EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
April 28, 2003, by and among ADVANCED VIRAL RESEARCH CORP., a Delaware
corporation, with headquarters located at 000 Xxxxxxxxx Xxxxxxxxx Xxxxx,
Xxxxxxx, Xxx Xxxx 00000 (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 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 Two Million Five
Hundred Thousand Dollars ($2,500,000) of convertible debentures (the
"Convertible Debentures"), of which One Million Dollars ($1,000,000) of
Convertible Debentures shall be purchased upon the execution of this Agreement
(the "First Closing"), Five Hundred Thousand Dollars ($500,000) of Convertible
Debentures shall be purchased within ten (10) Business Days of the filing of the
registration statement (the "Registration Statement") filed pursuant to the
Investor Registration Rights Agreement (as defined below) with the Securities
and Exchange Commission (the "Second Closing"), and One Million Dollars
($1,000,000) of Convertible Debentures shall be purchased twenty (20) Business
days from the date the Registration Statement is declared effective by the SEC
(the "Third Closing"), (individually referred to as the "First Closing", the
"Second Closing" and the "Third Closing" and collectively referred to as the
"Closings") which shall be convertible into shares of the Company's common
stock, par value $0.00001 (the "Common Stock") (as converted, the "Conversion
Shares"), for a total purchase price of up to Two Million Five Hundred Thousand
Dollars ($2,500,000), (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 Registration Rights
Agreement substantially in the form attached hereto as Exhibit A (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
WHEREAS, the aggregate proceeds of the sale of the Convertible
Debentures contemplated hereby shall be held in escrow pursuant to the terms of
an escrow agreement substantially in the form of the Escrow Agreement (as
defined herein) attached hereto as Exhibit B.
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering Irrevocable Transfer
Agent Instructions substantially in the form attached hereto as Exhibit C (the
"Irrevocable Transfer Agent Instructions").
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 CONVERTIBLE DEBENTURES.
(a) Purchase of Convertible Debentures. Subject to the
satisfaction (or waiver) of the terms and conditions of this Agreement, each
Buyer agrees, severally and not jointly, to purchase at the Closings (as defined
herein below) and the Company agrees to sell and issue to each Buyer, severally
and not jointly, at the Closings, Convertible Debentures 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 or a check payable to Xxxxxx Xxxxxxxx LLP, as Escrow Agent for
Advanced Viral Research Corp. / 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 Dates. The First Closing of the purchase and
sale of the Convertible Debentures shall take place at 10:00 a.m. Eastern
Standard Time on the fifth (5th) business day following the date hereof ("First
Closing Date"), the Second Closing of the purchase and sale of the Convertible
Debentures shall take place at 10:00 a.m. Eastern Standard Time on the fifth
(5th) business day following the date the Registration Statement filed pursuant
to the Investor Registration Rights Agreement is filed with the SEC (the "Second
Closing Date"), the Third Closing of the purchase and sale of the Convertible
Debentures shall take place at 10:00 a.m. Eastern Standard Time on twentieth
(20th) Business day from the date the Registration Statement is declared
effective by the SEC (the "Third Closing Date"), subject to notification of
satisfaction of the conditions to the Closings set forth in Sections 6 and 7
below. The Closings shall occur on the Closing Date at the offices of Xxxxxx
Xxxxxxxx, LLP, 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0, Xxxxx, XX 00000 (or such other
place as is mutually agreed to by the Company and the Buyer(s)).
(c) Escrow Arrangements; Form of Payment. Not later than
three (3) days prior to each Closing, the aggregate proceeds of the sale of the
Convertible Debentures to Buyer(s) pursuant hereto shall be deposited in a
non-interest bearing escrow account with Xxxxxx Xxxxxxxx LLP, as escrow agent
(the "Escrow Agent"), pursuant to the terms of an escrow agreement between the
Company, the Buyer(s) and the Escrow Agent in the form attached hereto as
Exhibit B (the "Escrow Agreement"). Subject to the satisfaction of the terms and
conditions of this Agreement, on the Closing Dates, (i) the Escrow Agent shall
deliver to the Company in accordance with the terms of the Escrow Agreement such
aggregate proceeds for the Convertible Debentures to be issued and sold to such
Buyer(s) at the Closings minus the fees and expenses of Xxxxxx Xxxxxxxx of
Fifteen Thousand Dollars ($15,000), as outlined in the Equity Line of Credit
Agreement dated the date hereof, and the retainer of Xxxxxxxxxxx & Xxxxxxxx LLP,
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,
Convertible Debentures which
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such Buyer(s) is purchasing in amounts indicated opposite such Buyer's name on
Schedule I, duly executed on behalf of the Company.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, severally and not jointly, that:
(a) Investment Purpose. Each Buyer is acquiring the
Convertible Debentures and, upon conversion of Convertible Debentures, 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 Convertible Debentures 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
Convertible Debentures 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
Convertible Debentures 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 Convertible Debentures 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
Convertible Debentures or the Conversion Shares, or
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the fairness or suitability of the investment in the Convertible Debentures or
the Conversion Shares, nor have such authorities passed upon or endorsed the
merits of the offering of the Convertible Debentures or the Conversion Shares.
(f) Transfer or Resale. Each Buyer understands that
except as provided in the Investor Registration Rights Agreement: (i) the
Convertible Debentures 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 Convertible Debentures 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
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counsel, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Conversion Shares may be made without
registration under the 1933 Act.
(h) Buyer's(s') Trading Activities. The Buyer's(s')
trading activities with respect to the Conversion Shares will be in compliance
with all applicable federal and state securities laws, rules and regulations and
the rules and regulations of the principal market on which the Company's Common
Stock is listed or traded. Neither the Buyer(s) nor any of their affiliates has
an open short position in the Common Stock of the Company, and each Buyer agrees
that it will not, and that it will cause its affiliates not to engage in any
short sales (as defined in any applicable SEC rules or rules of the National
Association of Securities Dealers) or in any hedging transactions with respect
to the Common Stock while the Convertible Debentures and/or the Investor's
warrants (as defined herein) remain issued and outstanding.
(i) 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.
(j) 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-K for the
fiscal year ended December 31, 2002; (iv) the Company's Form 10-Q for the fiscal
quarters ended March 31, 2002, June 30, 2002 and September 30, 2002, 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. Cornell Capital Partners LP has provided the Company
with its audited financial statements for the period ended December 31, 2002.
(k) 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 Convertible Debentures and
is not prohibited from doing so.
(l) 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.
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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, the Irrevocable Transfer Agent Instructions and
any related agreements, and to issue the Convertible Debentures, the Conversion
Shares and the Warrants (as defined herein) 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, the Convertible Debentures, the Warrants 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 Convertible Debentures, 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, the Convertible Debentures and the Warrants 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, the Convertible Debentures, the
Warrants 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. The authorized officer of the Company executing this
Agreement, the Investor Registration Rights Agreement, the Escrow Agreement, the
Irrevocable Transfer Agent Instructions, the Convertible Debentures, the
Warrants and any related agreements knows of no reason why the Company cannot
file the registration statement as required under the Investor Registration
Rights Agreement or perform any of the Company's other obligations under such
documents.
(c) Capitalization. The authorized capital stock of the
Company consists of 1,000,000,000 shares of Common Stock, par value $0.00001 per
share. As of March 31, 2003, the Company has 474,042,069 shares of Common Stock
and 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
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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 (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 outstanding registration statements other than
on Form S-8 and there are no outstanding comment letters from the SEC or any
other regulatory agency. There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Convertible Debentures 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 Convertible Debentures
and the Warrants to be issued to Cornell Capital Partners LP (the "Warrants")
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 Convertible Debentures and the shares of common
stock issuable upon exercise of the Warrants have been duly authorized and
reserved for issuance. Upon conversion or exercise in accordance with the
Convertible Debentures the Conversion Shares and the shares of common stock
issuable upon exercise of the Warrants 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, the Escrow Agreement, the Irrevocable
Transfer Agent Instructions,the Convertible Debentures and the Warrants 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 The National Association
of Securities Dealers Inc.'s OTC Bulletin Board 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.
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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,
2001, 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.
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(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 operations of the Company and its
subsidiaries taken as a whole.
(i) Acknowledgment Regarding Buyer's Purchase of the
Convertible Debentures. 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 Convertible Debentures 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
Convertible Debentures 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
Convertible Debentures or the Conversion Shares under the 1933 Act or cause this
offering of the Convertible Debentures 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
9
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.
10
(s) No Material Adverse Breaches, etc. Except with
respect to the Company's right of first refusal to an investor and 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) Fees and Rights of First Refusal. Except as set forth
on the SEC Documents and except for a right of first refusal to an investor, the
Company is not obligated to offer the securities offered hereunder on a right of
first refusal basis or otherwise to any third parties including, but not limited
to, current or former shareholders of the Company, underwriters, brokers, agents
or other third parties.
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.
11
(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 Convertible Debentures 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 Convertible Debentures 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
sixty (60) 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 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, the Investor Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions and the Convertible Debentures. The
Buyer(s) shall be entitled to a ten percent (10%) discount on the Purchase
12
Price. Furthermore the Buyer(s) shall receive a warrant to purchase fifteen
million (15,000,000) shares of the Company's Common Stock (the "Investor's
Warrant"). The Investor's Warrant shall be exercisable for five (5) years from
the date hereof. The Investor's Warrant shall have an exercise price of the
higher of one hundred ten percent (110%) of the closing bid price of the
Company's Common Stock (as reported by Bloomberg, LP) on the date hereof or
Eight Cents ($0.08) per share. The Investor's Warrant shall not be exercisable
prior to six (6) months after the date hereof.
The costs and expenses of the Buyer(s) and Xxxxxx Xxxxxxxx, LLP, the
retainer of Xxxxxxxxxxx & Xxxxxxxx LLP and the fee of Xxxxxx Xxxxxxxx LLP
pursuant to the Equity Line of Credit Agreement of Fifteen Thousand Dollars
($15,000) shall be paid for by the Company at Closing directly from the gross
proceeds held in escrow.
(h) Fully Earned. The Investor's Warrant shall be deemed
fully earned as of the date hereof.
(i) Registration Rights. The shares of Common Stock
underlying the Investor's Warrant will have "piggy-back" registration rights.
(j) Corporate Existence. Except with respect to the sale
of a subsidiary and a manufacturing facility, so long as any of the Convertible
Debentures remain outstanding, the Company shall not directly or indirectly
consummate any merger, reorganization, restructuring, reverse stock split
consolidation, sale of all or substantially all of the Company's assets or any
similar transaction or related transactions (each such transaction, an
"Organizational Change") unless, prior to the consummation of an Organizational
Change, the Company obtains the written consent of each Buyer. 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(j) will thereafter
be applicable to the Convertible Debentures.
(k) Transactions With Affiliates. So long as any
Convertible Debentures 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 in accordance
with the Company's past practices, (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, or (e) retention of the Law Firm of Xxxxxx Xxxxxx.
"Affiliate" for purposes hereof
13
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.
(l) 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.
(m) Restriction on Issuance of Capital Stock. So long as
any Convertible Debentures are outstanding, the Company shall not, without the
prior written consent of the Buyer(s), issue or sell shares of Common Stock or
preferred stock (i) without consideration, or (ii) any preferred stock, warrant,
option, right, contract, call, or other security instrument granting the holder
thereof, the right to acquire Common Stock without consideration or for a
consideration less than such Common Stock's Bid Price value determined
immediately prior to it's issuance, or (iii) file any registration statement on
Form S-8 or (iv) grant a security interest in any of the Assets of the Company.
The provisions of this Section 4(m) shall terminate and be of no further force
and effect as of the one hundred and twenty-first (121st) day following
effectiveness of the Registration Statement referred to in the Investor Rights
Agreement.
(n) Buyer's(s') Trading Activities. The Buyer's(s')
trading activities with respect to the Conversion Shares will be in compliance
with all applicable federal and state securities laws, rules and regulations and
the rules and regulations of the principal market on which the Company's Common
Stock is listed or traded. Neither the Buyer(s) nor any of their affiliates has
an open short position in the Common Stock of the Company, and each Buyer agrees
that it will not, and that it will cause its affiliates not to engage in any
short sales (as defined in any applicable SEC rules or rules of the National
Association of Securities Dealers) or in any hedging transactions with respect
to the Common Stock while the Convertible Debentures and/or the Investor's
warrants (as defined herein) remain issued and outstanding.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue Irrevocable Transfer Agent Instructions in the
form attached hereto as Exhibit C to its transfer agent irrevocably appointing
Xxxxxx Xxxxxxxx LLP 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 Convertible Debentures as
specified from time to time by the Buyer(s) to the Company upon conversion of
the Convertible Debentures, for interest owed pursuant to the Convertible
Debentures, and any and all Liquidated Damages (as this term is defined in the
Registration Rights Agreement) that may be owed pursuant to the Investor's
Registration Rights Agreement. Xxxxxx Xxxxxxxx LLP 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
14
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. If the Buyer(s) provides the Company with an
opinion of counsel, in form, scope and substance customary for opinions of
counsel in comparable transactions to the effect that registration of a resale
by the Buyer(s) of any of the Conversion Shares is not required under the 1933
Act, the Company shall within two (2) business days instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by the Buyer. 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
Convertible Debentures to the Buyer(s) at the Closings is subject to the
satisfaction, at or before the Closings, 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 Convertible Debentures in respective amounts as set forth
next to each Buyer as outlined on Schedule I attached hereto and the Escrow
Agent shall have delivered the net proceeds 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 Closings 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 Closings.
15
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer(s) hereunder to purchase the Convertible
Debentures at the Closing is subject to the satisfaction, at or before the
Closings, of each of the following conditions, provided that these conditions
are for the Buyer's sole benefit:
(a) The Company shall have executed this Agreement, the
Convertible Debentures, the Escrow Agreement, the Irrevocable Transfer
Instructions and the Investor Registration Rights Agreement, and delivered the
same to the Buyer(s).
(b) The Common Stock shall be authorized for quotation on
The National Association of Securities Dealers, Inc. OTC Bulletin Board, trading
in the Common Stock shall not have been suspended for any reason and all of the
Conversion Shares issuable upon conversion of the Convertible Debentures shall
be approved for listing or quotation on The National Association of Securities
Dealers, Inc. OTC Bulletin Board.
(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 Closings 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 Closings.
(d) The Company shall have executed and delivered to the
Buyer(s) the Convertible Debentures 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 Xxxxxxxxxxx & Xxxxxxxx, LLP.
(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 Closings, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Convertible Debentures, shares of Common Stock
to effect the conversion of all of the Conversion Shares.
(h) 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.
(i) The Company shall have provided to the Investor an
acknowledgement from Xxxxxxx, Xxxxx & Xxxxx as to its ability to provide all
consents required in order to file a registration statement in connection with
this transaction.
16
8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and
delivery of this Agreement and acquiring the Convertible Debentures 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 Convertible
Debentures 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 Convertible Debentures 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 Indemnities, any transaction financed or
to be financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Convertible Debentures or the status of the Buyer or holder
of the Convertible Debentures the Conversion Shares, as a Buyer of Convertible
Debentures 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, the Investor Registration Rights Agreement, the
Escrow Agreement, the Irrevocable Transfer Agent Instructions or any other
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, the Escrow
Agreement, the Irrevocable Transfer Agent Instructions, the Convertible
Debentures 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, the Escrow Agreement, the Irrevocable
Transfer Agent Instructions, the Convertible Debentures or any other
17
instrument, document or agreement executed pursuant hereto by any of the Company
Indemnities. 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. GOVERNING LAW: MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of Delaware 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:
18
If to the Company, to: Advanced Viral Research Corp.
000 Xxxxxxxxx Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxxx, Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx - Xxxxx 0000
Xxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Transfer Agent, to: American Stock Transfer & Trust Company
0000 00xx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000 0000
With a copy to: Xxxxxx Xxxxxxxx LLP
0000 Xxxxxxxxxx Xxxxxx - Xxxxx 0
Xxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, Esq.
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.
(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 9(l), the representations and warranties of the Company and the Buyer(s)
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall survive the Closing for a period of one (1) year following the later of
the date on which the Convertible Debentures are converted in full or the
Warrants are exercised in full. The Buyer(s) shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.
19
(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, 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; provided, however, that if this Agreement is terminated by the
Company pursuant to this Section 9(l), the Company shall remain obligated to
reimburse the Buyer(s) for the fees and expenses of Xxxxxx Xxxxxxxx described in
Section 4(g) above.
(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]
20
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:
ADVANCED VIRAL RESEARCH CORP.
By: /s/ Xxxxxx X. Xxxxxxxxx, MD
------------------------------
Name Xxxxxx X. Xxxxxxxxx
Title: Chief Executive Officer
21
SCHEDULE I
SCHEDULE OF BUYERS
ADDRESS/FACSIMILE AMOUNT OF
NAME SIGNATURE NUMBER OF BUYER SUBSCRIPTION
Cornell Capital Partners, LP By: Yorkville Advisors, LLC 000 Xxxxxx Xxxxxx - Xxxxx 0000 $
Its: General Partner Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
