SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below, is entered into by and between ADVANCED VIRAL
RESEARCH CORPORATION., a Delaware corporation, with headquarters located at 000
Xxxxxxxxx Xxxxxxxxx Xxxxx, Xxxxxxx, XX 00000 (the "Company"), and each entity
named on a signature page hereto (each, a "Buyer") (each agreement with a Buyer
being deemed a separate and independent agreement between the Company and such
Buyer, except that each Buyer acknowledges and consents to the rights granted to
each other Buyer under such agreement and the Transaction Agreements, as defined
below, referred to therein).
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded, inter alia, by Rule 506 under Regulation
D ("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and
subject to the conditions of this Agreement, 7% Convertible Debentures of the
Company which will be convertible into shares of Common Stock, $.00001 par value
per share of the Company (the "Common Stock"), upon the terms and subject to the
conditions of such Convertible Debentures, together with the Warrants (as
defined below) exercisable for the purchase of shares of Common Stock (the
"Warrant Shares"), and subject to acceptance of this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase; Certain Definitions.
(i) The undersigned hereby agrees to purchase from the Company
7% Convertible Debentures in the principal amount set forth on the Buyer's
signature page of this Agreement (the "Debentures," which term includes the
Initial Debentures and the Additional Debentures defined below), out of a total
offering of $2,000,000 of such Convertible Debentures, and having the terms and
conditions and being in the form attached hereto as Annex I.
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(ii) Subject to the terms and conditions of this Agreement and
the other Transaction Agreements, the Buyer will purchase (x) fifty percent
(50%) of the Debentures (the "Initial Debentures") on the Initial Closing Date
(as defined below) and (y) the balance of the Debentures (the "Additional
Debentures") on the Additional Closing Date (as defined below).
(iii) The purchase price to be paid by the Purchaser shall be
equal to the face amount of the Initial Debentures or the Additional Debentures,
as the case may be, and shall be payable in United States Dollars.
b. Certain Definitions. As used herein, each of the following
terms has the meaning set forth below, unless the context otherwise requires:
(i) "Securities" means the Debentures, the Warrants and the
Common Stock issuable upon conversion of the Debentures or the exercise of the
Warrants.
(ii) "Purchase Price" means the purchase price for the Initial
Debentures or the Additional Debentures, as the case may be.
(iii) "Initial Closing Date" means the date of the closing of
the purchase and sale of the Initial Debentures, as provided herein.
(iv) "Additional Closing Date" means the date of the closing
of the purchase and sale of the relevant Additional Debentures, as provided
herein.
(v) "Closing Date" means the Initial Closing Date or the
Additional Closing Date, as the case may be.
(vi) "Buyer's Allocable Share" means the fraction of which the
numerator is the Buyer's Debentures and the denominator is $2,000,000.
(vii) "Effective Date" means the effective date of the
Registration Statement covering the Registrable Securities (as those terms are
defined in the Registration Rights Agreement defined below).
(viii) "Converted Shares" means the shares of Common Stock
issuable upon conversion of the Debentures.
(ix) "Warrant Shares" means the shares of Common Stock
issuable upon exercise of the Warrants.
(x) "Shares" means the shares of Common Stock representing any
or all of the Converted Shares and the Warrant Shares.
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(xi) As used herein, the term "Market Price of the Common
Stock" means the average closing bid price of the Common Stock for the three (3)
trading days (which need not be consecutive) during the period of the ten (10)
trading days ending on the trading day immediately before the date indicated in
the relevant provision hereof (unless a different relevant period is specified
in the relevant provision) for which the closing bid price of the Common Stock
(as reported by Bloomberg, LP or, if not so reported, as reported on the
over-the-counter market) were the lowest.
c. Form of Payment; Delivery of Certificates.
(i) The Buyer shall pay the Purchase Price for the relevant
Debentures by delivering immediately available good funds in United States
Dollars to the escrow agent (the "Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as Annex II (the "Joint Escrow Instructions") on
the date prior to the relevant Closing Date.
(ii) No later than the relevant Closing Date, but in any event
promptly following payment by the Buyer to the Escrow Agent of the relevant
Purchase Price, the Company shall deliver the relevant Debentures and the
Warrants, each duly executed on behalf of the Company and issued in the name of
the Buyer (collectively, the "Certificates") to the Escrow Agent.
(iii) By signing this Agreement, each of the Buyer and the
Company, subject to acceptance by the Escrow Agent, agrees to all of the terms
and conditions of, and becomes a party to, the Joint Escrow Instructions, all of
the provisions of which are incorporated herein by this reference as if set
forth in full.
d. Method of Payment. Payment into escrow of the Purchase
Price shall be made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx LLP, Esqs.
Account No.: [To be provided to the Buyer by Xxxxxxx & Prager LLP]
Re: Advanced Viral Research Transaction
Not later than 5:00 p.m., New York time, on the date which is three (3) New York
Stock Exchange ("NYSE") trading days after the Company shall have accepted this
Agreement and returned a signed counterpart of this Agreement to the Escrow
Agent by facsimile, the Buyer shall deposit with the Escrow Agent the Purchase
Price for the Initial Debentures in immediately available funds. Time is of the
essence with respect to such payment, and failure by the Buyer to make such
payment, shall allow the Company to cancel this Agreement.
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e. Escrow Property. The Purchase Price and the Certificates
delivered to the Escrow Agent as contemplated by Sections 1(c) and (d) hereof
are referred to as the "Escrow Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock
pursuant to the Registration Statement, the Buyer is purchasing the Debentures
and the Warrants and will be acquiring the Shares for its own account for
investment only and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any distribution
thereof.
b. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Securities.
c. All subsequent offers and sales of the Debentures and the
Shares by the Buyer shall be made pursuant to registration of the Shares under
the 1933 Act or pursuant to an exemption from registration.
d. The Buyer understands that the Debentures are being offered
and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Debentures.
e. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Debentures and the
offer of the Shares which have been requested by the Buyer, including those set
forth on Annex V hereto. The Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Buyer has also had the opportunity to obtain and to review
the Company's (1) Annual Report on Form 10-K for the fiscal year ended December
31, 1998, (2) Quarterly Reports on Form 10-Q
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for the fiscal quarters ended March 31, June 30, 1999, and September 30, 1999,
respectively, and (3) Registration Statement on Form S-1/A filed on December 13,
1999 (collectively, the "Company's SEC Documents").
f. The Buyer understands that its investment in the Securities
involves a high degree of risk.
g. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities.
h. The Buyer has the requisite corporate power and authority
to enter into this Agreement and the other Transaction Agreements. This
Agreement and the other Transaction Agreements to which the Buyer is a party
have been duly and validly authorized, executed and delivered on behalf of the
Buyer and are valid and binding agreements of the Buyer enforceable in
accordance with their respective terms, subject as to enforceability to general
principles of equity and to bankruptcy, insolvency, moratorium and other similar
laws affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and
warrants to the Buyer as of the date hereof and as of each Closing Date that,
except as otherwise provided in the relevant Section or paragraph reference in
Annex V hereto (corresponding to the Section or paragraph references below):
a. Concerning the Debentures and the Shares. There are no
preemptive rights of any stockholder of the Company, as such, to acquire the
Debentures, the Warrants or the Shares.
b. Reporting Company Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or financial condition or results of operation of the Company and its
subsidiaries taken as a whole.. The Company is obligated to file reports
pursuant to Section 15(d) of the 1934 Act. The Common Stock is listed and traded
on The NASDAQ/Bulletin Board Market. The Company has received no notice, either
oral or written, with respect to the continued eligibility of the Common Stock
for such listing, and the Company has maintained all requirements for the
continuation of such listing.
c. Authorized Shares. The authorized capital stock of the
Company consists of 1 billion shares of Common Stock, $.00001 par value per
share, of which
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approximately 303,292,035 shares had been issued as of the date hereof. All
issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. The Company has sufficient
authorized and unissued shares of Common Stock as may be necessary to effect the
issuance of the Shares. The Shares have been duly authorized and, when issued
upon conversion of, or as interest on, the Debentures or upon exercise of the
Warrants, each in accordance with its respective terms, will be duly and validly
issued, fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder.
d. Securities Purchase Agreement; Registration Rights
Agreement and Stock. This Agreement and the Registration Rights Agreement, the
form of which is attached hereto as Annex IV (the "Registration Rights
Agreement"), and the transactions contemplated thereby, have been duly and
validly authorized by the Company, this Agreement has been duly executed and
delivered by the Company and this Agreement is, and the Debentures, the Warrants
and the Registration Rights Agreement, when executed and delivered by the
Company, will be, valid and binding agreements of the Company enforceable in
accordance with their respective terms, subject as to enforceability to general
principles of equity and to bankruptcy, insolvency, moratorium, and other
similar laws affecting the enforcement of creditors' rights generally.
e. Non-contravention. The execution and delivery of this
Agreement and the Registration Rights Agreement by the Company, the issuance of
the Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement, and the
Debentures do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the articles of incorporation or by-laws of the Company, each as currently in
effect, (ii) 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
properties or assets are bound, including any listing agreement for the Common
Stock except as herein set forth, (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, or (iv) the Company's listing agreement for its
Common Stock, except such conflict, breach or default which would not have a
material adverse effect on the business, operations, condition (financial or
otherwise), or results of operations of the Company and its subsidiaries, taken
as a whole, or on the transactions contemplated herein.
f. Approvals. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the stockholders of the Company is required to be
obtained by the Company for the issuance and sale of the Securities to the Buyer
as contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC Filings. None of the Company's SEC Documents contained,
at the time they were filed, any untrue statement of a material fact or omitted
to state any material fact
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required to be stated therein or necessary to make the statements made therein
in light of the circumstances under which they were made, not misleading. The
Company has since November 1, 1998 timely filed all requisite forms, reports and
exhibits thereto with the SEC.
h. Absence of Certain Changes. Since December 31, 1998, there
has been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or otherwise), or results
of operations of the Company, except as disclosed in the Company's SEC
Documents. Since December 31, 1998, except as provided in the Company's SEC
Documents, the Company has not (i) incurred or become subject to any material
liabilities (absolute or contingent) except liabilities incurred in the ordinary
course of business consistent with past practices; (ii) discharged or satisfied
any material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
i. Full Disclosure. There is no fact known to the Company
(other than general economic conditions known to the public generally or as
disclosed in the Company's SEC Documents) that has not been disclosed in writing
to the Buyer that (i) would reasonably be expected to have a material adverse
effect on the business, operations, condition (financial or otherwise), or
results of operations of the Company and its subsidiaries, taken as a whole ,
(ii) would reasonably be expected to materially and adversely affect the ability
of the Company to perform its obligations pursuant to this Agreement or any of
the agreements contemplated hereby (collectively, including this Agreement, the
"Transaction Agreements"), or (iii) would reasonably be expected to materially
and adversely affect the value of the rights granted to the Buyer in the
Transaction Agreements.
j. Absence of Litigation. Except as set forth in the Company's
SEC Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business, operations, condition (financial or otherwise), or results
of operation of the Company and its subsidiaries taken as a whole or the
transactions contemplated by any of the Transaction Agreements or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, any of the Transaction
Agreements.
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k. Absence of Events of Default. Except as set forth in
Section 3(e) hereof, no Event of Default (or its equivalent term), as defined in
the respective agreement to which the Company is a party, and no event which,
with the giving of notice or the passage of time or both, would become an Event
of Default (or its equivalent term) (as so defined in such agreement), has
occurred and is continuing, which would have a material adverse effect on the
business, operations, condition (financial or otherwise), or results of
operations of the Company and its subsidiaries, taken as a whole.
l. Prior Issues. During the twelve (12) months preceding the
date hereof, the Company has not issued any convertible securities. The
presently outstanding unconverted principal amount of each such issuance as at
the date hereof are set forth in Annex V.
m. No Undisclosed Liabilities or Events. The Company has no
liabilities or obligations other than those disclosed in the Company's SEC
Documents or those incurred in the ordinary course of the Company's business
since December 31, 1998, and which individually or in the aggregate, do not or
would not have a material adverse effect on the properties, business,
operations, condition (financial or otherwise), or results of operations of the
Company and its subsidiaries, taken as a whole. No event or circumstances has
occurred or exists with respect to the Company or its properties, business,
operations, condition (financial or otherwise), or results of operations, which,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed. There are no proposals currently under
consideration or currently anticipated to be under consideration by the Board of
Directors or the executive officers of the Company which proposal would (x)
change the certificate of incorporation or other charter document or by-laws of
the Company, each as currently in effect, with or without shareholder approval,
which change would reduce or otherwise adversely affect the rights and powers of
the shareholders of the Common Stock or (y) materially or substantially change
the business, assets or capital of the Company, including its interests in
subsidiaries.
n. No Default. The Company is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any material indenture, mortgage, deed of trust or other
material instrument or agreement to which it is a party or by which it or its
property is bound.
o. No Integrated Offering. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since November 1, 1998, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under Rule
506 of Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
p. Dilution. The number of Shares issuable upon conversion of
the Debentures and the exercise of the Warrants may increase substantially in
certain circumstances, including, but not necessarily limited to, the
circumstance wherein the trading price of the
8
Common Stock declines prior to the conversion of the Debentures. The Company's
executive officers and directors have studied and fully understand the nature of
the Securities being sold hereby and recognize that they have a potential
dilutive effect. The board of directors of the Company has concluded, in its
good faith business judgment, that such issuance is in the best interests of the
Company. The Company specifically acknowledges that its obligation to issue the
Shares upon conversion of the Debentures and upon exercise of the Warrants is
binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company, and the Company will honor every Notice of Conversion (as defined in
the Debentures) relating to the conversion of the Debentures and every Notice of
Exercise Form (as contemplated by the Warrants) relating to the exercise of the
Warrants unless the Company is subject to an injunction (which injunction was
not sought by the Company) prohibiting the Company from doing so.
r. Brokers, Finders. Except for payment of fees to First
Atlanta Securities LLC (the "Placement Agent"), payment of which is the sole
responsibility of the Company, the Company has taken no action which would give
rise to any claim by any person for brokerage commission, finder's fees or
similar payments by Buyer relating to this Agreement or the transactions
contemplated hereby. Buyer shall have no obligation with respect to such fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section 3(r) that may be due in connection with the
transactions contemplated hereby. The Company shall indemnify and hold harmless
each of Buyer, its employees, officers, directors, agents, and partners, and
their respective affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses suffered
in respect of any such claimed or existing fees, as and when incurred.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the
Debentures have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
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b. Restrictive Legend. The Buyer acknowledges and agrees that
the Debentures and the Warrants, and, until such time as the Common Stock has
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement and sold in accordance with an effective Registration Statement,
certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):
THESE SECURITIES INCLUDING ANY UNDERLYING SECURITIES (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN
OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
c. Registration Rights Agreement. The parties hereto agree to
enter into the Registration Rights Agreement on or before the Closing Date.
d. Filings. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Securities to the Buyer
under any United States laws and regulations applicable to the Company, or by
any domestic securities exchange or trading market, and to provide a copy
thereof to the Buyer promptly after such filing.
e. Reporting Status. So long as the Buyer beneficially owns
any of the Securities, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination. The Company will take all reasonable action under its
control to obtain and to continue the listing and trading of its Common Stock
(including, without limitation, all Registrable Securities) on The
NASDAQ/Bulletin Board Market and will comply in all material respects with the
Company's reporting, filing and other obligations under the by-laws or rules of
the National Association of Securities Dealers, Inc. ("NASD") or The
NASDAQ/Bulletin Board Market.
f. Use of Proceeds. The Company will use the proceeds from the
sale of the Debentures (excluding amounts paid by the Company for legal fees,
finder's fees and escrow fees in connection with the sale of the Debentures) for
internal working capital purposes, and, unless specifically consented to in
advance in each instance by the Buyer, the Company shall not, directly or
indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership enterprise or other person or for the repayment of any
outstanding loan by the Company to any other party.
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g. Certain Agreements. (i) Except to the extent specifically
provided below, but in each such event subject to compliance with all of the
other provisions of this Agreement, the Company covenants and agrees that it
will not, without the prior written consent of the Buyer, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock (collectively, "New Common Stock") with any third party
pursuant to a transaction which in any manner permits the registration of the
Common Stock included in or underlying the New Common Stock to become effective
on any date which is earlier than one hundred twenty (120) days after the
Effective Date.
(ii) The provisions of subparagraph (g)(i) will not apply to
the sale of New Common Stock for not more than $3 million pursuant to a single
transaction in which the Company sells Common Stock at a price per share equal
to or above the then Market Price of the Common Stock and/or issues warrants
exercisable at a price equal to or above the Market Price of the Common Stock as
of the date of such transaction; provided, however, that any action contemplated
under this subparagraph (g)(ii) is subject to the condition that registration
rights, if any, in connection with such action shall not require the filing of a
Registration Statement in respect of such stock prior to sixty (60) days after
the Effective Date.
(iii) The foregoing provisions shall not restrict the Company
from issuing shares of Common Stock upon the exercise of certain warrants and
options for the purchase of up to approximately 40,192,000 shares outstanding as
of the date hereof.
(iv) In the event the Company breaches the provisions of this
Section 4(g), the Conversion Rate (as defined in the Debentures) shall be
amended to be equal to (x) 90% of (y) the amount determined in accordance with
the provisions of the Debenture without regard to this provision, and the
Purchaser may require the Company to immediately redeem all outstanding
Debentures in accordance with Section 4(j)(y) hereof.
(v) In the event the Company consummates a new transaction (a
"New Transaction") for the sale of New Common Stock or the issuance of warrants
or other rights to purchase New Common Stock with a third party at any time
prior to the expiration of one hundred twenty (120) days after the Effective
Date on terms providing for (x) either a sale price equal to or computed based
on, or a determination of a conversion price based on, a lower percentage of the
then current market price (howsoever defined or computed) than provided in the
Debenture for determining the Conversion Rate or a lower Fixed Price (as defined
in the Debenture, but howsoever defined or computed in the New Transaction
documents) and/or (y) the issuance of warrants at an exercise price lower than
that provided in the Warrants and/or for a greater number of shares per dollar
paid or invested by such third party to or in the Company, the terms of the
Debenture and the Warrants (whether previously issued and/or converted or not)
shall be modified to (i) reduce the relevant Conversion Rate, Fixed Price or
Warrant exercise price and/or (ii) increase the number of shares covered by the
Warrants to be equal to that provided in the New Transaction as so consummated
(provided, however, that such increased Warrants shall have the same exercise
price formula as the New Transaction warrants).
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h. Available Shares. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, shares of
Common Stock sufficient to yield the aggregate of (i) two hundred percent (200%)
of the number of shares of Common Stock issuable at conversion as may be
required to satisfy the conversion rights of the Buyer pursuant to the terms and
conditions of the Debentures and (ii) the number of shares issuable upon
exercise as may be required to satisfy the exercise rights of the Buyer pursuant
to the terms and conditions of the Warrants.
i. Warrants. The Company agrees to issue to the Buyer on each
Closing Date transferable, divisible warrants with cashless exercise rights (the
"Warrants") for the purchase of one hundred thousand (100,000) shares of Common
Stock for each one million dollars ($1,000,000) of Purchase Price for the
Debentures issued on that date. The Warrants attributable to each such
conversion shall bear an exercise price per share equal to the Market Price of
the Common Stock on the Initial Closing Date (subject to adjustment as provided
in the Warrant). The Warrants will expire on the last day of the calendar month
in which the third anniversary of the relevant Closing Date occurs. The Warrants
shall be in the form annexed hereto as Annex VI, together with (x) registration
rights as provided in the Registration Rights Agreement and (y) piggy-back
registration rights after the effectiveness of the Registration Statement
expires, as contemplated by the Registration Rights Agreement.
j. Limitation on Issuance of Shares. If applicable to the
Company, the Company may be limited in the number of shares of Common Stock it
may issue by virtue of (i) the number of authorized shares or (ii) the
applicable rules and regulations of the principal securities market on which the
Common Stock is listed or traded, including, but not necessarily limited to,
NASDAQ Rule 4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be applicable
(collectively, the "Cap Regulations"). Without limiting the other provisions
thereof, the Debentures shall provide that (i) the Company will take all steps
reasonably necessary to be in a position to issue shares of Common Stock on
conversion of the Debentures without violating the Cap Regulations and (ii) if,
despite taking such steps, the Company still can not issue such shares of Common
Stock without violating the Cap Regulations, the holder of a Debenture which can
not be converted as result of the Cap Regulations (each such Debenture, an
"Unconverted Debenture") shall have the option, exercisable in such holder's
sole and absolute discretion, to elect either of the following remedies:
(x) if permitted by the Cap Regulations, require the Company
to issue shares of Common Stock in accordance with such holder's notice
of conversion at a conversion purchase price equal to the average of
the closing price per share of Common Stock for any five (5)
consecutive trading days (subject to certain equitable adjustments for
certain events occurring during such period) during the sixty (60)
trading days immediately preceding the date of notice of conversion; or
(y) require the Company to redeem each Unconverted Debenture
for an amount (the "Cap Redemption Amount"), payable in cash, equal to
(i) one hundred forty percent (140.0%) of the principal of the
Unconverted Debenture,
12
plus (ii) all accrued but unpaid interest on the Debenture through the
date of redemption (the "Cap Redemption Date") specified in the notice
from the holder electing this remedy.
A holder of an Unconverted Debenture may elect one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture. The Debentures shall
contain provisions substantially consistent with the above terms, with such
additional provisions as may be consented to by the Buyer. The provisions of
this paragraph are not intended to limit the scope of the provisions otherwise
included in the Debentures.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company warrants that, with respect to the Securities,
other than the stop transfer instructions to give effect to Section 4(a) hereof,
it will give its transfer agent no instructions inconsistent with instructions
to issue Common Stock from time to time upon conversion of the Debentures in
such amounts as specified from time to time by the Company to the transfer
agent, bearing the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the Shares under the 1933 Act, registered in
the name of the Buyer or its nominee and in such denominations to be specified
by the Buyer in connection with each conversion of the Debentures. Except as so
provided, the Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement, the
Registration Rights Agreement, and applicable law. Nothing in this Section shall
affect in any way the Buyer's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities. If the Buyer provides
the Company with an opinion of counsel reasonably satisfactory to the Company
that registration of a resale by the Buyer of any of the Securities in
accordance with clause (1)(B) of Section 4(a) of this Agreement is not required
under the 1933 Act, the Company shall (except as provided in clause (2) of
Section 4(a) of this Agreement) permit the transfer of the Securities and, in
the case of the Converted Shares or the Warrant Shares, as the case may be,
promptly instruct the Company's transfer agent to issue one or more certificates
for Common Stock without legend in such name and in such denominations as
specified by the Buyer.
b. Subject to the provisions of this Agreement, the Company
will permit the Buyer to exercise its right to convert the Debentures in the
manner contemplated by the Debentures.
c. The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date (as defined in the Debentures)
could result in economic loss to the Buyer. As compensation to the Buyer for
such loss, the Company agrees to pay late payments to the Buyer for late
issuance of Shares upon conversion in accordance with the following schedule
(applicable to each conversion independently): such amount shall be $1,000 if
the delivery is made on the third day after the Delivery Date and such amount
shall double from the preceding day for each day thereafter until the
certificates are so delivered. For example, if the certificates are delivered on
the sixth day after the Delivery Date, the amount
13
would be $4,000; provided, however, that payment of such amount shall not
relieve the Company from its continuing obligations to issue the Shares upon
conversion of the Debentures or exercise of the Warrants pursuant to the terms
hereof or of any of the other Transaction Agreements. For purposes of this
Section 5(c), in connection with a Mandatory Conversion (as defined in the
Debenture), the term "Delivery Date" shall refer to the earlier of (i) the
Delivery Date determined in relation to a Notice of Conversion actually
submitted by the Buyer to the Company or (ii) the third or fifth business date,
as the case may be, after written notice from the Buyer that the delivery of
shares to the Buyer in connection with the Mandatory Conversion has not been
accomplished. The Company shall pay any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall limit the Buyer's
right to pursue actual damages for the Company's failure to issue and deliver
the Common Stock to the Buyer. Furthermore, in addition to any other remedies
which may be available to the Buyer, in the event that the Company fails for any
reason to effect delivery of such shares of Common Stock within two (2) business
days after the Delivery Date, the Buyer will be entitled to revoke the relevant
Notice of Conversion by delivering a notice to such effect to the Company
whereupon the Company and the Buyer shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion.
d. If, by the relevant Delivery Date, the Company fails for
any reason to deliver the Shares to be issued upon conversion of a Debenture and
after such Delivery Date, the holder of the Debentures being converted (a
"Converting Holder") purchases, in an arm's-length open market transaction or
otherwise, shares of Common Stock (the "Covering Shares") in order to make
delivery in satisfaction of a sale of Common Stock by the Converting Holder (the
"Sold Shares"), which delivery such Converting Holder anticipated to make using
the Shares to be issued upon such conversion (a "Buy-In"), the Converting Holder
shall the right, to require the Company to pay to the Converting Holder, in lieu
and instead of the amounts due under Section 5(c) hereof (but in addition to all
other amounts contemplated in other provisions of the Transaction Agreements,
and not in lieu of any such other amounts), the Buy-In Adjustment Amount (as
defined below). The "Buy-In Adjustment Amount" is the amount equal to the
excess, if any, of (x) the Converting Holder's total purchase price (including
brokerage commissions, if any) for the Covering Shares over (y) the net proceeds
(after brokerage commissions, if any) received by the Converting Holder from the
sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount to
the Company in immediately available funds immediately upon demand by the
Converting Holder. By way of illustration and not in limitation of the
foregoing, if the Converting Holder purchases shares of Common Stock having a
total purchase price (including brokerage commissions) of $11,000 to cover a
Buy-In with respect to shares of Common Stock it sold for net proceeds of
$10,000, the Buy-In Adjustment Amount which Company will be required to pay to
the Converting Holder will be $1,000.
e. In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of the Buyer and its compliance with
the provisions contained in this paragraph, so long as the certificates therefor
do not bear a legend and the Buyer thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the
14
Buyer by crediting the account of Buyer's Prime Broker with DTC through its
Deposit Withdrawal Agent Commission system.
f. The Company will authorize its transfer agent to give
information relating to the Company directly to the Buyer or the Buyer's
representatives upon the request of the Buyer or any such representative, to the
extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Buyer in connection with a Notice of
Conversion, or (ii) the number of outstanding shares of Common Stock of all
stockholders as of a current or other specified date. The Company will provide
the Buyer with a copy of the authorization so given to the transfer agent. While
the Company will use its best efforts to effectuate the transfer agent's
compliance with such authorization, the Company will not be responsible for the
transfer agent's failure to do so.
6. CLOSING DATES.
a. The Initial Closing Date shall occur on the date which is
the first NYSE trading day after each of the conditions contemplated by Sections
7 and 8 hereof shall have either been satisfied or been waived by the party in
whose favor such conditions run.
b. (i) The Additional Closing Date shall be the date specified
in the Additional Closing Date Notice (as defined below) .
(ii) Subject to the other provisions of this Section 6(b),
the term "Additional Closing Date Notice" means a written notice given by the
Company to the Buyer and to the Escrow Agent by fax transmission or hand
delivery no later than one (1) business day after the Company submits the
Effectiveness Request (as defined below; a copy of the Effectiveness Request
shall be attached to the Additional Closing Date Notice) in which the Company
specifies that the fifth business day after the actual Effective Date, which
date shall be the Additional Closing Date. The Company shall also notify the
Buyer and the Escrow Agent both (x) by fax transmission or hand delivery and (y)
by telephone communication of the actual Effective Date declared by the SEC no
later than noon on the business day after such Effective Date.
(iii) The term "Effectiveness Request" means the Company's
written request to the SEC that the SEC declare the Registration Statement
effective on a specified date which is more than (5) business days prior to the
Additional Closing Date specified in the Additional Closing Date Notice;
provided, however, that the Effectiveness Request shall be given only after the
SEC has advised the Company informally, in writing or otherwise that it will
respond favorably to such request.
(iv) The closing for the Additional Debentures shall be
conducted upon the same terms and conditions as those applicable to the Initial
Debentures.
15
c. Each closing of the purchase and issuance of Debentures
shall occur on the relevant Closing Date at the offices of the Escrow Agent and
shall take place no later than 3:00 P.M., New York time, on such day or such
other time as is mutually agreed upon by the Company and the Buyer.
d. Notwithstanding anything to the contrary contained herein,
the Escrow Agent will be authorized to release the Escrow Funds to the Company
and to others and to release the other Escrow Property on the relevant Closing
Date upon satisfaction of the conditions set forth in Sections 7 and 8 hereof
and as provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the relevant Debentures to the Buyer pursuant to this Agreement on the relevant
Closing Date is conditioned upon:
a. The execution and delivery of this Agreement by the
Buyer;
b. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the relevant
Debentures in accordance with this Agreement;
c. The accuracy on such Closing Date of the representations
and warranties of the Buyer contained in this Agreement, each as if made on such
date, and the performance by the Buyer on or before such date of all covenants
and agreements of the Buyer required to be performed on or before such date;
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained; and
e. From and after the date hereof to and including such
Closing Date, the trading of the Common Stock shall not have been suspended by
the SEC or the NASD and trading in securities generally on the NYSE or The
NASDAQ/Bulletin Board Market shall not have been suspended or limited, nor shall
minimum prices been established for securities traded on The NASDAQ/Bulletin
Board Market, nor shall there be any outbreak or escalation of hostilities
involving the United States or any material adverse change in any financial
market that in either case in the reasonable judgment of the Company makes it
impracticable or inadvisable to sell the Debentures.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to
purchase the Debentures on the relevant Closing Date is conditioned upon:
16
a. The execution and delivery of this Agreement and the
Registration Rights Agreement by the Company;
b. Delivery by the Company to the Escrow Agent of the relevant
Certificates in accordance with this Agreement;
c. The accuracy in all material respects on such Closing Date
of the representations and warranties of the Company contained in this
Agreement, each as if made on such date, and the performance by the Company on
or before such date of all covenants and agreements of the Company required to
be performed on or before such date;
d. On such Closing Date, the Registration Rights Agreement
shall be in full force and effect and the Company shall not be in default
thereunder;
e. On such Closing Date, the Buyer shall have received an
opinion of counsel for the Company, dated such Closing Date, in form, scope and
substance reasonably satisfactory to the Buyer, substantially to the effect set
forth in Annex III attached hereto;
f. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained;
g. From and after the date hereof to and including such
Closing Date, the trading of the Common Stock shall not have been suspended by
the SEC or the NASD and trading in securities generally on the NYSE or The
NASDAQ/Bulletin Board Market shall not have been suspended or limited, nor shall
minimum prices been established for securities traded on The NASDAQ/Bulletin
Board Market, nor shall there be any outbreak or escalation of hostilities
involving the United States or any material adverse change in any financial
market that in either case in the reasonable judgment of the Buyer makes it
impracticable or inadvisable to purchase the Debentures; and
h. With respect to the Additional Closing Date,
(i) an Additional Closing Date Notice shall have been duly
given;
(ii) the Registration Statement shall have been declared
effective by the SEC to cover all Registrable Securities for all the Debentures
(and all the related Warrants), as contemplated by the Registration Rights
Agreement, prior to such Additional Closing Date;
(iii) the representations and warranties of the Company
contained in Section 3 hereof shall be true and correct in all material respects
(and the Company's issuance of the relevant Additional Debentures shall
constitute the Company's making each such representation and warranty as of such
date) and there shall have been no material adverse changes (financial or
otherwise) in the business or conditions of the Company from the Initial Closing
Date through
17
and including the Additional Closing Date (and the Company's issuance of the
relevant Additional Debentures shall constitute the Company's making such
representation and warranty as of such date), (iv) the Company shall have timely
issued all shares issuable upon conversion of the Debentures prior to the date
of such Additional Closing Date;
(iv) the Company shall have available and shall reserve for
issuance to Buyer at least one hundred fifty percent (150%) of the number of
Shares which would be issued on conversion of all unconverted Initial Debentures
and all Additional Debentures and exercise of all unexercised Warrants and all
Warrants which would be issued in connection with the conversion of any
unconverted Debentures (including all Additional Debentures); and
(v) if the Cap Regulations are applicable to the Company,
either the aggregate of the Common Stock issuable upon conversion of the
Additional Debentures as a group or together with the Common Stock issuable upon
conversion of the then previously issued Debentures will not result in the
issuance of shares in excess of the Cap Regulations or the Company shall have
obtained the consent of its shareholders, as contemplated by the Cap
Regulations, to such issuance.
9. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting 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. To the extent determined by such court, the Company shall
reimburse the Buyer for any reasonable legal fees and disbursements incurred by
the Buyer in enforcement of or protection of any of its rights under any of the
Transaction Agreements.
b. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
c. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
e. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
18
f. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original.
g. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
h. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
i. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
j. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
10. NOTICES. Any notice required or permitted hereunder shall
be given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of
(a) the date delivered, if delivered by personal delivery as
against written receipt therefor or by confirmed facsimile
transmission,
(b) the seventh business day after deposit, postage prepaid,
in the United States Postal Service by registered or certified
mail, or
(c) the third business day after mailing by domestic or
international express courier, with delivery costs and fees
prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: Advanced Viral Research Corp.
000 Xxxxxxxxx Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xx. Xxxxxx Xxxxxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
19
Attn: Xxxxxx Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
BUYER: At the address set forth on the signature page of
this Agreement.
with a copy to:
Xxxxxxx & Xxxxxx LLP, Esqs.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
ESCROW AGENT: Xxxxxxx & Xxxxxx LLP, Esqs.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Xxx.
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
Company's and the Buyer's representations and warranties herein shall survive
the execution and delivery of this Agreement and the delivery of the
Certificates and the Warrants and the payment of the Purchase Price, and shall
inure to the benefit of the Buyer and the Company and their respective
successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
20
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer
by one of its officers thereunto duly authorized as of the date set forth below.
AMOUNT AND PURCHASE PRICE OF DEBENTURES: $2,000,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 28th day of December, 1999.
Address: ENDEAVOUR CAPITAL FUND S.A. (Buyer)
c/o Endeavour Management, Inc.
14/14 Divrei Xxxxx St. By: /s/ Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, 00000, Xxxxxx ----------------------------------
Shamuli Margulies, Director
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
ADVANCED VIRAL RESEARCH CORP.
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Xxxxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
Date: December 28,1999
21
ANNEX I FORM OF DEBENTURE
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V COMPANY DISCLOSURE MATERIALS
ANNEX VI FORM OF WARRANT
