EXHIBIT 10.21
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated June 19, 2003, is
made by and between BIOSPECIFICS TECHNOLOGIES CORP., Inc., a Delaware
corporation (the "Company") and ADVANCE BIOFACTURES CORP., a New York
corporation ("ABC-NY") and BIO PARTNERS LP, a Delaware limited partnership (the
"Investor").
RECITALS
A. The Company wishes to obtain certain financing from Investor.
B. Investor is willing, on the terms contained in this Agreement, to
purchase a 12% Senior Secured Convertible Note of the Company, in the principal
amount of $1,575,000 having the characteristics set forth in the form of
convertible note, attached hereto as Exhibit A (the " Note")and (ii) shares of
Common Stock of the Company as further described in this Agreement.
ARTICLE I
DEFINED TERMS
The following terms, when used in this Agreement, have the following
meanings, unless the context otherwise indicates:
"33 Act" means the Securities Act of 1933, as amended, or any similar
federal law then in force and the regulations promulgated thereunder.
"34 Act" means the Securities Exchange Act of 1934, as amended, or any
similar federal law then in force and the regulations promulgated thereunder.
"Affiliate" means, with respect to any specified Person, (1) any other
Person who, directly or indirectly, owns or controls, is under common ownership
or control with, or is owned or controlled by, such specified Person, (2) any
other Person who is a director, officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities, of the specified Person or a Person described in clause (1) of this
paragraph, (3) another Person of whom the specified Person is a director,
officer or partner or is, directly or indirectly, the beneficial owner of 10
percent or more of any class of equity securities, (4) another Person in whom
the specified Person has a substantial beneficial interest or as to whom the
specified Person serves as trustee or in a similar capacity, or (5) any relative
or spouse of the specified Person or any of the foregoing Persons.
"Bylaws" means the bylaws of the Company, as amended.
"Certificate of Incorporation" means the certificate of incorporation
of the Company, as originally filed with the Delaware Secretary of State
together with all amendments thereto.
"Closing" and "Closing Date" mean the consummation of the Company's
sale and the Investors' purchase of the Securities.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means the $.001 par value common stock of the Company.
"Conversion Shares" means the Shares issuable upon conversion of the
Note.
"Demand Notes" means, collectively, the promissory notes due on demand
made by the Company in favor of Xxxxxxx X. Xxxxx (1) dated April 9, 2003 in the
principal amount of $100,000; (2) dated May 7, 2003 in the principal amount of
$100,000; (3) dated May 22, 2003 in the principal amount of $100,000; (4) dated
May 28, 2003 in the principal amount of $20,000; (5) dated May 29, 2003 in the
principal amount of $45,000: (6) dated June 5, 2003 in the principal amount of
$65,000; and (7) dated June 16, 2003 in the principal amount of $70,000.
"Domestic Subsidiary" means any Subsidiary organized under the laws of
a state of the United States.
"Draft Form 10-K" means that certain draft Annual Report on Form 10-KSB
of the Company for the year ended January 31, 2003 delivered to the Investor's
counsel on May 15, 2003, to be filed as such draft may be amended with the
Securities and Exchange Commission.
"Employee Benefit Plan" means any plan regulated under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
"FDA Exception" means the facts and circumstances related to the lack
of a Food and Drug Administration license of the Company's Curacao facility,
which has resulted in the Company's inability to sell finished product in the
United States and has materially negatively impacted the Company's cash flow and
ability to continue as a going concern without additional financing.
"Foreign Subsidiary" means any Subsidiary organized under the laws of
(i) any possession or territory of the United States, or (ii) any jurisdiction
outside of the United States.
"Knowledge" shall mean and include (a) actual knowledge of the
Person ; provided that, with respect to the Company, knowledge shall mean the
actual knowledge of the chief executive officer and chief financial officer, or
persons having similar responsibilities, and (b) that knowledge which a prudent
businessperson described in clause (a) of this definition would have obtained in
the management of his business.
"Korpodeko Assets" means those assets of the Company and its
Subsidiaries securing the obligations of Advance Biofactures of Curacao, B.V., a
Subsidiary of the Company (the "Curacao Subsidiary"), as borrower with respect
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to that certain loan (the "Korpodeko Loan") in the principal amount of 819,000
Antilles Guilders from STICHTING KORPORASHON PA DESAROYO DI KORSOU ("Korpodeko")
to the Curacao Subsidiary, pursuant to that certain loan agreement, dated August
6, 2001, as supplemented by that certain letter agreement, dated May 13, 2003
between the Curacao Subsidiary and Korpodeko.
"Purchased Shares" is defined in Section 2.1 of this Agreement.
"Securities" means the Note, the Purchased Shares and the Conversion
Shares.
"SEC Filings" means any Company filing required under the '34 Act for
the two years preceding the date hereof (or such shorter period as the Company
was required by law to file such material).
"Shares" means any shares of the Company's Common Stock.
"Subsidiary" or "Subsidiaries" of any entity means any corporation or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other individuals
performing similar functions are at the time directly or indirectly owned or
controlled by such entity or one or more Subsidiaries of such entity.
"Trading Market" means any of the New York Stock Exchange, the American
Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market.
"Transaction Documents" means this Agreement, the Note, the Investor
Rights Agreement between the Company and the Investor (the "Investor Rights
Agreement"), the Guaranty from Xxxxx Xxxxxx ("Xxxxxx") to Investor (the
"Guaranty"), the Pledge Agreement, made by Xxxxxx in favor of the Investor (the
"Pledge"); the Security Agreement made by the Company in favor of the
Investor(the "Security Agreement"), the Fee Agreement, dated as of January 21,
2003 ( the "Fee Agreement") between the Company and Xxxxxxx Xxxxx, the Finder's
Fee and Break-Up Fee Letter Agreement, dated April 9, 2003, between the Company
and Xxxxxxx Xxxxx (the "Finder's Fee Agreement"); the Guaranty from ABC-NY to
Investor ("ABC-NY") and any other documents or agreements executed or to be
executed in connection with the transactions contemplated under any Transaction
Document, including any amendment or restatement of any Transaction Document.
Additional defined terms are found in the body of the following text.
The masculine form of words includes the feminine and the neuter and
vice versa, and, unless the context otherwise requires, the singular form of
words includes the plural and vice versa. The words "herein," "hereof,"
"hereunder," and other words of similar import when used in this Agreement refer
to this Agreement as a whole, and not to any particular section or subsection.
The use of the term "including" shall be deemed to incorporate the phrase
"including, by way of example and not of limitation."
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ARTICLE II
PURCHASE AND SALE TERMS
Section 2.1. Purchase and Sale. Subject to the terms of this Agreement,
the Company shall issue and sell to the Investor, and the Investor shall
purchase from the Company at the Closing, the Note in the principal amount of
$1,575,000 for an aggregate purchase price of One Million Five Hundred
Seventy-Five Thousand Dollars ($1,575,000). In addition, subject to the terms of
this Agreement the Company shall issue and sell to the Investor, and the
Investor shall purchase from the Company at the Closing, Two Hundred Ninety-Five
Thousand Three Hundred Twelve (295,312) shares of Common Stock (the "Purchased
Shares") at a price per Share of $.001 and an aggregate purchase price of Two
Hundred Ninety-Five and Thirty-Two One Hundredths Dollars ($ 295.32).
Section 2.2. Payment. Except as provided below, the Investor shall pay
the Company the purchase price of the Securities in full at the Closing by wire
transfer of immediately available funds.
The Company acknowledges that, pursuant to the Demand Notes, the
Company borrowed an aggregate of $500,000 from Xxxxxxx X. Xxxxx, the sole
shareholder of the general partner of the Investor and, individually, a limited
partner of the Investor. At the Closing and simultaneously with the delivery of
the remainder of the aggregate purchase price, $1,075,295.32, the Company shall
pay the interest accrued under the Demand Notes to Xx. Xxxxx and the $500,000 of
principal outstanding under the Demand Notes shall be treated as an advance on
the purchase price of the Note due hereunder. The Company's accountants shall
reflect such treatment in the books and records of the Company. The Investor, on
behalf of Xxxxxxx X. Xxxxx, shall deliver all such Demand Notes to the Company
for cancellation at the Closing, subject to payment by the Company of the
interest accrued under the Demand Notes to Xxxxxxx X. Xxxxx.
Section 2.3. Transfer Legends and Restrictions. Investor shall not be
permitted to transfer the Note except to exercise its conversion rights as set
forth in the Transaction Documents. The Note shall be imprinted with a legend in
substantially the following form (unless otherwise permitted under this Section
or unless the Note shall have been effectively registered and sold under the '33
Act and the applicable state securities laws):
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE '33 ACT. IT MAY NOT BE
OFFERED OR TRANSFERRED BY SALE, ASSIGNMENT, PLEDGE OR OTHERWISE UNLESS
(I) A REGISTRATION STATEMENT FOR THE NOTE UNDER THE '33 ACT IS IN
EFFECT OR (II) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE '33
ACT. THIS NOTE IS SUBJECT TO FURTHER TRANSFER RESTRICTIONS CONTAINED IN
THAT CERTAIN SECURITIES PURCHASE AGREEMENT OF DATED JUNE ____, 2003, A
COPY OF WHICH IS AVAILABLE AT THE OFFICES OF THE COMPANY."
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The certificate representing the Purchased Shares (and the Conversion
Shares, if any) shall be imprinted with a legend in substantially the following
form:
"THE SHARES OF COMMON STOCK EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE '33 ACT. THESE SHARES MAY NOT BE OFFERED OR
TRANSFERRED BY SALE, ASSIGNMENT, PLEDGE OR OTHERWISE UNLESS PURUSANT TO
(I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE '33 ACT OR (II) AN
EXEMPTION FROM REGISTRATION UNDER THE '33 ACT."
The requirement that the foregoing legends be placed upon certificates
evidencing any such securities shall cease and terminate upon the earliest of
the following events: (i) when such shares are transferred in a public offering
under the `33 Act, (ii) when such shares are transferred pursuant to Rule 144
under the `33 Act or (iii) when such shares are transferred in any other
transaction if the Investor delivers to the Company an opinion of its counsel,
which opinion shall be reasonably satisfactory to the Company, or a "no-action"
letter from the staff of the Commission, in either case to the effect that such
legend is no longer necessary in order to protect the Company against a
violation by it of the '33 Act upon any sale or other disposition of such
securities without registration thereunder. Upon the occurrence of any event
requiring the removal of a legend hereunder, the Company, upon the surrender of
certificates containing such legend, but in no event later than five (5)
business days after the delivery of such certificates to the Company, shall, at
its own expense, deliver to the holder of any such securities as to which the
requirement for such legend shall have terminated, one or more new certificates
evidencing such securities not bearing such legend.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except with respect to Sections 3.1 and 3.3, the "Company" as used in
this Article III shall mean the Company and each of its Subsidiaries, as if each
of them were making the representations and warranties in this Article III
individually. All such representations and warranties are being made by the
Company as to itself and as to each of its Subsidiaries, Except as set forth
herein or in the Schedules attached to this Agreement, the Company represents
and warrants to the Investor, at and as of the Closing that:
Section 3.1. Corporate Existence. The Company and its Subsidiaries are
each a corporation duly incorporated, or other duly formed organization validly
existing and in good standing (or such similar status of an organization
organized under the laws of a jurisdiction) under the laws of their jurisdiction
of formation and each has all requisite power and authority to conduct its
business and own its properties as now conducted and owned. Schedule 3.1 is a
true and correct certified copy of the Certificate of Incorporation, with all
amendments. The Company and its Subsidiaries are each qualified as a foreign
corporation to do business in all jurisdictions in which the nature of its
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properties and business requires such qualification and in which noncompliance
with such qualification would reasonably be expected to have a material adverse
effect on the business, assets, or financial condition of the Company and its
Subsidiaries taken as a whole (a "Material Adverse Effect").
Section 3.2. Power and Authority; No Conflict. The Company has all
requisite power and authority, and has taken all required corporate and other
action necessary to permit it to own and hold properties to carry on its current
business, to execute and deliver this Agreement, to issue and sell the
Securities as herein provided and otherwise to carry out the terms of this
Agreement and all other documents, instruments, or transactions required by this
Agreement, and none of such actions will violate any provision of the Company's
Bylaws or Certificate of Incorporation, or result in the breach of or constitute
a default under any material agreement or instrument to which the Company or a
Subsidiary is a party or by which it is bound or result in the creation or
imposition of any material lien, claim or encumbrance on any Company asset. This
Agreement has been duly executed and delivered by the Company and (assuming the
due authorization, execution and delivery hereof by the Investor) constitutes
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, subject to (i) applicable bankruptcy, insolvency,
fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other
similar laws relating to creditors' rights or creditors' remedies generally and
(ii) general principles of equity (regardless of whether enforcement is sought
in a proceeding at law or in equity) and the discretion of the court before
which any proceeding therefore may be brought. Neither this Agreement nor any
other Transaction Document gives any Person rights to terminate any agreements
with the Company or otherwise to exercise rights, including preemptive rights,
against the Company.
Section 3.3. Subsidiaries. Schedule 3.3 contains a full and complete
list of all directly and indirectly owned Subsidiaries of the Company, each
Subsidiary's jurisdiction of organization, principal business address, and the
percentage of ownership of such Subsidiary by the Company or one or more of its
other Subsidiaries. Except as set forth on Schedule 3.3, the Company owns all
the outstanding equity interests of each of its Subsidiaries and no Person
controls (as defined in the '34 Act) any of the Company's Subsidiaries other
than the Company, has any pre-emptive rights or other rights requiring the
issuance of additional Subsidiary shares to such Person. Except as disclosed on
Schedule 3.3, the Company has not pledged or otherwise encumbered the stock it
owns of any Subsidiary.
Section 3.4. Litigation. There are no suits, proceedings or
investigations pending or to the Company's Knowledge, threatened against or
affecting the Company or, to the Company's Knowledge, an officer or director of
the Company which could reasonably be expect to have a Material Adverse Effect
or materially adversely affect the ability of any officer or director to
participate in the affairs of the Company, or which concern the transactions
contemplated by the Agreement.
Section 3.5. Licenses; Compliance with Laws, Other Agreements, etc.
Except for the FDA Exception, the Company has all material franchises, permits,
licenses, and other rights that it currently deems necessary for the conduct of
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its business as currently conducted and it knows of no basis for the denial of
such rights in the future. The Company is not in violation of any order or
decree of any court, or of the provisions of any material contract or agreement
to which it is a party or by which it may be bound, or, to its Knowledge, of any
law, order, or regulation of any governmental authority (except as provided in
Section 3.14), and neither this Agreement nor the transactions contemplated
hereby will result in any such violation, except in each case for such
violations that would not reasonably be expected to have a Material Adverse
Effect.
Section 3.5.1. Intellectual Property Rights and Government Approvals.
(a) Schedule 3.5.1 is a true and complete list and summary description of all
patents, trademarks, service marks, trade names, registered copyrights , and any
and all applications for the foregoing, all licenses and rights to use the
foregoing, and all trade secrets and similar proprietary information owned by
the Company or its Subsidiaries, including unregistered copyrighted material
necessary or required to conduct their respective businesses as now conducted
and as described in its Securities Filings and Section 5.4(a) of this Agreement
(collectively, the "Company IP"). To the Knowledge of the Company, the Company
IP consists of all the intellectual property rights necessary or required to
enable the Company and its Subsidiaries to conduct their respective businesses
as now conducted and as described in its Securities Filings and Section 5.4(a)
of this Agreement. Notwithstanding anything to the contrary contained herein or
in any other Transaction Document, All Company IP is owned by the Company or
ABC-NY as listed by entity on Schedule 3.5.1 and no other Subsidiary has any
rights or interest in or any claim to any Company IP, except that Advance
Biofactures of Curacao N.V, a Netherlands Antilles company (AB-Curacao"). is a
party to certain foreign patent applications as indicated on Schedule 3.5.1.
Prior to the date hereof, BSTC has caused AB-Curacao to file with the United
States Patent and Trademark Office, and ABC-NY has cooperated in such action and
executed, as necessary, all documents required to evidence the transfer of all
Company IP assigned and sold by AB-Curacao to ABC-NY pursuant to that certain
Assignment of Intellectual Property, dated as of June 5, 2003 (the "IP
Assignment"). BSTC or ABC-NY has delivered copies of such filings to the
Investor prior to the date hereof and shall deliver copies of all recorded
documents to Investor upon receipt.
Notwithstanding anything to the contrary contained in the IP
Assignment, AB-Curacao has assigned all licenses, sublicenses, agreements or
permissions related to the Company IP assigned under the IP Assignment and the
assignment of the foregoing items related to the Company IP did not and does not
violate any provision of such items or any law, judgment or order applicable to
such assigned items or their assignment.
(b) To the Knowledge of the Company, none of the patents owned or licensed by
the Company or its Subsidiaries is unenforceable or invalid, and none of the
patent applications owned or licensed by the Company has been challenged by any
Person (excluding for the avoidance of doubt challenges in connection with
patent prosecution by the United States Patent and Trademark Office or similar
foreign authorities).
(c) The Company's and its Subsidiaries' patents disclose patentable subject
matter and their respective patent applications disclose useful information and
there are no inventorship challenges, nor has any interference been declared or
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provoked, nor is any material fact known with respect to such patents and patent
applications that would preclude the issuance of patents with respect to such
applications or would render such patents invalid or unenforceable.
(d) The Company and its Subsidiaries are not in breach of and have complied
with, all terms of any license or other agreement relating to its patents and
patent applications. To the extent Company's or its Subsidiaries' patents and
patent applications are sublicensed to the Company or its Subsidiaries by a
third party, each of their sublicensed rights shall continue in full force and
effect if the principal third party license terminates for any reason.
(e) The Company's and its Subsidiaries' patents disclose and claim patentable
subject matter and their respective patent applications disclose useful
information under the United States patent laws encompassing the Company's and
its Subsidiaries' existing products and products under development to the extent
the Company and/or its counsel has determined that any such products should be
patented or that a patent application should be filed.
(f) the Company and its Subsidiaries have complied with the required duty of
candor and good faith in dealing with the United States Patent and Trademark
Office ("PTO"), including the duty to disclose to the PTO all information
believed to be material to the patentability of the Company's and its
Subsidiaries' patents and pending patent applications.
(g) Except for such Company IP identified in the IP Assignment, the Company, its
Subsidiaries and, to the Company's knowledge, its licensors, as appropriate, are
identified in the records of the PTO as the holders of record of its trademarks,
servicemarks, patents and patent applications and no other Person has any
rights, title or interest in such trademarks, servicemarks, patents and patent
applications.
(h) Neither the Company nor its Subsidiaries have received any notice of
infringement or other complaint that the Company's operations infringe rights of
others in any patents, trademarks, service marks, trade names, trade secrets,
copyrights or licenses in the foregoing or any other proprietary rights nor does
the Company have a reasonable belief that there has been any such infringement.
(i) To the Company's Knowledge, no person employed by the Company or its
Subsidiaries has wrongfully employed any trade secrets or any confidential
information or documentation proprietary to any former employer in connection
with the Company's business, and no person employed by the Company has violated
any confidential relationship that such person may have had with any third party
in connection with the Company's business.
(j) The Company has the right and authority to utilize the processes, systems
and techniques presently employed by it in the design, development and
manufacture of its present products and all of its other products contemplated
in its Securities Filings and as described in Section 5.4(a) of this Agreement
and all rights to any processes, systems and techniques which are Company IP
developed by any employee or consultant of the Company or its Subsidiaries have
been assigned to the Company.
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(k) No royalties, honorariums or fees are or will be payable by the Company to
other persons by reason of the ownership or use by the Company of Company IP. To
the Company's Knowledge, no officer, director, shareholder or employee of the
Company or its Subsidiaries owns or holds, directly or indirectly, any interests
in any Company IP.
(l) To the Knowledge of the Company, the Company and its Subsidiaries have all
material governmental approvals, authorizations, consents, licenses and permits
necessary or required to conduct their businesses currently or as contemplated
in the Securities Filings and Section 5.4(a) of this Agreement.
Section 3.5.2. Government Approvals. Assuming the accuracy of
the representations and warranties of the Investor made in Article Five of this
Agreement, no material authorization, consent, approval, license, qualification
or formal exemption from, nor any filing, declaration or registration with, any
court, governmental agency, regulatory authority or political subdivision
thereof, or any securities exchange is required in connection with the
execution, delivery or performance by the Company of this Agreement or the other
Transaction Documents to consummate the transactions contemplated in this
Agreement or the other Transaction Documents. All such material authorizations,
consents, approvals, licenses, qualifications, exemptions, filings, declarations
and registrations have been obtained or made, as the case may be, and are in
full force and effect and are not the subject of any pending or, to the
knowledge of the Company, threatened attack by appeal or direct proceeding or
otherwise.
Section 3.5.3. Investment Company Act. The Company is not, and
immediately after the Closing will not be, an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act.
Section 3.6. Title to Assets. Except for the Korpodeko Assets under the
Korpodeko Loan and as otherwise described on Schedule 3.6 , the Company and each
Subsidiary has good and marketable title in fee simple to all real property
owned by it and good and marketable title in all personal property owned by it,
in each case free and clear of all liens. Any real property and facilities held
under lease by the Company are held by it under valid, subsisting and
enforceable leases of which the Company is in compliance in all material
respects. Schedule 3.6A contains a full and complete description of the assets
of the Company other than the Company IP. All product and establishment or other
licenses or permits, including "Orphan Drug" rights, issued by the United States
Food and Drug Administration with respect to the business of the Company and its
Subsidiaries are owned or issued in the name of, as the case may be, by either
the Company or ABC-NY, as listed by entity in Schedule 3.6.
Section 3.7. Brokers, etc. Except as set forth in the Finder's Fee
Agreement, the Company has not dealt with any broker, finder, or other similar
person in connection with the offer or sale of the Securities and the
transactions contemplated by this Agreement, and the Company is not under any
obligation to pay any broker's fee, finder's fee or commission in connection
with such transactions.
Section 3.8. Certain Material Transactions. Except as set forth in
Schedule 3.8 hereto, or disclosed in the SEC Filings, there are no existing
material arrangements or proposed material transactions between the Company and
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any officer or director or holder of more than 10% of the capital stock of the
Company. The Company is not a party to any collective bargaining agreement and,
to its Knowledge, no organizational efforts are currently being made with
respect to any of their respective employees.
Section 3.9. Contracts and Commitments, etc. Except as set forth on
Schedule 3.9, the Company is not in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument to which any of them is a party which would reasonably
be expected to have a Material Adverse Effect.
Section 3.10. Employee Benefit Plans. The Company has made available to
Investor all (a) material profit-sharing, deferred compensation, bonus, stock
option, stock purchase, pension, retainer, consulting, retirement, welfare or
incentive plan or agreement whether legally binding or not, (b) material plans
providing for "fringe benefits" to its employees, including but not limited to
vacation, sick leave, medical, hospitalization, life insurance and other
insurance plans, and related benefits, (c) material employment agreements not
terminable on 30 days (or less) written notice, and (d) material other "employee
benefit plans" (within the meaning of Section 3(3) of ERISA). There are no
material negotiations, demands or proposals which are pending or have been made
which concern matters now covered, or that would be covered, by the type of
agreements or plans listed in this Section. The Company is in compliance in all
material respects with the applicable provisions of ERISA and the regulations
and published authorities thereunder with respect to all such employee benefit
plans. The Company is in compliance in all material respects with all other
statutes, orders or governmental rules and regulations applicable to such plans.
The Company has performed all of its material obligations under all such plans.
There are no material actions, suits or claims (other than routine claims for
benefits) pending or, to the Company's Knowledge, threatened against such plans
or the assets of such plans.
Section 3.11. Environmental Liabilities. The Company, together
with any real property that it owns, leases, or otherwise occupies or uses and
the operations of its business (the "Premises") are in compliance in all
material respects with all applicable Environmental Laws (as defined below) and
orders or directives or any governmental authorities having jurisdiction under
such Environmental Laws, including, without limitation, any Environmental Laws
or orders or directives with respect to any cleanup or remediation of any
release or threat of release of Hazardous Substances. The Company has not
received any written citation, directive, letter or other communication or any
notice of any proceedings, claims or lawsuits, from any person, entity or
governmental authority arising out of the ownership or occupation of the
Premises or the conduct of its operations. The Company has obtained and is
maintaining in full force and effect all necessary permits, licenses and
approvals required by any Environmental Laws applicable to the Premises and the
business operations conducted thereon (including operations conducted by tenants
on the Premises), and is in compliance with all such permits, licenses and
approvals in all material respects. Except as disclosed on Schedule 3.11, to the
Company's Knowledge, it has not caused or allowed a release, or a threat of
release, of any Hazardous Substance unto, at or near the Premises nor has the
Premises or any property at or near the Premises ever been subject to a release,
or a threat of release, of any Hazardous Substance. For purposes of this
Agreement, the term "Environmental Laws" shall mean any foreign, federal, state
or local law, ordinance or regulation pertaining to the protection of the
environment, including, the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. ?? 9601 et seq., Emergency Planning and Community
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Xxxxx-xx-Xxxx Xxx, 00 X.X.X. 00000 et seq., and the Resource Conservation and
Recovery Act, 42 U.S.C. ?? 6901 et seq. For purposes of this Agreement, the term
"Hazardous Substances" shall include oil and petroleum products, asbestos,
polychlorinated biphenyls and urea formaldehyde, and any other materials
classified as hazardous or toxic under any Environmental Laws.
Section 3.12. Issuance of the Securities. The Securities are duly
authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens, claims or encumbrances (other than
liens, claims or encumbrances granted to the Investor). The Company has reserved
from its duly authorized capital stock a sufficient number of Shares to enable
it to comply with its conversion and exercise obligations under the Note.
Section 3.13. Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock of the Company is set forth on
Schedule 3.13 hereto. No securities of the Company are entitled to preemptive or
similar rights, and no Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities and except as disclosed on Schedule 3.13, there are
no outstanding options, warrants, script rights to subscribe to, calls or
commitments, outstanding securities exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company is bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock.
Section 3.14. SEC Filings; Financial Statements. Except for its Annual
Report on Form 10-KSB for the fiscal year ended January 31, 2003 and its
quarterly report on Form 10-QSB for the quarter ended March 31, 2003, the
Company has made all SEC Filings required of it preceding the date hereof on a
timely basis or has received a valid extension of such time of filingand has
filed any such SEC Filings prior to the expiration of any such extension. The
Company has previously delivered to the Investor a copy of all SEC Filings . As
of their respective dates, the SEC Filings complied, and the Draft Form 10-K in
the form the Company will file with the SEC will comply, in all material
respects with the requirements of the `34 Act and the rules and regulations of
the Commission promulgated thereunder, and none of the SEC Filings, when filed,
contained, and the Draft Form 10-K in the form the Company will file with the
SEC will not contain, any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Filings comply., and the Draft Form 10-K when filed will comply, in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated subsidiaries
as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal
year-end audit adjustments.
11
Section 3.15. Material Changes. Except for the FDA Exception, those
matters disclosed in the SEC Filings, the Draft Form 10-K and as set forth on
Schedule 3.15, since the date of the latest audited financial statements
included within the SEC Filings: (i) there has been no event, occurrence or
development that has had or that would reasonably be expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and expenses incurred in
the ordinary course of business consistent with past practice, (B) liabilities
not required to be reflected in the Company's financial statements pursuant to
GAAP or required to be disclosed in filings made with the Commission, (C) costs
and expenses incurred in connection with the negotiation of a potential sale of
all or substantially all assets of the Company and the transactions contemplated
by this Agreement, and (D) costs and expenses incurred in connection with
attempting to obtain FDA approval of the Curacao facility, (iii) other than
changing its fiscal year end, the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders
or purchases, redeemed or made any agreements to purchase or redeem any shares
of its capital stock , and (v) the Company has not issued any equity securities
(or derivatives thereof) to any officer, director or Affiliate, except pursuant
to existing Company stock purchase and stock option plans approved by the
stockholders of the Company.
Section 3.16. Private Placement. Assuming the accuracy of the
representations and warranties of the Investor set forth in Article V of this
Agreement, the offer, issuance and sale of the Securities to the Investor as
contemplated by this Agreement are exempt from the registration requirements of
the '33 Act.
Section 3.17. Listing and Maintenance Requirements. Except for the
letter dated May 23 2003 from NASDAQ to the Company, a copy which was previously
delivered to Investor, the Company has not, in the twelve months preceding the
date hereof, received any written notice from any Trading Market on which the
Common Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such Trading
Market. The issuance and sale of the securities hereunder does not contravene
the rules and regulations of such Trading Market and no shareholder approval is
required for the Company to fulfill its obligations under the Transaction
Documents.
Section 3.18. Registration Rights. Except for the registration and
related rights granted to the Investor under the Investor Rights Agreement, the
Company has not granted or agreed to grant to any Person any rights (including
piggyback registration rights) to have any securities of the Company registered
with the Commission or any other governmental authority.
Section 3.19. Indebtedness; Seniority. Except as described on Schedule
3.19 or in Section 3.15, (i) the Company has no existing outstanding
indebtedness other than trade payables incurred in the ordinary course of
business and (ii) no indebtedness of the Company is senior to the Note in right
12
of payment, whether with respect to interest, security, or upon liquidation or
dissolution or otherwise. Moreover, except as described on Schedule 3.19, the
Company has not loaned to, acted as guarantor for or otherwise served as a
creditor of any individual or entity (including any of its direct or indirect
Subsidiaries).
Section 3.20 Disclosure. All disclosure provided to the Investor in
connection with the transactions contemplated by this Agreement regarding the
Company, its current business and its business as proposed to be conducted,
including the Schedules to this Agreement, has been furnished by or on behalf of
the Company without any intent to intentionally mislead the Investor. The
Company acknowledges and agrees that the Investor does not make or has not made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Article V of this Agreement.
Section 3.21. Investigation. It shall be no defense to an action for
breach of this Agreement that the Investors or their agents have (or have not)
made investigations into the affairs of the Company or that the Company could
not have known of the misrepresentation or breach of warranty. Damages for
breach of a representation or warranty or other provision of this Agreement
shall not be diminished by alleged tax savings resulting to the complaining
party as a result of the loss complained of.
ARTICLE IV
COVENANTS OF THE COMPANY
For the purposes of this Article, "Company" shall be deemed to include
all Subsidiaries.
Section 4.1. Use of Proceeds. The Company shall use the proceeds of the
issuance of the Securities for general corporate purposes, including repayment
of debt existing on the date hereof, but excluding the repurchase of securities
of the Company (except as otherwise contemplated in the Transaction Documents).
Section 4.2. Rule 144. So long as any Securities are outstanding, the
Company covenants that it will at all times comply with the current public
information requirements of Rule 144(c)(1) under the '33 Act; and (b) at all
such times as Rule 144 is available for use by the Investor, the Company will
furnish the Investor upon request with all information within the sole
possession of the Company required for the preparation and filing of Form 144.
Section 4.3. Future Noncompetition and Proprietary Rights Agreements.
(a) Proprietary Information. The Company and its Subsidiaries
shall implement and maintain all reasonable procedural safeguards, which at a
minimum shall include written agreements with the appropriate Person, to (i)
require that any Person employed by the Company will not wrongfully employ any
confidential information or documentation proprietary to any former employer,
and (ii) protect all technical, business and other information developed by or
for the Company and its Subsidiaries. The Company shall apply for patent
protection for all inventions developed by or for the Company, for which , in
13
the opinion of the Company and/or its counsel, is patentable and that, in the
opinion of the Company and/or its counsel, patent proection is required or
necessary to conduct its business as now conducted as described in the
Securities Filing and in Section 5.4(a) of this Agreement. The Company shall
cause each person who becomes an employee of the Company and who shall have
access to confidential or proprietary information of the Company or third
parties to execute an agreement relating to matters of noncompetition and
nondisclosure and assignment. The Company shall cause any person or consultant
employed by the Company to assign all inventions of any intellectual property to
the Company.
(b) Licenses and Intellectual Property. Except for the
termination of a license or abandonment of a patent, trademark, tradename or
copyright that would not be likely to have a Material Adverse Effect, the
Company shall maintain all registrations or applications for all patents,
trademarks, service marks, trade names, copyrights and licenses. With respect to
the foreign patent applications in the name of Advance Biofactures of Curacao
N.V. listed on Schedule 3.5.1 hereto, the Company shall make a reasonable, good
faith determination regarding how to handle such applications. Notwithstanding
the foregoing, if the Company or any of its Subsidiaries shall terminate any
license or abandon any intellectual property, the Company shall provide
reasonable notice thereof to the Investor The Investor shall have the option,
but not the obligation, to have, at Investor's sole cost, all right, title and
interest in such abandoned property assigned to it except where the terms of any
terminated or abandoned license prohibit its assignment.
Section 4.4. Liability Insurance. The Company will maintain in full
force and effect a policy or policies of standard comprehensive general
liability insurance underwritten by an insurance company insuring its properties
and business against such losses and risks, and in such amounts as are adequate
for its business in the Company's good faith determination, it being agreed by
the Investor that the maintenance of the Company's current policy or policies on
substantially similar terms shall satisfy this covenant. Such policies shall
include property loss insurance policies, with extended coverage, sufficient in
amount to allow the replacement of any of its tangible properties which might be
damaged or destroyed by the risks or perils normally covered by such policies.
Section 4.5. Maintenance of Corporate Existence. Each of the Company
and its Subsidiaries will preserve, renew and keep in full force and effect, its
corporate existence, qualification in requisite jurisdictions and rights and
privileges necessary or desirable in the normal conduct of its business except
where the failure to do so will not have a Material Adverse Effect.
Section 4.6. Governmental Consents. Except for the FDA Exception and
the termination of any of the following that would not reasonably be likely to
have a Material Adverse Effect, the Company will obtain and maintain all
material consents, approvals, licenses and permits required by federal, state,
local and foreign law to carry on its business.
Section 4.7. Further Assurances. The Company will cure promptly any
defects in the creation and issuance of the Securities and in the execution and
delivery of this Agreement or any other Transaction Document to which it is a
party. The Company, at its expense, will promptly execute and deliver to the
Investor upon its reasonable request all such other and further documents,
14
agreements and instruments in compliance with or pursuant to its covenants and
agreements herein, and will make any recordings, file any notices, and obtain
any consents as may be necessary in connection therewith.
Section 4.8. No Conflicting Agreements. The Company hereby agrees that
it will not enter into any new agreement or make any amendment to any existing
agreement, which by its terms would restrict the Company's performance of its
obligations to the Investor pursuant to this Agreement or any other Transaction
Document.
Section 4.9. Limitation on Indebtedness; Extensions of Credit. Other
than in connection with the Transaction Documents, without the prior written
consent of Investor (which shall not be unreasonably withheld)and while any
portion of the Note remains outstanding, after the date hereof, the Company and
its Subsidiaries shall not incur any unsecured indebtedness for borrowed money
or become a guarantor or otherwise contingently liable for any such indebtedness
exceeding in the aggregate Two Hundred Fifty Thousand Dollars ($250,000), except
for trade payables, purchase money obligations incurred in the ordinary course
of business or intercompany loans to the Company from its Domestic Subsidiaries.
Other than any amount loaned to ABC-NY from the proceeds of the Note
simultaneously with or within a reasonable period of time after the Closing, ,
the Company shall not, without the prior written consent of Investor, lend money
to, serve as a guarantor of, or otherwise extend credit to any individual or
entity (including any of its direct or indirect Subsidiaries).
Section 4.10 No Liens. Except for (i) the liens and security interests
granted to the Investor under the Transaction Documents, (ii) liens that may
arise by operation of law, such as materialmen's liens but expressly excluding
tax liens for taxes that are past due, (iii) purchase money security interests
in connection with purchase money obligations incurred in the ordinary course of
business, and (iv) the Korpodeko Assets, the Company will not, and will not
permit any Subsidiary to, create or permit to exist any lien on or security
interest in any assets of the Company or any assets of any Subsidiary, including
Company IP.
Section 4.11 Limitations On Other Transactions. Without the prior
written consent of the Investor or as otherwise provided in this Section, (i)
the Company will not, and will not permit any of its Subsidiaries to sell,
lease, assign or otherwise dispose of any of the assets of the Company and its
Subsidiaries (other than the sale of Inventory (as defined in the Security
Agreement) in the ordinary course of business), and (ii) the Company will not
sell, hypothecate, pledge, assign or otherwise dispose of any of the capital
stock or other securities of any of its Subsidiaries. Notwithstanding the
foregoing, the prior written consent of the Investor shall not be required for
the Company or its Subsidiaries to enter into any of the foregoing transactions
if, as a condition to closing of any such transaction, the Company and its
Subsidiaries shall repay the Investor in full and otherwise satisfy their
respective obligations to the Investor under the Transaction Documents on or
before the closing date for such transaction. The Company agrees to provide the
Investor at least 10 days' prior written notice that it or any of its
Subsidiaries is entering into a transaction described in this Section but not
requiring the prior written consent of the Investor.
15
Section 4.12. Waiver. Any violation of an affirmative or negative
covenant of the Company may be waived prospectively or retrospectively in a
given instance by the Investor, butsuch waiver shall operate only with respect
to the particular violation specified in the waiver. The Investor disclaims any
intent or purpose to control the Company or to manage its affairs for the
benefit of the Investor or otherwise.
Section 4.13 Indemnification
(a) Indemnification of the Investor. The Company will indemnify and hold the
Investor and its partners, officers, directors, shareholders, members, managers
employees and agents (each, an "Investor Party") harmless from all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts to be paid in settlements, court costs
reasonable attorney's fees and costs of investigation (collectively, "Losses")
that any Investor Party may suffer or incur as a result of or relating to any
cause of action, suit or claim brought or made against an Investor Party and
arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement or any of the other Transaction Documents. The
Company will reimburse any Investor Party as such expenses are incurred for its
reasonable legal and other expenses (including the cost of any investigation,
preparation and travel in connection therewith) incurred in connection with this
Section.
(b) Indemnification of the Company. The Investor will indemnify and hold the
Company and its officers, directors, shareholders, members, managers, employees
and agent (each, a "Company Party") harmless from all Losses that any Company
Party may suffer or incur as a result of or relating to any cause of action,
suit or claim brought or made against a Company Party by a third party
(including any governmental authority) arising out of or resulting from the
breach of any of the representations, warranties, covenants or agreements made
by the Investor under Sections 5.1, 5.2, 5.3, 5.4(b), 5.6 or 5.8 of this
Agreement.
(c) Procedures for Claims for Indemnification. In the case of claims for which a
claim for indemnification is made, the party against who such claim for
indemnification is made (the "Indemnitor") shall have the option (x) to assume
and thereafter conduct any proceedings or negotiations in connection therewith,
(y) to take all other steps to settle or defend any such claim and (z) to employ
counsel of the Indemnitor's choosing to contest any such claim in the name of
the party who makes such claim for indemnification (the "Indemnified Party") or
otherwise; provided, that, no settlement shall be effected without the advance
written consent of the Indemnified Party (which shall not be unreasonably
delayed or withheld). The Indemnified Party shall be entitled to participate at
its own expense and by its own counsel in any proceedings relating to any
third-party claim, and the Indemnified Party shall be entitled to participate
with counsel of its own choice at the expense of the Indemnitor if
representation of both parties by the same counsel presents a conflict of
interest or is otherwise inappropriate under applicable standards of
professional conduct. The Indemnitor shall, within 20 days of receipt of a claim
for indemnification, notify the Indemnified Party of its intention to assume the
defense of any such claim. Until the Indemnified Party has received notice of
the Indemnifying Party's election whether to defend any such claim, the
Indemnified Party shall take reasonable steps to defend such claim; provided,
that no settlement shall be effected without the advance written consent of the
Indemnifying Party, which shall not be unreasonably delayed or withheld. If the
Indemnitor shall decline to assume the defense of any such claim, or shall fail
16
to notify the Indemnified Party within 20 days after receipt of the claim for
indemnification of the Indemnitor's election to defend such claim, the
Indemnified Party shall defend such claim. The expenses of all proceedings,
contests or lawsuits in respect of any such claims (other than those incurred by
the Indemnified Party which are referred to in the second sentence of this
paragraph) shall be borne by the Indemnitor but only if the Indemnifying Party
is responsible pursuant hereto to indemnify the Indemnified Party in respect of
such claim. Regardless of which party shall assume the defense of the claim, the
parties agree to cooperate fully with one another in connection therewith.
Section 4.14. Publicist. Within four months of the Food and Drug
Administration's approval of the Curacao facility, the Company shall retain a
publicist mutually acceptable to the Investor and the Company.
Section 4.15. Payments to Employees. Until the payment of all amounts
due under the Note, neither the Company nor any of its Subsidiaries shall
increase the cash salary, cash bonus or other cash compensation of Xxxxx Xxxxxx
or Xxxxxx Xxxxxx by more than ten percent (10%) of their cash salary, cash bonus
or other cash compensation for fiscal year 2002.
Section 4.16. Application of Takeover Protections. The Company and its
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provisions under the Company's Certificate of Incorporation (or
similar charter documents), by-laws, or the laws of its state of incorporation
that is or could become applicable to the Investor as a result of the Investor
and the Company fulfilling their respective obligations or exercising their
respective rights under the Transaction Documents, including as a result of the
Company's issuance of the Securities and the Investor's or its Affiliates'
ownership of the Securities or the Investor's right of foreclosure under the
Pledge Agreement.
Section 4.17. Subsidiaries. Without the prior written consent of
Investor, neither the Company nor any Subsidiary shall be permitted to (i) make
additional capital contributions to, otherwise recapitalize or restructure a
Foreign Subsidiary or sell, assign or transfer any of their respective assets
(whether tangible or intangible) to a Foreign Subsidiary (including by way of a
license or grant of marketing or other rights) or (ii) create any Foreign
Subsidiaries not existing prior to the date hereof. If the Company or any
Subsidiary creates a Domestic Subsidiary, the Company shall promptly inform
Investor. Each new Domestic Subsidiary shall (i) pledge all its assets and
become a party to the Security Agreement(s) and (ii) become a co-debtor and
party to the Note.
Section 4.18. European Patent. The Curacao Subsidiary is the owner or
assignee of European Patent Office Patent EPO721781B1 June 2002 (collectively
with any patent issued therefrom by an individual European Union country, the
"European Patent") as further described in Schedule 3.5.1 attached hereto. The
Company will use its best efforts to cause the Curacao Subsidiary to assign the
European Patent to ABC-NY within 90 calendar days from the date hereof (provided
17
that the Company shall have no such obligation if the costs of assigning the
European Patent shall exceed $20,000, including, without limitation, any
assignment "fee" or "tax" on the fair market value of the European Patent (to be
determined in good faith by the Company and the Curacao Subsidiary). If such
costs exceed $20,000 and the 90 day period has elapsed, the Company and the
Curacao Subsidiary will use commercially reasonable efforts to assign the
European Patent to ABC-NY at a future date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company, at and as of the
Closing that:
Section 5.1 Existence. The Investor is a Delaware limited partnership
duly formed, validly existing and in good standing under the laws of the State
of Delaware and has all requisite power and authority to conduct its business.
Section 5.2. Power and Authority. The Investor has all requisite power
and authority, and has taken all required corporate (or trust, limited liability
company, or partnership, as the case may be) and other action necessary to
permit it to own and hold properties to carry on its business, to execute and
deliver this Agreement and otherwise to carry out the terms of this Agreement
and all other documents, instruments, or transactions required by this
Agreement, and none of such actions will violate any provision of the Investor's
partnership agreement or other governance documents. This Agreement has been
duly executed and delivered by the Investor and (assuming the due authorization,
execution and delivery hereof by the Company) constitutes the valid and binding
obligation of the Investor enforceable against the Investor accordance with its
terms, subject to (i) applicable bankruptcy, insolvency, fraudulent conveyance,
fraudulent transfer, reorganization, moratorium or other similar laws relating
to creditors' rights or creditors' remedies generally and (ii) general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity) and the discretion of the court before which any
proceeding therefore may be brought.
Section 5.3. Purchase for Investment. The Investor is purchasing the
Securities for investment, for its own account and not with a view to
distribution thereof.
Section 5.4. Speculative Nature of Investment; Financial Matters.
(a) Investor understands and acknowledges that:
(i) the FDA Exception has had a Material Adverse Effect on the
Company;
(ii) the Company's historical financial performance is not
indicative of the Company's future results;
18
(iii) the Company's efforts to discover, develop and commercialize
new products are at a very early stage and these efforts are
subject to a high risk of failure; the Company's ability to
develop additional products approved by the FDA, such as those
relating to injectable uses of Colleganase, and successfully
market any such product is highly speculative and they may be
unable to do so
(iv) if the Company's intellectual property rights expire or are
not broad enough, the Company's ability to compete may be
impaired because third parties may be able to use the
Company's technology or sell generic forms of the products
developed by the Company. In addition, any patent issued to
the Company may be challenged, invalidated, held unenforceable
or circumvented and the Company's success will depend in part
on its ability to obtain and maintain meaningful patent
protection for its products or product candidates throughout
the world. The patent positions of the Company involve complex
legal and factual questions and the Company will be able to
protect its intellectual property rights from unauthorized use
by third parties only to the extent that its technologies are
covered by valid and enforceable patents or are effectively
maintained as trade secrets;
(v) the Company has limited ability to conduct clinical trials and
limited manufacturing, sales, marketing and distribution
capabilities and if the Company does not develop these
capabilities, it will be dependent on third parties to conduct
clinical trials and manufacture and commercialize its
products. Furthermore, a third-party manufacturers' failure to
comply with FDA regulations could cause interruption of the
manufacture of our products;
(vi) other companies with substantially greater financial resources
could compete directly with any of the Company's products;
(vii) after the consummation of the transactions contemplated by
this Agreement, the Company will be highly leveraged with a
substantial amount of indebtedness and may be unable to meet
all of its payment obligations;
for these and other reasons, the Company may not have sufficient funds to repay
amounts owing under the Note or the other Transaction Documents when due or to
otherwise comply with its obligations under any of the Transaction Documents.
(b) The Investor represents and warrants to the Company that it understands that
the purchase of the Securities involves substantial risk and is highly
speculative and that its financial condition and investments are such that it is
in a financial position to hold the Securities for an indefinite period of time
or until the maturity thereof, as the case may be, and to bear the economic risk
of, and withstand a complete loss of, its investment.
19
Section 5.5 Unregistered Securities. The Investor understands and
acknowledges that the Securities to be acquired by the Investor hereunder have
not been registered under the 33 Act or any state securities or "blue sky" law
and may not be sold or disposed of in the absence of such registration without
exemption from the registration requirements of the 33 Act (including, without
limitation, Rule 144 thereof) or any requirements of any state securities or
"blue sky" law.
Section 5.6 Investor Status. At the time the Investor was offered the
Securities, it was and, according to representations and warranties given in
writing to the Investor, each of its limited and general partners were, and at
the date hereof it is, and, according to representations and warranties given in
writing to the Investor they are each , an "accredited investor" as defined in
Rule 501(a) under the'33 Act. Each general partner and limited partner of the
Investor has executed and delivered to the Company the letter in the form
attached hereto as Schedule 5.6.
Section 5.7 Disclosure. During the negotiation of the transactions
contemplated herein, the Investor and its representatives have been afforded
full and free access to corporate books, financial statements, records,
contracts, documents, and other information concerning the Company and to its
offices and facilities, have been afforded an opportunity to ask such questions
of the Company's officers and employees concerning the Company's business,
operations, financial condition, assets, liabilities and other relevant matters
as they have deemed necessary or desirable, and have been given all such
information as has been requested, in order to evaluate the merits and risks of
the prospective investment contemplated herein.
Section 5.8. Brokers, etc. The Investor has dealt with no broker,
finder, commission agent, or other similar person who is not an Affilate in
connection with the offer or sale of the Securities and the transactions
contemplated by this Agreement, and is under no obligation to pay any broker's
fee, finder's fee, or commission in connection with such transactions.
ARTICLE VI
THE CLOSING AND CLOSING CONDITIONS
Section 6.1. The Closing. The purchase and sale of the Securities shall
take place at the Closing to be held at the offices of Xxxxxxxx & Xxxxxx. The
Closing shall occur on the date of execution of this Agreement.
The obligation of the Investor to purchase the Securities at the Closing shall
be subject to satisfaction of the following conditions at and as of the Closing:
Section 6.2. Issuance of Note and Purchased Shares. The Company shall
have duly issued and delivered the Note and a certificate for the Purchased
Shares to the Investor.
Section 6.3. Legal Opinion from Counsel for the Company. The Investor
shall have received from Fried Xxxxx Xxxxxx Xxxxxxx and Xxxxxxxx, counsel for
the Company, an opinion, dated the date of Closing, in the form of Exhibit B
attached hereto.
20
Section 6.4 Execution of Related Documents. The Investor shall have
received the following duly authorized and executed documents at the Closing:
(i) the Note attached hereto as Exhibit A; (ii) the Investor Rights Agreement
attached hereto as Exhibit C; (iii) the Guaranty attached hereto as Exhibit D,
(iv) the Pledge attached hereto as Exhibit E, (vi) the Security Agreement
attached hereto as Exhibit F; (v) the ABC-NY Guaranty, attached hereto as
Exhibit G; and (vi) that certain representation letter (or letters) from Xxxxx
Xxxxxx and Xxxxxx Xxxxxx attached hereto as Exhibit H.
Section 6.5. Supporting Documents. On the Closing Date, the Investor
and its counsel shall have received copies of the following with respect to the
Company and each of its Domestic Subsidiaries (and, with respect to AB-Curacao,
the following except that the certificate referenced in (1)(d) below shall only
cover items (1) and (3) of such provision):
(a) copies of the Certificate of Incorporation , and all
amendments thereto, certified as of a recent date by the
appropriate governmental authority;
(b) a certificate of said authority dated as of a recent date
as to the due incorporation and good standing of the the
relevant entity and listing all documents of the relevant
entity on file with said authority;
(c) a telegram or telex from said authority as of the close of
business on the next business day preceding the Closing Date
as to the continued good standing of the relevant entity;
(d) a certificate of the Secretary or an Assistant Secretary
of the relevant entity, dated the Closing Date and certifying:
(1) that attached thereto is a true and complete copy of the
Bylaws of such entity as in effect on the date of such
certification; (2) that attached thereto is a true and
complete copy of resolutions adopted by the Board of Directors
of such entity authorizing the execution, delivery and
performance of this Agreement and the other Transaction
Agreements, the issuance, sale, and delivery of the
Securities, as applicable to such entity, and that all such
resolutions are still in full force and effect and are all the
resolutions adopted in connection with the transactions
contemplated by this Agreement; (3) that the Certificate of
Incorporation of such entity has not been amended since the
date of the last amendment referred to in the certificate
delivered pursuant to clause (b) above; and (4) the incumbency
and specimen signature of each officer of such entity
executing this Agreement and any Transaction Document, the
certificates or documents representing the Securities and any
certificate or instrument furnished pursuant hereto; and
(e) such additional documents and other information with
respect to the operations and affairs of the Company and its
Subsidiaries as the Investor or its counsel may reasonably
request in advance of the Closing Date.
21
All such documents shall be satisfactory in form and substance
to the Investor and its counsel.
Section 6.6. Payment of Investor's Counsel. All counsel fees and
expenses incurred by Investor shall be paid by the Company at the Closing out of
the funds advanced hereunder to each such counsel by wire transfer to such
account(s) as may be designated by any such counsel. In addition, the Company
hereby waives any fee cap contained in the Fee Agreement with respect to such
fees and expenses.
ARTICLE VII.
MISCELLANEOUS
Section 7.1. Expenses. The Company shall bear its own expenses,
including legal fees, in connection with this Agreement. The expenses and legal
fees of the Investor shall be paid in accordance with the Fee Agreement.
Section 7.2. Remedies Cumulative. Except as herein provided, the
remedies provided herein shall be cumulative and shall not preclude assertion by
any party hereto of any other rights or the seeking of any other remedies
against the other party hereto.
Section 7.3 Brokerage. Each party hereto will indemnify and hold
harmless the others against and in respect of any claim for brokerage or other
commission relative to this Agreement or to the transaction contemplated hereby,
based in any way on agreements, arrangements or understandings made or claimed
to have been made by such party with any third party.
Section 7.4. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provisions shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
Section 7.5. Parties in Interest. All covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective legal representatives,
successors and assigns of the parties hereto whether so expressed or not.
Section 7.6. Notices. Any notice, demand, request or other
communication required to be given pursuant to this Agreement shall be in
writing, addressed respectively as follows:
If to the Investor, to:
Bio Partners LP
0 Xxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: General Partner
22
with a copy to:
Xxxxxx Xxxxxx, Esq.
Xxxxxxxx & Padian
00 Xxxx 00xx Xxxxxx, 00xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to the Company, to:
BioSpecifics Technologies Corp.
00 Xxxxxx Xx.
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx
with a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxx, Esq.
All notices shall be given by personal delivery, nationally recognized overnight
delivery service, such as Federal Express, or registered or certified mail,
postage prepaid and return receipt requested. Any party hereto may from time to
time change the address to which notices are to be sent, and the recipient of
such notice, by giving the other party notice thereof. All notices given
pursuant to this section shall be effective upon receipt by the party to whom
such notice is directed.
Section 7.7. No Waiver. No failure to exercise and no delay in
exercising any right, power or privilege granted under this Agreement shall
operate as a waiver of such right, power or privilege. No single or partial
exercise of any right, power or privilege granted under this Agreement shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies provided in this Agreement
are cumulative and are not exclusive of any rights or remedies provided by law.
Section 7.8. Amendments. This Agreement may be modified or amended only
by a writing signed by the Company and by the Investor.
Section 7.9. Survival of Agreements, etc. All agreements,
representations and warranties contained in this Agreement or made in writing by
or on behalf of the Company or the Investor in connection with the transactions
contemplated by this Agreement shall survive the execution and delivery of this
Agreement, the Closing, and any investigation at any time made by or on behalf
of any Investor. Notwithstanding the preceding sentence, however, all such
representations (other than intentional misrepresentations) and warranties, but
no such agreements, shall expire (i) five (5) years after the date of this
Agreement in the case of those made by or on behalf of the Company and (ii) two
23
(2) years after the date of this Agreement, in the case of those made by or on
behalf of the Investor.
Section 7.10. Construction. This Agreement shall be governed by and
construed in accordance with the procedural and substantive laws of the State of
New York without regard for its conflicts-of-laws rules. The Company agrees that
it may be served with process in the State of New York and any action for breach
of this Agreement prosecuted against it in the courts of that State.
Section 7.11. Entire Understanding. This Agreement expresses the entire
understanding of the parties and supersedes all prior and contemporaneous
agreements and undertakings of the parties with respect to the subject matter of
this Agreement except for those contained in the Transaction Documents.
Section 7.12. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which taken together shall constitute one agreement.
Section 7.13. Successors, etc.. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns.
Section 7.14. Usury Notwithstanding any provision to the contrary
contained in any Transaction Document, it is expressly agreed and provided that
the total liability of the Company under the Transaction Documents for payments
in the nature of interest shall not exceed the maximum lawful rate authorized
under applicable law (the "Maximum Rate"), and, without limiting the foregoing,
in no event shall any rate of interest or default interest, or both of them,
when aggregated with any other sums in the nature of interest that the Company
may be obligated to pay under the Transaction Documents exceed such Maximum
Rate. It is agreed that if the maximum contract rate of interest allowed by law
and applicable to the Transaction Documents is increased or decreased by statute
or any official governmental action subsequent to the date hereof, the new
maximum contract rate of interest allowed by law will be the Maximum Rate of
interest applicable to the Transaction Documents from the effective date
forward, unless such application is precluded by applicable law. If under any
circumstances whatsoever, interest in excess of the Maximum Rate is paid by the
Company to the Investor with respect to indebtedness evidenced by the
Transaction Documents, such excess shall be applied by the Investor to the
unpaid principal balance of any such indebtedness, such application to be
effective from the date such excess payment was made to Investor
Section 7.15 Payment Set Aside. To the extent that the Company makes a
payment or payments to the Investor or at the direction of the Investor pursuant
to any Transaction Document or the Investor enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including any bankruptcy law, state
or federal law, common or equitable cause of action), then, to the extent any
such restoration, the obligation or part thereof originally intended to be
24
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
Section 7.16 Interpretation. The parties agree that this Agreement and
the other Transaction Documents have been negotiated in detail by the parties
and their counsel and that no court in interpreting this Agreement and the other
Transaction Documents shall construe them against the drafter.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
BIOSPECIFICS TECHNOLOGIES CORP.,
a Delaware corporation
By
------------------------------------
Xxxxx X. Xxxxxx, President
ADVANCE BIOFACTURES CORPORATION,
a New York corporation
By:
-----------------------------------
Its:
----------------------------------
BIO PARTNERS LP,
a Delaware limited partnership
By: Bio Management, Inc.,
a Delaware corporation,
its general partner
By:
---------------------------
Xxxxxxx X. Xxxxx, President
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EXHIBIT A - NOTE
EXHIBIT B- OPINION OF COMPANY COUNSEL
EXHIBIT C - INVESTOR RIGHTS AGREEMENT
EXHIBIT D - GUARANTY
EXHIBIT E - PLEDGE AGREEMENT
EXHIBIT F - SECURITY AGREEMENT ( ASSETS )
EXHIBIT G - ABC-NY GUARANTY
EXHIBIT H - XXXXXX REPRESENTATION LETTER(S)
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SCHEDULES
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