SECURITIES PURCHASE AGREEMENT
Exhibit
10.11
THIS SECURITIES
PURCHASE AGREEMENT
(this
“Agreement”)
is
made as of the 15th
day of
August, 2007, by and among HEALTH
DISCOVERY CORPORATION,
a
Georgia corporation (the “Company”),
the
investors listed on Schedule A hereto (the “Cash
Purchasers”),
and
the investors listed on Schedule B hereto (the “Lender
Purchasers”
and
with the Cash Purchasers, the “Purchasers”).
WHEREAS,
the
Company and the Purchasers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Rule 506
under Regulation D as promulgated by the United States Securities and Exchange
Commission (the “Commission”)
under
Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”);
WHEREAS,
subject
to the terms and conditions set forth in this Agreement, the Company desires
to
issue and sell to the Purchasers, and the Purchasers desire to purchase from
the
Company, (i)
shares (the “Shares”)
of the
common stock of the Company, no par value (the “Common
Stock”),
(ii)
warrants to purchase shares of Common Stock at an exercise price of $0.14 per
share (the “Tranche
1 Warrants”),
and
(iii) warrants to purchase shares of Common Stock at an exercise price of $0.19
per share (the “Tranche
2 Warrants”
and
together with the Tranche 1 Warrants, the “Warrants”);
WHEREAS,
this
Agreement and the sale of the securities to the Purchasers is a part of a
private offering (the “Offering”)
with
an aggregate minimum gross proceeds of at least $1,500,000.00 (the “Minimum
Amount”);
and
WHEREAS,
as
a
condition precedent to the obligations of the Cash Purchasers hereunder, holders
of at least $1,500,000 in principal amount of outstanding indebtedness of the
Company must convert such indebtedness into equity securities of the
Company.
NOW,
THEREFORE,
in
consideration of the promises and mutual covenants and agreements herein, the
Company and the Purchasers hereby agree as follows:
ARTICLE
I.
PURCHASE
AND SALE
1.1 Purchase
and Sale.
Subject
to the terms and conditions set forth herein, the Company shall issue and sell
to each Purchaser, and each Purchaser, severally and not jointly, agrees to
purchase from the Company, at the Closing (as defined below) that number of
Shares, Tranche 1 Warrants and Tranche 2 Warrants set forth opposite such
Purchaser’s name on Schedule A or Schedule B, as appropriate, for the amount set
forth on such Schedule (the “Purchase
Price”).
Not
withstanding the foregoing sentence, at any time prior to the Closing Date,
the
Lead Investor may increase, in its sole discretion, the amount of its investment
under this Agreement (provided that such investment is not more than $700,000)
and the number of Shares, Tranche 1 Warrants and Tranche 2 Warrants set forth
opposite the Lead Investor's name on Schedule A shall be proportionately
increased. Any such increase shall not decrease or otherwise change the amounts
set forth opposite the other Purchasers' names on Schedule A and Schedule
B.
1.2 Closing.
a. The
Closing.
The
initial closing (the “Initial
Closing”
or
the
“Closing”)
of the
purchase and sale of the Shares and the Warrants shall take place on September
7, 2007, or such other time as the Company and the Purchasers shall otherwise
agree (the “Closing
Date”).
If
there is more than one closing, the term “Closing”
shall
apply to each such closing unless otherwise specified.
b. Purchaser
Deliveries at Closing.
At the
closing, each Purchaser must deliver to the Company the following:
(i) a
copy of
this Agreement, each duly executed by such Purchaser,
(ii) a
completed Purchaser Questionnaire in the form of Exhibit A, attached hereto;
and
(iii) the
Purchase Price (A) for the Cash Purchasers to be paid by personal check, wire
transfer, bank check or money order and (B) for the Lender Purchasers to be
paid
by conversion of the indebtedness and all accrued interest under the promissory
note(s) previously issued by the Company to such Purchaser.
c. Company
Deliveries at Closing.
Upon
Closing, the Company shall deliver to each Purchaser (at the Purchasers’ address
listed on the signature page of this Agreement):
(i) one
copy
of this Agreement, duly executed by the Company,
(ii) an
opinion of the Company’s counsel in form, scope and substance in the form of
Exhibit B, attached hereto;
(iii) copies
of
duly executed Lock-Up Agreements from all executive officers of the Company
in
form, scope and substance substantially in the form of Exhibit C, attached
hereto;
(iv) a
certificate evidencing the Shares in the applicable amount set forth on
Schedule
A
hereto,
registered in the books and records of the Company in the name of the Purchaser
or the Purchaser’s nominee, and
(v) Warrants
in the form attached hereto as Exhibit E, duly executed on behalf of the Company
and representing the Purchaser’s right to acquire shares of Common Stock,
registered in the books and records of the Company in the name of the
Purchaser.
1.3 Sale
of Additional Shares and Warrants.
(a)
After
the Initial Closing, the Company may sell, on the same terms and conditions
as
those contained in this Agreement (subject to equitable and proportional
adjustment in the event of any stock dividend, stock split, reverse stock
dividend or reverse stock split, or any capital reorganization or
recapitalization or similar event affecting the Common Stock, which becomes
effective after the date of this Agreement and on or before the Closing Date),
additional shares of Common Stock (the “Additional
Shares”)
together with corresponding Warrants (the “Additional
Warrants”),
to
one or more purchasers (the “Additional
Purchasers”),
in
one or more subsequent closings provided that (a) such
subsequent sales, together with the sales to the Cash Purchasers, do not result
in gross proceeds to the Company of greater than $2,500,000 (the “Maximum
Amount”),
(b)
such subsequent sales are consummated on or prior to October 31, 2007, and
(c) each Additional Purchaser shall become a party to this Agreement, as
defined below, by executing and delivering a counterpart signature page to
this
Agreement. Schedule A or Schedule B, as appropriate, to this Agreement shall
be
updated to reflect the number of Additional Shares purchased at each such
Closing and the parties purchasing such Additional Shares and Additional
Warrants. The term “Shares”
and
“Warrants”
shall
include the Additional Shares and Additional Warrants unless otherwise
specified.
(b) Prior to the Initial Closing, additional Cash Purchasers or Lender
Purchasers may, with the written consent of the Company, become a party to
this
Agreement by executing and delivering a counterpart signature page to this
Agreement, in which event (i) such Additional Purchasers will purchase their
Additional Shares and Additional Warrants at the Initial Closing, and (ii)
Schedule A or Schedule B, as appropriate, to this Agreement shall be updated
to
reflect the number of Additional Shares purchased, and the parties purchasing
such Additional Shares and Additional Warrants. Notwithstanding the
foregoing, any additional Cash Purchaser or Lender Purchaser may not become
a
party to this Agreement to the extent that his, her or its purchase of Common
Stock and Warrants at the Initial Closing would result in an aggregate Purchase
Price for total sales of Common Stock and Warrants to all Cash Purchasers in
the
Offering in an amount exceeding the Maximum Amount.
ARTICLE
II.
REPRESENTATIONS
AND WARRANTIES
2.1 Representations
and Warranties of the Company.
The
Company represents and warrants to the Purchasers that, to its knowledge, the
statements contained in this Section 2.1 are true, correct and complete, in
all
material respects, as of the date of this Agreement, and will be true correct
and complete, in all material respects, as of the Closing Date.
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a. Organization
and Qualification.
The
Company is duly incorporated, validly existing and in good standing under the
laws of the State of Georgia, with the requisite corporate power and authority
to carry on its business as currently conducted. The Company is duly qualified
as a foreign corporation to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would not,
individually or in the aggregate, (x) adversely affect the legality,
validity or enforceability of this Agreement or any of the transactions
contemplated hereby, (y) have or result in a material adverse effect on the
condition (financial or otherwise), business, operations, results of operations,
assets, capitalization, financial condition, licenses, permits, rights or
privileges (whether contractual or otherwise) or prospects of the Company,
taken
as a whole, or (z) impair the Company’s ability to perform fully on a timely
basis its obligations hereunder (an effect caused by or change resulting from
any event or circumstance described in clause (x), (y) or (z), being a
“Material
Adverse Effect”).
The
Company has made available to the Purchasers true and correct copies of the
Company’s Articles of Incorporation, as in effect on the date of this Agreement
(the “Articles
of Incorporation”),
and
the Company’s Bylaws, as in effect on the date of this Agreement (the
“Bylaws”).
b. Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by this Agreement and otherwise to
carry out its obligations hereunder. The execution and delivery of this
Agreement by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
by the Company. This Agreement has been duly executed by the Company and when
delivered in accordance with the terms hereof will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws
relating to, or affecting generally the enforcement of, creditors’ rights and
remedies or by other equitable principles of general application and except
that
rights to indemnification and contribution may be limited by federal or state
securities laws or public policy relating thereto.
c. Capitalization.
As of
the date of this Agreement, the authorized capital stock of the Company consists
of 300,000,000 shares of Common Stock, of which 117,468,384 shares are issued
and outstanding, 30,000,000 shares of preferred stock, of which no shares are
issued and outstanding, and options and warrants to acquire 73,296,250 shares
of
Common Stock have been granted, and 4,376,598 shares of Common Stock may be
issued upon the conversion of convertible notes issued in connection with the
acquisition of interests in the support vector machine patents and other assets
formerly owned by BioWulf Technologies LLC (the “Acquisition”).
All
of such shares of capital stock have been, or upon issuance will be, duly
authorized and validly issued, fully paid and nonassessable. The sellers in
the
Acquisition were granted the right to participate pro rata in all future
fundraising efforts until the notes issued in the Acquisition have been fully
paid, and the Company has fully complied with such rights in connection with
the
execution, delivery and performance of this Agreement. Except as described
in
this Section 2.1(c), no Person (as hereinafter defined) has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by this Agreement. Other than
with
respect to the Placement Agent engaged by the Company to assist in the sale
of
the securities pursuant to this Agreement, the issuance and sale of the Shares
and the Warrants will not obligate the Company to issue shares of Common Stock
or other securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the exercise,
exchange, conversion or reset price under such securities. Other than as set
forth in this Section 2.1(c) and except as may be granted pursuant to this
Agreement, there are no outstanding options, warrants, rights (including
conversion or preemptive rights, rights of first refusal and phantom stock
rights), or proxy, voting, transfer restriction or shareholder agreements with
respect to the Company’s capital stock or agreements of any kind for the
purchase or acquisition from the Company of any of its securities.
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d. Authorization
and Validity; Issuance of Shares.
The
Shares, the shares of Common Stock issuable upon exercise of the
Warrants (the
“Warrant
Shares”),
and
the Subsequent Shares (collectively with the Shares and the Warrant Shares,
the
“Securities”)
are
and will at all times hereafter continue to be duly authorized and, when issued
and paid for in accordance with this Agreement or the applicable warrant
agreement, will be validly issued, fully paid and non-assessable, free and
clear
of all liens.
e. No
Conflicts.
The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby do not
and
will not (i) conflict with or violate any provision of the Articles of
Incorporation, Bylaws or other organizational documents of the Company,
(ii) subject
to obtaining the consents referred to in Section 2.1(f), 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, patent,
patent license or instrument to which the Company is a party or by which any
property or asset of the Company is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree
or
other restriction of any court or governmental authority to which the Company
is
subject or by which any material property or asset of the Company is
bound.
f. Consents
and Approvals.
The
Company is not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court
or
other federal, state, local or other governmental authority, regulatory or
self
regulatory agency, or other Person in connection with the execution, delivery
and performance by the Company of this Agreement, other than (i) any
required application(s) or any letter(s) acceptable to the Over-the-Counter
Bulletin Board (“OTCBB”),
and
(ii) any filings, notices or registrations under applicable federal or state
securities laws (the “Required
Approvals”),
except where failure to do so has not resulted or would not reasonably result,
individually, or in the aggregate, in a Material Adverse Effect. “Person”
means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
g. Litigation;
Proceedings.
Except
as specifically set forth on in the SEC Documents (hereinafter defined) there
is
no action, suit, notice of violation, proceeding or investigation pending or
threatened against or affecting the Company or any of its subsidiaries or any
of
their respective properties before or by any court, governmental or
administrative agency or regulatory authority (collectively, an “Action”)
which
(i) adversely affects or challenges the legality, validity or enforceability
of
any of this Agreement, or (ii) would reasonably be expected to, individually
or
in the aggregate, have a Material Adverse Effect. There has not been, and there
is not pending or contemplated, any investigation by the Commission involving
the Company or any current or former director that was a director of the Company
at any time during the last three years or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
subsidiary under the Exchange Act of 1934, as amended (the “Exchange
Act”)
or the
Securities Act.
h. No
Default or Violation.
The
Company (i) is not in default under or in violation of any indenture, loan
or
other credit agreement or any other agreement or instrument to which it is
a
party or by which it or any of its properties is bound and which is required
to
be included as an exhibit to any SEC Document, other than with respect to the
promissory notes currently held by Memorial Health Trust, Inc., Xxxxxx Xxxxx,
Xxxxx Xxxxxxx, Xxxxxx XxXxxxxx, Xxxxx Xxxxxxxxxx, and Xxxxxx Xxxxxxxx where
the
Company currently does not have the requisite cash balance required by the
terms
of the promissory notes (and with respect to which the Company is being released
from each such default by such Persons pursuant to Section 2.2(n) hereof),
(ii)
is not in violation of any order of any court, arbitrator or governmental body
applicable to it, (iii) is not in violation of any statute, rule or
regulation of any governmental authority to which it is subject, (iv) is not
in
default under or in violation of its Articles of Incorporation, Bylaws or other
organizational documents, respectively in the case of (i), (ii) and (iii),
except where such violations have not resulted or would not reasonably result,
individually or in the aggregate, in a Material Adverse Effect.
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i. SEC
Documents; Financial Statements.
Since
January 1, 2005, the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it, with the Commission, pursuant
to
Section 13, 14 or 15(d) of the Exchange Act (collectively referred to herein
as
the “SEC
Documents”).
As of
their respective dates, the SEC Documents complied in all material respects
with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder applicable to such SEC
Document. Except to the extent that information contained in any SEC Document
filed and publicly available prior to the date of this Agreement has been
revised or superseded by a later filed SEC Document, which later filed SEC
Document was filed prior to the date of this Agreement, none of the SEC
Documents, when filed, 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 light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements fairly present in all material respects the financial
position of the Company as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case
of
unaudited statements, to normal, year-end audit adjustments.
j. Material
Changes.
Since
the date of the latest audited financial statements included within the SEC
Documents, except as specifically disclosed in the SEC Documents, (i) there
has
been no event, occurrence or development that has had or that could result
in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
other
than (A) trade payables and accrued expenses incurred in the ordinary course
of
business consistent with past practice, (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or required to
be disclosed in filings made with the Commission, and (C) in connection with
the
termination of Xxxxxx Xxxxxxxx'x employment with the Company and in lieu of
the
cash payment by the Company under his employment agreement, the grant to Xx.
Xxxxxxxx of 300,000 options for Common Stock with an exercise price of $0.08
per
share and the issuance to Xx. Xxxxxxxx of 575,000 shares of Common Stock
(collectively, the "Xxxxxxxx Securities"), (iii) the Company has not altered
its
method of accounting or the identity of its auditors, and (iv) the Company
has
not declared or made any dividend or distribution of cash or other property
to
its shareholders or purchased, redeemed or made any agreements to purchase
or
redeem any shares of its capital stock.
k. Listing
and Maintenance Requirements.
The
Company has not, in the two years preceding the date of this Agreement, received
notice from the OTCBB or any other exchange or 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 exchange or
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 of the OTCBB. The issuance and sale of the Shares
and
Warrants hereunder does not contravene the rules and regulations of the OTCBB
and approval of the shareholders of the Company is not required for the Company
to issue and deliver to the Purchasers the number of Shares and Warrant Shares
contemplated by this Agreement.
l. Broker’s
Fees.
The
Purchasers shall have no obligation with respect to any fees or with respect
to
any claims made by or on behalf of other Persons for fees of any broker, finder
or other intermediary retained by the Company that may be due in connection
with
the transactions contemplated by this Agreement.
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m. Intellectual
Property.
(i) For
purposes hereof, “Patents”
means
rights arising from or in respect to patents and patent applications, including
continuation, divisional, continuation-in-part, reissue or reexamination patent
applications and patents issuing therefrom, patent disclosures and inventions,
draft patent applications and foreign versions of the foregoing whether
protected, created or arising under the laws of the United States or any other
jurisdiction. For purposes hereof, “Trademarks”
means
rights arising from or in respect to trademarks, service marks, trade names,
logos, internet domain names and corporate names (whether registered or
unregistered, including any applications for registration of the foregoing),
trade dress rights and general intangibles of a like nature, industrial or
product designs together with all of the goodwill associated therewith, and
foreign versions of the foregoing, whether protected, created or arising under
the laws of the United States or any other jurisdiction. For purposes hereof,
“Copyrights”
means
rights arising from or in respect to copyrights and copyrightable works and
registrations, applications and renewals for registration thereof, mask works
and registrations and applications for registration or renewals thereof,
computer software, data, databases and documentation including copies and
tangible embodiments (in whatever form or medium) thereof whether protected,
created or arising under the laws of the United States or any other
jurisdiction. For purposes hereof, “Trade
Secrets”
means
rights arising from or in respect to trade secrets and other confidential
information (including, without limitation, ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, concepts, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, financial and marketing plans and
customer and supplier lists and information whether protected, created or
arising under the laws of the United States or any other jurisdiction. For
purposes hereof, the “Lucent License” means that certain patent license
agreement by and between the Company and Lucent Technologies GRL Corporation
(“Lucent”) effective September 26, 2004, pursuant to which the Company received
a license to use a hyperplane patent (Xxx. No. 5,649,068) from Lucent. The
Patents, Trademarks, Copyrights, and Trade Secrets that the Company owns or
otherwise has the right to use (including, but not limited to, Patent No.
6,996,549 and those other patents listed in the Company’s Annual Report on Form
10-KSB for the fiscal year ended December 31, 2006 and filed on March 30, 2007
other than Patent No. 6,996,542, which is not owned by the Company)
and
the
Lucent License are referred to herein as the “Intellectual
Property”
or
“Company
Intellectual Property”.
(ii) The
Company owns all right, title and interest in and to or possesses exclusive
rights to use all of the Company Intellectual Property, subject to the terms
of
the applicable agreement, free and clear of all Liens or claims of others.
For
purposes of this Section 2.1(m), “Lien”
means
(a) any encumbrance, mortgage, pledge, lien, charge or other security interest
of any kind upon any property or assets of any character, or upon the income
or
profits therefrom; (b) any acquisition of or agreement to have an option to
acquire any property or assets upon conditional sale or other title retention
agreement, device or arrangement (including a capitalized lease); or (c) any
sale, assignment, pledge or other transfer for security of any accounts, general
intangibles or chattel paper, with or without recourse.
(iii) The
Company has not received any notice, written or otherwise, or claim challenging
the complete and exclusive ownership or possession of its rights to use the
Company Intellectual Property by the Company, or suggesting that any other
Person has any claim of legal or beneficial ownership with respect thereto.
Similarly, the Company has not received any notice, written or otherwise,
challenging, terminating, amending, or affecting the interest of the Company
in
the Company Intellectual Property.
(iv) The
Company has taken all necessary and reasonable actions to procure and maintain
the Company Intellectual Property that it owns
or
licenses,
including, if and when applicable and required, the secrecy or confidentiality
thereof,
which
action may be taken by the Company
and the
Company, the Company Intellectual Property is currently in compliance with
all
applicable legal requirements (including timely payment of filing, examination,
maintenance and legal fees) necessary to maintain the Company Intellectual
Property.
6
(v) The
Company has not received any notice, written or otherwise, of a claim that
any
of the Company Intellectual Property is invalid, unenforceable, or
misused.
(vi) No
Company Intellectual Property owned by the Company and no Company Intellectual
Property owned by a third party, is involved in any interference, reissue,
reexamination, opposition or cancellation proceeding or any other litigation
or
proceeding of any kind in the United States or in any other
jurisdiction.
(vii) The
transactions contemplated by this Agreement shall have no adverse effect on
the
right, title and interest of the Company in and to Company Intellectual
Property.
(viii) The
Company has not received any communications, written or otherwise, from any
other Person
alleging that
it
has infringed
or,
by
conducting its Business as currently conducted or proposed to be conducted,
would infringe
the intellectual property
rights
of any Person.
(ix) It
is not
necessary to the Business, as currently conducted, to utilize any Intellectual
Property of any of its employees of the Company made prior to their employment
by the Company, except for inventions, trade secrets or proprietary information
that have been assigned to the Company.
(x) Since
the
date of this Agreement, there has not been any sale, assignment or transfer
of
any Intellectual Property or other material intangible assets of the Company,
except for licenses entered into in the ordinary course of
business.
(xi) All
former and current Employees and Consultants of the Company have signed
agreements containing confidentiality provisions and invention assignment
provisions.
(xii) The
Company Intellectual Property is sufficient to permit the operation of the
Company’s business as currently conducted and as proposed to be conducted as
described in the SEC Documents.
2.2 Representations,
Warranties and Covenants of the Purchasers.
a. Purchaser
Status.
Each
Purchaser, severally and not jointly, represents and warrants to, and covenants
with, the Company that: (i) the Purchaser is an “accredited investor” as
defined in Regulation D under the Securities Act, and the Purchaser is also
knowledgeable, sophisticated and experienced in making, and is qualified to
evaluate the risks and merits and make decisions with respect to investments
in
securities presenting an investment decision like that involved in the purchase
of the Securities, including investments in securities issued by the Company
and
investments in comparable companies, and has requested, received, reviewed
and
considered all information it deemed relevant in making an informed decision
to
purchase the Securities and is able to bear the risks of this investment;
(ii) the Purchaser is acquiring the Securities in the ordinary course of
its business and for its own account for investment only and not with a view
to,
or for resale in connection with, any distribution thereof within the meaning
of
the Securities Act; (iii) the Purchaser will not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers
to
buy, purchase or otherwise acquire or take a pledge of) any of the Securities
(including the Warrant Shares) except in compliance with the Securities Act,
applicable state securities laws and the respective rules and regulations
promulgated thereunder; (iv) the Purchaser has answered all questions on
the Investor Questionnaire for use in preparation of the Registration Statement
and the answers thereto are true, correct and complete in all material respects
as of the date hereof and will be true, correct and complete in all material
respects as of the Closing Date; (v) the Purchaser has delivered to the
Company the Investor Questionnaire; (vi) the Purchaser will notify the Company
immediately of any material change in any of such information until such time
as
the
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Purchaser
has sold all of its Shares and Warrant Shares or until the Company is no longer
required to keep the Registration Statement effective; and (vii) the Purchaser
has, in connection with its decision to purchase the Securities, relied only
upon the SEC Documents and the representations and warranties of the Company
contained herein. Each Purchaser understands that its acquisition of the Shares,
the Warrants and the Warrant Shares has not been registered under the Securities
Act or registered or qualified under any state securities law in reliance on
specific exemptions therefrom, which exemptions may depend upon, among other
things, the bona fide nature of the Purchasers’ investment intent as expressed
herein.
b. Foreign
Offering.
Each
Purchaser acknowledges, represents and agrees that no action has been or will
be
taken in any jurisdiction outside the United States by the Company that would
permit an offering of the Securities, or possession or distribution of offering
materials in connection with the issuance of the Securities, in any jurisdiction
outside the United States where legal action by the Company for that purpose
is
required. Each Purchaser outside the United States will comply with all
applicable laws and regulations in each foreign jurisdiction in which it
purchases, offers, sells or delivers the Securities or has in its possession
or
distributes any offering material, in all cases at its own expense.
c. Resale
Restrictions.
Each
Purchaser hereby covenants with the Company not to make any sale of the Shares,
the Warrants or the Warrant Shares without complying with the provisions of
this
Agreement and without satisfying all requirement of an applicable exemption
under the Securities Act for such sale. Each Purchaser acknowledges that there
may occasionally be times when the Company determines that it must suspend
the
use of the Prospectus forming a part of the Registration Statement, as set
forth
in Section 3.2(c). Each Purchaser acknowledges that the Shares, the Warrants
and
the Warrant Shares will be imprinted with the following legend that prohibits
their transfer except in accordance therewith:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
d. Short
Positions.
Each
Purchaser hereby covenants with the Company not to use any of the Shares or
the
Warrant Shares, acquired pursuant to this Agreement, to cover any short position
in the Common Stock of the Company if doing so would be in violation of
applicable securities laws.
e. No
Advice.
Each
Purchaser understands that nothing in the SEC Documents, this Agreement or
any
other materials presented to the Purchasers in connection with the purchase
and
sale of the Securities constitutes legal, tax or investment advice. Each
Purchaser has consulted such legal, tax and investment advisors as it, in its
sole discretion, has deemed necessary or appropriate in connection with its
purchase of the Securities.
f. Organization;
Authority.
Each
Purchaser is either an individual residing in the state as set forth on the
signature page of this Agreement, or a corporation, limited liability company
or
limited partnership duly formed, validly existing and in good standing under
the
laws of the jurisdiction of its incorporation or formation in either case with
the requisite power and authority, corporate or otherwise, to enter into and
to
consummate the transactions contemplated by this Agreement and to carry out
the
obligations hereunder. The purchase by each Purchaser of the Shares and the
Warrants hereunder has been duly authorized by all necessary action on the
part
of the Purchaser. This Agreement
8
has
been
duly executed and delivered by the Purchaser and constitutes the valid and
legally binding obligation of each Purchaser, enforceable against each Purchaser
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors’ rights generally and to general principles
of equity and except that rights to indemnification and contribution may be
limited by federal or state securities laws or public policy relating thereto.
g. Risk.
Each
Purchaser has carefully reviewed and understands the risks of, and other
considerations relating to, the purchase of the Shares and the Warrants, and
an
investment in the Company. Each Purchaser has adequate means of providing for
its current needs and possible future contingencies, and each Purchaser has
no
need, and anticipates no need in the foreseeable future, to sell or otherwise
transfer the Shares, the Warrants or the Warrant Shares. Each Purchaser is
able
to bear the economic risks of this investment and, consequently, without
limiting the generality of the foregoing, each Purchaser is able to hold the
Shares, the Warrants or the Warrant Shares for an indefinite period of time
and
has sufficient net worth to sustain a loss of its entire investment in the
Company if such loss should occur. Each Purchaser understands that each of
the
Shares, the Warrants and the Warrant Shares is a highly speculative investment,
which involves a high degree of risk of loss of the Purchaser’s entire
investment therein.
h. Reliance.
Each
Purchaser understands and acknowledges that (i) the Shares, the Warrants and
the
Warrant Shares are being offered and sold to the Purchasers without registration
under the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act under Section 4(2) of the
Securities Act or Regulation D promulgated thereunder, and (ii) the availability
of such exemption depends in part on, and the Company will rely upon the
accuracy and truthfulness of, the representations set forth in this Section
2.2,
including, without limitation, the accredited investor status and the investment
intent of the Purchasers, and each Purchaser hereby consents to such reliance.
i. Information.
Each
Purchaser and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Shares and the Warrants which have been
requested by such Purchaser or its advisors. Each Purchaser and its advisors,
if
any, have been afforded the opportunity to ask questions of the Company and
receive answers concerning the terms and conditions of the offering and obtain
any additional information, which the Company possesses or can acquire without
unreasonable effort or expense, that is necessary to verify the accuracy of
any
representations or information set forth in any such material. Representatives
of the Company have adequately answered all inquiries that the Purchasers has
made of them concerning the Company or any other matters relating to the
operation of the Company and sale of the Shares and Warrants.
j. Taxes.
Each
Purchaser is aware that the Company and its representatives assume no
responsibility for the tax consequences to the Purchasers of any investment
in
the Company.
k. No
Representation or Promise.
No one
has ever represented or promised expressly or by implication, any of the
following: (i) the approximate or exact length of time that Purchasers will
be required to remain as owner of the Shares or Warrant Shares, (ii) the
amount or type of profit, or loss (including tax write-offs and/or tax benefits)
to be realized, if any, as a result of the Purchaser’s investment, or
(iii) that the past performance or experience of the officers or directors
of the Company or any affiliate, their associates, agents, or employees or
of
any other person gives any assurance that the Company will be a
success.
9
l. Offering
Literature; No Advertisement.
No
Purchaser has not been furnished any offering literature other than, and has
relied only on the information contained in, (i) the Company’s public SEC
Documents, and (ii) this Agreement, including the exhibits and schedules
thereto. No Purchaser is purchasing the Shares or the Warrants as a result
of,
or subsequent to, any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or meeting in which
representatives of the Company were in attendance.
m. Governmental
Review.
Each
Purchaser understands that no United States federal or state agency or any
other
government or governmental agency has passed upon or made any recommendation
or
endorsement of the Common Stock or the Warrants.
n. Lender
Purchaser.
Each
Lender Purchaser unconditionally and irrevocably agrees to accept the number
of
Shares specified under the caption “Shares
Purchased”
adjacent
to the name of such Lender Purchaser on Schedule B in full payment and
satisfaction of the note(s) issued to such Lender Purchaser, including
principal, accrued interest, fees, and all other rights of such Lender Purchaser
and all other obligations of the Company under the note(s). At the Closing,
each
Lender Purchaser shall deliver to the Company the original note(s) for
cancellation by the Company; provided that the failure of a Lender Purchaser
to
do so shall not affect the cancellation of such note(s) pursuant to this Section
2.2(n). Effective at the Closing, upon delivery of the Shares and Warrants
to a
Lender Purchaser pursuant to this Agreement, all liens and encumbrances securing
the note(s) owned by such Lender Purchaser shall be terminated and discharged,
the Company shall be authorized to file such termination statements and other
filings as may be necessary, convenient, or appropriate to evidence the
satisfaction and discharge of all obligations of the Company under the note(s)
owned by such Lender Purchaser, and the Company shall thereupon be released
and
discharged from any and all liability to the Lender Purchasers that may have
arisen by virtue of any defaults under the note(s).
ARTICLE
III.
REGISTRATION
OF THE SHARES AND WARRANT SHARES;
COMPLIANCE
WITH THE SECURITIES ACT
3.1 Registration
Procedures and Other Matters.
The
Company shall:
a. subject
to receipt of necessary information from the Purchasers after prompt request
from the Company to the Purchasers to provide such information, (i) prepare
and
file with the SEC, within 45 days after the filing of the Company’s Form 10-KSB
for the year ended December 31, 2007, a registration statement on Form SB-2
(the
“Registration
Statement”
and
the
date of filing of the Registration Statement, the “Filing
Date”)
to
enable the public, unrestricted resale of the Shares and the Warrant Shares
(and
shall include in the Registration Statement or promptly file an amendment to
the
Registration Statement to register any Additional Shares or Warrant Shares
issued pursuant to Section 1.3, shares of Common Stock issued pursuant to this
Section 3.1(a), and shares of Common Stock (or other securities convertible
into
Common Stock) issued pursuant to Section 4.6 (collectively, the “Subsequent
Shares”))
by
the Purchasers from time to time, and shall use its best efforts to ensure
that
the Registration Statement is declared effective by the earlier of July 29,
2008
or 120 days after the Filing Date if the Securities and Exchange Commission
(the
“SEC”)
does
not undertake a review of the Registration Statement (a “Review”)
or by
the earlier of August 28, 2008 or 150 days after the Filing Date if the SEC
does
undertake a Review (the applicable date by which effectiveness is to be achieved
being herein referred to as the “Effectiveness
Due Date”),
and
(ii) if the Registration Statement is not declared effective by the
Effectiveness Due Date, then the number of Shares sold to the Purchasers
pursuant to this Agreement shall be increased by one percent (1%) for the 30-day
period beginning on the day after the Registration Statement was to be declared
effective and two percent (2%) for each 30-day period thereafter until the
Registration Statement is declared effective; provided, however, that the
maximum number of shares to be issued under this Section 3.1(a) shall be 10%
of
the number originally purchased pursuant to this Agreement. All Shares to effect
Section 3.1(a)(ii) will be delivered to the Purchasers within ten days of each
delinquency.
10
b. use
its
reasonable efforts to prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith (the “Prospectus”)
as may
be necessary to keep the Registration Statement current, effective and free
from
any material misstatement or omission to state a material fact for a period
not
exceeding, with respect to each Purchaser’s Shares, Warrant Shares and
Subsequent Shares, the earlier of (i) the date on which the Purchasers may
sell all Shares, Warrant Shares and Subsequent Shares then held by the
Purchasers under Rule 144(k) under the Securities Act, or (ii) such
time as all Shares, Warrant Shares and Subsequent Shares have been sold by
the
Purchasers;
c. furnish
to the Purchasers with respect to the Shares, Warrant Shares and Subsequent
Shares registered under the Registration Statement such number of copies of
the
Registration Statement, Prospectuses and preliminary Prospectuses, if
applicable, in conformity with the requirements of the Securities Act and such
other documents as the Purchasers may reasonably request in light of then
existing securities laws, rules and regulations, in order to facilitate the
public sale or other disposition of all or any of the Shares, Warrant Shares
or
Subsequent Shares by the Purchasers; provided, however, that the obligation
of
the Company to deliver copies of Prospectuses or preliminary Prospectuses,
if
applicable, to the Purchasers shall be subject to the receipt by the Company
of
reasonable assurances from the Purchasers that the Purchasers will comply with
the applicable provisions of the Securities Act and of such other securities
or
blue sky laws as may be applicable in connection with any use of such
Prospectuses or preliminary Prospectuses;
d. file
documents required of the Company for normal blue sky clearance in states
specified in writing by the Purchasers and use its best efforts to maintain
such
blue sky qualifications during the period the Company is required to maintain
the effectiveness of the Registration Statement pursuant to Section 3.1(b);
provided, however, that the Company shall not be required to qualify to do
business or consent to service of process in any jurisdiction in which it is
not
now so qualified or has not so consented;
e. bear
all
expenses in connection with the procedures in paragraph (a) through (d) of
this
Section 3.1 and the registration of the Shares, Warrant Shares and
Subsequent Shares pursuant to the Registration Statement; and
f. advise
the Purchasers promptly after it shall receive notice or obtain knowledge of
the
issuance of any stop order by the SEC delaying or suspending the effectiveness
of the Registration Statement or of the initiation or threat of any proceeding
for that purpose; and it will promptly use its reasonable best efforts to
prevent the issuance of any stop order or to obtain its withdrawal at the
earliest possible moment if such stop order should be issued.
The
Company understands that each Purchaser disclaims being an underwriter, but
that
any Purchaser being deemed an underwriter by the SEC shall not relieve the
Company of any obligations it has hereunder; provided,
however
that if
the Company receives notification from the SEC that any Purchaser is deemed
an
underwriter, then the period by which the Company is obligated to submit an
acceleration request to the SEC shall be extended to the earlier of (i) the
90th day after such SEC notification, or (ii) 120 days after the initial
filing of the Registration Statement with the SEC.
3.2 Transfer
of Shares, Warrant Shares and Subsequent Shares After Registration;
Suspension.
a. Each
Purchaser agrees that it will not effect any disposition of the Shares, the
Warrants, the Warrant Shares or the Subsequent Shares that would constitute
a
sale within the meaning of the Securities Act except as contemplated in the
Registration Statement referred to in Section 3.1 (with respect to the
Shares, Warrant Shares and Subsequent Shares) and as described below or as
otherwise permitted by law, and that it will promptly notify the Company of
any
material changes in the information set forth in the Registration Statement
regarding itself or its plan of distribution.
11
b. Except
in
the event that paragraph (c) below applies, the Company shall (i) prepare
and file from time to time with the SEC a post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or a supplement
or amendment to any document incorporated therein by reference or file any
other
required document so that such Registration Statement will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
and
so that, as thereafter delivered to purchasers of the Shares, Warrant Shares
or
Subsequent Shares being sold thereunder, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required
to
be stated therein or necessary to make the statements therein, in light of
the
circumstances under which they were made, not misleading; and (ii) inform
each Purchaser if the Company files a post-effective amendment to the
Registration Statement which has not yet been declared effective, and will
use
its reasonable efforts to secure the effectiveness of such post-effective
amendment as promptly as reasonably possible and will promptly notify the
Purchasers pursuant to Section 7.2 hereof when the amendment has
become effective.
c. Subject
to paragraph (d) below,
in the
event
(i) of any request 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
or
for additional information; (ii) of 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) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of any of the Shares, Warrant Shares or Subsequent Shares for
sale
in any jurisdiction or the initiation or threatening of any proceeding for
such
purpose; or (iv) of any event or circumstance which necessitates the making
of
any changes, or in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company or any plan or
proposal of the Company with respect to its corporate development, financing
or
other activities to make such changes, in the Registration Statement or
Prospectus, or any document incorporated or deemed to be incorporated therein
by
reference, so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; then the Company shall deliver a certificate in writing to each
Purchaser (the “Suspension
Notice”)
to the
effect of the foregoing and, upon receipt of such Suspension Notice, the
Purchasers will refrain from selling any Shares, Warrant Shares or Subsequent
Shares pursuant to the Registration Statement (a “Suspension”)
until
the Purchaser is advised in writing by the Company that the then current
Prospectus may be used; provided, however, that there may be no more than one
Suspension in any 12-month period. In the event of any Suspension, the Company
will use its reasonable efforts to cause the use of the Prospectus so suspended
to be resumed and the Registration Statement to be effective as soon as
reasonably practicable, and in any event within 90 days after the delivery
of a
Suspension Notice to the Purchasers.
d. Provided
that a Suspension is not then in effect, the Purchasers may sell the Shares,
the
Warrant Shares and the Subsequent Shares under the Registration Statement once
effective, provided that it arranges for any required delivery of a current
Prospectus to the transferee of such shares.
12
e. In
the
event of a sale of the Shares, the Warrant Shares or the Subsequent Shares
by
the Purchasers pursuant to the Registration Statement, the Purchasers must
also
deliver to the Company’s transfer agent, with a copy to the Company, a
Certificate of Subsequent Sale substantially in the form attached hereto as
Exhibit D, so that the Shares, the Warrant Shares and the Subsequent Shares
may be properly transferred.
3.3 Termination
of Conditions and Obligations.
The
conditions precedent imposed by Section 2.2 or this Article III upon the
transferability of the Shares, the Warrant Shares and the Subsequent Shares
shall cease and terminate as to any particular number of Shares, Warrant Shares
and Subsequent Shares when such shares shall have been effectively registered
under the Securities Act and sold or otherwise disposed of in accordance with
the intended method of disposition set forth in the Registration Statement
covering such shares or at such time as an opinion of counsel reasonably
satisfactory to the Company shall have been rendered to the effect that such
conditions are not necessary in order to comply with the Securities
Act.
ARTICLE
IV.
OTHER
AGREEMENTS
4.1 Reservation
of Warrant Shares.
If at
any time the number of authorized but unissued shares of Common Stock is
insufficient to cover the number of Warrant Shares issuable upon exercise of
the
Warrants without regard to any limitation on exercises and a Purchaser indicates
that it desires to exercise a Warrant, the Company will pursue best efforts
to
acquire the authority for issuance sufficient for the exercise of such Warrant.
If any Investors have indicated an intention to exercise Warrants but the
Company has not acquired the authority for sufficient shares to honor the
election, such Investors’ Warrants shall not expire until the exercise of those
Warrants has been honored.
4.2 Furnishing
of Information.
Until
the earlier of the second anniversary of the Closing Date or the date upon
which
no Purchaser owns any Shares, Warrants or Warrant Shares, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by
the
Company after the date of this Agreement pursuant to the Exchange Act.
4.3 Integration.
The
Company shall not and shall use its best efforts to ensure that no affiliate
of
the Company shall sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the shares of Common
Stock hereunder in a manner that would require the registration under the
Securities Act of the sale of the shares Common Stock to the
Purchasers.
4.4 Best
Efforts.
Both of
the parties hereto shall use its best efforts to satisfy each of the conditions
to be satisfied by it as provided in Article IV of this Agreement.
4.5 Confidential
Information.
a. Each
Purchaser represents to the Company that, at all times during the Company’s
offering of the Securities, the Purchaser has maintained in confidence and
has
not used except in connection with its purchase of the Securities pursuant
hereto, all non-public information regarding the Company received by the
Purchaser from the Company or its agents, and covenants that it will continue
to
maintain in confidence such information until such information (i) becomes
generally publicly available other than through a violation of this provision
by
the Purchaser or its agents or (ii) is required to be disclosed in legal
proceedings (such as by deposition, interrogatory, request for documents,
subpoena, civil investigation demand, filing with any governmental authority
or
similar process), provided, however, that before making any use or disclosure
in
reliance on this subparagraph (ii) the Purchasers shall give the Company at
least fifteen (15) days prior written notice (or such shorter period as required
by law) specifying the circumstances giving rise thereto and will furnish only
that portion of the non-public information which is legally required and will
exercise its best efforts to obtain reliable assurance that confidential
treatment will be accorded any non-public information so furnished.
13
b. The
Company shall on or as soon as practicable following the date of this Agreement
issue a press release disclosing the material terms of the transactions
contemplated hereby (including at least the amount of Securities sold and
proceeds therefrom).
4.6 Issuances
of Additional Shares of Common Stock.
a. If,
at
any time prior to the Anti-Dilution End Date, the Company shall issue or
sell any shares of Common Stock (or other New Securities) at an effective
price per share of Common Stock of less than $0.08 (after giving effect to
the conversion, exchange or exercise of all convertible, exchangeable and
exercisable New Securities), as adjusted pursuant to the terms of this Agreement
(a “Discounted
Price”),
then
each Purchaser shall, within 30 days of each sale or issuance of Common Stock
(or other New Securities) at a Discounted Price (each, a “Discounted
Price Transaction”)
be
issued by the Company (the “Anti-Dilution
Issuance”),
for
no additional consideration, a number of additional shares of Common Stock
so
that the sum of the number of shares of Common Stock issued to them in the
Offering and in the Anti-Dilution Issuance shall, collectively, be equal to
the
number of shares of Common Stock which is:
(i) $0.08,
divided
by
(ii) the
effective per share sale price for the Common Stock in the Discounted Price
Transaction, with such quotient then being multiplied
by
(iii) the
number of shares issued to such Purchaser in the Offering.
b. The
provisions of paragraph (a) of this Section 4.6 shall not apply to any issuance
of shares of Common Stock for which an adjustment is provided under Section
4 of
the Warrant.
c. No
additional shares of Common Stock will be issued under paragraph (a) above
due
to, or as a result of, any Permitted Issuances. “Permitted
Issuances”
shall
mean (i) Common Stock issued pursuant to a stock split or subdivision, (ii)
Common Stock issued or issuable upon conversion of the Warrants or any other
securities exercisable or exchangeable for, or convertible into shares of Common
Stock, outstanding as of the date hereof.
d. All
references to $0.08 or $0.01 in this Section 4.6 shall be subject to equitable
and proportional adjustment in the event of any stock dividend, stock split,
reverse stock dividend or reverse stock split, or any capital reorganization
or
recapitalization or similar event affecting the Common Stock, which becomes
effective after the date of this Agreement.
e. If,
any
time prior to the three year anniversary of the Closing Date, the Company
re-prices any warrants or options (whether or not such warrants or options
are
outstanding as of the date hereof) or extends the exercise period of any
such
warrant or option, then each such warrant and option shall be deemed, for
purposes of this Section 4.6 to be an issue or sale of a number of shares
of
Common Stock equal to the number of shares that may be acquired upon exercise
of
such warrant or option at an effective price per share of Common Stock equal
to
$0.01.
f. The
"Anti-Dilution End Date" shall mean (i) for purposes of this Section 4.6
other
than Section 4.6(e), the date that is eighteen months after the Closing
Date,
and (ii) for purposes of Section 4.6(e), the date that is three years after
the
Closing Date.
4.7 Competing
Registration Statement.
Until
the Registration Statement required to be filed pursuant to Section 3.1 is
declared effective by the SEC, the Company shall not file any other registration
statement attempting to register any other shares of Common Stock under the
Securities Act for sale to the public for its own account or for the account
of
other shareholders (except with respect to registration statements on Form
S-4
or S-8 or another form not available for registering the shares of Common Stock
issued in the Offering for sale to the public or registration statements used
otherwise in connection with bona fide acquisitions, mergers, technology
licenses or purchases, corporate partnering agreements, joint ventures or
similar transactions, the terms of which are approved by the Board of Directors
of the Company; provided, however, that if any Form S-8 attempts to register
shares of Common Stock in excess of 1% of the number of the then outstanding
shares of Common Stock, the Company must obtain the prior written approval
of
the Purchasers).
14
4.8 Right
of Participation.
Within
thirty (30) days after the issuance of New Securities (a “Financing”),
the
Company shall give notice to Prime Mover Capital Partners, LP (the
“Lead
Purchaser”),
which
notice shall describe the type, price, and terms of the New Securities (as
defined below). The Lead Purchaser shall have twenty (20) days from the date
of
receipt of such notice to elect to purchase up to 10% of the number of New
Securities that were sold in the Financing. The closing of such sale shall
occur
within sixty (60) days of the date of notice to the Lead Purchaser consisting
of
the same type, price, and terms of the New Securities that were issued in the
Financing. The Lead Purchaser’s rights under this Section 4.8 shall expire on
the fifth anniversary of the Closing Date. The Lead Purchaser shall be entitled
to apportion the right granted to it by this Section 4.8 among itself and its
partners, members, and affiliates in such proportions as it deems appropriate.
For purposes of this Agreement, a Financing shall exclude the issuance of:
(i) compensatory grants of shares of Common Stock or options or warrants to
acquire shares of Common Stock issued or deemed issued to employees or directors
of, or consultants to, the Company or any of its subsidiaries pursuant to a
compensation plan, agreement, or arrangement approved by the Board of Directors
of the Company; provided that such grants are not made in connection with a
capital raising transaction or as compensation for services in connection with
the promotion or maintaining of a market for the Company's
securities; (ii) securities pursuant to the conversion or exercise of
convertible or exercisable securities outstanding on the date hereof; (iii)
securities issued in connection with any stock split or stock dividend of the
Company; (iv) securities in connection with a bona fide business
acquisition of or by the Company, whether by merger, consolidation, sale of
assets, sale or exchange of stock, or otherwise; (v) stock, warrants, or
other securities or rights to persons with which the Company has business
relationships provided such issuances are for other than capital raising
purposes and provided that at the time of any such issuance, the aggregate of
such issuance and similar issuances in the preceding twelve month period do
not
exceed 2% of the then outstanding shares of Common Stock. For purposes of this
Agreement, “New
Securities”
shall
mean equity securities of the Company, whether now authorized or not, or rights,
options, or warrants to purchase said equity securities, or securities of any
type whatsoever that are, or may become, convertible into or exchangeable into
or exercisable for said equity securities.
4.9 Matters
Related to the Board of Directors.
Upon
the Closing, the Company shall take all acts necessary to effect an increase
in
the size of the Board of Directors to facilitate the election of two individuals
reasonably acceptable to the Company and the Lead Investor, and shall support
the appointment of each to serve until the next meeting of the shareholders.
Promptly after the Closing, the Board of Directors shall evaluate a reverse
stock split of at least 15 to 1 and up to 100 to 1.
4.10
Limitation
on Issuance of Options and Warrants.
Except
with the consent of the Lead Purchaser, until the third anniversary of the
Closing Date, the Company will not issue (a) warrants to any director, employee
or consultant other than Xxxx Xxxxx or the members of the Company's Scientific
Advisory Board; (b) in any single calendar year options to directors, employees
and consultants of the Company and warrants to Xxxx Xxxxx or the members of
the
Company's Scientific Advisory Board (issued in accordance with Section 4.10(a))
in an aggregate amount greater than 2.5% of the primary shares outstanding;
and
(c) any warrants to acquire shares of Common Stock other than in a future
financing. For purposes of this Section 4.10, the Xxxxxxxx Securities shall
be
deemed to have been issued prior to the Closing Date.
411.
Debt
Payments.
All
amounts of debt owed by the Company to Xxxxxxx X. X'Xxxxx at the Closing Date
(whether or not then payable) shall be paid in full within three months
following the Closing Date. The Company will use its best efforts to, within
three months following the Closing Date, either (i) pay in full all amounts
of
debt owed by the Company to each of the DIP Financers at the Closing Date
(whether or not then payable), or (ii) have each of the DIP Financers convert
such debt into an equity interest in the Company. The "DIP Financers" shall
mean
Xx. Xxxxx A. Bergaron, Xxxx X. Xxxxxxxx, K. Xxxxxxx Xxxxxxx, Xxxxxx Xxxxx,
Xxxxxx Xxxxxxxx, Xxxxx Xxxxx Xxxxxxx, Xx. Xxxxx Xxxxxxxxxx, Memorial Health
Trust and Dr. Xxxxxx XxXxxxxx.
4.12
Right
of First Refusal for Warrants.
Subject
to Section 7.5, if a Purchaser (the “Transferring
Purchaser”)
proposes to transfer any Warrant(s) (the "Transfer
Warrants"),
then
the Transferring Purchaser shall promptly give written notice (the "Transfer
Notice")
of
such proposed transfer to the Lead Purchaser pursuant to Section 7.2 hereof.
The
Transfer Notice shall set forth the terms and conditions of the proposed
transfer, including, without limitation, the number of Warrant Shares issuable
upon exercise of each Transfer Warrant, the cash consideration to be paid per
warrant (or, in the event that the consideration is other than cash, the value
of the consideration as determined in good faith by the Transferring
15
Purchaser)
(the "Purchase
Price Per Warrant"),
and
the name and address of each prospective purchaser or transferee (each, a
"Proposed
Transferee").
The
Transferring Purchaser shall enclose with the Transfer Notice a copy of any
written offer, letter of intent or other written document signed by the Proposed
Transferee(s) setting forth the proposed terms and conditions of the transfer.
For a period of three (3) days
following the date (the "Transfer
Notice Date")
on
which the Transfer Notice is given to the Lead Purchaser (the "Lead
Purchaser Acceptance Period"),
the
Lead Purchaser shall have the right to purchase such Warrant(s) on the same
terms and conditions as set forth in the Transfer Notice. If the Lead Purchaser
desires to exercise its right to purchase all or any portion of such Transfer
Warrants, it shall give written notice (the "Lead
Investor Notice")
to the
Transferring Purchaser, with a copy to the Company, no later than the expiration
of the Lead Investor Acceptance Period. The Lead Investor Notice shall state
that the Lead Investor desires to purchase all of the Transfer Warrants or,
if
the Lead Investor desires to purchase less than all of the Transfer Warrants,
the number of Transfer Warrants the Lead Investor desires to purchase.
If
the
Transferring Purchaser fails or refuses to deliver on a timely basis a
certificate or certificates representing such Transfer Warrants properly
endorsed for transfer, the Company shall effect the transfer of the Transfer
Warrants to the Lead Purchaser in accordance with this Section 4.12 and
thereafter the Transferring Purchaser shall look only to the Lead Purchaser
for
payment.
ARTICLE
V.
CONDITIONS
5.1 Closing.
a. Conditions
Precedent to the Obligation of the Company to Sell the Shares and the
Warrants.
The
obligation of the Company to sell the Shares and the Warrants is subject to
the
satisfaction or waiver by the Company, at or before the Closing Date, of each
of
the following conditions:
(i) the
representations and warranties of the Purchasers in this Agreement shall be
true
and correct in all material respects as of the date when made and as of the
Closing Date;
(ii) the
Purchasers shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by the Purchasers at or before the Closing
Date; and
(iii) 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 which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
b. Conditions
Precedent to the Obligation of the Purchasers to Purchase the Shares and
Warrants at the Closing.
The
obligation of the Purchasers hereunder to acquire and pay for the Shares and
the
Warrant at the Closing shall be several and not joint and is subject to the
satisfaction or waiver by the Purchasers, at or before the Closing Date, of
each
of the following conditions:
(i) the
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all material respects as of the date when made and as
of
the Closing Date;
(ii) the
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by the Company at or before the Closing
Date;
16
(iii) 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 which prohibits the consummation of any
of
the transactions contemplated by this Agreement;
(iv)
all
Required Approvals shall have been obtained;
(v) the
Minimum Amount shall have been subscribed for;
(vi)
execution
and delivery by each of the managers and employees of the Company of the
Management Lockup Agreement in the form attached hereto as Exhibit
C;
(vii)
the
sales
to the Purchasers hereunder shall not result in gross cash proceeds to the
Company of greater than the Maximum Amount;
(viii) delivery
of all items deliverable under Section 1.2(c);
(ix) no
Material Adverse Effect shall have occurred or been threatened (and no
condition, event or development shall have occurred or been threatened involving
a prospective Material Adverse Effect) in respect of the Company or any of
its
subsidiaries between the date of this Agreement and the Closing Date;
and
(x)
from
the
date hereof to the Closing Date, trading in the Common Stock shall not have
been
suspended by the Commission or the Company’s principal trading market (except
for any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the Closing), and, at any time
prior to the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum prices
shall
not have been established on securities whose trades are reported by such
service, or on any trading market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable
to
purchase the Shares and the Warrants at the Closing.
ARTICLE
VI.
INDEMNIFICATION
6.1 Indemnification.
a. By
the
Company.
The
Company will indemnify and hold each Purchaser harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that such Purchaser may suffer or
incur as a result of or relating to any misrepresentation, breach or inaccuracy,
or any allegation by a third party that, if true, would constitute a breach
or
inaccuracy, of any of the representations, warranties, covenants or agreements
made by the Company in this Agreement; provided, however, that any and all
payments, in the aggregate, made or due by the Company as a result of the
obligations of this Section 6.1 shall be limited to, and in no case shall
exceed, the Purchase Price paid by such Purchaser, as stated in Section 1.1
herein.
b. By
the
Purchasers.
Each
Purchaser will indemnify and hold the Company harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that the Company may suffer or incur
as a result of or relating to any misrepresentation, breach or inaccuracy,
or
any allegation by a third party that, if true, would constitute a breach or
inaccuracy, of any
17
of
the
representations, warranties, covenants or agreements made by such Purchaser in
this Agreement; provided, however, that any and all payments, in the aggregate,
made or due by such Purchaser as a result of the obligations of this Section
6.1
shall be limited to, and in no case shall exceed, the amount of the Purchase
Price (but no credit shall be granted for such payment for any obligation of
the
Purchasers pursuant to this Section 6.1) paid by such Purchaser, as stated
in
Section 1.1 herein.
c. Registration-Related
Indemnification.
(i) For
purposes of this Section 6.1(c):
(a) “Equity
Securities”
shall
mean (i) the Shares and the Warrant Shares, and (ii) any equity securities
issued as a distribution with respect to or in exchange for or in replacement
for any of the shares referred to in clause (i).
(b) “Registrable
Securities”
shall
mean any Equity Securities until the earlier of the date on which (i) a
registration statement covering such Equity Securities has been declared
effective by the Commission and such Equity Securities have been disposed of
pursuant to such effective registration statement, (ii) such Equity Securities
are sold under circumstances in which all the applicable conditions of Rule
144
(or any similar provisions then in force) under the Securities Act are met,
or
such Equity Securities may be sold in a single transaction under Rule 144(k)
(or
any similar provision then in force) under the Securities Act, and are freely
tradable after such sale by the transferee, (iii) the Company has delivered
a
new certificate or other evidence of ownership for such Equity Securities not
bearing a legend restricting further transfer and such Equity Securities may
be
resold without registration under the Equity Securities Act or (iv) such
Securities shall have been sold or otherwise disposed of by the Purchasers
(other than as permitted under Section 7.5 or to the Lead Purchaser pursuant
to
Section 4.12).
(c) A
person
shall be deemed to be a holder of such Registrable Securities (each a
“Holder”)
whenever such Person is the registered holder of such Registrable Securities
on
the Company’s books and records.
(ii) The
Company agrees, to the maximum extent permitted by law, to indemnify and hold
harmless (i) each Holder covered by any Registration Statement, (ii) each other
Person who participates as an underwriter in the offering or sale of such
securities, (iii) each person, if any, who controls (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) any such
Holder or underwriter (any of the persons referred to in this clause (iii)
being
hereinafter referred to as a “controlling person”) and (iv) the respective
officers, directors, partners, employees, representatives and agents of any
such
Holder or underwriter or any controlling person (any person referred to in
clause (i), (ii), (iii) or (iv) may hereinafter be referred to as an
“Indemnified
Person”),
from
and against any and all losses, claims, damages, liabilities, judgments or
expenses, joint or several (or actions or proceedings, whether commenced or
threatened, in respect thereof), including, without limitation, interest,
penalties, and attorneys’ fees and disbursements, asserted against, resulting
to, imposed upon or incurred by such Indemnified Person (collectively,
“Claims”),
to
which such Indemnified Person may become subject, directly or indirectly, under
either Section 15 of the Securities Act or Section 20 of the Exchange Act or
otherwise, insofar as such Claims arise out of or are based upon, or are caused
by any untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement or Prospectus (or any amendment or supplement
thereto), or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or a violation by the Company of the Securities Act or any state
securities law, or any rule or regulation promulgated under the Securities
Act
or any state securities law, or any other law applicable to the Company relating
to any
18
such
registration or qualification, except insofar as such losses, claims, damages,
liabilities, judgments or expenses of any such Indemnified Person; (x) are
caused by any such untrue statement or omission or alleged untrue statement
or
omission that is based upon information relating to such Indemnified Person
furnished in writing to the Company by or on behalf of any of such Indemnified
Person expressly for use therein; or (y) with respect to the preliminary
Prospectus, result from the fact that such Holder sold Equity Securities to
a
person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Prospectus, as amended or supplemented,
if the Company shall have previously furnished copies thereof to such Holder
in
accordance with this Agreement and said Prospectus, as amended or supplemented,
would have corrected such untrue statement or omission. Such indemnity shall
remain in full force and effect regardless of any investigation made by or
on
behalf of any Indemnified Person and shall survive the transfer of such
securities by such Holder.
(iii) In
case
any action shall be brought or asserted against any of the Indemnified Persons
with respect to which indemnity may be sought against the Company, such
Indemnified Person shall promptly notify the Company and the Company shall
assume the defense thereof with counsel reasonably satisfactory to the
Indemnified Persons. Such Indemnified Person shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of the
Indemnified Person unless (i) the employment of such counsel shall have been
specifically authorized in writing by the Company, (ii) the Company shall have
failed to assume the defense and employ counsel or (iii) the named parties
to
any such action (including any implied parties) include both the Indemnified
Person and the Company and the Indemnified Person shall have been advised in
writing by its counsel that there may be one or more legal defenses available
to
it which are materially different from or additional to those available to
the
Company, it being understood, however, that the Company shall not, in connection
with such action or similar or related actions or proceedings arising out of
the
same general allegations or circumstances, be liable for the reasonable fees
and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) at any time for all the Indemnified Persons, which firm shall be (x)
designated by such Indemnified Persons and (y) reasonably satisfactory to the
Company. The Company shall not be liable for any settlement of any such action
or proceeding effected without the Company’s prior written consent, which
consent shall not be withheld unreasonably, and the Company agrees to indemnify
and hold harmless any Indemnified Person from and against any loss, claim,
damage, liability, judgment or expense by reason of any settlement of any action
effected with the written consent of the Company. The Company shall not, without
the prior written consent of each Indemnified Person, which shall not be
unreasonably withheld, settle or compromise or consent to the entry of judgment
on or otherwise seek to terminate any pending or threatened action, claim,
litigation or proceeding in respect of which indemnification or contribution
may
be sought hereunder (whether or not any Indemnified Person is a party thereto),
unless such settlement, compromise, consent or termination includes an
unconditional release of each Indemnified Person from all liability arising
out
of such action, claim litigation or proceeding.
(iv) Each
Holder of Registrable Securities covered by any Registration Statement agrees,
severally and not jointly, to indemnify and hold harmless the Company and its
directors, officers and any person controlling (within the meaning of Section
15
of the Securities Act or Section 20 of the Exchange Act) the Company, and the
respective officers, directors, partners, employees, representatives and agents
of each person, to the same extent as the foregoing indemnity from the Company
to each of the Indemnified Persons, but only
(i) (x)
with respect to actions based on information relating to such Holder furnished
in writing by or on behalf of such Holder expressly for use in any Registration
Statement or Prospectus, or (y) with respect to the preliminary Prospectus,
any
matters which result from the fact that such Holder sold Equity Securities
to a
person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Prospectus, as amended or supplemented,
if the Company shall have previously furnished copies thereof to such Holder
in
accordance with this Agreement and said Prospectus, as amended or supplemented,
would have corrected such untrue statement or
19
omission,
and (ii) to the extent of the net cash proceeds, if any, received by such Holder
from the sale or other disposition of his or its Registrable Securities covered
by such Registration Statement. In case any action or proceeding shall be
brought against the Company or its directors or officers or any such controlling
person in respect of which indemnity may be sought against a Holder of
Registrable Securities covered by any Registration Statement, such Holder shall
have the rights and duties given the Company in Section 6.1(c)(ii), and the
Company or its directors or officers or such controlling person shall have
the
rights and duties given to each Holder by Section 6.1(c)(ii). Such indemnity
shall remain in full force and effect regardless of any investigation made
by or
on behalf of any the Company or any other Indemnified Person and shall survive
the transfer of securities by any applicable Holder.
(v) If
the
indemnification provided for in this Section 6.1(c) is unavailable to an
indemnified party under Section 6.1(c)(ii), (iii) or (iv) (other than by reason
of exceptions provided in those Sections) in respect of any losses, claims,
damages, liabilities, judgments or expenses referred to therein, then each
applicable indemnifying party (in the case of the Holders severally and not
jointly), in lieu of indemnifying such indemnified party, shall contribute
to
the amount paid or payable by such indemnified party as a result of such losses,
claims damages, liabilities, judgments or expenses (i) in such proportion as
is
appropriate to reflect the relative benefits received by the Company on the
one
hand and the Holder on the other hand from sale of Registrable Securities or
(ii) if such allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of
the Company and such Holder in connection with the statements or omissions
which
resulted in such losses, claims, damages, liabilities, judgments or expenses,
as
well as any other relevant equitable considerations. The relative fault of
the
Company on the one hand and of such Holder on the other shall be determined
by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material
fact
relates to information supplied by the Company or by such Holder and the parties
relative intent, knowledge, access to information and opportunity to correct
or
prevent such statement or omission. The amount paid to a party as a result
of
the losses, claims, damages, liabilities judgments and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
Section 6.1(c)(iii) and Section 6.1(c)(iv), any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim.
(vi) The
Company and each Holder of Registrable Securities covered by any Registration
Statement agree that it would not be just and equitable if contribution pursuant
to this Section 6.1(c)(vi) were determined by pro rata allocation (even if
the
Holders were treated as one entity for such purpose) or by any other method
of
allocation which does not take into account the equitable considerations
referred to in the immediately preceding paragraph. Notwithstanding the
provisions of this Section 6.1(c)(vi), no Holder (and none of its related
Indemnified Persons) shall be required to contribute, in the aggregate, any
amount in excess of the amount by which the dollar amount of proceeds received
by such Holder upon the sale of the Registrable Securities exceeds the amount
of
any damages which such Holder has otherwise been required to pay by reason
of
such untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(vii) The
indemnity and contribution provisions contained in this Section 6.1(c) are
in
addition to any liability which the indemnifying person may otherwise have
to
the Indemnified persons referred to above.
ARTICLE
VII.
MISCELLANEOUS
7.1 Entire
Agreement.
This
Agreement, together with the Schedules and Exhibits hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral or written, with
respect to such matters.
20
7.2 Notices.
Whenever it is provided herein that any notice, demand, request, consent,
approval, declaration or other communication shall or may be given to any of
the
parties by another, or whenever any of the parties desires to give another
any
such communication with respect to this Agreement, each such notice, demand,
request, consent, approval, declaration or other communication shall be in
writing, and shall be delivered in person with receipt acknowledged or by
registered or certified mail, return receipt requested, postage prepaid, or
by
telecopy and confirmed by telecopy answerback addressed as follows:
|
If
to the Company:
|
With
a Copy to:
|
|
Health
Discovery Corporation
0
Xxxx Xxxxx Xxxxxx, Xxxxx #000
Xxxxxxxx,
XX 00000
Attn:
Xxxxxx X. Xxxxx
Facsimile:
(000) 000-0000
|
Xxxxxx
Xxxxxxxxx LLP
0000
X. Xxxxxxxxx Xxxxxx, X.X.
00xx
Xxxxx
Xxxxxxx,
Xxxxxxx 00000
Attn:
Xxxx Xxxx, Esq.
Facsimile:
(000) 000-0000
|
|
If
to the Purchasers:
|
|
|
To
the addresses listed on the
signature page of this Agreement
|
or
at
such other address as may be substituted by notice given as herein provided.
The
giving of any notice required hereunder may be waived in writing by the party
entitled to receive such notice. Every notice, demand, request, consent,
approval, declaration or other communication hereunder shall be deemed to have
been duly given and effective on the earliest of (a) the date of transmission,
if such notice or communication is delivered via facsimile prior to 5:30 p.m.
(New York City time) on a business day, (b) the next business day after the
date
of transmission, if such notice or communication is delivered via facsimile
on a
day that is not a business day or later than 5:30 p.m. (New York City time)
on
any business day, (c) the business day following the date of mailing, if sent
by
a U.S. nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is required to be given. As used
herein, a “business
day”
means
any day except Saturday, Sunday or a day which is a federal legal holiday or
a
day on which banking institutions in the State of New York are authorized or
required by law or other governmental action to close.
7.3 Amendments;
Waivers.
No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by both the Company and each
of
the Purchasers or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought. No waiver of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed
to
be a continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of either
party
to exercise any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter.
7.4 Headings.
The
headings herein are for convenience only, do not constitute a part of this
Agreement, and shall not be deemed to limit or affect any of the provisions
hereof.
7.5 Successors
and Assigns; Assignability; No Third-Party Beneficiaries.
Neither
this Agreement nor any right, remedy, obligation or liability arising hereunder,
or by reason hereof, shall be assignable by the Purchasers without the prior
written consent of the Company; provided, however, that each Purchaser may
assign any of its rights under this Agreement to any of its affiliates. In
the
event that this Agreement is assigned, all covenants contained herein shall
bind
and inure to the benefit of the parties hereto and their respective successors
and assigns. 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.
21
7.6 Governing
Law; Waiver of Jury Trial.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of Georgia, without regard to the principles
of conflicts of law thereof. Each party agrees that all proceedings concerning
the interpretations, enforcement and defense of the transactions contemplated
by
this Agreement (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) (each a
“Proceeding”)
shall
be commenced exclusively in the state and federal courts sitting in the Atlanta,
Georgia. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the Atlanta, Georgia
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 Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such Proceeding
is improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such Proceeding by mailing
a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for 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. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If either party shall commence a Proceeding to enforce
any
provisions of this Agreement, then the prevailing party in such Proceeding
shall
be reimbursed by the other party for its attorney’s fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
Proceeding.
7.7 Survival.
The
representations, warranties, agreements and covenants contained herein shall
survive following the Closing.
7.8 Counterparts;
Execution.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original and all of which together shall be deemed to be one
and
the same instrument. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original
thereof.
7.9 Publicity.
The
Purchasers shall not issue any press release or make any public disclosure
regarding the transactions contemplated hereby unless such press release or
public disclosure is approved by the Company in advance. Notwithstanding the
foregoing, each of the parties hereto may, in documents required to be filed
by
it with the SEC or other regulatory bodies, make such statements with respect
to
the transactions contemplated hereby as each may be advised by counsel is
legally necessary or advisable, and may make such disclosure as it is advised
by
its counsel is required by law.
7.10
Severability.
In case
any one or more of the provisions of this Agreement shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision which shall be a reasonable substitute thereof, and upon
so agreeing, shall incorporate such substitute provision in this
Agreement.
7.11
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.
22
7.12
Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, the Purchasers and the Company will be
entitled to specific performance under this Agreement. The parties agree that
monetary damages will not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence and
hereby agree to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
7.13
Fees
and Expenses.
If the
Closing occurs or if the Closing does not occur at the election of the Company,
the Company will pay the reasonable legal fees of the Lead Purchaser in an
aggregate amount not to exceed $25,000.00. Except as provided herein, each
Party
shall pay the fees and expenses of its own advisers, accountants and other
experts.
23
IN
WITNESS WHEREOF,
the
parties hereto have caused this Securities Purchase Agreement to be duly
executed by their respective authorized persons as of the day and year
below.
HEALTH
DISCOVERY
CORPORATION
By:
Name:
Title:
Date:
__________________________, 2007
IN
MAKING AN INVESTMENT DECISION, THE PURCHASER MUST RELY ON ITS OWN EXAMINATION
OF
THE COMPANY AND THE TERMS OF THE SALE OF THE SHARES AND WARRANT, INCLUDING
THE
MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE,
THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PURCHASER
Print
Name:
Signature:
Date:
__________________________, 2007
Address:
Resident
of the State
of
24
SCHEDULE
A
Schedule
of Cash Purchasers
|
Name
|
Purchase
Price
|
Number
of Shares
Purchased
|
Number
of Tranche 1
Warrants
Purchased
|
Number
of Tranche 2
Warrants
Purchased
|
25
SCHEDULE
B
Schedule
of Lender Purchasers
|
Name
|
Purchase
Price
(Principal
+
Accrued
Interest)
|
Number
of Shares
Purchased
|
Number
of Tranche 1
Warrants
Purchased
|
Number
of Tranche 2
Warrants
Purchased
|
26
