EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
September 9, 2002, is entered into by and between ADVANCED VIRAL RESEARCH
CORP., a Delaware corporation (the "Company"), and the purchasers listed on
Exhibit A attached hereto (each a "Purchaser" and collectively, the
"Purchasers"), for the purchase and sale of shares of the Company's common
stock, par value $.00001 per share (the "Common Stock"), in the manner, and
upon the terms, provisions and conditions set forth in this Agreement.
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Purchasers
and the Purchasers shall purchase shares of Common Stock;
WHEREAS, such purchase and sale will be registered under the United
States Securities Act of 1933, as amended (the "Securities Act"), pursuant to
the Registration Statement (as defined in Section 3(c) hereof); and
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue to the Purchasers and the
Purchasers shall acquire warrants, in substantially the form attached hereto as
Exhibit B (the "Warrants"), to purchase an aggregate of 16,125,000 shares of
Common Stock.
NOW, THEREFORE, in consideration of the representations, warranties
and agreements contained herein and other good and valuable consideration, the
receipt and legal adequacy of which is hereby acknowledged by the parties, the
Company and the Purchasers hereby agree as follows:
1. PURCHASE PRICE.
(a) Upon the following terms and subject to the
conditions contained herein, the Purchasers hereby agree to purchase an
aggregate of 21,500,000 shares of the Company's Common Stock (the "Common
Shares"), at a per share price of $.14 and for an aggregate purchase price of
$3,010,000 (the "Purchase Price"). Each Purchaser shall purchase that number of
Common Shares set forth on Exhibit A hereto.
(b) Upon the following terms and subject to the
conditions contained herein, the Purchasers shall be issued the Warrants. Each
Purchaser shall acquire Warrants to purchase that number of shares of Common
Stock set forth on Exhibit A hereto. The Warrants shall be exercisable for five
(5) years from the date of issuance and shall have an exercise price equal to
the Warrant Price (as defined in the Warrants). The Warrant Shares (as defined
below) shall be registered pursuant to the Registration Rights Agreement, in
substantially the form attached hereto as Exhibit C (the "Registration Rights
Agreement").
(c) The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, a sufficient number of its authorized but
unissued shares of Common Stock to effect the issuance of the Common Shares.
(d) The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, a sufficient number of its authorized but
unissued shares of Common Stock to effect the exercise of the Warrants. Any
shares of Common Stock issuable upon exercise of the Warrants (and such shares
when issued) are herein referred to as the "Warrant Shares". The Common Shares
and the Warrant Shares are sometimes collectively referred to as the "Shares".
The Shares and the Warrants are sometimes collectively referred to as the
"Securities".
(e) The Company agrees to issue and sell to the
Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers agree to purchase the Common Shares and the Warrants. The
closing under this Agreement (the "Closing") shall take place no later than
September 10, 2002 at the offices of Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP, The
Chrysler Building, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 1:00 p.m.
(eastern time) upon the satisfaction of each of the conditions set forth in
Section 4 hereof (the "Closing Date").
(f) The parties agree to enter into a mutually
acceptable escrow agreement (the "Escrow Agreement") with Jenkens & Xxxxxxxxx
Xxxxxx Xxxxxx LLP (the "Escrow Agent"), in substantially the form attached
hereto as Exhibit D, which shall provide for the deposit of the Common Shares
and Purchase Price at the Closing.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS.
Each Purchaser represents and warrants to the Company, and covenants for the
benefit of the Company, with respect solely to itself and not with respect to
any other Purchaser, as follows:
(a) Authorization. This Agreement has been duly
authorized, validly executed and delivered by each Purchaser and is a valid and
binding agreement and obligation of each Purchaser enforceable against each
Purchaser in accordance with its terms, subject to limitations on enforcement
by general principles of equity and by bankruptcy or other laws affecting the
enforcement of creditors' rights generally, and each Purchaser has full power
and authority to execute and deliver this Agreement and the other agreements
and documents contemplated hereby and to perform its obligations hereunder and
thereunder.
(b) Independent Investigation. Each Purchaser has
received and carefully reviewed copies of the Public Documents (as hereinafter
defined). Each Purchaser understands that no Federal, state, local or foreign
governmental body or regulatory authority has made any finding or determination
relating to the fairness of an investment in any of the Securities and that no
Federal, state, local or foreign governmental body or regulatory authority has
recommended or endorsed, or will recommend or endorse, any investment in any of
the Securities. Each Purchaser, in making the decision to purchase the
Securities, has relied upon independent investigation made by it and has not
relied on any information or representations made by third parties.
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(c) Qualified Buyer. Each Purchaser is an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act. Each Purchaser is sophisticated and experienced in making, and
is qualified to make, decisions with respect to investments in developmental
companies.
(d) Information Provided. Each Purchaser has had a
reasonable opportunity to ask questions of and receive answers from persons
acting on behalf of the Company concerning the transactions to be consummated
hereby and if such opportunity was taken, all such questions have been answered
to the full satisfaction of Purchaser. Each Purchaser and its advisors, if any,
have had the opportunity to request, receive and consider all information
relating to the business, properties, operations, condition (financial or
other), results of operations or prospects of the Company and information
relating to the offer and sale of the Securities deemed relevant by them.
(e) Reoffers and Resales. Purchaser will not, directly
or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or
solicit any offers to buy, purchase or otherwise acquire or take a pledge of)
any of the Securities unless registered under the Securities Act or pursuant to
an exemption from registration under the Securities Act.
(f) Risks; Tax and Economic Considerations. Purchaser
recognizes that an investment in the Securities involves substantial risks,
including loss of the entire amount of such investment. Purchaser is familiar
with and understands the terms regarding the offer and sale of the Securities.
With respect to tax and other economic considerations involved in this
investment, Purchaser is not relying on the Company. Purchaser has carefully
considered and has, to the extent Purchaser believes such discussion necessary,
discussed with Purchaser's professional legal, tax, accounting and financial
advisors the suitability of an investment in the Company, by purchasing the
Securities, for Purchaser's particular tax and financial situation and has
determined that the investment being made by Purchaser is a suitable investment
for Purchaser.
(g) No Advertisement, Etc. Purchaser is not subscribing
for the Securities as a result of, or pursuant to, any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or presented at any seminar or
meeting. Purchaser understands that no United States federal or state agency,
or similar agency of any other country, has passed upon or made any
recommendation or endorsement of the Company, this transaction or the purchase
of the Securities.
(h) Acquisition for Investment Only. Purchaser is
purchasing the Securities for its own account for investment, and not with a
view toward the resale or distribution thereof, except as permitted under the
Securities Act. Purchaser has not offered nor sold any portion of the
Securities being acquired nor does Purchaser have any intention of dividing the
Securities with others or of selling, distributing or otherwise disposing of
any of the Securities either currently or after the passage of a fixed or
determinable period of time or upon the occurrence or non-occurrence of any
predetermined event or circumstance; provided, however, that by making the
representations herein, Purchaser does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in
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accordance with or pursuant to a registration statement or an exemption under
the Securities Act and in compliance with this Agreement.
(i) Questionnaire. Purchaser acknowledges and
understands that the Company will rely upon the information contained in the
Questionnaire delivered to the Company in connection with this Agreement.
Purchaser represents to the Company that the information contained in the
Questionnaire is complete and accurate and may be relied upon by the Company,
and Purchaser shall notify the Company immediately of any material change in
any of such information occurring prior to the closing of the transactions
contemplated hereunder.
(j) Separate Purchasers; Not Affiliates. Purchaser is a
separate investor; no Purchaser is acting in concert with or as a group with
any other Purchaser or any other person in connection with the purchase of the
Securities pursuant to this Agreement. No Purchaser is an officer, director or
a person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with the Company or
any "Affiliate" of the Company (as that term is defined in Rule 405 of the
Securities Act). No Purchaser nor its Affiliates has an open short position in
the Common Stock of the Company.
(k) Company Reliance. Purchaser understands that the
Securities are being offered and sold to the Purchaser by the Company in
reliance upon the truth and accuracy of, and the Purchaser's compliance with,
the representations, warranties, agreements, acknowledgments and understandings
of the Purchaser set forth herein and in the documents contemplated in
connection herewith in order to determine the eligibility of the Purchaser to
acquire or receive an offer to acquire the Securities; and the information with
respect to the Purchaser provided to the Company by the Purchaser is accurate
and complete in all material respects.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company represents and warrants to each Purchaser, and covenants for the
benefit of each Purchaser, as follows:
(a) The Company has been duly incorporated and is
validly existing and in good standing under the laws of the state of Delaware,
with full corporate power and authority to own, lease and operate its
properties and to conduct its business as currently conducted, and is duly
registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure to register or qualify would not have a Material Adverse Effect. For
purposes of this agreement, "Material Adverse Effect" shall mean any effect on
the business, prospects, operations, properties or financial condition of the
Company that is material and adverse to the Company and its subsidiaries, taken
as a whole and/or any condition, circumstance, or situation that would prohibit
the Company from entering into and performing any of its obligations under this
Agreement in any material respect.
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(b) The Company has furnished the Purchasers with copies
of the Company's most recent Annual Report on Form 10-K, as amended, for fiscal
year ended December 31, 2001 (the "Form 10-K") filed with the Securities and
Exchange Commission (the "Commission") and its Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 2002 (the "Form 10-Q"; collectively
with the Form 10-K, the "Public Documents"). The Public Documents and the
Commission Documents (as defined below) at the time of their filing did not
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading. As used herein,
"Commission Documents" means all reports, schedules, forms, statements and
other documents filed by the Company with the Securities and Exchange
Commission (the "Commission") pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), including
material filed pursuant to Section 13(a) or 15(d) of the Exchange Act and the
Registration Statement (as defined below) and the Prospectus Supplement (as
defined below).
(c) The Common Shares to be issued by the Company to the
Purchasers have been registered under the Securities Act, pursuant to a
registration statement on Form S-3, Commission File Number 333-33774 (the
"Registration Statement"); and (b) the Company has filed a prospectus
supplement to the Registration Statement (the "Prospectus Supplement") in
connection with the transaction contemplated by this Agreement.
(d) The Company at all times shall remain a reporting
company pursuant to the Exchange Act.
(e) The Securities have been duly authorized by all
necessary corporate action and, when paid for by the Purchasers and issued in
accordance with the terms hereof, the Securities shall be validly issued, fully
paid and non-assessable.
(f) This Agreement has been duly authorized, validly
executed and delivered on behalf of the Company and is a valid and binding
agreement and obligation of the Company enforceable against the Company in
accordance with its terms, subject to limitations on enforcement by general
principles of equity and by bankruptcy or other laws affecting the enforcement
of creditors' rights generally, and the Company has full power and authority to
execute and deliver this Agreement and the other agreements and documents
contemplated hereby and to perform its obligations hereunder and thereunder.
(g) The execution, delivery and performance of this
Agreement, the issuance of any of the Securities and the consummation of the
transactions contemplated by this Agreement by the Company, will not (i)
conflict with or result in a breach of or a default under any of the terms or
provisions of, (A) the Company's certificate of incorporation or by-laws, or
(B) of any material provision of any indenture, mortgage, deed of trust or
other material agreement or instrument to which the Company is a party or by
which it or any of its material properties or assets is bound, (ii) result in a
violation of any material provision of any law, statute, rule, regulation, or
any existing applicable decree, judgment or order by any court, Federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company, or any of its material properties or assets or
(iii) result in the creation or imposition of any material lien, charge or
encumbrance upon any material property or assets of the Company or any of its
subsidiaries pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of
their property or any of them is subject except in the case of clauses (i)(B)
or (iii) for any such conflicts, breaches, or defaults or any liens, charges,
or encumbrances which would not have a Material Adverse Effect.
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(h) No consent, approval or authorization of or
designation, declaration or filing with any governmental authority on the part
of the Company is required in connection with the valid execution and delivery
of this Agreement or the offer, sale or issuance of the Securities or the
consummation of any other transaction contemplated by this Agreement (other
than any filings which may be required to be made by the Company with the
Commission, the OTC Bulletin Board or pursuant to any state or "blue sky"
securities laws subsequent to the Closing).
(i) There is no action, suit, claim or proceeding before
or by any court or governmental agency or body, domestic or foreign, now
pending against or affecting the Company, or any of its properties, which
questions the validity of this Agreement or the transactions contemplated
thereby or any action taken or to be take pursuant thereto. There is no action,
suit, claim or proceeding before or by any court or governmental agency or
body, domestic or foreign, now pending against or affecting the Company, or any
of its properties, which, if adversely determined, is reasonably likely to
result in a Material Adverse Effect.
(j) Subsequent to the dates as of which information is
given in the Public Documents, except as contemplated herein, the Company has
not incurred any material liabilities or material obligations, direct or
contingent, or entered into any material transactions not in the ordinary
course of business.
(k) The Company has sufficient title and ownership of
all trademarks, service marks, trade names, copyrights, patents, trade secrets
and other proprietary rights ("Intellectual Property") necessary for its
business as now conducted and as proposed to be conducted as described in the
Public Documents or the Commission Documents except for any of the foregoing,
the absence of which would not reasonably be likely to result in a Material
Adverse Effect and, to its knowledge without any conflict with or infringement
of the rights of others. Except as set forth in the Public Documents or the
Commission Documents, there are no material outstanding options, licenses or
agreements of any kind relating to the Intellectual Property, nor is the
Company bound by or party to any material options, licenses or agreements of
any kind with respect to the Intellectual Property of any other person or
entity.
(l) The Company has complied and will comply with all
applicable federal and state securities laws in connection with the offer,
issuance and sale of the Securities hereunder. The Company will continue to
take all action necessary to continue the listing or trading of its Common
Stock on the OTC Bulletin Board or any relevant market or system, if
applicable, and will comply in all material respects with the Company's
reporting, listing or other obligations under the rules of the OTC Bulletin
Board or any relevant market or system. The Company shall comply with all
applicable laws, rules, regulations and orders.
(m) The Company will promptly notify each Purchaser of
(a) its receipt of notice of the issuance by the Commission of any stop order
or other suspension of the effectiveness of the Registration Statement and (b)
its becoming aware of the happening of any event as a result of which the
prospectus included in the Registration Statement includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein, or which makes it necessary to change the Registration Statement in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
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(n) Neither this Agreement or the Schedules hereto
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made herein or therein, in the
light of the circumstances under which they were made herein or therein, not
misleading.
(o) The authorized capital stock of the Company and the
shares thereof issued and outstanding as of September 5, 2002 are set forth on
Schedule 3(o) attached hereto. All of the outstanding shares of the Company's
Common Stock have been duly and validly authorized, and are fully paid and
non-assessable. Except as set forth in this Agreement, the Public Documents,
the Commission Documents or on Schedule 3(o) attached hereto, as of the date
hereof, no shares of Common Stock are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company. Furthermore, except as set forth in this Agreement, in
the Public Documents, the Commission Documents or on Schedule 3(o) as of the
date hereof, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except as disclosed in
the Commission Documents and except for customary transfer restrictions
contained in agreements entered into by the Company in order to sell restricted
securities, as of the date hereof, the Company is not a party to any agreement
granting registration rights to any person with respect to any of its equity or
debt securities. The Company is not a party to, and it has no knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of the Company. The offer and sale of all capital stock, convertible
securities, rights, warrants, or options of the Company issued prior to the
Closing complied with all applicable federal and state securities laws, and no
stockholder has a right of rescission or damages with respect thereto which is
reasonably likely to have a Material Adverse Effect. The Company has furnished
or made available to the Purchasers true and correct copies of the Company's
certificate of incorporation as in effect on the date hereof (the
"Certificate"), and the Company's bylaws as in effect on the date hereof (the
"Bylaws").
(p) The Company shall not issue any press release or
otherwise make any public statement or announcement with respect to this
Agreement or the transactions contemplated hereby or the existence of this
Agreement without the prior written consent of the Purchasers, which shall not
be unreasonably withheld. Notwithstanding the foregoing, in the event the
Company is required by law or regulation to issue a press release or otherwise
make a public statement or announcement with respect to this Agreement or the
transaction contemplated hereby prior to or after the Closing, the Company
shall consult with the Purchasers on the form and substance of such press
release or other disclosure.
(q) During the period commencing on the Closing Date and
ending on the first (1st) anniversary thereof, the Company covenants and agrees
to promptly notify (in no event later than five (5) days after making or
receiving an applicable offer) in writing (a "Rights Notice") the Purchasers of
the terms and conditions of any proposed Subsequent Financing. For the
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purposes hereof, "Subsequent Financing" shall mean a subsequent offer or sale
to, or exchange with (or other type of distribution to), any third party, of
Common Stock or any securities convertible, exercisable or exchangeable into
Common Stock, including debt securities. The Rights Notice shall describe, in
reasonable detail, the proposed Subsequent Financing, the proposed closing date
of the Subsequent Financing, which shall be within sixty (60) calendar days
from the date of the Rights Notice, including, without limitation, all of the
terms and conditions thereof. The Rights Notice shall provide each Purchaser an
option (the "Rights Option") during the five (5) trading days following
delivery of the Rights Notice (the "Option Period") to inform the Company
whether such Purchaser will purchase all or part of the securities being
offered in such Subsequent Financing on the same, absolute terms and conditions
as contemplated by such Subsequent Financing (the "First Refusal Rights").
Delivery of any Rights Notice constitutes a representation and warranty by the
Company that there are no other material terms and conditions, arrangements,
agreements or otherwise except for those disclosed in the Rights Notice, to
provide additional compensation to any party participating in any proposed
Subsequent Financing, including, but not limited to, additional compensation
based on changes in the purchase price or any type of reset or adjustment of a
purchase or conversion price or to issue additional securities at any time
after the closing date of a Subsequent Financing. If the Company does not
receive notice of exercise of the Rights Option from a Purchaser within the
Option Period, the Company shall have the right to close the Subsequent
Financing on the scheduled closing date with a third party; provided that all
of the terms and conditions of the closing are the same as those provided to
the Purchasers in the Rights Notice. If the closing of the proposed Subsequent
Financing does not occur within ten (10) business days of the scheduled closing
date, any closing of the contemplated Subsequent Financing or any other
Subsequent Financing shall be subject to all of the provisions of this Section
3(q), including, without limitation, the delivery of a new Rights Notice.
Notwithstanding anything contained herein to the contrary, the provisions of
this Section 3(q) shall not apply to issuances of financing securities in
connection with (i) grants of stock options and issuances of Common Stock
pursuant to the Company's currently outstanding convertible securities,
including stock options, warrants and convertible securities; and (ii)
issuances of the Company's securities in connection with strategic business
relationships, including without limitation, joint ventures and license
agreements, so long as such issuances are not primarily for the purpose of
raising capital.
4. CONDITIONS PRECEDENT. The obligations hereunder of the
Company and each Purchaser to enter into this Agreement and sell and purchase
the Common Shares and the Warrants is subject to their satisfaction or waiver,
at or before the Closing, of each of the conditions set forth below. These
conditions are for the Company's and each Purchaser's sole benefit
respectively, and they may waive their own rights at any time in their sole
discretion.
(a) The parties shall have executed and delivered this
Agreement, the Registration Rights Agreement and the Escrow Agreement.
(b) The Registration Statement continues to be
effective.
(c) The Company shall have filed the Prospectus
Supplement describing the particular terms of the transaction contemplated by
this Agreement.
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(d) Each Purchaser shall have delivered to the Escrow
Agent the Purchase Price for the Common Shares and Warrants and the Company
shall have (i) delivered certificates evidencing the Common Shares to the
Escrow Agent or (ii) if requested by a Purchaser, delivered the Common Shares
via DWAC transfer to an account specified in writing by such Purchaser to the
Company.
(e) The Company shall have delivered the Warrants to
each Purchaser.
(f) Each of the representations and warranties of the
Company and each Purchaser shall be true and correct in all material respects
as of the Closing Date, except for representations and warranties that speak as
of a particular date, which shall be true and correct in all material respects
as of such date.
(g) The Company shall have performed, satisfied and
complied in all respects with all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by the Company at
or prior to the Closing Date.
(h) Trading in the Company's Common Stock shall not have
been suspended by the Commission (except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall be terminated
prior to the Closing), and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg Financial Markets ("Bloomberg")
shall not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg, or on the New
York Stock Exchange, nor shall a banking moratorium have been declared either
by the United States or New York State authorities, nor shall the Company have
suffered a Material Adverse Effect.
(i) At the Closing, the Purchasers shall have received
an opinion of counsel to the Company, dated the date of such Closing, in the
form of Exhibit E hereto and such other certificates and documents as the
Purchasers or their counsel shall reasonably require incident to such Closing.
(j) As of the Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the exercise of the Warrants, a number of shares of Common
Stock equal to at least 200% of the aggregate number of Shares issuable upon
exercise of the Warrants on the Closing Date.
(k) The Company shall have delivered to the Purchasers a
secretary's certificate, dated as of the Closing Date, as to (i) the
resolutions of the Company's Board of Directors authorizing the transaction
contemplated by this Agreement, (ii) the Certificate, (iii) the Bylaws, each as
in effect at the Closing, and (iv) the authority and incumbency of the officers
of the Company executing the Transaction Documents and any other documents
required to be executed or delivered in connection therewith.
(l) All fees and expenses required to be paid by the
Company shall have been or authorized to be paid by the Company as of the
Closing Date.
5. FEES AND EXPENSES. The Company and the Purchasers shall pay
its respective fees and expenses related to the transactions contemplated by
this Agreement; except that the
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Company shall pay on the Closing Date, all reasonable fees and expenses,
including disbursements and out-of-pocket expenses, incurred by the Purchasers
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the Warrants in an amount not to exceed $20,000.
6. BROKERAGE. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party, other
than pursuant to that certain Placement Agent Agreement of even date herewith
between the Company and the Placement Agent, X.X. Xxxxxxxxxx & Co., Inc. The
Company on the one hand, and Purchasers, on the other hand, agree to indemnify
the other, its employees, officers, directors, agents, and partners, and their
respective affiliates, against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
7. INDEMNIFICATION.
(a) The Company will indemnify and hold harmless each
Purchaser, each of its directors, fund managers and officers, and each person,
if any, who controls such Purchaser within the meaning of Section 15 of the
Securities Act, or Section 20(a) of the Exchange Act, from and against any
losses, claims, damages, liabilities and expenses (including reasonable costs
of defense and investigation and all reasonable attorneys' fees) to which each
Purchaser, each of its directors, fund managers and officers, and each person,
if any, who controls such Purchaser may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages, liabilities and
expenses (or actions in respect thereof) arise out of or are based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained,
or incorporated by reference, in the Registration Statement relating to the
Common Stock being sold to the Purchasers (including any Prospectus Supplement
filed in connection with the transactions contemplated hereunder which are a
part of it), or any amendment or supplement to it, or (ii) the omission or
alleged omission to state in that Registration Statement or any document
incorporated by reference in the Registration Statement, a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided that the Company shall not be liable under this Section
6(a) to the extent that a court of competent jurisdiction shall have determined
by a final judgment (with no appeals available) that such loss, claim, damage,
liability or action resulted directly from any such acts or failures to act,
undertaken or omitted to be taken by the Purchasers or such person through its
bad faith or willful misconduct; provided, however, that the foregoing
indemnity shall not apply to any loss, claim, damage, liability or expense to
the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by the Purchasers expressly for use in the Registration Statement, any
preliminary prospectus or the prospectus (or any amendment or supplement
thereto); and provided, further, that with respect to the prospectus, the
foregoing indemnity shall not inure to the benefit of the Purchasers or any
such person from whom the person asserting any loss, claim, damage, liability
or expense purchased Common Stock, if copies of the prospectus were timely
delivered to the Purchasers pursuant hereto and a copy of the prospectus (as
then amended or supplemented if the Company
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shall have furnished any amendments or supplements thereto) was not sent or
given by or on behalf of the Purchasers or any such person to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Common Stock to such person, and if the
prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense.
(b) Each Purchaser agrees to indemnify and hold harmless
the Company and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, each officer of the Company who
signs the Registration Statement and each director of the Company from and
against any losses, claims, damages or liabilities to which the Company or any
such officer, director or controlling person may become subject (under the
Securities Act or otherwise), including, but not limited to, any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim, insofar as such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) arise out of, or
are based upon, any failure to comply with such Purchaser's representation and
warranties hereunder, or any untrue statement or alleged untrue statement, or
any omission or alleged omission to state in the Registration Statement, any
preliminary prospectus or the prospectus (or any amendment or supplement
thereto) a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading contained in the Registration Statement on or after the
effective date thereof if such untrue statement, alleged untrue statement,
omission or alleged omission was made in reliance upon and in conformity with
written information furnished by such Purchaser or on such Purchaser"s behalf
specifically for use in preparation of the Registration Statement, any
preliminary prospectus or the prospectus (or any amendment or supplement
thereto).
(c) The Company will reimburse each Purchaser and each
such controlling person promptly upon demand for any legal or other costs or
expenses reasonably incurred by each Purchaser or any controlling person in
investigating, defending against, or preparing to defend against any such
claim, action, suit or proceeding, except that the Company will not be liable
to the extent a claim or action which results in a loss, claim, damage,
liability or expense arises out of, or is based upon, an untrue statement,
alleged untrue statement, omission or alleged omission, included in any
Registration Statement, prospectus or Prospectus Supplement or any amendment or
supplement to the thereto in reliance upon, and in conformity with, written
information furnished by the Purchasers to the Company for inclusion in the
Registration Statement, prospectus or Prospectus Supplement.
8. INDEMNIFICATION PROCEDURES. Promptly after a person receives
notice of a claim or the commencement of an action for which the person intends
to seek indemnification under Section 6, the person will notify the
indemnifying party in writing of the claim or commencement of the action, suit
or proceeding, but failure to notify the indemnifying party will not relieve
the indemnifying party from liability under Section 6, except to the extent
such indemnifying party has been materially prejudiced by the failure to give
notice. The indemnifying party will be entitled to participate in the defense
of any claim, action, suit or proceeding as to which indemnification is being
sought, and if the indemnifying party acknowledges in writing the obligation to
indemnify the party against whom the claim or action is brought, the
indemnifying party may (but will not be required to) assume the defense against
the claim, action, suit or proceeding with counsel satisfactory to it. After an
indemnifying party
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notifies an indemnified party that the indemnifying party wishes to assume the
defense of a claim, action, suit or proceeding the indemnifying party will not
be liable for any legal or other expenses incurred by the indemnified party in
connection with the defense against the claim, action, suit or proceeding
except that if, in the opinion of counsel to the indemnifying party, one or
more of the indemnified parties should be separately represented in connection
with a claim, action, suit or proceeding the indemnifying party will pay the
reasonable fees and expenses of one separate counsel for the indemnified
parties. Each indemnified party, as a condition to receiving indemnification as
provided in Section 6, will cooperate in all reasonable respects with the
indemnifying party in the defense of any action or claim as to which
indemnification is sought. No indemnifying party will be liable for any
settlement of any action effected without its prior written consent. No
indemnifying party will, without the prior written consent of the indemnified
party, effect any settlement of a pending or threatened action with respect to
which an indemnified party is, or is informed that it may be, made a party and
for which it would be entitled to indemnification, unless the settlement
includes an unconditional release of the indemnified party from all liability
and claims which are the subject matter of the pending or threatened action.
If the indemnification provided for herein is conclusively determined
(by an entry of final judgment by a court of competent jurisdiction and the
expiration of the time or denial of the right to appeal) to be unavailable or
insufficient to hold any indemnified party harmless in respect to any losses,
claims, damages, liabilities or expenses referred to herein, each indemnifying
party will, in lieu of indemnifying the indemnified party, contribute to the
amount paid or payable by the indemnified party as a result of the loss or
liability, (i) in the proportion which is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and by the
indemnified party on the other from the sale of stock which is the subject of
the claim, action, suit or proceeding which resulted in the loss or liability
or (ii) if that allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits of the
sale of stock, but also the relative fault of the indemnifying party and the
indemnified party with respect to the statements or omissions which are the
subject of the claim, action, suit or proceeding that resulted in the loss or
liability, as well as any other relevant equitable considerations.
9. GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall
be governed by and interpreted in accordance with the laws of the State of New
York without giving effect to the rules governing the conflicts of laws. Each
of the parties consents to the exclusive jurisdiction of the Federal courts
whose districts encompass any part of the County of New York located in the
City of New York in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens, to the bringing of any
such proceeding in such jurisdictions. Each party waives its right to a trial
by jury. Each party to this Agreement irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, to such party at its address set forth
herein or its agent. Nothing herein shall affect the right of any party to
serve process in any other manner permitted by law. The party which does not
prevail in any dispute arising under this Agreement shall be responsible for
all fees and expenses, including attorneys' fees, incurred by the prevailing
party in connection with such dispute.
-12-
10. NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express
overnight courier, registered first class mail, or telecopier, initially to the
address set forth below, and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section.
(a) if to the Company:
Advanced Viral Research Corp.
000 Xxxxxxxxx Xxxxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, M.D.,
President
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxx & Xxxxxxx, P.A.
Bank of America Tower
Suite 3500
000 Xxxxxxxxx Xxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
(b) if to any Purchaser:
to the address of such Purchaser listed on
Exhibit A to this Agreement.
with a copy to:
Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when receipt is
acknowledged, if telecopied; or when actually received or refused if sent by
other means.
11. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement of the parties with respect to the subject matter
hereof and supersedes all prior and/or contemporaneous oral or written
proposals or agreements relating thereto all of which are merged herein. This
Agreement may not be amended or any provision hereof waived in whole or in
part, except by a written amendment signed by both of the parties.
12. COUNTERPARTS. This Agreement may be executed by facsimile
signature and in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
-13-
IN WITNESS WHEREOF, this Agreement was duly executed on the date first
written above.
ADVANCED VIRAL RESEARCH CORP.
By: /S/ Xxxxxx X. Xxxxxxxxx, M.D.
-------------------------------------------------
Name: Xxxxxx X. Xxxxxxxxx, M.D.
Title: President
PURCHASERS:
SDS MERCHANT FUND, LP XMARK FUND, LTD.
By: /s/ Xxxxx Xxxxx By: /s/ Xxxxxxxx Xxxx
Title: Managing Member Title: Chief Investment Officer
XXXXXXXXXXX LIMITED PARTNERSHIP XMARK FUND, L.P.
By: /s/ Xxxxxxx Xxxxxxxxxxx By: /s/ Xxxxxxxx Xxxx
Title: President Title: Chief Investment Officer
01144 LTD. RIG MICROCAP FUND LP
By: /s/ Xxxxxxx X. Xxxxxxxx By: Xxxxx Investment Group, Inc.
Title: Director
By: Xxx Xxxxx
Title: CEO
BRISTOL INVESTMENT FUND, LTD. /S/ XXXXXXX XXXXXXX
By: /s/ Xxxx Xxxxxxx
Title: Director
ALPHA CAPITAL
By: /s/ Xxxxxx Xxxxxxxx
Title: Director
-14-
EXHIBIT A TO THE
COMMON STOCK PURCHASE AGREEMENT
LIST OF PURCHASERS
NAMES AND ADDRESSES OF NUMBER OF WARRANTS DOLLAR AMOUNT
PURCHASERS PURCHASED OF INVESTMENT
---------------------- ------------------ -------------
SDS Merchant Fund, LP 4,821,429 $900,000
00 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Fax: 000-000-0000
Attention: Xxxxx Xxxxx
Xxxxxxxxxxx Limited Partnership 4,017,857 750,000
000 Xxxx Xxxxxx Xxxx., Xxx. 000
Xxxxxxx, Xxxxxxx X0X0X0
Fax: 000-000-0000
Attention: Xxxxxxx Xxxxxxxxxxx
01144 Ltd. 535,715 100,000
0xx Xxxxx Xxx Xx Xxxxx Xxxxx
00 Xxx Xx Xxxxx Xxxx
Xxxxxxxx, XX00, Xxxxxxx
Fax: 000-000-0000
Attention: Xxxxxxx XxXxxxxx
Bristol Investment Fund, Ltd. 2,142,857 400,000
Caledonian House Xxxxxxx Street
Georgetown, Grand Cayman
Cayman Islands
Fax: 000-000-0000
Attention: Xxx Xxxx
Alpha Capital 2,678,572 500,000
Xxxxxxxxx 0, Xxxxxxxxxxx 0000
Xxxxx, Xxxxxxxxxxxxx
Fax: 000-000-000-0000
Attention: Konrud Xxxxxxxx
Xmark Fund, Ltd. 825,000 154,000
000 Xxxx 00xx Xxxxxx 00xx Xxxxx
Xxx Xxxx, XX 00000 Fax: 000-000-0000
Attention: Xxxxxxxx Xxxx
Xmark Fund, L.P. 300,000 56,000
000 Xxxx 00xx Xxxxxx 00xx Xxxxx
Xxx Xxxx, XX 00000 Fax: 000-000-0000
Attention: Xxxxxxxx Xxxx
RIG MicroCap Fund LP 535,715 100,000
C/x Xxxxx Investment Group, Inc.
000 Xxxxxxxxx Xxxxxx, 00xx Xx.
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Attention: Xxx Xxxxx
Xxxxxxx Xxxxxxx 267,857 50,000
XX Xxx 000
Xxxxxxx Xxxxx, XX 00000
Fax: 000-000-0000
