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Exhibit 10.39
EQUITY LINE OF CREDIT AGREEMENT
AGREEMENT dated as of the 18th day of September 2000, (the "Agreement")
between Spinneret Financial Systems, Inc. (the "Investor") and Advanced Viral
Research Corp., a corporation organized and existing under the laws of the State
of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase up to
Twenty Million ($20,000,000) Dollars of the Company's common stock, par value
$0.00001 per share (the "Common Stock"), for a total purchase price of Twenty
Million ($20,000,000) Dollars; and
WHEREAS, such investments will be made in reliance upon the provisions
of Regulation D ("Regulation D") of the Securities Act of 1933, as amended, and
the regulations promulgated thereunder (the "Securities Act"), and or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "Advance" shall mean the portion of the Commitment Amount
requested by the Company in the Advance Notice.
Section 1.2 "Advance Notice Date" shall mean each date the Company
delivers to the Investor an Advance Notice requiring the Investor to advance
funds to the Company, subject to the terms of this Agreement. No Advance Notice
Date shall be less than fifteen Trading Days after the prior Advance Notice
Date.
Section 1.3 "Advance Date" shall mean the date payment is made of an
Advance by the Investor to the Company. No Advance Date shall be less than
twenty-five (25) Trading Days after an Advance Notice Date.
Section 1.4 "Advance Notice" shall mean a written notice to the
Investor setting forth the Advance amount that the Company requests from the
Investor and the Advance Date,
Section 1.5 "Bid Price" shall mean, on any date, the closing bid price
(as reported by Bloomberg L.P.) of the Common Stock on the Principal Market or
if the Common Stock is not traded on a Principal Market, the highest reported
bid price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc.
Section 1.6 "Closing" shall mean one of the closings of a purchase and
sale of Common Stock pursuant to Section 2.1.
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Section 1.7 "Commitment Amount" shall mean the aggregate amount of up
to $20,000,000 which the Investor has agreed to provide to the Company in order
to purchase the Company's Common Stock pursuant to the terms and conditions of
this Agreement.
Section 1.8 "Commitment Period" shall mean the period commencing on the
earlier to occur of (i) the Effective Date, or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which the Investor shall have made payment
of Advances pursuant to this Agreement in the aggregate amount of $20,000,000,
(y) the date this Agreement is terminated pursuant to Section 2.6, or (z) the
date occurring thirty (30) months from the date hereof.
Section 1.9 "Common Stock" shall mean the Company's common stock, par
value $0.00001 per share.
Section 1.10 "Condition Satisfaction Date" shall have the meaning set
forth in Section 7.2.
Section 1.11 "Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorney's fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.12 "Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.13 "Escrow Agreement" shall mean the escrow agreement between
the Company and the Investor dated the date hereof.
Section 1.14 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.15 "Material Adverse Effect" shall mean any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to enter into and perform any of its obligations
under this Agreement or the Registration Rights Agreement in any material
respect.
Section 1.16 "Maximum Advance Amount" on any Advance Notice Date shall
be equal to the difference between (i) the amount indicated in the Maximum
Advance Amount column opposite the range of the 25 Day Average Daily Volume
Traded on such Advance Notice Date, as set forth in the table below and (ii) the
sum of the Advances made pursuant to this Agreement, in the 15 Trading Days
immediately preceding the Advance Notice Date:
25-Day Average Volume Traded(1) Maximum Advance Amount
------------------------------- ----------------------
$ 25,000 - $ 50,000 $ 100,000
$ 50,001 - $ 100,000 $ 200,000
$100,001 - $ 200,000 $ 350,000
$200,001 - $ 300,000 $ 500,000
$300,001 - $ 400,000 $ 650,000
$400,001 - $ 500,000 $ 900,000
$500,001 - $ 600,000 $1,200,000
$600,001 - $ 800,000 $1,500,000
$800,001 - $1,000,000 $1,750,000
$1,000,000 plus $2,000,000
(1) The 25-Day Average Volume Traded shall be equal to the Bid Price multiplied
by the volume for each of the 25 Trading Days preceding the Advance Notice Date.
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Section 1.17 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.18 "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
Section 1.19 "Placement Agent" shall mean May Xxxxx Group, Inc.
Section 1.20 "Principal Market" shall mean the Nasdaq National Market,
the Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.
Section 1.21 "Purchase Price" shall mean the average of the three (3)
lowest Bid Prices of the Common Stock over the twenty-five (25) Trading Day
period ending on the Advance Notice Date.
Section 1.22 "Registrable Securities" shall mean the shares of Common
Stock (i) in respect of which the Registration Statement has not been declared
effective by the SEC, (ii) which have not been sold under circumstances meeting
all of the applicable conditions of Rule 144 (or any similar provision then in
force) under the Securities Act ("Rule 144") or (iii) which have not been
otherwise transferred to a holder who may trade such shares without restriction
under the Securities Act, and the Company has delivered a new certificate or
other evidence of ownership for such securities not bearing a restrictive
legend.
Section 1.23 "Registration Rights Agreement" shall mean the
Registration Rights Agreement dated the date hereof, regarding the filing of the
Registration Statement for the resale of the Registrable Securities, entered
into between the Company and the Investor.
Section 1.24 "Registration Statement" shall mean a registration
statement on Form S-1 or Form S-3 (if use of such form is then available to the
Company pursuant to the rules of the SEC and, if not, on such other form
promulgated by the SEC for which the Company then qualifies and which counsel
for the Company shall deem appropriate, and which form shall be available for
the resale of the Registrable Securities to be registered thereunder in
accordance with the provisions of this Agreement and the Registration Rights
Agreement, and in accordance with the intended method of distribution of such
securities), for the registration of the resale by the Investor of the
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Registrable Securities under the Securities Act.
Section 1.25 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.26 "SEC" shall mean the Securities and Exchange Commission.
Section 1.27 "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.28 "SEC Documents" shall mean Annual Reports on Form 10-KSB,
Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K and Proxy
Statements of the Company as supplemented to the date hereof, filed by the
Company for a period of at least twelve (12) months immediately preceding the
date hereof or the Advance Date, as the case may be, until such time as the
Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.
Section 1.29 "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.
ARTICLE II
ADVANCES
Section 2.1 INVESTMENTS.
(a) ADVANCES. Upon the terms and conditions set forth herein
(including without limitation, the provisions of Article VII hereof), on any
Advance Notice Date the Company may request an Advance by the Investor by the
delivery of an Advance Notice. The number of shares of Common Stock that the
Investor shall receive for each Advance shall be determined by dividing the
amount of the Advance by the Purchase Price on the Advance Notice Date. No
fractional shares shall be issued. Fractional shares shall be rounded to the
next higher whole number of shares. The aggregate maximum amount of all Advances
that the Investor shall be obligated to make under this Agreement shall not
exceed the Commitment Amount.
Section 2.2 MECHANICS.
(a) ADVANCE NOTICE. At any time during the Commitment Period,
the Company may deliver an Advance Notice to the Investor, subject to the
conditions set forth in Section 2.7 and Section 7.2; provided, however, the
amount for each Advance as designated by the Company in the applicable Advance
Notice shall not be (i) less than $30,000, or (ii) more than the Maximum Advance
Amount. The aggregate amount of the Advances pursuant to this Agreement shall
not exceed the Commitment Amount, unless otherwise agreed by the Investor in the
Investor's sole and absolute discretion. There will be a minimum of fifteen (15)
Trading Days between each Advance Notice.
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(b) DATE OF DELIVERY OF ADVANCE NOTICE. An Advance Notice
shall be deemed delivered on (i) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 12:00 noon Eastern
Time, or (ii) the immediately succeeding Trading Day if it is received by
facsimile or otherwise after 12:00 noon Eastern Time on a Trading Day or at any
time on a day which is not a Trading Day. No Advance Notice may be deemed
delivered, on a day that is not a Trading Day.
Section 2.3 CLOSINGS. On each Advance Date, which shall be twenty-five
(25) Trading Days after an Advance Notice Date, (i) the Company shall deliver to
the Escrow Agent, as defined pursuant to the Escrow Agreement, shares of the
Company's Common Stock, representing the amount of the Advance by the Investor
pursuant to Section 2.1 herein, registered in the name of the Investor which
shall be delivered to the Investor, or otherwise in accordance with the Escrow
Agreement and (ii) the Investor shall deliver to the Escrow Agent the amount of
the Advance specified in the Advance Notice by wire transfer of immediately
available funds which shall be delivered to the Company, or otherwise in
accordance with the Escrow Agreement. In addition, on or prior to the Advance
Date, each of the Company and the Investor shall deliver to the other through
the Escrow Agent all documents, instruments and writings required to be
delivered or reasonably requested by either of them pursuant to this Agreement
in order to implement and effect the transactions contemplated herein. Payment
of funds to the Company and delivery of the Company's Common Stock to the
Investor shall occur in accordance with the conditions set forth above and those
contained in the Escrow Agreement; PROVIDED, HOWEVER, that to the extent the
Company has not paid the fees, expenses, and disbursements of the Investor's
counsel and the Placement Agent in accordance with Section 12.4, the amount of
such fees, expenses, and disbursements may be deducted by the Investor (and
shall be paid to the relevant party) from the amount of the Advance with no
reduction in the amount of shares of the Company's Common Stock to be delivered
on such Advance Date.
Section 2.4 SUSPENSION OF REGISTRATION STATEMENT. If subsequent to any
Closing, the Registration Statement is suspended for any period exceeding ten
(10) days, the Company shall pay an amount equal to the sum of (i) two percent
(2%) of the Purchase Price of all Common Stock held by the Investor (in
determining the number of shares of Common Stock held by the Investor, the
number of shares of Common Stock in which the Investor has a short position
shall be a reduction in the number of shares of Common Stock held by the
Investor), purchased pursuant to this Agreement for each thirty (30) day period
or portion thereof and (ii) 10% per annum of the Purchase Price of all Common
Stock held by the Investor purchased pursuant to this Agreement until such
shares of Common Stock may be sold pursuant to the provisions of Rule 144(k);
PROVIDED, HOWEVER, that the Company shall not be required to pay such amount to
the Investor in connection with any period commencing upon the filing of a
post-effective amendment to such Registration Statement and ending upon the date
on which such post-effective amendment is declared effective by the SEC. The
Company shall pay to the Investor any actual damages sustained by the Investor
as a result of the suspension of the Registration Statement, including but not
limited to any damages resulting from the buy-in of a short position held by the
Investor, if such amount is greater than the amount calculated in accordance
with the previous sentence.
Section 2.5 TERMINATION OF INVESTMENT. The obligation of the Investor
to make an Advance to the Company pursuant to this Agreement shall terminate
permanently (including with
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respect to an Advance Date that has not yet occurred) in the event that (i)
there shall occur any stop order or suspension of the effectiveness of the
Registration Statement for an aggregate of thirty (30) Trading Days during the
Commitment Period, or (ii) the Company shall at any time fail materially to
comply with the requirements of Section 6.3, 6.4 or 6.7; PROVIDED, HOWEVER, that
this termination provision shall not apply to any period commencing upon the
filing of a post-effective amendment to such Registration Statement and ending
upon the date on which such post effective amendment is declared effective by
the SEC.
Section 2.6 AGREEMENT TO ADVANCE FUNDS.
(a) The Investor agrees to advance the amount specified in the
Advance Notice to the Company after the completion of each of the following
conditions and the other conditions set forth in this Agreement:
(i) the execution and delivery by the Company, and the
Investor, of this Agreement, and the Exhibits hereto;
(ii) the Escrow Agent shall have received the shares of Common
Stock applicable to the Advance;
(iii) the Company's Registration Statement with respect to the
resale of the Registrable Securities in accordance with the terms of
the Registration Rights Agreement shall have been declared effective by
the SEC;
(iv) the Company shall have obtained all permits and
qualifications required by at least ten states for the offer and sale
of the Registrable Securities, or shall have the availability of
exemptions therefrom. The sale and issuance of the Registrable
Securities shall be legally permitted by all laws and regulations to
which the Company is subject;
(v) the Company shall have filed with the Commission in a
timely manner all reports, notices and other documents required of a
"reporting company" under the Exchange Act and applicable Commission
regulations;
(vi) the fees as set forth in Section 12.4 below shall have
been paid or can be withheld as provided in Section 2.3; and
(vii) the conditions set forth in Section 7.2 shall have been
satisfied.
Section 2.7 LOCK UP PERIOD. (a) Intentionally omitted
(b) On the date hereof, the Company shall obtain from each
officer, director and Affiliate, as defined below, a lock-up agreement, as
defined below, in the form annexed hereto as Schedule 2.7(b). "Affiliate" for
purposes hereof shall have the meaning set forth in Section 405 of the
Securities Act.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor hereby represents and warrants to, and agrees with, the
Company that the following are true and as of the date hereof and as of each
Advance Date:
Section 3.1 ORGANIZATION AND AUTHORIZATION. Investor is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority to
purchase and hold the securities issuable hereunder. The decision to invest and
the execution and delivery of this Agreement by such Investor, the performance
by such Investor of its obligations hereunder and the consummation by such
Investor of the transactions contemplated hereby have been duly authorized and
requires no other proceedings on the part of the Investor. The undersigned has
the right, power and authority to execute and deliver this Agreement and all
other instruments ( including, without limitations, the Registration Rights
Agreement), on behalf of the Investor. This Agreement has been duly executed and
delivered by the Investor and, assuming the execution and delivery hereof and
acceptance thereof by the Company, will constitute the legal, valid and binding
obligations of the Investor, enforceable against the Investor in accordance with
its terms.
Section 3.2 EVALUATION OF RISKS. The Investor has such knowledge and
experience in financial tax and business matters as to be capable of evaluating
the merits and risks of, and bearing the economic risks entailed by, an
investment in the Company and of protecting its interests in connection with
this transaction. It recognizes that its investment in the Company involves a
high degree of risk.
Section 3.3. NO LEGAL ADVICE FROM THE COMPANY. The Investor
acknowledges that it had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with his or its own legal counsel
and investment and tax advisors. The Investor is relying solely on such counsel
and advisors and not on any statements or representations of the Company or any
of its representatives or agents for legal, tax or investment advice with
respect to this investment, the transactions contemplated by this Agreement or
the securities laws of any jurisdiction.
Section 3.4 INVESTMENT PURPOSE. The securities are being purchased by
the Investor for its own account, for investment and without any view to the
distribution, assignment or resale to others or fractionalization in whole or in
part. The Investor agrees not to assign or in any way transfer the Investor's
rights to the securities or any interest therein and acknowledges that the
Company will not recognize any purported assignment or transfer except in
accordance with applicable Federal and state securities laws. No other person
has or will have a direct or indirect beneficial interest in the securities. The
Investor agrees not to sell, hypothecate or otherwise transfer the Investor's
securities unless the securities are registered under Federal and applicable
state securities laws or unless, in the opinion of counsel satisfactory to the
Company, an exemption from such laws is available.
Section 3.5 ACCREDITED INVESTOR. Investor is an "accredited investor"
as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.
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Section 3.6 INFORMATION. Such Investor and its advisors (and his or its
counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information it deemed
material to making an informed investment decision. Such Investor and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and its management. Neither such inquiries nor any other due diligence
investigations conducted by such Investor or its advisors, if any, or its
representatives shall modify, amend or affect the Investor's right to rely on
the Company's representations and warranties contained in this Agreement. Such
Investor understands that its investment involves a high degree of risk. Such
Investor is in a position regarding the Company, which, based upon employment,
family relationship or economic bargaining power, enabled and enables each
Investor to obtain information from the Company in order to evaluate the merits
and risks of this investment. Such Investor has sought such accounting, legal
and tax advice, as it has considered necessary to make an informed investment
decision with respect to this transaction.
Section 3.7 RECEIPT OF DOCUMENTS. Such Investor and his or its counsel
has received and read in their entirety: (i) this Agreement and the Exhibits
annexed hereto; (ii) all due diligence and other information necessary to verify
the accuracy and completeness of such representations, warranties and covenants;
(iii) the Company's Form 10-KSB for the year ended December 31, 1999 and Form
10-QSB for the periods ended March 31, 2000 and June 30, 2000; and (v) answers
to all questions the Investor submitted to the Company regarding an investment
in the Company; and the Investor has relied on the information contained therein
and has not been furnished any other documents, literature, memorandum or
prospectus.
Section 3.8 REGISTRATION RIGHTS AGREEMENT AND ESCROW AGREEMENT. The
parties have entered into the Registration Rights Agreement and the Escrow
Agreement, each dated the date hereof.
Section 3.9 NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the shares of Common Stock offered hereby.
Section 3.10 NOT AN AFFILIATE. The Investor is not 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 "an
Affiliate," as that term is defined in Rule 405 of the Securities Act) of the
Company). The Investor agrees that it will not, and that it will cause its
affiliates not to, engage in any short sales of or hedging transactions with
respect to the Common Stock in violation of applicable U.S. securities laws and
regulations.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as stated below or on the disclosure schedules attached hereto,
the Company hereby represents and warrants to, and covenants with, the Investor
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that the following are true and correct as of the date hereof and as of each
Advance Date:
Section 4.1 ORGANIZATION AND QUALIFICATION. The Company and its
subsidiaries are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power to own their properties and to carry on their
business as now being conducted. Each of the Company and its subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries taken as a whole.
Section 4.2. AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER
INSTRUMENTS. (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Registration Rights Agreement and any
related agreements, in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement, the Registration Rights Agreement, the
Escrow Agreement and any related agreements by the Company and the consummation
by it of the transactions contemplated hereby and thereby, have been duly
authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders, (iii) this Agreement, Registration Rights Agreement, the Escrow
Agreement and any related agreements have been duly executed and delivered by
the Company, (iv) this Agreement, the Registration Rights Agreement, Escrow
Agreement and any related agreements constitute the valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies.
Section 4.3 CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of 1,000,000,000 shares of Common Stock,
par value $0.00001 per share, of which 360,841,465 shares were issued and
outstanding. All of such outstanding shares have been validly issued and are
fully paid and nonassessable. Except as disclosed on Schedule 4.3, no shares of
Common Stock are subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company. Except as disclosed
on Schedule 4.3, as of the date hereof, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities and (iii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any of
their securities under the Securities Act (except pursuant to the Registration
Rights Agreement and except with respect to securities, the transfer of which
are already covered by effective registration statements). There are no
securities or instruments containing anti-dilution or similar provisions that
will be triggered in this Agreement or any related agreement or the consummation
of the transactions described herein or therein.. The Company has furnished to
the Investor true and correct copies of the Company's Certificate of
Incorporation, as amended and as
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in effect on the date hereof (the "Certificate of Incorporation"), and the
Company's By-laws, as in effect on the date hereof (the "By-laws"), and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
Section 4.4 NO CONFLICT. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby will not (i) result in a violation of the
Certificate of Incorporation, any certificate of designations of any outstanding
series of preferred stock of the Company or By-laws or (ii) conflict with or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of NASD's OTC Bulletin Board on which the Common Stock is quoted)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries is bound or affected. Except as
disclosed on Schedule 4.4, neither the Company nor its subsidiaries is in
violation of any term of or in default under its Certificate of Incorporation or
By-laws or their organizational charter or by-laws, respectively, or any
material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its subsidiaries. The business of the Company and its subsidiaries is
not being conducted, and shall not be conducted in violation of any material
law, ordinance, regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the Securities Act and any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under or contemplated by this Agreement or the Registration
Rights Agreement in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company and its subsidiaries are unaware of any
facts or circumstance which might give rise to any of the foregoing.
Section 4.5 SEC DOCUMENTS; FINANCIAL STATEMENTS. Since March 31, 2000,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC under of the Exchange Act (all
of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Investor or its representatives,
or made available through the SEC's website at xxxx://xxx.xxx.xxx, true and
complete copies of the SEC Documents. As of their respective dates, the
financial statements of the Company disclosed in the SEC Documents (the
"Financial Statements") complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
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operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Investor which is not
included in the SEC Documents contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
Section 4.6. 10b-5. The SEC Documents do not include any untrue
statements of material fact, nor do they omit to state any material fact
required to be stated therein necessary to make the statements made, in light of
the circumstances under which they were made, not misleading.
Section 4.7 NO DEFAULT. The Company is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it is or its property
is bound and neither the execution, nor the delivery by the Company, nor the
performance by the Company of its obligations under this Agreement or any of the
exhibits or attachments hereto will conflict with or result in the breach or
violation of any of the terms or provisions of, or constitute a default or
result in the creation or imposition of any lien or charge on any assets or
properties of the Company under its Certificate of Incorporation, By-Laws, any
material indenture, mortgage, deed of trust or other material agreement
applicable to the Company or instrument to which the Company is a party or by
which it is bound, or any statute, or any decree, judgment, order, rules or
regulation of any court or governmental agency or body having jurisdiction over
the Company or its properties, in each case which default, lien or charge is
likely to cause a material adverse effect on the Company's business or financial
condition.
Section 4.8 ABSENCE OF EVENTS OF DEFAULT. Except for matters described
in the SEC Documents and/or this Agreement, no Event of Default, 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 (as so defined), has occurred and is continuing, which would have a
material adverse effect on the Company's business, properties, prospects,
financial condition or results of operations.
Section 4.9 INTELLECTUAL PROPERTY RIGHTS. The Company and its
subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service xxxx registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company, there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service xxxx registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
Section 4.10 EMPLOYEE RELATIONS Neither the Company nor any of its
subsidiaries is
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involved in any labor dispute nor, to the knowledge of the Company or any of its
subsidiaries, is any such dispute threatened. None of the Company's or its
subsidiaries' employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees are good.
Section 4.11 ENVIRONMENTAL LAWS. The Company and its subsidiaries are
(i) in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
Section 4.12 TITLE. Except as set forth in Schedule 4.12, the Company
has good and marketable title to its properties and material assets owned by it,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest other than such as are not material to the business of the
Company. Any real property and facilities held under lease by the Company and
its subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
Section 4.13 INSURANCE. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
Section 4.14 REGULATORY PERMITS. The Company and its subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
Section 4.15 INTERNAL ACCOUNTING CONTROLS. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
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Section 4.16 NO MATERIAL ADVERSE BREACHES, ETC. Except as set forth in
the SEC Documents, neither the Company nor any of its subsidiaries is subject to
any charter, corporate or other legal restriction, or any judgment, decree,
order, rule or regulation which in the judgment of the Company's officers has or
is expected in the future to have a material adverse effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries. Neither the Company nor any of its
subsidiaries is in breach of any contract or agreement which breach, in the
judgment of the Company's officers, has or is expected to have a material
adverse effect on the business, properties, operations, financial condition,
results of operations or prospects of the Company or its subsidiaries.
Section 4.17 ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending against or
affecting the Company, the Common Stock or any of the Company's subsidiaries,
wherein an unfavorable decision, ruling or finding would (i) have a material
adverse effect on the transactions contemplated hereby (ii) adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a material adverse effect on the business, operations,
properties, financial condition or results of operation of the Company and its
subsidiaries taken as a whole.
Section 4.18 SUBSIDIARIES. Except as disclosed in the SEC Documents,
the Company does not presently own or control, directly or indirectly, any
interest in any other corporation, partnership, association or other business
entity.
Section 4.19 OTHER OUTSTANDING SECURITIES/FINANCING RESTRICTIONS. As of
the date hereof, other than warrants and options to acquire shares of Common
Stock as disclosed in Schedule 4.3, there are no other warrants and options
registered with the SEC, which are available for sale as unrestricted ("free
trading") stock.
Section 4.20 TAX STATUS. The Company and each of its subsidiaries has
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject and (unless
and only to the extent that the Company and each of its subsidiaries has set
aside on its books provisions reasonably adequate for the payment of all unpaid
and unreported taxes) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
Section 4.21 CERTAIN TRANSACTIONS. Except as set forth in the SEC
Documents, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental
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of real or personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of the Company,
any corporation, partnership, trust or other entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
Section 4.22 FEES AND RIGHTS OF FIRST REFUSAL. The Company is not
obligated to offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to, current
or former shareholders of the Company, underwriters, brokers, agents or other
third parties.
Section 4.23 USE OF PROCEEDS. The Company represents that the net
proceeds from this offering will be used as provided on Schedule 4.23. However,
in no event shall the net proceeds from this offering be used by the Company for
the payment (or loaned to any such person for the payment) of any judgment, or
other liability, incurred by any executive officer, officer, director, or
employee of the Company.
Section 4.24 FURTHER REPRESENTATION AND WARRANTIES OF THE COMPANY. For
so long as any securities issuable hereunder held by the Investor remain
outstanding, the Company acknowledges, represents, warrants and agrees that it
will use commercially reasonable efforts to maintain the listing of its Common
Stock on NASD Bulletin Board and/or the NASDAQ Small Cap Stock Market and/or the
American Stock Exchange.
Section 4.25 OPINION OF COUNSEL. Investor shall receive an opinion
letter from counsel to the Company (updated where applicable) on the date hereof
and on each Advance Date substantially to the effect that:
(a) The Company is incorporated and validly existing in the
jurisdiction of its incorporation. The Company and/or its subsidiaries are duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where, to such counsel's knowledge, the Company and/or its
subsidiaries owns or leases properties, maintains employees or conducts
business, except for jurisdictions in which the failure to so qualify would not
have a material adverse effect on the Company, and has all requisite corporate
power and authority to own its properties and conducts its business.
(b) To such counsel's knowledge, there is no action,
proceeding or investigation pending, or threatened against the Company which
might result, either individually or in the aggregate, in any material adverse
change in the business or financial condition of the Company, except as has been
described in the SEC Documents.
(c) To such counsel's knowledge, the Company is not a party to
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality, except as has been
described in the SEC Documents.
(d) To such counsel's knowledge, there is no action, suit,
proceeding or investigation by the Company currently pending, except as has been
described in the SEC Documents.
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(e) The shares of Common Stock issuable pursuant to this
Agreement have been duly authorized and upon issuance will be validly issued
under the laws of the Company's state of incorporation.
(f) This Agreement and the shares of Common Stock issuable
pursuant to this Agreement have been duly approved by all required corporate
action and all such securities, upon full payment therefor in accordance with
the terms of this Agreement shall, upon execution and delivery thereof shall be
validly issued and outstanding, fully paid and nonassessable.
(g) The issuance of the shares of Common Stock will not
violate the applicable listing agreement between the Company and any securities
exchange or market on which the Company's securities are listed.
(h) The authorized capital stock of the Company consists of
1,000,000,000 shares of Common Stock, $0.00001 par value per share, of which
360,841,465 are outstanding.
(i) The Common Stock is registered pursuant to Section 12(b)
or Section 12(g) of the Securities Exchange Act of 1934, as amended, and, to
such counsel's knowledge, the Company has timely, subject to permitted
extensions, filed all the reports (without confirming as to the completeness or
accuracy of such reports) required to be filed pursuant to Sections 13(a) or
15(d) of such Act for a period of at least twelve months preceding the date
hereof.
(j) The Company and its subsidiaries own or possess adequate
rights or licenses to use all trademarks, trade names, service marks, service
xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now conducted. Except
as described in Schedule 4.9, counsel does not have any knowledge of any
infringement by the Company or its subsidiaries of trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service xxxx registrations, trade secret or other similar rights of
others, and, to the knowledge of counsel, after due inquiry, there is no claim,
action or proceeding being made or brought against, or to counsel's knowledge,
being threatened against, the Company or its subsidiaries regarding trademark,
trade name, patents, patent rights, invention, copyright, license, service
names, service xxxx, service xxxx registrations, trade secret or other
infringement; and counsel is unaware of any facts or circumstances which might
give rise to any of the foregoing.
(k) The Company has the requisite corporate power and
authority to enter into the Agreement, the Registration Rights Agreement and the
Escrow Agreement and to sell and deliver the Common Stock to be issued pursuant
to this Agreement, as the case may be, as described in the Agreement; each of
the Agreement, the Registration Rights Agreement and the Escrow Agreement has
been duly and validly authorized by all necessary corporate action by the
Company; no approval of any governmental or other body is required for the
execution and delivery of each of the Agreement, the Registration Rights
Agreement or the Escrow Agreement by the Company or the consummation of the
transactions contemplated thereby; each of the Agreement, Registration Rights
Agreement and the Escrow Agreement has been duly and validly executed and
delivered by and on behalf of the Company, and is a valid and binding agreement
of the Company, enforceable in accordance with its terms, except as (i)
enforceability may be limited by general equitable principles,
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bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other laws affecting creditors rights generally, (ii) to compliance with
federal, state and foreign securities laws and (iii) to provisions providing for
indemnification or contribution, in each case, as to which no opinion is
expressed.
(l) The execution, delivery and performance of the Agreement,
the Registration Rights Agreement and the Escrow Agreement by the Company and
the performance of its obligations thereunder do not and will not constitute a
breach or violation of any of the terms and provisions of, or constitute a
default under or conflict with or violate any provision to our knowledge of (i)
the Company's Certificate of Incorporation or By-Laws, (ii) any indenture,
mortgage, deed of trust, agreement or other instrument to which the Company is a
party or by which it or any of its property is bound, (iii) any applicable
statute or regulation, (iv) or any judgment, decree or other order of any court
or governmental body having jurisdiction over the Company or any of its
property.
(m) Based upon communications received from the Securities and
Exchange Commission, the Registration Statement has become effective under the
Securities Act and, to our knowledge, no stop order denying or suspending the
effectiveness of the Registration Statement is in effect and no proceedings for
that or any similar purpose have been instituted or are pending before or
threatened by the SEC; and
(n) The Registration Statement and the prospectus which forms
a part of the Registration Statement (except for the financial statements, notes
thereto and other financial information and statistical data contained therein,
as to which we express no opinion) comply as to form in all material respects
with the Securities Act and the Rules and Regulations promulgated under the
Securities Act, and the Registrable Securities may be sold in accordance with
the Registration Statement.
Section 4.26 DILUTION. The Company is aware and acknowledges that
issuance of shares of the Company's Common Stock could cause dilution to
existing shareholders and could significantly increase the outstanding number of
shares of Common Stock.
ARTICLE V
INDEMNIFICATION
The Investor and the Company represent to the other the following with
respect to itself:
Section 5.1 INDEMNIFICATION. (a) In consideration of the Investor's
execution and delivery of this Agreement, and in addition to all of the
Company's other obligations under this Agreement, the Company shall defend,
protect, indemnify and hold harmless the Investor(s), and all of their officers,
directors, employees and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Investor Indemnitees") from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Investor Indemnitee is a party to the action for which indemnification hereunder
is sought), and
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including reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by the Investor Indemnitees or any of them as a result
of, or arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement or the Registration Rights
Agreement or any other certificate, instrument or document contemplated hereby
or thereby, or (c) any cause of action, suit or claim brought or made against
such Indemnitee and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other instrument, document
or agreement executed pursuant hereto by any of the Indemnitees. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
(b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Investor's other obligations under this
Agreement, the Investor shall defend, protect, indemnify and hold harmless the
Company and all of it's officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Company Indemnitees") from
and against any and all Indemnified Liabilities incurred by the Indemnitees or
any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Investor(s) in this Agreement or any instrument or document contemplated hereby
or thereby executed by the Investor, (b) any breach of any covenant, agreement
or obligation of the Investor(s) contained in this Agreement, the Registration
Rights Agreement or any other certificate, instrument or document contemplated
hereby or thereby executed by the Investor, or (c) any cause of action, suit or
claim brought or made against such Company Indemnitee based on material
misrepresentations or due to a material breach and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement or
any other instrument, document or agreement executed pursuant hereto by any of
the Company Indemnitees. To the extent that the foregoing undertaking by the
Investor may be unenforceable for any reason, the Investor shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 REGISTRATION RIGHTS. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all material respects with the terms thereof.
Section 6.2 LISTING OF COMMON STOCK. The Company shall maintain the
Common Stock's authorization for quotation on the NASD's OTC Bulletin Board.
Section 6.3 EXCHANGE ACT REGISTRATION. The Company will cause its
Common Stock to continue to be registered under Section 12(g) of the Exchange
Act, will file in a timely manner all reports and other documents required of it
as a reporting company under the Exchange Act and will
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not take any action or file any document (whether or not permitted by Exchange
Act or the rules thereunder to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under said Exchange
Act.
Section 6.4 TRANSFER AGENT INSTRUCTIONS. Upon each Closing and the
effectiveness of the Registration Statement the Company will deliver
instructions to its transfer agent to issue to Investor shares of Common Stock
free of legends.
Section 6.5 CORPORATE EXISTENCE. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.
Section 6.6 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION
OF RIGHT TO MAKE AN ADVANCE. The Company will immediately notify the Investor
upon its becoming aware of the occurrence of any of the following events in
respect of a registration statement or related prospectus relating to an
offering of Registrable Securities: (i) receipt of any request for additional
information by the SEC or any other Federal or state governmental authority
during the period of effectiveness of the Registration Statement for amendments
or supplements to the registration statement or related prospectus; (ii) the
issuance by the SEC or any other Federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus of any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
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; and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate; and the Company
will promptly make available to the Investor any such supplement or amendment to
the related prospectus. The Company shall not deliver to the Investor any
Advance Notice during the continuation of any of the foregoing events.
Section 6.7 CONSOLIDATION; MERGER. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all the assets of the Company to
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investor such shares of stock and/or securities as
the Investor is entitled to receive pursuant to this Agreement.
Section 6.9 ISSUANCE OF THE COMPANY'S COMMON STOCK. The sale of the
shares of Common Stock shall be made in accordance with the provisions and
requirements of Regulation D and any applicable state securities law.
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ARTICLE VII
CONDITIONS FOR ADVANCE AND CONDITIONS TO CLOSING
Section 7.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The
obligation hereunder of the Company to issue and sell the shares of Common Stock
to the Investor incident to each Closing is subject to the satisfaction, or
waiver by the Company, at or before each such Closing, of each of the conditions
set forth below.
(a) ACCURACY OF THE INVESTOR'S REPRESENTATION AND WARRANTIES.
The representations and warranties of the Investor shall be true and correct in
all material respects as of the date of this Agreement and as of the date of
each such Closing as though made at each such time.
(b) PERFORMANCE BY THE INVESTOR. The Investor 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 Investor at or prior to such Closing.
Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER
AN ADVANCE NOTICE AND THE OBLIGATION OF THE INVESTOR TO PURCHASE SHARES OF
COMMON STOCK. The right of the Company to deliver an Advance Notice and the
obligation of the Investor hereunder to acquire and pay for shares of the
Company's Common Stock incident to a Closing is subject to the satisfaction or
waiver by the Investor, on (i) the date of delivery of such Advance Notice and
(ii) the applicable Advance Date (each a "Condition Satisfaction Date"), of each
of the following conditions:
(a) REGISTRATION OF THE COMMON STOCK WITH THE SEC. The Company
shall have filed with the SEC a Registration Statement with respect to the
resale of the Registrable Securities in accordance with the terms of the
Registration Rights Agreement. As set forth in the Registration Rights
Agreement, the Registration Statement shall have previously become effective and
shall remain effective on each Condition Satisfaction Date and (i) neither the
Company nor the Investor shall have received notice that the SEC has issued or
intends to issue a stop order with respect to the Registration Statement or that
the SEC otherwise has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently, or intends or has
threatened to do so (unless the SEC's concerns have been addressed and the
Investor is reasonably satisfied that the SEC no longer is considering or
intends to take such action), and (ii) no other suspension of the use or
withdrawal of the effectiveness of the Registration Statement or related
prospectus shall exist. The Registration Statement must have been declared
effective by the SEC prior to the first Advance Notice Date.
(b) AUTHORITY. The Company shall have obtained all permits and
qualifications required by any applicable state in accordance with the
Registration Rights Agreement for the offer and sale of the shares of Common
Stock, or shall have the availability of exemptions therefrom. The sale and
issuance of the shares of Common Stock shall be legally permitted by all laws
and regulations to which the Company is subject.
(c) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company shall be true and correct in
all material respects as
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of each Condition Satisfaction Date as though made at each such time (except for
representations and warranties specifically made as of a particular date) with
respect to all periods, and as to all events and circumstances occurring or
existing to and including each Condition Satisfaction Date.
(d) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to each Condition Satisfaction Date.
(e) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits or directly and adversely affects any of the
transactions contemplated by this Agreement, and no proceeding shall have been
commenced that may have the effect of prohibiting or adversely affecting any of
the transactions contemplated by this Agreement.
(f) ADVERSE CHANGES. Since the date of filing of the Company's
most recent SEC Document, no event that had or is reasonably likely to have a
Material Adverse Effect has occurred.
(g) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK.
The trading of the Common Stock is not suspended by the SEC or the Principal
Market (if the Common Stock is traded on a Principal Market). The issuance of
shares of Common Stock with respect to the applicable Closing, if any, shall not
violate the shareholder approval requirements of the Principal Market (if the
Common Stock is traded on a Principal market). The Company shall not have
received any notice threatening the continued listing of the Common Stock on the
Principal Market (if the Common Stock is traded on a Principal Market).
(h) MAXIMUM ADVANCE AMOUNT. The amount of the advance
requested by the Company does not exceed the Maximum Advance Amount.
(i) NO KNOWLEDGE. The Company has no knowledge of any event
more likely than not to have the effect of causing such Registration Statement
to be suspended or otherwise ineffective.
(j) PURCHASE PRICE. The Bid Price on the Advance Notice Date
shall not be less than the Purchase Price.
(k) OTHER. On each Condition Satisfaction Date, the Investor
shall have received and been reasonably satisfied with such other certificates
and documents as shall have been reasonably requested by the Investor in order
for the Investor to confirm the Company's satisfaction of the conditions set
forth in this Section 7.2, including, without limitation, a certificate executed
by an executive officer of the Company and to the effect that all the conditions
to such Closing shall have been satisfied as at the date of each such
certificate substantially in the form annexed hereto on Exhibit B.
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ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION
Section 8.1 DUE DILIGENCE REVIEW. Prior to the filing of the
Registration Statement the Company shall make available for inspection and
review by the Investor, advisors to and representatives of the Investor, any
underwriter participating in any disposition of the Registrable Securities on
behalf of the Investor pursuant to the Registration Statement, any such
registration statement or amendment or supplement thereto or any blue sky, NASD
or other filing, all financial and other records, all SEC Documents and other
filings with the SEC, and all other corporate documents and properties of the
Company as may be reasonably necessary for the purpose of such review, and cause
the Company's officers, directors and employees to supply all such information
reasonably requested by the Investor or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investor and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
Section 8.2 NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
(a) The Company shall not disclose non-public information to
the Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require the Investor's advisors and
representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investor.
(b) Nothing herein shall require the Company to disclose
non-public information to the Investor or its advisors or representatives, and
the Company represents that it does not disseminate non-public information to
any investors who purchase stock in the Company in a public offering, to money
managers or to securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided,
immediately notify the advisors and representatives of the Investor and, if any,
underwriters, of any event or the existence of any circumstance (without any
obligation to disclose the specific event or circumstance) of which it becomes
aware, constituting non-public information (whether or not requested of the
Company specifically or generally during the course of due diligence by such
persons or entities), which, if not disclosed in the prospectus included in the
Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements, therein, in light of the circumstances in which they
were made, not misleading. Nothing contained in this Section 8.2 shall be
construed to mean that such persons or entities other than the Investor (without
the written consent of the Investor prior to disclosure of such information) may
not obtain non-public information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent any
such persons or entities from notifying the Company of their opinion that based
on such due diligence by such persons or entities,
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that the Registration Statement contains an untrue statement of material fact or
omits a material fact required to be stated in the Registration Statement or
necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE IX
CHOICE OF LAW/JURISDICTION
Section 9.1 GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
ARTICLE X
ASSIGNMENT; TERMINATION
Section 10.1 ASSIGNMENT. Neither this Agreement nor any rights of the
Company hereunder may be assigned to any other Person. The provisions of this
Agreement shall inure to the benefit of, and be enforceable by, any transferee
of the Investor. The Investor's interest in this Agreement may be assigned at
any time, in whole or in part, to any other person or entity (including any
affiliate of the Investor) who agrees to make the representations and warranties
contained in Article III and who agrees to be bound by the covenants of Article
V. Notwithstanding the foregoing, the Investor shall not be released from its
obligations hereunder upon any assignment of this Agreement.
Section 10.2 TERMINATION. The obligations of the Investor to make
Advances under Article II
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hereof shall terminate 30 months after the date hereof.
ARTICLE XI
NOTICES
Section 11.1 NOTICES. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one business day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
ADVANCED VIRAL RESEARCH CORP.
000 Xxxxxxxxx Xxxxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx, M.D.
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy to:
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to an Investor, to its address and facsimile number on the Schedule of
Investors attached hereto, with copies to such Investor's representatives as set
forth on the Schedule of Investors or to such other address and/or facsimile
number and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
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ARTICLE XII
MISCELLANEOUS
Section 12.1 COUNTERPARTS. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof
Section 12.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes
all other prior oral or written agreements between the Investor(s), the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
Section 12.3 REPORTING ENTITY FOR THE COMMON STOCK. The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of
the Investor and the Company shall be required to employ any other reporting
entity.
Section 12.4 FEES AND EXPENSES. The Company hereby agrees to pay the
following fees:
(a) LEGAL FEES. Each of the parties shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby, except that on the date hereof, the Company will pay the
legal fees of up to Thirty Five Thousand ($35,000) Dollars, to Xxxxxxxxx,
Xxxxxxx & Xxxxxxx, P.C. Subsequently on each Advance Date, the Company will pay
Xxxxxxxxx, Xxxxxxx & Xxxxxxx, P.C. the sum of One Thousand Five Hundred ($1,500)
Dollars for escrow fees.
(b) PLACEMENT AGENT FEES. On each Advance Date the Company
shall pay the May Xxxxx Group, Inc.,an amount equal to five (5%) percent of the
amount of the Advance to May Xxxxx Group, Inc. or as otherwise legally directed
by May Xxxxx Group, Inc. The Company hereby agrees that if such payment, as is
described above, is not made by the Company on the Advance Date, such payment
will be made at the direction of the Investor as outlined and mandated by
Section 2.3 of this Agreement.
Section 12.5 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 the Placement Agent. The Company on the one hand, and the Investor,
on the other hand, agree to indemnify the other against and hold the other
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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.
Section 12.6 CONFIDENTIALITY. If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties hereto
shall keep confidential any information obtained from any other party (except
information publicly available or in such party's domain prior to the date
hereof, and except as required by court order) and shall promptly return to the
other parties all schedules, documents, instruments, work papers or other
written information without retaining copies thereof, previously furnished by it
as a result of this Agreement or in connection herein.
Section 12.7 REMEDIES.
(a) In the event of either party's failure to perform under
this Agreement, the parties shall have the right to enforce specific performance
under this Agreement together with other damages available at law or in equity.
Notwithstanding the foregoing, the Investor shall in no event be liable for
consequential or punitive damages in connection with this Agreement or the
transactions contemplated hereby.
(b) The prevailing party in any dispute shall be entitled to
reasonable attorneys' fees.
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IN WITNESS WHEREOF, the parties hereto have caused this Line of Credit
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
COMPANY:
ADVANCED VIRAL RESEARCH CORP.
By:
----------------------------------
Name:
Title:
INVESTOR:
SPINNERET FINANCIAL SYSTEMS, INC.
By:
----------------------------------
Name:
Title:
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EXHIBIT A
SCHEDULE OF INVESTORS
Spinneret Financial Systems, Inc.
000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxx, XX 00000
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EXHIBIT B
ADVANCE NOTICE/COMPLIANCE CERTIFICATE
ADVANCED VIRAL RESEARCH CORP.
The undersigned, ________________________________ hereby certifies,
with respect to the sale of shares of Common Stock of Advanced Viral Research
Corp. ( the "Company") issuable in connection with this Advance Notice and
Compliance Certificate dated ___________________ (the "Notice"), delivered
pursuant to the Equity Line Of Credit Agreement (the "Agreement"), as follows:
1. The undersigned is the duly elected Chief Executive Officer of
the Company.
2. The representations and warranties of the Company set forth in
the Agreement dated as of ___________________ are true and
correct in all material respects as though made on and as of
the date hereof.
3. The Company has performed in all material respects all
covenants and agreements to be performed by the Company on or
prior to the Advance Date related to the Notice and has
complied in all material respects with all obligations and
conditions contained in the Agreement.
4. The Advance requested is _____________________.
The undersigned has executed this Certificate this ____ day of
_________________.
ADVANCED VIRAL RESEARCH CORP.
By:
---------------------------
Name:
Title:
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SCHEDULE 2.7(b)
ADVANCED VIRAL RESEARCH CORP.
The undersigned hereby agrees that for a period commencing on the date
hereof and expiring on the termination of the Equity Line of Credit Agreement
(the "Agreement") dated September ___, 2000 between Advanced Viral Research
Corp. (the "Company") and Spinneret Financial Systems, Inc. (the "Investor")
(the "Lock-up Period"), he, she or it will not, directly or indirectly, without
the prior written consent of the Investor, issue, offer, agree or offer to sell,
sell, grant an option for the purchase or sale of, transfer, pledge, assign,
hypothecate, distribute or otherwise encumber or dispose of (whether pursuant to
Rule 144 of the General Rules and Regulations under the Securities Act of 1933,
as amended, or otherwise) any shares of Common Stock, including options, rights,
warrants or other securities underlying, convertible into, exchangeable or
exercisable for or evidencing any right to purchase or subscribe for any common
stock (whether or not beneficially owned by the undersigned), or any beneficial
interest therein (collectively, the "Securities") for a period of 10 Trading
Days following the receipt of an Advance Notice by the Investor, as such terms
are defined in the Agreement.
In order to enable the aforesaid covenants to be enforced, the
undersigned hereby consents to the placing of legends and/or stop-transfer
orders with the transfer agent of the Company's securities with respect to any
of the Securities registered in the name of the undersigned or beneficially
owned by the undersigned, and the undersigned hereby confirms the undersigned's
investment in the Company.
This Agreement shall expire upon the death of the undersigned.
Dated: _______________, 2000
Signature
------------------------------
Address:
City, State, Zip Code:
------------------------------
Print Social Security Number
or Taxpayer I.D. Number
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