entity,
(ii) has ten percent (10%) or more common ownership with that person or entity,
(iii) controls that person or entity, or (iv) shares common control with that
person or entity. "Control" or "controls" for purposes hereof means that a
person or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
(j) Transfer Agent. The Company covenants and agrees that, in the event that the
Company's agency relationship with the transfer agent should be terminated for
any reason prior to a date which is two (2) years after the Closing Date, the
Company shall immediately appoint a new transfer agent and shall require that
the transfer agent execute and agree to be bound by the terms of the Irrevocable
Transfer Agent Instructions (as defined herein) to Transfer Agent.
(k) Restriction on Issuance of the Common Stock. So long as any Series E
Preferred Stock are outstanding, with the exception of shares of Common Stock
issued to the Buyer or their affiliates under conversion of the Series E
Preferred Stock or otherwise, the Company shall not file any registration
statement on Form S-8.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions in the form attached
hereto as Exhibit C to its transfer agent irrevocably appointing Xxxxx Xxxxxxxx,
Esq. as its agent for purpose of having certificates issued, registered in the
name of the Buyer(s) or its respective nominee(s), for the Conversion Shares
representing such amounts of Series E Preferred Stock as specified from time to
time by the Buyer(s) to the Company upon conversion of the Series E Preferred
Stock (the "Irrevocable Transfer Agent Instructions"). Yorkville Advisors
Management, LLC shall be paid a cash fee of Fifty Dollars ($50) for every
occasion they act pursuant to the Irrevocable Transfer Agent Instructions. The
Company shall not change its transfer agent without the express written consent
of the Buyer(s), which may be withheld by the Buyer(s) in its sole discretion.
Prior to registration of the Conversion Shares under the 1933 Act, all such
certificates shall bear the restrictive legend specified in Section 2(g) of this
Agreement. The Company warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5, and stop transfer
instructions to give effect to Section 2(g) hereof (in the case of the
Conversion Shares prior to registration of such shares under the 0000 Xxx) will
be given by the Company to its transfer agent and that the Conversion Shares
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the Investor Registration
Rights Agreement. Nothing in this Section 5 shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of Conversion Shares. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5, that the
Buyer(s) shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Series E
Preferred Stock to the Buyer(s) at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion:
(a) Each Buyer shall have executed this Agreement, the Escrow Agreement and the
Investor Registration Rights Agreement and delivered the same to the Company.
(b) The Buyer(s) shall have delivered to the Escrow Agent the Purchase Price for
the Series E Preferred Stock in respective amounts as set forth next to each
Buyer as outlined on Schedule I attached hereto and the Escrow Agent shall have
delivered such funds to the Company by wire transfer of immediately available
U.S. funds pursuant to the wire instructions provided by the Company.
(c) The representations and warranties of the Buyer(s) shall be true and correct
in all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date), and the Buyer(s) shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer(s) at or prior to the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer(s) hereunder to purchase the Series E
Preferred Stock at the First Closing is subject to the satisfaction, at or
before the First Closing Date, of each of the following conditions, provided
that these conditions are for the Buyer's sole benefit and may be waived by the
Buyer(s) at any time in its sole discretion:
(a) The Company shall have executed the Transaction Documents, and delivered the
same to the Buyer(s).
(b) The Common Stock shall be authorized for quotation on the Amex, trading in
the Common Stock shall not have been suspended for any reason and all of the
Conversion Shares issuable upon conversion of the Series E Preferred Stock shall
be approved for listing or quotation on the AMEX.
(c) The representations and warranties of the Company shall be true and correct
in all material respects (except to the extent that any of such representations
and warranties is already qualified as to materiality in Section 3 above, in
which case, such representations and warranties shall be true and correct
without further qualification) as of the date when made and as of the First
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the First Closing Date. The Buyer
shall have received a certificate, executed by the President of the Company,
dated as of the First Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by the Buyer including, without
limitation an update as of the First Closing Date regarding the representation
contained in Section 3(c) above.
(d) The Company shall have delivered to the Buyer(s) the Series E Preferred
Stock in the respective amounts set forth opposite each Buyer(s) name on
Schedule I attached hereto.
(e) The Buyer(s) shall have received an opinion of counsel from Counsel to the
Company in a form satisfactory to the Buyer(s).
(f) The Company shall have provided to the Buyer(s) a certificate of good
standing from the secretary of state from the state in which the company is
incorporated.
(g) As of the Closing Date, the Company shall have reserved out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Series E Preferred Stock, shares of Common Stock to effect the
conversion of all of the Conversion Shares then outstanding.
(h) The Company shall have obtained the approval of its board of directors to
adopt the Certificate of Designations of Series E Preferred Stock and shall have
filed the Certificate of Designations in Delaware.
(i) The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to the Buyer, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
The obligation of the Buyer(s) hereunder to purchase the Series E
Preferred Stock at the Second Closing is subject to the satisfaction, at or
before the Second Closing Date, of each of the following conditions, provided
that these conditions are for the Buyer's sole benefit and may be waived by the
Buyer(s) at any time in its sole discretion:
(j) The Common Stock shall be authorized for quotation on the Amex, trading in
the Common Stock shall not have been suspended for any reason and all of the
Conversion Shares issuable upon conversion of the Series E Preferred Stock shall
be approved for listing or quotation on the AMEX.
(k) The representations and warranties of the Company shall be true and correct
in all material respects (except to the extent that any of such representations
and warranties is already qualified as to materiality in Section 3 above, in
which case, such representations and warranties shall be true and correct
without further qualification) as of the date when made and as of the Second
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Second Closing Date. The
Buyer shall have received a certificate, executed by the President of the
Company, dated as of the Second Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by the Buyer including,
without limitation an update as of the Second Closing Date regarding the
representation contained in Section 3(c) above.
(l) As of the Second Closing Date, the Company shall have reserved out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Series E Preferred Stock, shares of Common Stock in an amount
equal to two times the number of shares of Common Stock that the Buyer(s) would
be entitled to receive if it converted all of the Series E Preferred Stock
(including those to be received in connection with the Second Closing) on the
date immediately prior to the Second Closing Date.
(m) The Company shall have certified that all conditions to the Second Closing
have been satisfied and that the Company shall file the Registration Statement
with the SEC in compliance with the rules and regulations promulgated by the SEC
for filing thereof two (2) business days after the Second Closing. If requested
by the Buyer, the Buyer shall have received a certificate, executed by two
officers of the Company, dated as of the Second Closing Date, to the foregoing
effect. The Buyers have no obligation to fund at the Second Closing if the
Company has filed the Registration Statement, or if the Registration Statement
has been filed prior to the funding of the second installment or will be filed
outside the time period set forth in the Investor Registration Rights Agreement
of even date herewith.
(n) No default or event of default shall have occurred under any Transaction
Document.
8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and delivery of this Agreement and
acquiring the Series E Preferred Stock and the Conversion Shares hereunder, and
in addition to all of the Company's other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Buyer(s) and each
other holder of the Series E Preferred Stock and the Conversion Shares, and all
of their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Buyer Indemnitees") from and against any and
all actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Buyer Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Indemnified Liabilities"), incurred by the Buyer
Indemnitees or any of them as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, the Series E Preferred Stock or the Investor
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, or the Investor
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or any other
instrument, document or agreement executed pursuant hereto by any of the
Indemnitees, any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Series E
Preferred Stock or the status of the Buyer or holder of the Series E Preferred
Stock or the Conversion Shares, as a Buyer of Series E Preferred Stock in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
(b) In consideration of the Company's execution and delivery of this Agreement,
and in addition to all of the Buyer's other obligations under this Agreement,
the Buyer shall defend, protect, indemnify and hold harmless the Company and all
of its officers, directors, employees and agents (including, without limitation,
those retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Company Indemnitees") from and against any and
all Indemnified Liabilities incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by the Buyer(s) in this Agreement, or any
certificate, instrument or document contemplated hereby or thereby executed by
the Buyer, (b) any breach of any covenant, agreement or obligation of the
Buyer(s) contained in this Agreement, the Investor Registration Rights Agreement
or any other certificate, instrument or document contemplated hereby or thereby
executed by the Buyer, or (c) any cause of action, suit or claim brought or made
against such Company Indemnitee based on material misrepresentations or due to a
material breach and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement, the Investor Registration Rights
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Company Indemnitees. To the extent that the foregoing
undertaking by each Buyer may be unenforceable for any reason, each Buyer shall
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities, which is permissible under applicable law.
9. COMMITMENT. The Buyer(s) shall commit to purchase an additional $750,000 of
Series E Preferred Stock (the "Follow-on Offering") upon satisfaction of the
following conditions: (i) the registration statement registering the resale of
the initial $750,000 of Series E Preferred Stock being purchased hereunder shall
be declared effective by the SEC and shall remain effective until the Follow-on
Offering is consummated, (ii) the Company shall have signed into and delivered
definitive contracts regarding the Follow-on Offering, which contracts shall be
in the same form as the Transaction Documents, (iii) the Company shall have
satisfied all of the conditions to be set forth in the definitive contracts
(which shall be similar to those contained in Section 7 hereof), (iv) no default
or event of default shall have occurred under any Transaction Document and (v)
the Company shall have no restriction or limitation (whether regulatory or
otherwise) on its ability to issue to the Buyer(s) Common Stock upon conversion
of the Series E Preferred Stock (including the Series E Preferred Stock issued
under this Agreement and to be issued in the Follow-on Offering) in an amount
not less than two times the number of shares of Common Stock that the Buyer(s)
would be entitled to receive if it converted all of the Series E Preferred Stock
(including the Series E Preferred Stock issued under this Agreement and to be
issued in the Follow-on Offering) on the date immediately prior to the Second
Closing Date.
10. EVENT OF DEFAULT. An "Event of Default" shall be deemed to have occurred
hereunder upon the occurrence of an Event of Default under the Certificate of
Designations.
11. GOVERNING LAW: MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey without regard to the
principles of conflict of laws. The parties further agree that any action
between them shall be heard in Xxxxxx County, New Jersey, and expressly consent
to the jurisdiction and venue of the Superior Court of New Jersey, sitting in
Xxxxxx County and the United States District Court for the District of New
Jersey sitting in Newark, New Jersey for the adjudication of any civil action
asserted pursuant to this Paragraph.
(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
(4) additional original executed signature pages to be physically delivered to
the other party within five (5) days of the execution and delivery hereof.
(c) Headings. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement, Amendments. This Agreement supersedes all other prior oral
or written agreements between the Buyer(s), the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the party to
be charged with enforcement.
(f) Notices. Any notices, consents, waivers, or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon confirmation of receipt, when sent by facsimile; (iii)
three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company, to: Avistar, Inc.
00 Xxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Dolgenos Xxxxxx & Xxxxxx LLP
00 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Transfer Agent, to: Continental Stock Transfer & Trust Company
00 Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
Telephone: (212) 509-4000 ext. 301
Facsimile: (000) 000-0000
If to the Investor: At the address listed on Schedule I.
With Copy to: Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx -Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxx, Esq.
Senior Vice-President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer(s), to its address and facsimile number on Schedule I,
with copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
(g) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns. Neither
the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party
hereto.
(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.
(i) Survival. Unless this Agreement is terminated under Section 11(l), the
representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
10, and the indemnification provisions set forth in Section 8, shall survive the
Closing for a period of one (1) year following the date on which the Series E
Preferred Stock are converted in full. The Buyer(s) shall be responsible only
for its own representations, warranties, agreements and covenants hereunder.
(j) Publicity. The Company and the Buyer(s) shall have the right to approve,
before issuance any press release or any other public statement with respect to
the transactions contemplated hereby made by any party; provided, however, that
the Company shall be entitled, without the prior approval of the Buyer(s), to
issue any press release or other public disclosure with respect to such
transactions required under applicable securities or other laws or regulations
(the Company shall use its best efforts to consult the Buyer(s) in connection
with any such press release or other public disclosure prior to its release and
Buyer(s) shall be provided with a copy thereof upon release thereof).
(k) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(l) Termination. In the event that the Closing shall not have occurred with
respect to the Buyers on or before five (5) business days from the date hereof
due to the Company's or the Buyer's failure to satisfy the conditions set forth
in Sections 6 and 7 above (and the non-breaching party's failure to waive such
unsatisfied condition(s)), the non-breaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party.
(m) No Strict Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY:
AVITAR, INC.
By:
Name: Xxxxx X. Xxxxxxxx
Title: CEO
SCHEDULE I
SCHEDULE OF BUYERS
Address/Facsimile Amount of
Name Signature Number of Buyer Subscription
Cornell Capital Partners, By: Yorkville Advisors, LLC 000 Xxxxxx Xxxxxx - Suite $750,000.00
LP 3700
Its: General Partner Xxxxxx Xxxx, XX 00000
Facsimile: (201)
985-8266
By:
Name: Xxxx X. Xxxxxx
Its: Portfolio Manager
