SECURITIES PURCHASE AGREEMENT
Exhibit
10.1
THISSECURITIES
PURCHASE AGREEMENT
(this “Agreement”), dated
as
of January 3, 2008, by and among IR BIOSCIENCES HOLDINGS,
INC.,
a Delaware corporation (the “Company”), and the
Buyers listed on Schedule I attached hereto (individually, a “Buyer” or
collectively “Buyers”).
WITNESSETH
WHEREAS,
the Company and the
Buyer(s) are executing and delivering this Agreement in reliance upon an
exemption from securities registration pursuant to Section 4(2) and/or
Rule 506 of Regulation D (“Regulation D”) as
promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the
Securities Act of 1933, as amended (the “Securities
Act”);
WHEREAS,
the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall issue and sell to the Buyer(s), as provided herein, and the Buyer(s)
shall
purchase (i) up to Three Million Dollars ($3,000,000) of secured convertible
debentures in the form attached hereto as “Exhibit A” (the
“Convertible
Debentures”), which shall be convertible into shares of the Company’s
common stock, par value $0.001 (the “Common Stock”) (as
converted, the “Conversion Shares”),
and (ii) warrants substantially in the form attached hereto as “Exhibit B” (the
“Warrants”),
to
acquire up to that number of additional shares of Common Stock set forth
opposite such Buyer’s name on Schedule I (as exercised, the “Warrant Shares”) of
which Two Million Dollars ($2,000,000) shall be funded within five (5) business
day following the date hereof (the “First Closing”) and
the Company shall have the right (subject to the satisfaction of certain
conditions) to issue and sell to the Buyers an additional One Million Dollars
($1,000,000) on the six month anniversary of the date hereof (the “Second Closing”)
(individually referred to as a “Closing” collectively
referred to as the “Closings”), for a
total purchase price of up to Three Million Dollars ($3,000,000), (the “Purchase Price”) in
the respective amounts set forth opposite each Buyer(s) name on Schedule I
(the
“Subscription
Amount”);
WHEREAS,
contemporaneously with the execution
and delivery of this Agreement, (i) the Buyer, the Company, and each
subsidiary of the Company are executing and delivering a Security Agreement
(the
“Security
Agreement”) pursuant to which the Company and its wholly owned
subsidiaries agree to provide the Buyer a security interest in Pledged Property
(as this term is defined in the Security Agreement), (ii) the Buyer, the
Company, and each subsidiary of the Company are executing and delivering a
Patent Security Agreement (the “Patent Security
Agreement”) pursuant to which the Company and its wholly owned
subsidiaries agree to provide the Buyer a security interest in Patent Collateral
(as this term is defined in the Patent Security Agreement), and (iii) each
subsidiary of the Company is executing and delivering a Guaranty dated the
date
hereof (the “Guaranty” and
collectively with the Security Agreement and the Patent Security Agreement,
the
“Security
Documents”) in favor of the Buyer;
WHEREAS,
contemporaneously
with the execution and delivery of this Agreement, the Company is delivering
Irrevocable Transfer Agent Instructions (the “Irrevocable Transfer
Agent
Instructions”) to the Company’s transfer agent, which will acknowledge
and execute such instructions upon receipt, and the parties hereto are entering
into an agreement (the “Transfer Instructions
Agreement”) with respect to the Irrevocable
Transfer Agent
Instructions; and
WHEREAS,
the Convertible
Debentures, the Conversion Shares, the Warrants, and the Warrants Shares
collectively are referred to herein as the “Securities”).
NOW,
THEREFORE, in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Buyer(s) hereby agree as follows:
1. PURCHASE
AND SALE OF
CONVERTIBLE DEBENTURES.
(a) Purchase
of Convertible
Debentures. Subject to the satisfaction (or waiver) of the
terms and conditions of this Agreement, the Buyer agrees to purchase at the
First Closing and the Company agrees to sell and issue to the Buyer at the
First
Closing, Convertible Debentures in amounts corresponding with the Subscription
Amount set forth opposite each Buyer’s name on Schedule I hereto and the
Warrants to acquire up that number of Warrant Shares as set forth opposite
the
Buyer’s name on Schedule I. Subject to the satisfaction (or waiver)
of the terms and conditions of this Agreement, the Company at its sole option
may elect to sell and issue to the Buyer at the Second Closing, and the Buyer
agrees to purchase at the Second Closing, Convertible Debentures in amounts
corresponding with the Subscription Amount set forth opposite the Buyer’s name
on Schedule I hereto by providing the Buyer with fifteen business days’ advance
written notice that it wishes to exercise such option.
(b) Closing
Dates. The First Closing of the purchase and sale of the
Convertible Debentures and Warrants shall take place at 10:00 a.m. Eastern
Standard Time on the fifth (5th)
business day following the date hereof, subject to notification of satisfaction
of the conditions to the First Closing set forth herein and in Sections 6 and
7
below (or such later date as is mutually agreed to by the Company and the Buyer)
(the “First Closing
Date”) and, if the Company exercises its option with respect to the
Second Closing, the Second Closing of the purchase and sale of the Convertible
Debentures shall take place at 4:00 p.m. Eastern Standard Time on the six month
anniversary of the date hereof, subject to notification of satisfaction of
the
conditions to the Second Closing set forth herein and in Sections 6 and 7 below
(or such later date as is mutually agreed to by the Company and the Buyer)
(the
“Second Closing
Date”) (collectively referred to a the “Closing
Dates”). The Closings shall occur on the respective Closing
Dates at the offices of Yorkville Advisors, LLC, 0000 Xxxxxx Xxxxxx, Xxxxx
0000,
Xxxxxx Xxxx, Xxx Xxxxxx 00000 (or such other place as is mutually agreed to
by
the Company and the Buyer(s)).
(c) Form
of
Payment. Subject to the satisfaction of the terms and
conditions of this Agreement, on each Closing Date, (i) the Buyers shall deliver
to the Company such aggregate proceeds for the Convertible Debentures and
Warrants to be issued and sold to such Buyer at such Closing, minus the fees
to
be paid directly from the proceeds of such Closing as set forth herein, and
(ii) the Company shall deliver to each Buyer, Convertible Debentures and
Warrants which such Buyer is purchasing at such Closing in amounts indicated
opposite such Buyer’s name on Schedule I, duly executed on behalf of the
Company.
2. BUYER’S
REPRESENTATIONS AND
WARRANTIES.
Each
Buyer represents and warrants, severally and not jointly, that:
(a) Investment
Purpose. Each Buyer is acquiring the Securities for its own
account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the Securities Act; provided, however, that
by making the representations herein, such Buyer reserves the right to dispose
of the Securities at any time in accordance with or pursuant to an effective
registration statement covering such Securities or an available exemption under
the Securities Act. Such Buyer does not presently have any agreement
or understanding, directly or indirectly, with any Person to distribute any
of
the Securities.
(b) Accredited
Investor
Status. Each Buyer is an “Accredited
Investor”
as that term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance
on
Exemptions. Each Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws
and
that the Company is relying in part upon the truth and accuracy of, and such
Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order
to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
(d) Information. Each
Buyer and its advisors (and his or, its counsel), if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and information he deemed material to making an informed investment
decision regarding his purchase of the Securities, which have been requested
by
such Buyer. Each Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and its
management. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer’s right to rely on the
Company’s representations and warranties contained in Section 3
below. Each Buyer understands that its investment in the Securities
involves a high degree of risk. Each Buyer is in a position regarding
the Company, which, based upon employment, family relationship or economic
bargaining power, enabled and enables such Buyer to obtain information from
the
Company in order to evaluate the merits and risks of this
investment. Each Buyer has sought such accounting, legal and tax
advice, as it has considered necessary to make an informed investment decision
with respect to its acquisition of the Securities.
(e) No
Governmental
Review. Each Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on
or
made any recommendation or endorsement of the Securities, or the fairness or
suitability of the investment in the Securities, nor have such authorities
passed upon or endorsed the merits of the offering of the
Securities.
(f) Transfer
or
Resale. Each Buyer understands that: (i) the Securities have
not been and are not being registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) such Buyer shall have
delivered to the Company an opinion of counsel, in a generally acceptable form,
to the effect that such Securities to be sold, assigned or transferred may
be
sold, assigned or transferred pursuant to an exemption from such registration
requirements, or (C) such Buyer provides the Company with reasonable assurances
(in the form of seller and broker representation letters) that such Securities
can be sold, assigned or transferred pursuant to Rule 144, Rule 144(k), or
Rule
144A promulgated under the Securities Act, as amended (or a successor rule
thereto) (collectively, “Rule 144”), in each
case following the applicable holding period set forth therein; (ii) any sale
of
the Securities made in reliance on Rule 144 may be made only in accordance
with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale
of
the Securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that
term
is defined in the Securities Act) may require compliance with some other
exemption under the Securities Act or the rules and regulations of the SEC
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register the Securities under the Securities Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.
(g) Legends. Each
Buyer agrees to the imprinting, so long as is required by this Section 2(g),
of
a restrictive legend in substantially the following form:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS.
Certificates
evidencing the Conversion Shares or Warrant Shares shall not contain any legend
(including the legend set forth above), (i) while a registration statement
covering the resale of such security is effective under the Securities Act,
(ii)
following any sale of such Conversion Shares or Warrant Shares pursuant to
Rule
144, (iii) if such Conversion Shares or Warrant Shares are eligible for sale
under Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the SEC). The Company shall
cause its counsel to issue a legal opinion to the Company’s transfer agent
promptly after the effective date (the “Effective Date”) of a
registration statement if required by the Company’s transfer agent to effect the
removal of the legend hereunder. If all or any portion of the
Convertible Debentures or Warrants are exercised by a Buyer that is not an
Affiliate of the Company (a “Non-Affiliated
Buyer”) at a time when there is an effective registration statement to
cover the resale of the Conversion Shares or the Warrant Shares, such Conversion
Shares or Warrant Shares shall be issued free of all legends. The
Company agrees that following the Effective Date or at such time as such legend
is no longer required under this Section 2(g), it will, no later than three
(3)
Trading Days following the delivery by a Non-Affiliated Buyer to the Company
or
the Company’s transfer agent of a certificate representing Conversion Shares or
Warrant Shares, as the case may be, issued with a restrictive legend (such
third
Trading Day, the “Legend Removal
Date”), deliver or cause to be delivered to such Non-Affiliated Buyer a
certificate representing such shares that is free from all restrictive and
other
legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section. Each Buyer acknowledges that
the Company’s agreement hereunder to remove all legends from Conversion Shares
or Warrant Shares is not an affirmative statement or representation that such
Conversion Shares or Warrant Shares are freely tradable. Each Buyer,
severally and not jointly with the other Buyers, agrees that the removal of
the
restrictive legend from certificates representing Securities as set forth in
this Section 3(g) is predicated upon the Company’s reliance that the buyer will
sell any Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery requirements,
or an
exemption therefrom, and that if Securities are sold pursuant to a registration
statement, they will be sold in compliance with the plan of distribution set
forth therein.
(h) Authorization,
Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and is a valid and
binding agreement of such Buyer enforceable in accordance with its terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.
(i) Receipt
of
Documents. Each Buyer and his or its counsel has received and
read in their entirety: (i) this Agreement and each representation,
warranty and covenant set forth herein and the Transaction Documents (as defined
herein); (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/A for the fiscal year ended December 31, 2006;
(iv) the Company’s Form 10-QSB for the fiscal quarter ended September 30, 2007
and (v) answers to all questions each Buyer submitted to the Company regarding
an investment in the Company; and each Buyer has relied on the information
contained therein and has not been furnished any other documents, literature,
memorandum or prospectus.
(j) Due
Formation of Corporate
and Other Buyers. If the Buyer(s) is a corporation, trust,
partnership or other entity that is not an individual person, it has been formed
and validly exists and has not been organized for the specific purpose of
purchasing the Securities and is not prohibited from doing so.
(k) No
Legal Advice From the
Company. Each Buyer acknowledges, that it had the opportunity
to review this Agreement and the transactions contemplated by this Agreement
with his or its own legal counsel and investment and tax
advisors. Each Buyer is relying solely on such counsel and advisors
and not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect
to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
3. REPRESENTATIONS
AND
WARRANTIES OF THE COMPANY.
Except
as
set forth under the corresponding section of the Disclosure Schedules which
Disclosure Schedules shall be deemed a part hereof and to qualify any
representation or warranty otherwise made herein to the extent of such
disclosure, the Company hereby makes the representations and warranties set
forth below to each Buyer:
(a) Subsidiaries. All
of the direct and indirect subsidiaries of the Company are set forth on Schedule
3(a). The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each subsidiary free and clear of
any
liens, and all the issued and outstanding shares of capital stock of each
subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities.
(b) 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 or reasonably be expected to
result in (i) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material adverse effect
on
the results of operations, assets, business or condition (financial or
otherwise) of the Company and the subsidiaries, taken as a whole, or (iii)
a
material adverse effect on the Company’s ability to perform in any material
respect on a timely basis its obligations under any Transaction Document (any
of
(i), (ii) or (iii), a “Material Adverse
Effect”) and no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification..
(c) Authorization,
Enforcement,
Compliance with Other Instruments. (i) The Company has
the requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Convertible Debentures, the Warrants,
the
Security Documents, the Irrevocable Transfer Agent Instructions, the Transfer
Instructions Agreement, and each of the other agreements entered into by the
parties hereto in connection with the transactions contemplated by this
Agreement (collectively the “Transaction
Documents”) and to issue the Securities in accordance with the terms
hereof and thereof, (ii) the execution and delivery of the Transaction Documents
by the Company and the consummation by it of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of the
Securities, the reservation for issuance and the issuance of the Conversion
Shares, and the reservation for issuance and the issuance of the Warrant Shares,
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) the Transaction Documents have been duly executed and
delivered by the Company, (iv) the Transaction Documents constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and
remedies. The authorized officer of the Company executing the
Transaction Documents knows of no reason why the Company cannot perform any
of
the Company’s obligations under the Transaction Documents.
(d) Capitalization. The
authorized capital stock of the Company consists of 250,000,000 shares of Common
Stock and 10,000,000 shares of Preferred Stock, par value $0.001 (“Preferred Stock”) of
which 114,322,539 shares of Common Stock
and zero shares of Preferred Stock are issued and outstanding. All of
the outstanding shares of capital stock of the Company are validly issued,
fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. Except as disclosed in Schedule 3(d) or in the
Company’s filings with the SEC,: (i) none of the Company's capital stock is
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company; (ii) 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,
or
exercisable or exchangeable for, any 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 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, or exercisable
or exchangeable for, any capital stock of the Company or any of its
subsidiaries; (iii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing indebtedness of the Company or any of its subsidiaries or by which
the Company or any of its subsidiaries is or may become bound; (iv) there are
no
financing statements securing obligations in any material amounts, either singly
or in the aggregate, filed in connection with the Company or any of its
subsidiaries; (v) there are no outstanding securities or instruments of the
Company or any of its subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to redeem a security of the Company or any of its subsidiaries; (vi)
there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities; (vii) the Company
does
not have any stock appreciation rights or "phantom stock" plans or agreements
or
any similar plan or agreement; and (viii) the Company and its subsidiaries
have
no liabilities or obligations required to be disclosed in the SEC Documents
but
not so disclosed in the SEC Documents, other than those incurred in the ordinary
course of the Company's or its subsidiaries' respective businesses and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect. The Company has furnished to the Buyers true, correct and
complete copies of the Company's Certificate of Incorporation, as amended and
as
in effect on the date hereof (the “Certificate of
Incorporation”), and the Company's Bylaws, as amended and as in effect on
the date hereof (the “Bylaws”), and the
terms of all securities convertible into, or exercisable or exchangeable for,
shares of Common Stock and the material rights of the holders thereof in respect
thereto. No further approval or authorization of any stockholder, the
Board of Directors of the Company or others is required for the issuance and
sale of the Securities. There are no stockholders agreements, voting
agreements or other similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s stockholders.
(e) Issuance
of
Securities. The issuance of the Convertible Debentures and the
Warrants is duly authorized and free from all taxes, liens and charges with
respect to the issue thereof. Upon conversion in accordance with the
terms of the Convertible Debentures or exercise in accordance with the Warrants,
as the case may be, the Conversion Shares and Warrant Shares, respectively,
when
issued will be validly issued, fully paid and nonassessable, free from all
taxes, liens and charges with respect to the issue thereof. The
Company has reserved from its duly authorized capital stock the appropriate
number of shares of Common Stock as set forth in this Agreement.
(f) No
Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company
of
the transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Convertible Debentures and the Warrants, and reservation
for
issuance and issuance of the Conversion Shares and the Warrant Shares) will
not
(i) result in a violation of any certificate of incorporation, certificate
of
formation, any certificate of designations or other constituent documents of
the
Company or any of its subsidiaries, any capital stock of the Company or any
of
its subsidiaries or bylaws of the Company or any of its subsidiaries or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) in any respect 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 (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including foreign, federal and state
securities laws and regulations and the rules and regulations of the National
Association of Securities Dealers Inc.’s OTC Bulletin Board) 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 in the case
of
each of clauses (ii) and (iii), such as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted in violation of any material law,
ordinance, or regulation of any governmental entity violation of which would
have a Material Adverse Effect. 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 in accordance with the
terms
hereof. 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.
(g) SEC
Documents; Financial
Statements. Except as disclosed on Schedule 3(g), the Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC under the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), for the two years preceding the date hereof (or such shorter
period as the Company was required by law or regulation to file such material)
(all of the foregoing filed prior to the date hereof or amended after the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein, being hereinafter
referred to as the “SEC Documents”) on
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Document prior to the expiration of any such
extension. Except as disclosed on Schedule 3(g), all of the Company’s
SEC Documents have been amended to respond to all written comment letters
received by the Company from the SEC relating to the SEC
Documents. The Company has delivered to the Buyers or their
representatives, or made available through the SEC’s website at
xxxx://xxx.xxx.xxx., true and complete copies of the SEC
Documents. Except as set forth on Schedule 3(g). as of their
respective dates, the SEC Documents complied in all material respects with
the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as
may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in
all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). The Company knows of knows reason that would prevent it
from continuing to timely file its SEC Documents.
(h) RESERVED.
(i) 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 have a Material Adverse Effect.
(j) Acknowledgment
Regarding
Buyer’s Purchase of the Convertible Debentures. The Company
acknowledges and agrees that each Buyer is acting solely in the capacity of
an
arm’s length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that each Buyer
is not acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by each Buyer or any of their
respective representatives or agents in connection with this Agreement and
the
transactions contemplated hereby is merely incidental to such Buyer’s purchase
of the Securities. The Company further represents to each Buyer that
the Company’s decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives.
(k) 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
Securities.
(l) No
Integrated
Offering. Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf has, directly or indirectly, made
any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of the Securities under
the
Securities Act or cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of the Securities Act.
(m) Employee
Relations. Neither the Company nor any of its subsidiaries is
involved in any labor dispute or, 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.
(n) 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.
(o) 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”)
the violation of which would have a Material Adverse Effect, (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses the failure of which
to obtain would not have a Material Adverse Effect and (iii) are in compliance
with all terms and conditions of any such permit, license or approval the
violation of which would have a Material Adverse Effect.
(p) Title. All
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.
(q) Insurance. The
Company and each of its subsidiaries is 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 have
a
Material Adverse Effect, 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.
(r) Regulatory
Permits. The Company and its subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
(s) Internal
Accounting
Controls. The Company and each of its subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, and (iii)
the recorded amounts for assets are compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(t) No
Material Adverse
Breaches, etc. 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. 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.
(u) Tax
Status. The Company and each of its subsidiaries has made and
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject and (unless
and
only to the extent that the Company and each of its subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment
of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim.
(v) Certain
Transactions. Except for arm’s length transactions pursuant to
which the Company makes payments in the ordinary course of business upon terms
no less favorable than the Company could obtain from third parties and other
than the grant of stock options disclosed in the SEC Documents, none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers
and
directors), including any contract, agreement or other arrangement providing
for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(w) 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.
(x) Investment
Company.
The Company is not, and is not an affiliate of, and immediately after receipt
of
payment for the Securities, will not be or be an affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that
it will not become subject to the Investment Company Act.
(y) Registration
Rights. Except as disclosed on Schedule 3(y), other than each
of the Buyers, no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the
Company. There are no outstanding registration statements not yet
declared effective and there are no outstanding comment letters from the SEC
or
any other regulatory agency. The Company does not owe any liquidated
damages or have any liabilities to any person for failing to obtain the
effectiveness of any registration statements.
(z) Private
Placement.
Assuming the accuracy of the Buyers’ representations and warranties set forth in
Section 2, no registration under the Securities Act is required for the offer
and sale of the Securities by the Company to the Buyers as contemplated hereby.
The issuance and sale of the Securities hereunder does not contravene the rules
and regulations of the Primary Market.
(aa) Listing
and Maintenance
Requirements. The Company’s Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to terminate, or which to its knowledge is likely
to
have the effect of, terminating the registration of the Common Stock under
the
Exchange Act nor has the Company received any notification that the SEC is
contemplating terminating such registration. The Company has not, in
the twelve (12) months preceding the date hereof, received notice from any
Primary Market on which the Common Stock is or has been listed or quoted to
the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Primary Market. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be,
in
compliance with all such listing and maintenance requirements.
(bb) Manipulation
of
Price. The Company has not, and to its knowledge no one acting on
its behalf has, (i) taken, directly or indirectly, any action designed to cause
or to result in the stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of any of the Securities, (ii)
sold, bid for, purchased, or, paid any compensation for soliciting purchases
of,
any of the Securities, or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other securities of the
Company, other than, in the case of clauses (ii) and (iii), compensation paid
to
the Company’s placement agent in connection with the placement of the
Securities.
(cc) Dilutive
Effect. The Company understands and acknowledges that the
number of Conversion Shares issuable upon conversion of the Convertible
Debentures and the Warrant Shares issuable upon exercise of the Warrants will
increase in certain circumstances. The Company further acknowledges
that its obligation to issue Conversion Shares upon conversion of the
Convertible Debentures in accordance with this Agreement and the Convertible
Debentures and its obligation to issue the Warrant Shares upon exercise of
the
Warrants in accordance with this Agreement and the Warrants, in each case,
is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the
Company.
(dd) The
Company has not received any correspondence or letters from the SEC’s
enforcement division or from anyone other regulatory entity concerning actions
of the Company or its officers or directors and has no reason to believe that
any inquiry or investigation has begun.
4. COVENANTS.
(a) Best
Efforts. Each party shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Sections
6
and 7 of this Agreement.
(b) Form
D. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to
each
Buyer promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Securities, or obtain an exemption for the Securities
for sale to the Buyers at the Closing pursuant to this Agreement under
applicable securities or “Blue Sky” laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or prior
to
the Closing Date.
(c) Reporting
Status. With a view to making available to the Buyer the
benefits of Rule 144 promulgated under the Securities Act or any similar rule
or
regulation of the SEC that may at any time permit the Buyer to sell securities
of the Company to the public without registration (“Rule 144”), and as
a
material inducement to the Buyer’s purchase of the Securities, the Company
represents, warrants, and covenants to the following:
(i) The
Company is subject to the reporting requirements of section 13 or 15(d) of
the
Exchange Act and has filed all required reports under section 13 or 15(d) of
the
Exchange Act during the 12 months prior to the date hereof (or for such shorter
period that the issuer was required to file such reports), other than Form
8-K
reports;
(ii) from
the
date hereof until all the Securities either have been sold by the Buyer, or
may
permanently be sold by the Buyer without any restrictions pursuant to Rule
144,
(the “Registration
Period”) the Company shall file with the SEC in a timely manner all
required reports under section 13 or 15(d) of the Exchange Act and such reports
shall conform to the requirement of the Exchange Act and the SEC for filing
thereunder;
(iii) The
Company shall furnish to the Buyer so long as the Buyer owns Securities,
promptly upon request, (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may
be
reasonably requested to permit the Buyers to sell such securities pursuant
to
Rule 144 without registration; and
(iv) During
the Registration Period the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or
the
rules and regulations thereunder would otherwise permit such
termination.
(d) Use
of
Proceeds. The Company will use the proceeds from the sale of
the Convertible Debentures for general corporate and working capital
purposes.
(e) Reservation
of
Shares. On the date hereof, the Company shall reserve for
issuance to the Buyers 50,000,000 shares for issuance upon conversions of the
Convertible Dentures and exercise of the Warrants (collectively, the “Share
Reserve”). The Company represents that it has sufficient
authorized and unissued shares of Common Stock available to create the Share
Reserve after considering all other commitments that may require the issuance
of
Common Stock. The Company shall take all action reasonably necessary
to at all times have authorized, and reserved for the purpose of issuance,
such
number of shares of Common Stock as shall be necessary to effect the full
conversion of the Convertible Debentures and the full exercise of the
Warrants. If at any time the Share Reserve is insufficient to effect
the full conversion of the Convertible Debentures or the full exercise of the
Warrants, the Company shall increase the Share Reserve
accordingly. If the Company does not have sufficient authorized and
unissued shares of Common Stock available to increase the Share Reserve, the
Company shall call and hold a special meeting of the shareholders within thirty
(30) days of such occurrence, for the sole purpose of increasing the number
of
shares authorized. The Company’s management shall recommend to the
shareholders to vote in favor of increasing the number of shares of Common
Stock
authorized. Management shall also vote all of its shares in favor of
increasing the number of authorized shares of Common Stock.
(f) Listings
or
Quotation. The Company’s Common Stock shall be listed or
quoted for trading on any of (a) the American Stock Exchange, (b) New York
Stock
Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital Market, or (e)
the Nasdaq OTC Bulletin Board (which does not include the Pink Sheets LLC)
(“OTCBB”)
(each, a “Primary
Market”). The Company shall promptly secure the listing of all
of the Conversion Shares and Warrant Shares upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock
is
then listed (subject to official notice of issuance) and shall maintain such
listing of Conversion Shares and Warrant Shares from time to time issuable
under
the terms of the Transaction Documents.
(g) Fees
and
Expenses.
(i) The
Company shall pay all of its costs and expenses incurred by it connection with
the negotiation, investigation, preparation, execution and delivery of the
Transaction Documents.
(ii) The
Company shall place into escrow $175,000 upon the First Closing, and, if the
Company elects to close the Second Closing, shall place an additional $75,000
into escrow directly from the proceeds of each Closing (collectively, the “Monitoring Fees,” and
as deposited into escrow, the “Escrow Funds”) which
shall be used to compensate Yorkville Advisors LLC (“Investment Manager”)
for monitoring and managing the purchase and investment made by YA Global
Investments, L.P. (“YA
Global”) described herein, pursuant to the Investment Manager’s existing
advisory obligations to YA Global. The Company, Investment Manager,
and YA Global shall enter into an Escrow Agreement of even date herewith in
the
form attached hereto as Exhibit D (the “Escrow Agreement”)
appointing Xxxxx Xxxxxxxx, Esq. as escrow agent (the “Escrow Agent”) to
hold the Escrow Funds and to periodically disburse portions of such Escrow
Funds
to the Investment Manager from escrow in accordance with the terms of the Escrow
Agreement. The Investment Manager shall periodically receive portions
of the Escrow Funds in accordance with the Escrow Agreement until either: (1)
the Escrow Funds shall have been fully disbursed pursuant the Escrow Agreement
or (2) the Securities shall have been Fully Retired. “Fully Retired”
shall mean that the Buyer shall have fully disposed of all the Securities issued
or issuable hereunder, shall no longer have any investment in, or ownership
of,
any of the Securities, all amounts owed to YA Global under the Transaction
Documents shall have been paid, and the Transaction Documents shall have been
terminated. When the Securities are Fully Retired, the remaining
Escrow Funds shall be returned to the Company or otherwise disbursed in
accordance with the Escrow Agreement.
(iii) The
Company shall pay a structuring fee to Yorkville of Twenty Thousand Dollars
($20,000), of which Ten Thousand Dollars ($10,000) has been paid and the
remaining Ten Thousand Dollars ($10,000) shall be paid directly from the
proceeds of the First Closing. The structuring shall be nonrefundable
and payable whether or not any Closing occurs.
(h) Corporate
Existence.
So long as any of the Convertible Debentures remain outstanding, the Company
or
any subsidiary of the Company shall not be party to any Change of Control
Transaction (as defined in the Convertible Debentures) unless, prior to the
consummation an such Change of Control Transaction, the Company offers the
Buyer
the right to either (i) be redeemed of all amounts outstanding under the
Convertible Debentures, or (ii) exercise its rights to convert the Convertible
Debentures, in each case, in accordance with the terms and conditions of the
Convertible Debentures.
(i) RESERVED.
(j) Transfer
Agent. The Company covenants and agrees that, in the event
that the Company’s agency relationship with the transfer agent should be
terminated for any reason prior to a date which is two (2) years after the
Closing Date, the Company shall immediately appoint a new transfer agent and
shall require that the new transfer agent execute and agree to be bound by
the
terms of the Irrevocable Transfer Agent Instructions (as defined
herein).
(k) Restriction
on Issuance of
the Capital Stock. So long as any Convertible Debentures are outstanding,
the Company shall be prohibited from effecting or entering into an agreement
to
effect any issuance by the Company or any of its subsidiaries of Common Stock
or
securities or instruments convertible or exercisable into Common Stock involving
a “Variable Rate Transaction.” The term “Variable Rate
Transaction” shall mean a transaction in which the Company issues or
sells (i) any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion, exercise or exchange rate or other price
that
is based upon and/or varies with the trading prices of or quotations for the
shares of Common Stock at any time after the initial issuance of such debt
or
equity securities, or (B) with a conversion, exercise or exchange price that
is
subject to being reset at some future date after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market
for
the Common Stock or (ii) enters into any agreement, including, but not limited
to, an equity line of credit, whereby the Company may sell securities at a
future determined price. Notwithstanding the foregoing, this
Section shall not apply in respect of (i) any Excluded Securities or (ii) any
transaction with the Buyer. “Excluded Securities” shall mean, (a)
shares or options issued or deemed to have been issued by the Company pursuant
to an means a stock option plan that has been approved by the Board of Directors
of the Company, (b) shares of Common Stock issued or deemed to be issued by
the
Company upon the conversion, exchange or exercise of any right, option,
obligation or security outstanding on the date prior to date of this Agreement,
provided that the terms of such right, option, obligation or security are not
amended or otherwise modified on or after the date of this Agreement, and
provided that the conversion price, exchange price, exercise price or other
purchase price is not reduced, adjusted or otherwise modified and the number
of
shares of Common Stock issued or issuable is not increased (whether by operation
of, or in accordance with, the relevant governing documents or otherwise) on
or
after the date of this Agreement, (c) shares issued in connection with any
acquisition or strategic transaction by the Company, whether through an
acquisition of stock or a merger of any business, assets or technologies,
leasing arrangement or any other transaction the primary purpose of which is
not
to raise equity capital, and (d) the shares of Common Stock issued or
deemed to be issued by the Company upon conversion of the Convertible Debentures
or the Warrants.
(l) Neither
the Buyer(s) nor any of its affiliates have an open short position in the Common
Stock of the Company, and the Buyer(s) agrees that it shall 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 as long as any Convertible
Debentures shall remain outstanding.
(m) Rights
of First
Refusal. So long as any portion of Convertible Debentures are
outstanding, if the Company intends to raise additional capital by the issuance
or sale of capital stock of the Company, including without limitation shares
of
any class of common stock, any class of preferred stock, options, warrants
or
any other securities convertible or exercisable into shares of common stock
(whether the offering is conducted by the Company, underwriter, placement agent
or any third party) but excluding any Excluded Securities, the Company shall
be
obligated to offer to the Buyers such issuance or sale of capital stock, by
providing in writing the principal amount of capital it intends to raise and
outline of the material terms of such capital raise, prior to the offering
such
issuance or sale of capital stock to any third parties including, but not
limited to, current or former officers or directors, current or former
shareholders and/or investors of the obligor, underwriters, brokers, agents
or
other third parties. The Buyers shall have ten (10) business days from
receipt of such notice of the sale or issuance of capital stock to accept or
reject all or a portion of such capital raising offer.
(n) Lockup
Agreements. On the date hereof, the Company shall obtain from
each officer and director a lockup agreement in the form attached hereto as
Exhibit
C.
(o) RESERVED.
(p) Review
of Public
Disclosures. All SEC filings (including, without limitation,
all filings required under the Exchange Act, which include Forms 10-Q and
10-QSB, 10-K and 10K-SB, 8-K, etc) and other public disclosures made by the
Company, including, without limitation, all press releases, investor relations
materials, and scripts of analysts meetings and calls, shall be reviewed and
approved for release by the Company’s attorneys and, if containing financial
information, the Company’s independent certified public
accountants.
(q) Disclosure
of
Transaction. Within four Business Days following the date of
this Agreement, the Company shall file a Current Report on Form 8-K describing
the terms of the transactions contemplated by the Transaction Documents in
the
form required by the Exchange Act and attaching the material Transaction
Documents (including, without limitation, this Agreement, the form of the
Convertible Debenture, the form of Warrant) as exhibits to such
filing.
(r) No
Adjustment to Convertible
Securities. For so long as the Convertible Debentures
remain outstanding, the Company shall not adjust any terms of any Convertible
Securities, including, without limitation, reducing the conversion price,
exchange price, exercise price or other purchase price, or increasing the number
of shares of Common Stock issued or issuable under such Convertible Securities.
“Convertible Securities” shall mean any right, obligation, or security directly
or indirectly convertible into or exchangeable for Common Stock.
5. TRANSFER
AGENT
INSTRUCTIONS.
(a) The
Company shall enter into the Transfer Instructions Agreement and shall issue
the
Irrevocable Transfer Agent Instructions to its transfer agent, and any
subsequent transfer agent, irrevocably appointing Xxxxx Xxxxxxxx, Esq. as the
Company’s agent for purpose instructing its transfer agent to issue certificates
or credit shares to the applicable balance accounts at The Depository Trust
Company (“DTC”), registered
in
the name of each Buyer or its respective nominee(s), for the Conversion Shares
and the Warrant Shares issued upon conversion of the Convertible Debentures
or
exercise of the Warrants as specified from time to time by each Buyer to the
Company upon conversion of the Convertible Debentures or exercise of the
Warrants. The Company shall not change its transfer agent without the
express written consent of the Buyers, which may be withheld by the Buyers
in
their sole discretion. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section
5,
and stop transfer instructions to give effect to Section 2(g) hereof (in the
case of the Conversion Shares or Warrant Shares prior to registration of such
shares under the Securities Act) will be given by the Company to its transfer
agent, and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the other Transaction Documents. If a Buyer effects a sale,
assignment or transfer of the Securities in accordance with Section 2(f), the
Company shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in
such
name and in such denominations as specified by such Buyer to effect such sale,
transfer or assignment and, with respect to any transfer, shall permit the
transfer. In the event that such sale, assignment or transfer
involves Conversion Shares or Warrant Shares sold, assigned or transferred
pursuant to an effective registration statement or pursuant to Rule 144, the
transfer agent shall issue such Securities to the Buyer, assignee or transferee,
as the case may be, without any restrictive
legend. Nothing in this Section 5 shall affect in any way
the Buyer’s obligations and agreement to comply with all applicable securities
laws upon resale of Conversion Shares. The Company acknowledges that
a breach by it of its obligations hereunder will cause irreparable harm to
the
Buyer by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law
for a breach of its obligations under this Section 5 will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 5, that the Buyer(s) shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity
of
showing economic loss and without any bond or other security being
required.
6. CONDITIONS
TO THE COMPANY’S
OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Convertible Debentures
to the Buyer(s) at the Closings is subject to the satisfaction, at or before
the
Closing Dates, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion:
(a) Each
Buyer shall have executed the Transaction Documents and delivered them to the
Company.
(b) The
Buyer(s) shall have delivered to the Company the Purchase Price for the
Convertible Debentures and Warrants in the respective amounts as set forth
next
to each Buyer as set forth on Schedule I attached hereto, minus any fees to
be
paid directly from the proceeds the Closings as set forth herein, by wire
transfer of immediately available U.S. funds pursuant to the wire instructions
provided by the Company.
(c) The
representations and warranties of the Buyer(s) shall be true and correct in
all
material respects as of the date when made and as of the Closing Dates as though
made at that time (except for representations and warranties that speak as
of a
specific date), and the Buyer(s) shall have performed, satisfied and complied
in
all material respects with the covenants, agreements and conditions required
by
this Agreement to be performed, satisfied or complied with by the Buyer(s)
at or
prior to the Closing Dates.
7. CONDITIONS
TO THE BUYER’S
OBLIGATION TO PURCHASE.
(a) The
obligation of the Buyer(s) hereunder to purchase the Convertible Debentures
at
the First Closing is subject to the satisfaction, at or before the First Closing
Date, of each of the following conditions, provided that these conditions are
for the Buyer’s sole benefit and may be waived by the Buyer at any time in its
sole discretion:
(i) The
Company shall have executed the Transaction Documents and delivered the same
to
the Buyers.
(ii) The
Common Stock shall be authorized for quotation or trading on the Primary Market,
trading in the Common Stock shall not have been suspended for any reason, and
all the Conversion Shares issuable upon the conversion of the Convertible
Debentures shall be approved for listing or trading on the Primary
Market.
(iii) The
representations and warranties of the Company shall be true and correct in
all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the First Closing
Date
as though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied
and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the First Closing Date
(iv) The
Company shall have executed and delivered to the Buyer(s) the Convertible
Debentures and Warrants in the respective amounts set forth opposite each
Buyer’s name on Schedule I attached hereto.
(v) The
Buyers shall have received an opinion of counsel from counsel to the Company
in
a form satisfactory to the Buyers.
(vi) The
Company shall have provided to the Buyers a true copy of a certificate of good
standing evidencing the formation and good standing of the Company from the
secretary of state (or comparable office) from the jurisdiction in which the
Company is incorporated, as of a date within 10 days of the First Closing
Date.
(vii) The
Company shall have delivered to the Buyers a certificate, executed by the
Secretary of the Company and dated as of the First Closing Date, as to (i)
the
resolutions consistent with Section 3(c) as adopted by the Company's Board
of
Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate
of
Incorporation and (iii) the Bylaws, each as in effect at the First
Closing.
(viii) The
Company or the Buyer shall have filed a form UCC-1 or such other forms as may
be
required to perfect the Buyer’s interest in the Pledged Property as detailed in
the Security Agreement dated the date hereof and provided proof of such filing
to the Buyer(s).
(ix) The
Company shall have provided to the Buyer an acknowledgement, to the satisfaction
of the Buyer, from the Company’s independent certified public accountants as to
its ability to provide all consents required in order to file a registration
statement in connection with this transaction.
(x) The
Company shall have created the Share Reserve.
(xi) The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory
to
the Buyer, shall have been delivered to and acknowledged in writing by the
Company’s transfer agent and Transfer Instructions Agreement shall have been
executed.
(b) The
obligation of the Buyer(s) hereunder to accept the Convertible Debentures at
the
Second Closing is subject to the satisfaction, at or before the Second Closing
Date, of each of the following conditions, provided that these conditions are
for the Buyer’s sole benefit and may be waived by the Buyer at any time in its
sole discretion:
(i) The
Common Stock shall be authorized for quotation or trading on the Primary Market,
trading in the Common Stock shall not have been suspended for any reason, and
all the Conversion Shares issuable upon the conversion of the Convertible
Debentures shall be approved for listing or trading on the Primary
Market.
(ii) The
representations and warranties of the Company shall be true and correct in
all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Second Closing
Date as though made at that time (except for representations and warranties
that
speak as of a specific date) and the Company shall have performed, satisfied
and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Second Closing Date.
(iii) The
Company shall have executed and delivered to the Buyers the Convertible
Debentures in the respective amounts set forth opposite each Buyers name on
Schedule I attached hereto.
(iv) The
Company shall have increased the Share Reserve by at least a number of shares
of
Common Stock equal to the $1,000,000 divided the one half of the closing price
of the Common Stock on the last Trading Day immediately prior to the Second
Closing Date.
(v) No
event
or series of events shall have occurred that would, individually or in the
aggregate, have any effect that is material and adverse to the Company and
such
subsidiaries, taken as a whole, or that would prohibit or otherwise interfere
with the ability of the Company to perform any of its obligations under the
Transaction Documents.
(vi) The
Company shall have certified, in a certificate executed by two officers of
the
Company and dated as of the Second Closing Date, that all conditions to the
Second Closing have been satisfied.
8. INDEMNIFICATION.
(a) In
consideration of the Buyer’s execution and delivery of this Agreement and
acquiring the Convertible Debentures and the Conversion Shares hereunder, and
in
addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Buyer(s) and
each
other holder of the Convertible Debentures and the Conversion Shares, and all
of
their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated
by
this Agreement) (collectively, the “Buyer Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Buyer Indemnitee is a party to
the
action for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by the Buyer Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by the Company in this Agreement, the
Convertible Debentures or the other Transaction Documents 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 other Transaction Documents 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 Buyer 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 parties hereto, any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Convertible Debentures or the status of the Buyer or holder of the
Convertible Debentures the Conversion Shares, as a Buyer
of Convertible Debentures in the Company. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction
of
each of the Indemnified Liabilities, which is permissible under applicable
law.
(b) In
consideration of the Company’s execution and delivery of this Agreement, and in
addition to all of the Buyer’s other obligations under this Agreement, the Buyer
shall defend, protect, indemnify and hold harmless the Company and all of its
officers, directors, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Company Indemnitees”)
from and against any and all Indemnified Liabilities incurred by the Indemnitees
or any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Buyer(s) in this Agreement, instrument or document contemplated hereby or
thereby executed by the Buyer, (b) any breach of any covenant, agreement or
obligation of the Buyer(s) contained in this Agreement, the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby executed by the Buyer, or (c) any cause of
action, suit or claim brought or made against such Company Indemnitee based
on
material misrepresentations or due to a material breach and arising out of
or
resulting from the execution, delivery, performance or enforcement of this
Agreement, the Transaction Documents or any other instrument, document or
agreement executed pursuant hereto by any of the parties hereto. To
the extent that the foregoing undertaking by each Buyer may be unenforceable
for
any reason, each Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
9. GOVERNING
LAW:
MISCELLANEOUS.
(a) Governing
Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey without regard to the
principles of conflict of laws. The parties further agree that any
action between them shall be heard in Xxxxxx County, New Jersey, and expressly
consent to the jurisdiction and venue of the Superior Court of New Jersey,
sitting in Xxxxxx County and the United States District Court for the District
of New Jersey sitting in Newark, New Jersey for the adjudication of any civil
action asserted pursuant to this Paragraph.
(b) Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
party. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall cause four (4)
additional original executed signature pages to be physically delivered to
the
other party within five (5) days of the execution and delivery
hereof.
(c) Headings. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
(d) Severability. If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement,
Amendments. This Agreement supersedes all other prior oral or
written agreements between the Buyer(s), the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein,
and
this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
(f) Notices. Any
notices, consents, waivers, or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered (i) upon receipt, when delivered personally; (ii) upon
confirmation of receipt, when sent by facsimile; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1)
day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
|
If
to the Company, to:
|
IR
Biosciences Holdings, Inc.
|
|
0000
X. Xxx Xx Xxxxxxx, Xxxxx 000
|
|
|
Xxxxxxxxxx,
XX 00000
|
|
|
Attention: Chief
Executive Officer
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
With
a copy to:
|
Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxx Xxxxx Xxxxx, LLP
|
|
00000
Xxxxx Xxxxxx Xxxx., 0xx
Xxxxx
|
|
|
Xxx
Xxxxxxx, XX 00000
|
|
|
Attention: Xxxxxx
X. Xxxxxxx
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
If
to the
Buyer(s), to its address and facsimile number on Schedule I, with copies to
the
Buyer’s counsel as set forth on Schedule I. Each party shall provide
five (5) days’ prior written notice to the other party of any change in address
or facsimile number.
(g) Successors
and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and
assigns. Neither the Company nor any Buyer shall assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other party hereto.
(h) No
Third Party
Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and
is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.
(i) Survival. Unless
this Agreement is terminated under Section 9(l), the representations and
warranties of the Company and the Buyer(s) contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4, 5 and 9, and the
indemnification provisions set forth in Section 8, shall survive the Closing
for
a period of two (2) years following the date on which the Convertible Debentures
are converted in full. The Buyer(s) shall be responsible only for its
own representations, warranties, agreements and covenants
hereunder.
(j) Publicity. The
Company and the Buyer(s) shall have the right to approve, before issuance any
press release or any other public statement with respect to the transactions
contemplated hereby made by any party; provided, however, that the Company
shall
be entitled, without the prior approval of the Buyer(s), to issue any press
release or other public disclosure with respect to such transactions required
under applicable securities or other laws or regulations (the Company shall
use
its best efforts to consult the Buyer(s) in connection with any such press
release or other public disclosure prior to its release and Buyer(s) shall
be
provided with a copy thereof upon release thereof).
(k) Further
Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents,
as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Termination. In
the event that the First Closing shall not have occurred with respect to the
Buyers on or before five (5) business days from the date hereof due to the
Company’s or the Buyer’s failure to satisfy the conditions set forth in Sections
6 and 7 above (and the non-breaching party’s failure to waive such unsatisfied
condition(s)), the non-breaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on
such
date without liability of any party to any other party; provided, however,
that
if this Agreement is terminated by the Company pursuant to this Section 9(l),
the Company shall remain obligated to reimburse the Buyer(s) for the fees and
expenses of Yorkville Advisors LLC described in Section 4(g) above (other than
the amounts set forth in Section 4(g)(ii)).
(m) Brokerage. The
Company represents that no broker, agent, finder or other party has been
retained by it in connection with the transactions contemplated hereby and
that
no other fee or commission has been agreed by the Company to be paid for or
on
account of the transactions contemplated hereby.
(n) No
Strict
Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.
[REMAINDER
PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, each Buyer
and the Company
have caused their respective signature page to this Securities Purchase
Agreement to be duly executed as of the date first written above.
|
COMPANY:
|
|
|
IR
BIOSCIENCES HOLDINGS, INC.
|
|
|
By: /s/
Xxxxxxx
Xxxxxx
|
|
|
Name:
Xxxxxxx Xxxxxxx
|
|
|
Title:
President and Chief Executive Officer
|
|
IN
WITNESS WHEREOF, each Buyer
and the Company
have caused their respective signature page to this Securities Purchase
Agreement to be duly executed as of the date first written above.
|
BUYERS:
|
|
|
YA
GLOBAL INVESTMENTS, L.P.
|
|
|
By:
Yorkville Advisors, LLC
|
|
|
Its:
Investment Manager
|
|
|
By: /s/
Xxxx
Xxxxxx
|
|
|
Name: Xxxx
Xxxxxx
|
|
|
Its:
Portfolio Manager
|
SCHEDULE
I
SCHEDULE
OF
BUYERS
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
(7)
|
(8)
|
|
Buyer
|
Subscription
Amount
|
Number
of Warrant Shares
|
Legal
Representative’s Address and Facsimile Number
|
||||
|
First
Closing
|
Second
Closing
|
First
Closing
|
|||||
|
YA
Global Investments, L.P.
000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx
Xxxx, XX 00000
Attention:
Xxxx Xxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Residence: Cayman
Islands
|
$2,000,000
|
$1,000,000
|
7,500,000
|
Xxxx
Xxxxx, Esq.
000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx
Xxxx, Xxx Xxxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
|
|||
LIST
OF
EXHIBITS:
Disclosure
Schedule
Exhibit
A
– Form of Convertible Debentures
Exhibit
B
– Form of Warrant
Exhibit
C
– Form of Lockup Agreement
EXHIBIT
C
LOCKUP
AGREEMENT
The
undersigned hereby agrees that for a period commencing on January 3, 2008 and
expiring on the date thirty (30) days after the date that all amounts owed
to YA
Global Investments, L.P. (the “Buyer”), under
the
Secured Convertible Debentures issued to the Buyer pursuant to the Securities
Purchase Agreement between IR Biosciences Holdings, Inc. (the “Company”) and the
Buyer dated January 3, 2008 have been paid (the “Lock-up Period”), he,
she or it will not, directly or indirectly, without the prior written consent
of
the Buyer, 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 any securities of the Company, including common
stock or 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”) except
in accordance with the volume limitations set forth in Rule 144(e) of the
General Rules and Regulations under the Securities Act of 1933, as
amended.
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.
Dated:
January 3, 2008
Signature
Name:
____________________________________
Address:
City,
State, Zip Code:
Print
Social Security Number
or
Taxpayer I.D. Number
