Exhibit 10.8
SECURITIES PURCHASE AGREEMENT
Securities Purchase Agreement (together with the schedules and exhibits
hereto, this "Agreement"), dated as of September 1, 2005, by and between
Bioaccelerate Holdings, Inc., a Nevada corporation (the "Company"), and each of
the Persons (as defined below) who has executed a signature page to this
Agreement (each a "Purchaser," and together, the "Purchasers").
W I T N E S S E T H:
WHEREAS, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to purchase from the Company, the Securities (as such term is
defined below) as set forth below.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements hereinafter contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
intending to be legally bound, the parties hereto hereby agree as follows:
1. 1. Offer and Sale of Securities.
1.1 The Offering. The Company is offering for sale in this offering up to
Five Million (5,000,000) shares (the "Maximum Offering") of its Series A
Convertible Preferred Stock, par value $0.001 per share (the "Series A Preferred
Stock"). Notwithstanding the foregoing, the Company, in its sole discretion, may
increase the Maximum Offering, at any time during the Offering and without prior
notice, by up to ten percent (10%). There is no minimum offering, and the
Company may accept and close upon subscriptions from time to time in its sole
discretion during the offering period referred to in this Agreement. Each share
of Series A Preferred Stock initially converts to Four (4) shares of the
Company's common stock, par value $0.001 per share (the "Common Stock"). The
shares of Common Stock into which the Series A Preferred Stock is convertible
are sometimes hereafter referred to as the "Conversion Shares"). In addition to
the shares of Series A Preferred Stock being offered hereby (the "Shares"), for
every two Conversion Shares underlying a Share acquired by a Purchaser at an
applicable Closing (as such term is hereinafter defined) pursuant to this
Agreement, the Company shall deliver to such Purchaser a warrant (the "Warrant")
substantially in the form of Exhibit C to this Agreement to purchase one share
of Common Stock (but there will be no fractional Warrants). The Warrants, which
shall not be transferable, shall initially be exercisable at $2.00 per share of
Common Stock, subject to adjustment, and be exercisable for a period of three
(3) years after issuance or until the date which is ten (10) days after the
Company furnishes written notice to the Warrant holder that the market price of
the Common Stock has been at least Three Hundred Percent (300%) of the then
applicable exercise price of the Warrant for a period of at least thirty (30)
days, and the average trading volume of the Common Stock has been at least One
Hundred Thousand (100,000) shares per day during such thirty (30) day period
(subject to adjustment of such trading volume threshold in the event of stock
splits, reverse stock splits, stock dividends, recapitalizations or similar
events) and the shares of Common Stock which may be acquired upon exercise of
the Warrants are registered at the time of exercise under an effective
registration statement. The shares of Common Stock which may be acquired upon
exercise of a Warrant are sometimes hereinafter referred to as the "Warrant
Shares"). The Series A Preferred Stock have the powers, designations,
preferences, rights, qualifications, limitations and restrictions contained in
the Amended and Restated Certificate of Designations of the Series A Preferred
Stock, substantially in the form of Exhibit A hereto (the "Certificate of
Designations"). In addition to the Shares being offered hereby, for every Share
acquired by a Purchaser at an applicable Closing pursuant to this Agreement, the
Company shall cause to be delivered to such Purchaser four (4) shares (each such
share, a "Cynat Share") of the common stock, par value $0.001 per share (the
"Cynat Common Stock") of Cynat Oncology, Inc. ("Cynat") and four (4) shares
(each such share, a "Genaderm Share") of the common stock, par value $0.001 per
share (the "Genaderm Shares") of Genaderm Inc. ("Genaderm"). The Series A
Preferred Stock offered hereby, and the accompanying Warrants are sometimes
referred to herein as the "Securities". The Conversion Shares and the Warrant
Shares are also included within the meaning of the term "Securities" except when
such inclusion would be inappropriate in the context of the statement written.
The Cynat Shares and the Genaderm Shares are sometimes referred to as the
"Subsidiary Securities". The Purchasers of the Series A Preferred Stock shall
have the benefit of certain registration rights in respect of the Conversion
Shares and the Warrant Shares as well as the Cynat Shares and the Genaderm
Shares on the terms and conditions of certain Registration Rights Agreements,
substantially in the form of Exhibit B hereto (the "Registration Rights
Agreement"). The Company is offering the Securities and the Subsidiary
Securities (the "Offering") for sale only to individuals, entities or groups,
including, without limitation, corporations, limited liability companies,
limited or general partnerships, joint ventures, associations, joint stock
companies, trusts, unincorporated organizations, or governments or any agencies
or political subdivisions thereof (each, a "Person") who are "accredited
investors" (as defined herein). The Offering of the Securities and the
Subsidiary Securities is being made directly through a placement agent (the
"Placement Agent") and other registered broker-dealers ("Other Participating
Agents"). The Company presently intends to pay to the Placement Agent and to
Other Participating Agents, if any, commissions equal to 10% of the gross sales
price of the Shares sold in the offering by the applicable Placement Agent or
Other Participating Agent to investors introduced by that person (without
duplication of introduction). In addition, the Company presently intends to
issue to any such Placement Agent or Other Participating Agent, if any, at each
Closing warrants (the "Placement Agent Warrants") granting to such person
warrant coverage equal to Ten Per Cent (10%) of the number of Conversion Shares
into which the Shares sold at that Closing to investors introduced by that
person (without duplication of introduction) are originally convertible. There
will be no Placement Agent Warrants issued with respect to Warrants or Warrant
Shares or Subsidiary Securities. The Placement Agent Warrants shall initially be
exercisable at One Dollar and Fifty Cents ($1.50) per share of Common Stock,
subject to adjustment, commencing upon the date of issuance and continuing for
Five (5) years after issuance or until the date which is ten (10) days after the
Company furnishes written notice to the Warrant holder that the market price of
the Common Stock has been at least Three Hundred Percent (300%) of the then
applicable exercise price of the Warrant for a period of at least Thirty (30)
days, and the average trading volume of the Common Stock has been at least One
Hundred Thousand (100,000) shares per day (subject to adjustment of such trading
volume threshold in the event of stock splits, reverse stock splits, stock
dividends, recapitalizations or similar events) during such Thirty (30) day
period and the shares of Common Stock which may be acquired upon exercise of the
Placement Agent Warrants are registered at the time of exercise under an
effective registration statement. The shares of Common Stock which may be
acquired upon exercise of a Warrant are sometimes hereinafter referred to as the
"Placement Agent Warrant Shares"). The Placement Agent Warrants shall contain a
cashless exercise provision. The Placement Agent Warrants shall be transferable
by the Placement Agent or Other Participating Agent receiving the same only to
its officers, directors, shareholders and employees, as well as by such persons
to their immediate family affiliates in connection with estate planning,
provided that no such transfer or disposition may be made other than in
compliance with applicable securities laws and furnishing satisfactory evidence
of such compliance to the Company. The Company will indemnify the Placement
Agent and any Other Participating Agents, if any, against certain liabilities.
The Company will pay its own costs of the Offering. At each Closing, the
Placement Agent will receive a non-accountable expense allowance equal to 3% of
the total gross proceeds received by the Company at that Closing from the sale
of Shares to investors at that Closing (other than investors introduced by
management or affiliates of the Company or management), such 3% amount being
sometimes hereafter referred to as the "Non-Accountable Expense Allowance". The
Company will not pay for any other fees and expenses of any Placement Agent or
Other Participating Agent. All subscription proceeds in the Offering will be
paid at Closing to the account or accounts specified in or pursuant to Section
1.2 herein, provided that in the event that a Placement Agent is utilized, the
Company will utilize an escrow agent (the "Escrow Agent") for receipt of funds
if required under applicable law. All references in this Agreement to the Escrow
Agent shall be deemed to be references to the Company in the event that there is
no third party Escrow Agent.
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1.2 Subscription. Subject to the terms and conditions hereinafter set
forth in this Agreement, each Purchaser hereby offers to purchase, at a price of
Six Dollars ($6.00) per Share, the number of Shares set forth beneath each such
Purchaser's name on the signature pages of this Agreement, (together with (i)
one accompanying Warrant for every two Conversion Shares underlying each Share
at the applicable Closing Date, but with no fractional Warrants, and (ii) ) four
(4) Cynat Shares and four (4) Genaderm Shares for each share of Series A
Preferred Stock acquired in the Offering) for an aggregate purchase price (the
"Purchase Price") for the Shares to be paid by such Purchaser in the amount set
forth on the signature page beneath such Purchaser's name, to such account or
accounts as the Company may specify by written notice to the Purchaser.
1.3 Subscription Procedures. To submit this Subscription, each Purchaser
must complete, execute, and deliver (i) this Agreement, (ii) the related
Purchaser Questionnaire in the form delivered by the Company with this
Agreement, and (iii) the Registration Rights Agreements to the following
address, unless otherwise advised by the Company:
Bioaccelerate Holdings Inc.
19th Floor
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx, 00000
Reference: Series A Preferred 2005 Private Placement
(with any questions to be raised with Xxx Xxxx at x0 (000) 000-0000).
The Company may accept or reject subscriptions, in whole or in part, or
accept subscriptions for less than the One Hundred Twenty Thousand ($120,000)
minimum subscription, in its sole discretion. The Company shall notify each
Purchaser of the portion, if any, of such Purchaser's subscription which has
been accepted, payment instructions for the Purchase Price, including wire
transfer instructions and instructions for delivery of payment by checks, if
applicable, and the date upon which the applicable Closing shall be held and
payment must be made. At each applicable Closing, each Purchaser acquiring
Shares at such Closing shall deliver and pay the applicable Purchase Price in
full for the Shares being purchased by such Purchaser at such Closing, in the
amount of Six Dollars ($6.00) for each Share for which such Purchaser's
subscription has been accepted, in U.S. dollars, in immediately available funds,
in accordance with the payment instructions contained in the notification to
such Purchaser by the Company.
2. Closing. Upon acceptance of subscriptions for the Securities and the
Subsidiary Securities offered hereby, the Company shall hold one or more
closings (each one a "Closing", with the first one being the "Initial Closing"
and the final one being the "Final Closing"). Each Closing shall be held at such
location as the Company may determine. The Final Closing Date will be that date
which is the earlier to occur of (i) September 30, 2005 or (ii) the sale of all
of the Shares being offered hereby, unless the Offering is extended without
notice to investors, by the Company in its sole discretion, for up to twenty
(20) additional days (the Final Closing Date is sometimes hereafter also
referred to as the "Termination Date"). At the Closing with respect to the
subscription by each Purchaser, to the extent the same is accepted, the seller
will record on its stock ledger in the name of each such Purchaser that number
of securities being purchased by such Purchaser in accordance with the
information on the applicable signature page of this Agreement.
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2.1 Escrow. In the event that the Company engages a Placement Agent for
this Offering, which the Company may choose not to do, then, and only in such
case, pending each Closing all funds paid in respect of this Agreement with
regard to such Closing shall be deposited in an escrow account (the "Escrow
Account") maintained by the Escrow Agent in accordance applicable laws and
regulations. The Escrow Account shall not be interest bearing. In such a case,
if the Company accepts subscriptions at or prior to the Initial Closing Date or
the Final Closing Date, as the case may be, then all subscription proceeds
received for subscriptions accepted by the Company prior to such Closing Date
shall be paid over to the Company at each Closing, net of the Placement Agent
fees, if any, and other offering expenses, which shall be paid to the
appropriate parties at each such Closing. In any event, if the Company shall not
have received and accepted each Purchaser's subscription, then that subscription
shall be void and all funds paid hereunder by such Purchaser with respect to
such unaccepted subscription, without deduction therefrom or interest thereon,
shall be promptly returned to such Purchaser.
2.2. Return of Funds. Each Purchaser hereby authorizes and directs both
the Company and the Escrow Agent, if any, jointly and severally, to return or
direct the return of any funds from the Escrow Account, if any, without
deduction therefrom or interest thereon, to the same account from which the
funds were originally drawn, to the extent that such Purchaser's subscription is
not accepted prior to the termination of the Offering.
3. Conditions to the Obligations of each Purchaser at Closing.
The obligation of each Purchaser to purchase and pay for the Shares
subscribed for by such Purchaser at the applicable Closing is subject to the
satisfaction on or prior to the applicable Closing Date or the Final Closing
Date, as the case may be, of the following conditions, each of which may be
waived by the applicable Purchaser:
3.1 Representations and Warranties. The representations and warranties of
the Company contained in this Agreement which are qualified as to materiality
must be true and correct in all respects, and the representations and warranties
of the Company contained in this Agreement which are not qualified as to
materiality must be true and correct in all material respects, in each case as
of the applicable Closing Date except to the extent that the representations and
warranties relate to a different date in which case the representations and
warranties must be true and correct as written or true and correct in all
material respects, as the case may be, as of the different date.
3.2 Performance of Covenants. The Company shall have performed or complied
with in all material respects all covenants and agreements required to be
performed by it on or prior to the applicable Closing pursuant to this
Agreement, including, without limitation, the delivery of certificates
evidencing the securities issued to the Purchasers at the Closing.
3.3 No Litigation. No litigation or other formal proceeding shall have
been instituted seeking to enjoin the issuance or sale of securities
contemplated by this Agreement and not dismissed or withdrawn, and no injunction
or temporary restraining order shall have been issued with respect to the
issuance or sale of securities contemplated hereby.
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3.4 Closing Documents. At each Closing, the Company shall have delivered
to the Placement Agent on behalf of each Purchaser, in form and substance
reasonably acceptable to the Placement Agent, the following:
(a) a certificate of the Chief Executive Officer or the President of the
Company certifying that the conditions in Sections 3.1 and 3.2 have been
satisfied;
(b) A certificate of the Secretary of the Company, dated as of that
Closing Date, certifying (i) the attached copies of the Certificate of
Incorporation and By-laws of the Company, (ii) the resolutions of the Board of
Directors of the Company (the "Board") authorizing the execution, delivery and
performance of this Agreement and the issuance and delivery, whichever is
applicable, of the securities contemplated hereby and reserving for issuance the
Conversion Shares and the Warrant Shares (including, but not limited to, for
purposes of Nevada corporations law) and (iii) the incumbency of the officers
duly authorized to execute this Agreement and the other documents contemplated
by this Agreement;
(c) A corresponding certificate of the Secretary of Cynat, dated as of
that Closing Date, certifying substantially the same matters as to Cynat;
(d) A corresponding certificate of the Secretary of Genaderm, dated as of
that Closing Date, certifying substantially the same matters as to Genaderm;
(e) a certificate of the Secretary of State of the jurisdiction of
incorporation of each of the Company, Cynat and Genaderm, dated as of a recent
date (but no more than five business days) prior to the date of the applicable
Closing, to the effect that the Company is in good standing in the applicable
jurisdiction of incorporation, and that all annual reports, if any, have been
filed as required and that all taxes and fees have been paid in connection
therewith;
(f) a copy of the Certificate of Designations certified by the Secretary
of State of the State of Nevada;
(g) a certificate evidencing the Shares acquired by each Purchaser;
(h) a certificate evidencing the Warrants acquired by each Purchaser;
(i) a certificate evidencing the Cynat Shares acquired by each Purchaser;
(j) a certificate evidencing the Genaderm Shares acquired by each
Purchaser;
(k) an opinion of counsel to the Company substantially in the form of
Exhibit D to this Agreement; and
(l) the Registration Rights Agreements duly executed by the Company.
3.5 Waivers and Consents. The Company will have obtained all consents and
waivers necessary to execute and deliver this Agreement and all related
documents and agreements and to issue and deliver the Securities and the
Subsidiary Securities, and all consents and waivers will be in full force and
effect.
3.6 Regulatory Approvals. All approvals and authorizations of, filings and
registrations with, and notifications to, all Governmental Authorities required
for the consummation of the transactions contemplated by this Agreement shall
have been obtained or made and shall be in full force and effect, except such as
are not required to be made until after the execution, delivery or performance
of this Agreement.
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4. Conditions to the Obligations of the Company at Closing.
The obligation of the seller to issue and/or deliver securities as
contemplated by this Agreement to any Purchaser is subject to the satisfaction
on or prior to each Closing Date of the following conditions, each of which may
be waived by the Company:
4.1 Receipt of Purchase Price. The Company shall have received payment in
full in immediately available funds in U.S. dollars of the Purchase Price for
the Shares with respect to which the Company has accepted the Subscription made
by such Purchaser by means of this Agreement.
4.2 Representations and Warranties. The representations and warranties of
each applicable Purchaser contained in this Agreement which are qualified as to
materiality must be true and correct in all respects, and the representations
and warranties of each applicable Purchaser contained in this Agreement which
are not qualified as to materiality must be true and correct in all material
respects, in each case as of the applicable Closing Date except to the extent
that the representations and warranties relate to a different date in which case
the representations and warranties must be true and correct as of the different
date.
4.3 Performance of Covenants. Each applicable Purchaser will have
performed or complied with in all material respects all covenants and agreements
required to be performed by each applicable Purchaser on or prior to the Closing
pursuant to this Agreement.
4.4 Purchaser Questionnaire. All of the information furnished by each
applicable Purchaser in the confidential purchaser questionnaire accompanying
this Agreement (the "Purchaser Questionnaire") shall have been accurate and
complete in all material respects.
4.5 No Litigation. No litigation or other formal proceeding shall have
been instituted seeking to enjoin the issuance or sale of Securities or the
Subsidiary Securities contemplated by this Agreement and not dismissed or
withdrawn, and no injunction or temporary restraining order shall have been
issued with respect to the issuance or sale of Securities or the Subsidiary
Securities contemplated hereby.
4.6 Closing Documents. Each applicable Purchaser shall have completed,
executed and delivered to the Company this Agreement, including the Purchasers
Questionnaire in the form delivered herewith, and the Registration Rights
Agreements.
5. Representations and Warranties of each Purchaser.
Each Purchaser, in order to induce the Company to perform this Agreement,
hereby represents and warrants, severally and not jointly, as follows:
5.1 Due Authorization. Each Purchaser represents for such Purchaser to the
Company that such Purchaser has full power and authority and has taken all
action necessary to authorize such Purchaser to execute, deliver and perform
such Purchaser's obligations under this Agreement and the other agreements to be
executed and delivered by such Purchaser in connection herewith. This Agreement,
and each other such agreement, is the legal, valid and binding obligation of
such Purchaser in accordance with its terms.
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5.2 Accredited Investor. Each Purchaser represents that such Purchaser is
an Accredited Investor as that term is defined in Regulation D promulgated under
the Securities Act of 1933, as amended (the "Securities Act").
5.3 No Investment Advice. No person or entity has made any other
representations or warranties to such Purchaser other than as set forth herein
or incorporated herein by reference with respect to the Company, Cynat or
Genaderm or rendered any investment advice.
5.4 Investment Experience. Each Purchaser represents that such Purchaser
has not authorized any Person to act as such Purchaser's Purchaser
Representative (as that term is defined in Regulation D of the General Rules and
Regulations under the Securities Act) in connection with this transaction. Such
Purchaser has such knowledge and experience in financial, investment and
business matters that such Purchaser is capable of evaluating the merits and
risks of the prospective investment in the securities offered hereby. Such
Purchaser has consulted with such independent legal counsel or other advisers as
such Purchaser has deemed appropriate to assist such Purchaser in evaluating the
proposed investment in the securities offered hereby.
5.5 Adequate Means. Each Purchaser represents as to such Purchaser that
such Purchaser (i) has adequate means of providing for such Purchaser's current
financial needs and possible contingencies; and (ii) can afford (a) to hold
unregistered securities for an indefinite period of time as required; and (b)
sustain a complete loss of the entire amount of the subscription.
5.6 Access to Information. Each Purchaser represents that such Purchaser
has been afforded the opportunity to ask questions of, and receive answers from
the officers and/or directors of the Company, Cynat and Genaderm acting on its
behalf concerning the terms and conditions of this transaction and to obtain any
additional information, to the extent that the Company, Cynat or Genaderm
possesses such information or can acquire it without unreasonable effort or
expense, necessary to verify the accuracy of the information furnished; and has
had such opportunity to the extent such Purchaser considers appropriate in order
to permit such Purchaser to evaluate the merits and risks of an investment in
the securities offered hereby. It is understood that all documents, records and
books pertaining to this investment have been made available for inspection, and
that the books and records of the sellers will be available upon reasonable
notice for inspection by investors during reasonable business hours at its
principal place of business. The foregoing shall in no way be deemed to limit
the ability of each Purchaser to rely on the representations and warranties set
forth herein or incorporated herein by reference.
5.7 No Endorsement. Each Purchaser further acknowledges that the offer and
sale of the Securities and the Subsidiary Securities has not been passed upon or
the merits thereof endorsed or approved by any state or federal authorities.
5.8 Non-Registered Securities. Each Purchaser acknowledges that neither
the offer and sale of the Shares or the Warrants or the Subsidiary Securities at
the Closing, or the offer or sale of the Conversion Shares or the Warrant Shares
upon conversion of the Shares or exercise of the Warrants hereafter, has been
registered under the Securities Act or any state securities laws and the Shares,
the Subsidiary Securities, the Conversion Shares and the Warrant Shares may be
resold only if registered pursuant to the provisions thereunder or if an
exemption from registration is available and such resale is otherwise permitted
by law and contract. Each Purchaser understands that the offer and sale of the
Shares, the Subsidiary Securities and the Warrants at the Closing, and the offer
and sale of the Conversion Shares or the Warrant Shares upon conversion of the
Shares or exercise of the Warrants hereafter, is intended to be exempt from
registration under the Securities Act, based, in part, upon the representations,
warranties and agreements of such Purchaser contained in this Agreement.
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5.9 No Resale. Each Purchaser represents that the Shares, Warrants, Cynat
Shares and Genaderm shares being subscribed for, and the securities underlying
the subscription, are being acquired solely for the account of such Purchaser
for such Purchaser's investment and not with a view to, or for resale in
connection with, any distribution in any jurisdiction where such sale or
distribution would be precluded. By such representation, such Purchaser means
that, other than as disclosed on both the signature page of this Agreement and
in the Purchaser Questionnaire, no other Person has a beneficial interest in the
securities offered hereby or the securities underlying the subscription, and
that no other Person has furnished or will furnish directly or indirectly, any
part of or guarantee the payment of any part of the consideration to be paid by
such Purchaser to the Company in connection therewith. Such Purchaser does not
intend to dispose of all or any part of the securities offered hereby or the
securities underlying the subscription except in compliance with the provisions
of the Securities Act and applicable state securities laws, and understands that
the securities offered hereby and the securities underlying the subscription are
being offered pursuant to a specific exemption under the provisions of the
Securities Act, which exemption(s) depends, among other things, upon the
compliance with the provisions of the Securities Act.
5.10 Legend. Each Purchaser hereby acknowledges and agrees that until
either (i) a registration statement or registration statements covering the
resale of the Securities and the Subsidiary Securities is effective under the
Securities Act and such securities have been disposed of thereunder, (ii) such
securities are disposed of under Rule 144 and are no longer required to be
legended under Rule 144, or (iii) such securities are eligible for sale under
Rule 144(k) promulgated under the Securities Act, and, in either case, the
holder properly requests that the legend be removed in accordance therewith, the
following or similar legend on the face of the certificates evidencing the
Shares, the Subsidiary Securities, the Warrants, the Conversion Shares and/or
the Warrant Shares, as the case may be, if the Company deems the same to be
necessary or appropriate in order to ensure compliance with the Securities Act
or state securities laws:
"These securities have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or any state securities laws and
may not be sold or otherwise transferred or disposed of except pursuant to
an effective registration statement under the Securities Act and any
applicable state securities laws, or an opinion of counsel satisfactory to
counsel to the issuer that an exemption from registration under the
Securities Act and any applicable state securities laws is available."
In addition, the Company may insert a legend to the effect that the Warrants are
non-transferable except in accordance with their express terms.
5.11 Broker's or Finder's Commissions. Other than the Placement Agent (as
placement agent on behalf of the Company) or any Other Participating Agent, if
any, no finder, broker, agent, financial person or other intermediary has acted
on behalf of any Purchaser in connection with the sale of the Securities or the
Subsidiary Securities by the Company or the consummation of this Agreement or
any of the transactions contemplated hereby.
Each Purchaser certifies that each of the foregoing representations and
warranties by such Purchaser set forth in this Section 5 are true as of the date
hereof and shall survive such date.
6. Representations and Warranties of the Company.
The Company represents and warrants to the Purchasers as follows as of
each applicable Closing, each such representation and warranty being made
subject to such disclosures as are made pursuant to this Agreement or any
schedule or exhibit delivered in connection herewith at the applicable Closing,
and the consummation of additional Closings as contemplated by this Agreement:
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6.1 Organization, Good Standing and Qualification. (a) The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. The Company has full corporate power and authority to
own and hold its properties and to conduct its business. The Company and each
subsidiary of the Company, if any, is duly licensed or qualified to do business,
and in good standing, in each jurisdiction in which the nature of its business
requires licensing, qualification or good standing, except for any failure to be
so licensed or qualified or in good standing that would not have a material
adverse effect on the Company or its results of operations, assets, business or
financial condition, taken as a consolidated whole, or on its ability to perform
its obligations under this Agreement or to issue the Securities or to cause the
sale and delivery of the Subsidiary Securities (a "Material Adverse Effect").
(b) Each of Cynat and Genaderm is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Cynat and Genaderm has full corporate power and authority to own and
hold its properties and to conduct its business.
6.2 Capitalization. (a) As of the date of this Agreement, the authorized
capital stock of the Company consists of 100,000,000 shares of Common Stock and
10,000,000 shares of preferred stock, par value $0.001 per share (the "Preferred
Stock"). The capitalization of the Company as of July 31, 2005 is as set forth
on Schedule 6.2 to this Agreement, which is specifically incorporated herein by
reference. Other than as set forth on Schedule 6.2 or Shares contemplated to be
issued or reserved for issuance in this Offering, as of July 31, 2005 there are
no other securities outstanding or reserved for issuance. All the outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and nonassessable and free of preemptive rights created by or through
the Company, and have been issued in compliance with all federal and state
securities laws, and were not issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities. Except as set forth on
Schedule 6.2 or Shares contemplated to be issued or reserved for issuance in
this Offering, as of July 31, 2005 there are no other options, warrants or other
rights, convertible debt, agreements, arrangements or commitments of any
character obligating the Company to issue or sell any shares of capital stock of
or other equity interests in the Company, and the Company is not obligated to
retire, redeem, repurchase or otherwise reacquire any of its capital stock or
other equity securities. Except as identified on Schedule 6.2 or as contemplated
by this Agreement, if at all, there are no stockholders agreements, voting
agreements or other similar agreements with respect to the Company's securities
to which the Company is a party and has material continuing obligations. The
Company has not adopted a stockholders rights plan, poison pill or similar
arrangement. The consummation of the transactions contemplated by this Agreement
will not accelerate the vesting schedule of any Company option or warrant. As
used in this Agreement, the term "Commission Documents" shall mean all reports,
schedules, forms, statements and other documents filed by the Company with the
United States Securities and Exchange Commission (the "Commission" or the "SEC")
pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), including all exhibits included therein and
financial statements and schedules thereto and documents or instruments
incorporated by reference therein.
(b) As of the date of this Agreement, the authorized capital stock of
Cynat and of Genaderm is as set forth on Schedule 6.2 to this Agreement. The
capitalization of each of Cynat and Genaderm as of July 31, 2005 is as set forth
on Schedule 6.2 to this Agreement, which is specifically incorporated herein by
reference. Other than as set forth on Schedule 6.2 or for securities issued in
the Offering or contemplated to be issued or reserved for issuance in this
Offering, as of July 31, 2005 there are no other securities of Cynat or Genaderm
outstanding or reserved for issuance, no other options, warrants or other
rights, convertible debt, agreements, arrangements or commitments of any
character obligating either Cynat or Genaderm to issue or sell any shares of
capital stock of or other equity interests in Cynat or Genaderm, and neither
Cynat or Genaderm is obligated to retire, redeem, repurchase or otherwise
reacquire any of its capital stock or other equity securities.. All the
outstanding securities of the Cynat and Genaderm have been duly authorized and
validly issued and are fully paid and nonassessable and free of preemptive
rights created by or through Cynat or Genaderm, and have been issued in
compliance with all federal and state securities laws, and were not issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. Except as identified on Schedule 6.2 or as contemplated by
this Agreement, if at all, there are no stockholders agreements, voting
agreements or other similar agreements with respect to the securities of Cynat
or Genaderm to which Cynat or Genaderm is a party and has material continuing
obligations. Neither Cynat or Genaderm has adopted a stockholders rights plan,
poison pill or similar arrangement. The consummation of the transactions
contemplated by this Agreement will not accelerate the vesting schedule of any
option or warrant of Cynat or Genaderm.
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6.3 Corporate Power, Authorization; Enforceability. The Company and its
applicable subsidiaries have full corporate power and authority to execute,
deliver and perform this Agreement, the Warrants, the Placement Agent Warrants
(if any), the Certificate of Designations, and the Registration Rights
Agreements (collectively, the "Transaction Documents") and to consummate the
transactions contemplated hereby and thereby. All action on the part of the
Company, its applicable subsidiaries, and their respective directors or
stockholders necessary for (i) the authorization, execution, delivery and
performance of the Transaction Documents by the Company or any applicable
subsidiary, (ii) the authorization, sale, issuance and delivery of the
Securities, the Subsidiary Securities and the Placement Agent Warrants as
contemplated hereby, (iii) the reservation of shares of Common Stock for
issuance upon conversion of the Shares and upon exercise of the Warrants and the
Placement Agent Warrants, and (iv) the performance of the obligations of the
Company and any applicable subsidiaries, if any, hereunder and thereunder, has
been taken. The Shares and Subsidiary Securities to be acquired by Purchasers on
each Closing Date and the related Warrants and Placement Agent Warrants, and the
underlying Conversion Shares, Warrant Shares, and Placement Agent Warrant Shares
have been duly authorized and, when issued in accordance with the applicable
Transaction Document(s), as the case may be, will be validly issued, fully paid
and nonassessable and will be free and clear of any mortgage, deed of trust,
pledge, hypothecation, assignment, encumbrance, lien (statutory or other) or
preference, priority, right or other security interest or preferential
arrangement of any kind or nature whatsoever (collectively, "Liens") imposed by
or through the Company or any applicable subsidiary, if any, other than
restrictions imposed by this Agreement or any other Transaction Document, as the
case may be, and applicable securities laws. No preemptive or other rights to
subscribe for or purchase equity securities exists with respect to the issuance
and sale of the Securities, the Subsidiary Securities, the Placement Agent
Warrants, or the Conversion Shares, the Warrant Shares or the Placement Agent
Warrant Shares binding upon the person or entity issuing or delivering the same.
The Transaction Documents have been duly executed and delivered by the Company,
and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity relating to enforceability (regardless of whether
considered in a proceeding at law or in equity).
6.4 No Conflict; Governmental Consents. (a) The execution and delivery by
the Company of the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby will not (i) result in the
violation of any provision of the Certificate of Incorporation or By-laws or
other organizational documents of the Company or any subsidiary of the Company,
(ii) result in any violation of Requirements of Law to or by which the Company
or any subsidiary of the Company is bound, or (iii) conflict with, or result in
a breach or violation of, any of the terms or provisions of, or constitute (with
due notice or lapse of time or both) a default under, any bond, debenture, note
or other evidence of indebtedness, or any material lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Company or any subsidiary of the Company is a party or
by which it or its property is bound, nor result in the creation or imposition
of any Lien upon any of the properties or assets of the Company, except for, in
the case of clauses (ii) and (iii) of this subsection (a), any violation,
conflict, breach or default which would not have a Material Adverse Effect. For
purposes of this Agreement, "Requirements of Law" means, as to any Person, any
law, statute, treaty, rule, regulation, right, privilege, qualification, license
or franchise or determination of an arbitrator or a court or other government of
any nation, state, city, locality or other political subdivision thereof, any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing (each, a "Governmental Authority") or stock exchange, in each case
applicable or binding upon such Person or any of its property or to which such
Person or any of its property is subject or pertaining to any or all of the
transactions contemplated or referred to herein.
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(b) No material consent, approval, license, permit, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other Governmental Authority or Person, and no lapse of
any waiting period under any Requirements of Law, remains to be obtained (or
lapsed) or is otherwise required to be obtained by the Company or any subsidiary
of the Company in connection with the authorization, execution and delivery of
the Transaction Documents or the consummation of the transactions contemplated
hereby or thereby, including, without limitation the issue and sale of the
Securities or the Subsidiary Securities as disclosed in this Agreement, and
except filings, if any, as may be required to be made by the Company after each
Closing with (i) the Commission, (ii) the National Association of Securities
Dealers, Inc. ("NASD"), (iii) the Nasdaq Stock Market, Inc. and (iv) state blue
sky or other securities regulatory authorities.
6.5 Litigation. There are no claims, actions, suits, investigations or
proceedings pending or, to the Company's knowledge, threatened against the
Company or any subsidiary of the Company or its respective assets, at law or in
equity, by or before any Governmental Authority, or by or on behalf of any third
party, except for any claim, action, suit, investigation or proceeding which
would not have a Material Adverse Effect. There are no claims, actions, suits,
investigations or proceedings pending or, to the Company's knowledge, threatened
proceedings against the Company or any subsidiary of the Company contesting the
right of the Company to use, sell, import, license, or make available to any
Person any of the Company's or any subsidiary's products or services currently
or previously sold, offered, licensed or made available to any Person or used by
the Company or opposing or attempting to cancel any of the Company's
Intellectual Property (as such term is hereafter defined) rights, except for any
claim, action, suit, investigation or proceeding which would not have a Material
Adverse Effect.
6.6 Compliance with Laws; No Default or Violation; Contracts. The Company
and each subsidiary of the Company is in compliance in all material respects
with all Requirements of Law and all orders issued by any court or Governmental
Authority against the Company in all material respects. To the Company's
knowledge, there is no existing or currently proposed Requirement of Law which
could reasonably be expected to prohibit or restrict the Company or any
subsidiary from, or otherwise materially adversely affect the Company or any
subsidiary in, conducting its business in any jurisdiction in which it now
conducts or proposes to conduct such business. The Company and each subsidiary
of the Company have all licenses, permits and approvals of any Governmental
Authority (collectively, "Permits") that are necessary for the conduct of the
business of the Company and each subsidiary of the Company, respectively; (ii)
such Permits are in full force and effect; and (iii) no violations are or have
been recorded in respect of any Permit, in each case except such as would not be
reasonably expected to have a Material Adverse Effect. No material expenditure
is presently required by the Company to comply with any existing Requirements of
Law or order. Except as would not be reasonably expected to have a Material
Adverse Effect, neither the Company nor any subsidiary of the Company is (i) in
default under or in violation of any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party of by which it or any of
its properties is bound or (ii) in violation of any order, decree or judgment of
any court, arbitrator or other Governmental Authority. The contracts described
in the Commission Documents or incorporated by reference therein that are
material to the Company (collectively, the "Contractual Obligations") are in
full force and effect on the date hereof, and neither the Company or any
subsidiary's nor, to the Company's knowledge, any other party to such contracts
is in breach of or default under any of such contracts nor, to the Company's
knowledge, does any condition exist that with notice or lapse of time or both
would constitute a default by such other party thereunder, in each case except
such as would not be reasonably expected to have a Material Adverse Effect.
Neither the Company nor any subsidiary of the Company has received notice of a
default and is in default under, or with respect to, any Contractual Obligation
nor, to the Company's knowledge, does any condition exist that with notice or
lapse of time or both would constitute a default thereunder, in each case except
such as would not be reasonably expected to have a Material Adverse Effect. All
of such Contractual Obligations are valid, subsisting, in full force and effect
and binding upon the Company or each subsidiary that is a party thereto and, to
the Company's knowledge, the other parties thereto, and the Company has paid in
full or accrued all amounts due thereunder and has satisfied in full or provided
for all of its liabilities and obligations thereunder.
-11-
6.7 Environmental Matters. The Company and each subsidiary of the Company
are in compliance, in all material respects, with all applicable Environmental
Laws. There is no civil, criminal or administrative judgment, action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding, notice
or demand letter pending or, to the Company's knowledge, threatened against the
Company pursuant to Environmental Laws. To the Company's knowledge, there are no
past or present events, conditions, circumstances, activities, practices,
incidents, agreements, actions or plans which could reasonably be expected to
prevent compliance with, or which have given rise to or will give rise to
liability which would have a Material Adverse Effect, under Environmental Laws.
For purposes of the foregoing, "Environmental Laws" means federal, state, local
and foreign laws, principles of common laws, civil laws, regulations, and codes,
as well as orders, decrees, judgments or injunctions, issued, promulgated,
approved or entered thereunder relating to pollution, protection of the
environment or public health and safety.
6.8 Taxes. The Company and each subsidiary of the Company has filed all
required Tax returns and has paid or caused to be paid, or has established
reserves in accordance with GAAP for all Tax liabilities applicable to such
entity except as would not have a Material Adverse Effect. No additional Tax
assessment against the Company or its subsidiaries has been heretofore proposed
or, to the Company's knowledge, threatened by any Governmental Authority for
which provision has not been made on its balance sheet.
No tax audit is currently in progress and there is no unassessed
deficiency proposed or, to the Company's knowledge, threatened against the
Company or any subsidiary. The Company has no knowledge of any change in the
rates or basis of assessment of any Tax (other than federal income tax), of the
Company or any subsidiary which would reasonably be expected to have a Material
Adverse Effect. The Company has not agreed to or is required to make any
adjustments under section 481 of the Code by reason of a change of accounting
method or otherwise. None of the assets of the Company or any subsidiary is
required to be treated as being owned by any Person, other than the Company or
any of its subsidiaries, pursuant to the "safe harbor" leasing provisions of
Section 168(f)(8) of the Code. The company is not a "United States real property
holding corporation" (a "USRPHC") as that term is defined in Section 897(c)(2)
of the Code and the regulations promulgated thereunder.
For purposes of this Agreement, "Code" means the Internal Revenue Code of
1986, as amended, and "Taxes" means any federal, state, provincial, county,
local, foreign and other taxes (including, without limitation, income, profits,
windfall profits, alternative, minimum, accumulated earnings, personal holding
company, capital stock, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll and property taxes,
import duties and other governmental charges and assessments), whether or not
measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect thereto, and
including expenses associated with contesting any proposed adjustments related
to any of the foregoing.
-12-
6.9 Intellectual Property.
(a) "Intellectual Property" shall mean all of the following as they are
necessary in connection with the business of the Company or its subsidiaries as
presently conducted and as they exist in all jurisdictions throughout the world,
in each case, to the extent owned by or licensed to the Company or its
subsidiaries: (i) patents, patent applications and inventions, designs and
improvements described and claimed therein, patentable inventions and other
patent rights (including any divisions, continuations, continuations-in-part,
reissues, reexaminations, or interferences thereof, whether or not patents are
issued on any such applications and whether or not any such applications are
modified, withdrawn, or resubmitted) ("Patents"); (ii) trademarks, service
marks, trade dress, trade names, brand names, designs, logos, or corporate
names, whether registered or unregistered, and all registrations and
applications for registration thereof ("Trademarks"); (iii) copyrights and mask
works, including all renewals and extensions thereof, copyright registrations
and applications for registration thereof, and non-registered copyrights
("Copyrights"); (iv) trade secrets, inventions, know-how, process technology,
databases, confidential business information, customer lists, technical data and
other proprietary information and rights ("Trade Secrets"); (v) computer
software programs, including, without limitation, all source code, object code,
and documentation related thereto ("Software"); (vi) Internet addresses, domain
names, web sites, web pages and similar rights and items ("Internet Assets");
and (vii) all licenses, sublicenses and other agreements or permissions
including the right to receive royalties, or any other consideration related to
the property described in (i)-(vi). The Intellectual Property contains all of
the intellectual property necessary to operate the business of the Company as
currently conducted.
(b) The Company or its subsidiaries exclusively own (or otherwise have the
right to use the Intellectual Property pursuant to a valid license, sublicense
or other agreement), free and clear of all Liens, and has the unrestricted right
(subject to any such license terms, if applicable) to use, sell, license, or
sublicense all Intellectual Property.
(c) As used in this Agreement, the term "IP Licenses" means all material
licenses, sublicenses, distributor agreements and other agreements or
permissions under which the Company or any of its subsidiaries is a (i)
licensor, or (ii) licensee, distributor, or reseller, except such licenses,
sublicenses and other agreements relating to off-the-shelf software which is
commercially available on a retail basis for less than $15,000 per license and
$100,000 in the aggregate and used solely on the computers of the Company
("Off-the-Shelf Software"). To the knowledge of the Company, all of the IP
Licenses are valid, enforceable, and in full force and effect, and, with respect
to the Company and its subsidiaries, will continue to be on identical terms
immediately following the completion of the transactions contemplated by this
Agreement.
(d) All products made, used or sold by the Company or any of its
subsidiaries under the Patents have been marked with the proper patent notice.
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(e) All products and materials made, used or sold by the Company or its
subsidiaries containing Trademarks bear the proper federal registration notice
where permitted by law.
(f) All works encompassed by the Copyrights and used by the Company or its
subsidiaries have been marked with the proper copyright notice.
(g) To the actual knowledge of the Company's executive officers, all the
Company's Intellectual Property rights are valid and enforceable except as the
failure to be valid and enforceable would not have a Material Adverse Effect.
The Company has taken all reasonably necessary actions to maintain and protect
each item of Intellectual Property owned by the Company or its subsidiaries.
(h) The Company and each subsidiary of the Company has taken all
reasonable precautions to protect the secrecy, confidentiality, and value of its
Trade Secrets and the proprietary nature and value of its Intellectual Property.
To the best of the Company's knowledge, none of the Trade Secrets, wherever
located, the value of which is contingent upon maintenance of confidentiality
thereof, have been disclosed to any employee, representative or agent of the
Company or any other person not obligated to maintain such Trade Secret in
confidence pursuant to a confidentiality agreement entered into with the
Company, except as required pursuant to the filing of a patent application by
the Company.
(i) The Company or a subsidiary of the Company, as applicable, is
diligently prosecuting all Patent applications it has filed, as instructed by
patent counsel. The Company or a subsidiary of the Company, as applicable, is
diligently filing and preparing to file Patent applications for all inventions
in a manner and within a sufficient time period to avoid statutory
disqualification of any potential Patent application.
(j) Unless otherwise disclosed by the Company or pursuant to a current
license, it is not necessary for the Company's business to use any Intellectual
Property owned by any present or past director, officer, employee or consultant
of the Company (or persons the Company presently intends to hire). To the actual
knowledge of the Company's executive officers, at no time during the conception
or reduction to practice of any of the Company's Intellectual Property was any
developer, inventor or other contributor to such Intellectual Property operating
under any grants from any Governmental Authority or subject to any employment
agreement, invention and assignment, nondisclosure agreement or other
Contractual Obligation with any Person that could adversely affect the Company's
rights to its Intellectual Property.
(k) To the actual knowledge of the Company's executive officers, none of
the Intellectual Property, products or services owned, used, developed,
provided, sold or licensed by the Company, or made for, used or sold by or
licensed to the Company by any person infringes upon or otherwise violates any
Intellectual Property rights of others.
(l) To the actual knowledge of the Company's executive officers, no Person
is infringing upon or otherwise violating the Intellectual Property rights of
the Company except as would not have a Material Adverse Effect.
6.10 Employee Benefit Plans.
(a) Neither the Company nor any entity which is or was under common
control within the meaning of Section 414(b), (c), (m) or (o) of the Code
maintains or contributes to, or has within the preceding six years maintained or
contributed to, or may have any liability with respect to any employee benefit
plan subject to Title IV of Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 412 of the Code or any "multiple employer plan"
within the meaning of the Code or ERISA. Each employee benefit plan,
arrangement, policy, program, agreement or commitment which the Company
maintains, contributes to or may have any liability in respect to (each, a
"Plan") has been established and administered in accordance with its terms, and
complies in form and in operation with the applicable requirements of ERISA, the
Code and other applicable Requirements of Law. No claim with respect to the
administration or the investment of the assets of any Plan (other than routine
claims for benefits) is pending. No event has occurred in connection with which
the Company or any Plan, directly or indirectly, could be subject to any
material liability under ERISA, the Code or any other law, regulation or
governmental order applicable to any Plan, or under any agreement, instrument,
statute, rule of law or regulation pursuant to or under which the Company has
agreed to indemnify any person against liability incurred under, or for a
violation or failure to satisfy the requirement of, any such statute, regulation
or order. The Company has no liability, whether absolute or contingent,
including any obligations under any Plan, with respect to any misclassification
of any person as an independent contractor rather than as an employee.
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(b) Neither the Company nor any subsidiary of the Company has any
obligations to provide or any direct or indirect liability, whether contingent
or otherwise, with respect to the provision of health or death benefits to or in
respect of any former employee, except as may be required pursuant to Section
4980B of the Code and the corresponding provisions of ERISA and the cost of
which are fully paid by such former employees.
(c) There are no unfunded obligations under any Plan which are not fully
reflected on the Financial Statements.
(d) The consummation of the transactions contemplated by this Agreement
will not (i) entitle any Company (or subsidiary) employee to severance pay or
(ii) accelerate the time of payment or vesting or trigger any payment or funding
(though a grantor trust or otherwise) of compensation or benefits under,
increase the amount payable or trigger any other material obligations pursuant
to, any Plan.
6.11 Investment Company. The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company Act of 1940, as
amended.
6.12 Compliance. The Common Stock is registered pursuant to the Exchange
Act and the Common Stock is listed on the OTC Bulletin Board under the symbol
BACL.OB, and the Company has taken no action designed to, or likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act or delisting the Common Stock from the OTC Bulletin Board. The Company has
not taken and will not, in violation of applicable law, take, any action
designed to or that might reasonably be expected to cause or result in unlawful
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Securities.
6.13 Private Offerings. Assuming the truth of each Purchaser's
representations and acknowledgments contained in Section 5 hereof and in the
Purchasers Questionnaire delivered by such Purchaser in connection herewith,
neither the Company, any of its applicable subsidiaries, nor any Person acting
on behalf of any of them (other than the Purchasers, as to whom the Company
makes no representations) has offered or sold the Securities or the Subsidiary
Securities by means of any general solicitation or general advertising within
the meaning of Rule 502(c) under the Securities Act and this offering is exempt
from the registration requirements of the Securities Act. Neither the Securities
or the Subsidiary Securities have been sold to anyone other than the subscribers
to this Agreement. Each certificate evidencing the Securities or the Subsidiary
Securities shall bear substantially the same legend set forth in Section 8
hereof for at least so long as required by the Securities Act.
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6.14 Broker's or Finder's Commissions. Other than the Placement Agent or
any Other Participating Agent, if any are engaged by the Company, no finder,
broker, agent, financial person or other intermediary has acted on behalf of the
Company or any of its applicable subsidiaries in connection with the sale of the
Securities or the Subsidiary Securities in the Offering or the consummation of
this Agreement or any of the transactions contemplated hereby. Neither the
Company nor any of its applicable subsidiaries has had any direct or indirect
contact with any other investment banking firm (or similar firm) with respect to
the offer of the Securities or the Subsidiary Securities in the Offering to the
Purchasers or the Purchasers' subscriptions for the Securities or the Subsidiary
Securities.
6.15 Disclosure. The Transaction Documents do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading. The Company does not
have any knowledge of any fact that has specific application to the Company
(other than general economic or industry conditions) and that can reasonably be
foreseen to cause a Material Adverse Effect that has not been set forth in the
Transaction Documents or the Commission Documents.
6.16 Insurance.
The Company maintains and will continue to maintain insurance of the
types and in the amounts that the Company reasonably believes is adequate for
its business, including, but not limited to, insurance covering real and
personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against
by similarly situated companies, all of which insurance is in full force and
effect.
6.17 Registration Rights.
Except as provided in the Registration Rights Agreements or in
Schedule 6.17 to this Agreement, which is specifically incorporated herein by
reference, the Company is not under any contractual obligation to register any
of its outstanding securities.
7. Indemnification.
7.1 (a) The Company agrees to indemnify and hold harmless the Purchasers,
their affiliates and each of their respective directors, officers, general and
limited partners, principals, agents and attorneys (individually, an
"Indemnified Party" and collectively, the "Indemnified Parties") from and
against any and all losses, claims, damages, liabilities, costs (including
reasonable attorneys' fees) and expenses (collectively, "Losses") to which any
Indemnified Party may become subject, insofar as such Losses arise out of, in
any way relate to, or result from (i) any breach of any representation or
warranty made by the Company contained in or made pursuant to Article 6 of this
Agreement, or (ii) the failure of the Company to fulfill any agreement or
covenant contained in or made pursuant to this Agreement. In no event, however,
shall the Company be liable for indirect, incidental or consequential or special
damages of any kind. All of the representations and warranties of the Company
made herein shall survive the execution and delivery of this Agreement until the
date that is one hundred eighty (180) days after the date of this Agreement,
except for (a) Sections 6.1 (Organization, Good Standing and Qualification), 6.2
(Capitalization), 6.3 (Corporate Power, Authorization; Enforceability), 6.13
(Private Offerings) and 6.14 (Broker's or Finder's Commission), which
representations and warranties shall survive indefinitely (or if indefinite
survival is not permitted by law, then for the maximum period permitted by
applicable law), (b) Section 6.8 (Taxes), which representation and warranty
shall survive until the later to occur of (i) the lapse of the statute of
limitations with respect to the assessment of any tax to which such
representation and warranty relates (including any extensions or waivers
thereof) and (ii) sixty (60) days after the final administrative or judicial
determination of the Taxes to which such representation and warranty relates,
and no claim with respect to Section 6.8 may be asserted thereafter with the
exception of claims arising out of any fact, circumstance, action or proceeding
to which the party asserting such claim shall have given notice to the other
parties to this Agreement prior to the termination of such period of reasonable
belief that a tax liability will subsequently arise therefrom, and (c) Section
6.7 (Environmental Matters), which representation and warranty shall survive
until the lapse of the applicable statute of limitations. Except as set forth
herein, all of the covenants, agreements and obligations of the Company shall
survive the Final Closing indefinitely (or if indefinite survival is not
permitted by law, then for the maximum period permitted by applicable law).
-16-
(b) Each Purchaser severally, and not jointly, agrees to indemnify and
hold harmless the Company, its affiliates and each of their respective
directors, officers, general and limited partners, principals, agents and
attorneys from and against any and all Losses to which any such Person may
become subject, insofar as such Losses arise out of, in any way relate to, or
result from (i) any breach of any representation or warranty made by such
Purchaser contained in or made pursuant to Article 5 of this Agreement, or (ii)
the failure of such Person to fulfill any agreement or covenant contained in or
made pursuant to this Agreement. In no event, however, shall any Purchaser be
liable for indirect, incidental or consequential or special damages of any kind.
All of the representations and warranties of each Purchaser made herein shall
survive the execution and delivery of this Agreement for the maximum period
permitted by applicable law with respect to the statute of limitations
applicable to survival of contractual claims for indemnification. Except as set
forth herein, all of the covenants, agreements and obligations of the Purchasers
shall survive the Final Closing for the maximum period permitted by applicable
law with respect to the statute of limitations applicable to survival of
contractual claims for indemnification. Furthermore, in no event shall any
Purchaser be required to make indemnification payments pursuant to this Section
in excess of the gross Purchase Price of the Securities and the Subsidiary
Securities acquired by such Purchaser in the Offering.
7.2 Promptly after receipt by any Person entitled to seek indemnification
under Section 7.1 of this Agreement (individually, an "Indemnified Party" and
collectively, the "Indemnified Parties") of notice of any claim as to which
indemnity may be sought, including, without limitation, the commencement of any
action or proceeding, the Indemnified Party will, if a claim in respect thereof
may be made against a Person required to provide indemnification under Section
7.1 of this Agreement (individually, an "Indemnifying Party" and collectively,
the "Indemnifying Parties"), promptly notify the Indemnifying Party in writing
of the commencement thereof; provided that the failure of the Indemnified Party
to so notify the Indemnifying Party will not relieve the Indemnifying Party from
its obligations under this Section unless, and only to the extent that, such
omission results in the Indemnifying Party's forfeiture of substantive rights or
defenses or being materially prejudiced by the Indemnified Person's failure to
give such notice. In case any action or proceeding is brought against any
Indemnified Party, and it notifies the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to assume the defense thereof
at its own expense, with counsel reasonably satisfactory to such Indemnified
Party, which approval will not be unreasonably withheld or delayed unreasonably;
provided, however, that any Indemnified Party may, at its own expense, retain
separate counsel to participate in such defense at its own expense. After notice
from the Indemnifying Party to the Indemnified Party of its election to so
assume the defense thereof, the Indemnifying Party will not be liable to the
Indemnified Party under that Section 7 for any legal or any other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof (other than reasonable costs of investigation) unless incurred at the
written request of the Indemnifying Party. Notwithstanding the above, the
Indemnified Party will have the right to employ counsel of its own choice in any
action or proceeding (and be reimbursed by the Indemnifying Party for the
reasonable fees and expenses of the counsel and other reasonable costs of the
defense) if, in the written opinion of such Indemnified Party's counsel,
representation of the Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests or conflicts between the Indemnified Party and any other party
represented by the counsel in the action; provided, however, that the
Indemnifying Party will not in connection with any one action or proceeding or
separate but substantially similar actions or proceedings arising out of the
same general allegations, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys at any time for all Indemnified Parties,
except to the extent that local counsel, in addition to regular counsel, is
required in order to effectively defend against the action or proceeding. An
Indemnifying Party will not be liable to any Indemnified Party for any
settlement or entry of judgment concerning any action or proceeding effected
without the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. The Indemnifying Party agrees that it will not, without
the prior written consent of the Indemnified Party, settle, compromise or
consent to the entry of any judgment in any pending or threatened claim relating
to the matters contemplated hereby (if any Indemnified Party is a party thereto
or has been actually threatened to be made a party thereto) unless such
settlement, compromise or consent includes an unconditional release of each
Indemnified Party from all liability arising or that may arise out of such
claim. The rights accorded to an Indemnified Party hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise; provided, however, that notwithstanding the
foregoing or anything to the contrary contained in this Agreement, (a) nothing
in this Section 7 shall restrict or limit any rights that any Indemnified Party
may have to seek equitable relief and (b) this Section 7 shall be the sole
remedy for any breach of the Company's representations and warranties contained
in this Agreement and for any breach of any Purchaser's representations and
warranties contained in this Agreement except, in either case, with respect to
claims arising out of fraud or willful misconduct.
-17-
8. Covenants.
8.1 Use of Proceeds. The Company will use the proceeds from this Offering
for general working capital and other corporate purposes, including, without
limitation, the development of various compounds.
8.2 Conduct of the Company's Business. Except as contemplated by this
Agreement, during the period from the date hereof to the Closing Date, the
Company and each of its subsidiaries will conduct their respective businesses
and operations solely in the ordinary course of business consistent with past
practice and each shall use reasonable commercial efforts to keep available the
services of its officers and employees and preserve its current relationships
with customers, suppliers, licensors, creditors and others having business
dealings with it, except as would not be reasonably expected to have a Material
Adverse Effect.
8.3 Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement at the earliest
practicable date.
8.4 Tax Matters.
(a) The Company covenants that it will use commercially reasonable efforts
not to become a USRPHC at any time while any Purchaser owns any of the Series A
Preferred Stock.
(b) In the event that a Purchaser desires to sell or dispose of any of the
Series A Preferred Stock or Conversion Shares as permitted under this Agreement
and applicable law, and upon demand by such Purchaser, the Company agrees to
deliver to such Purchaser a letter (the "Letter") which complies with Sections
1.1445-2(c)(3) and 1.897-2(h) of the Treasury Regulations, addressed to such
Purchaser, stating whether or not the Company is a USRPHC. The Letter shall be
delivered to the Purchaser one business day prior to the close of any such
permitted sale or disposition of the Series A Preferred Stock or Conversion
Shares by the Purchaser (the "Delivery Date"). The Letter shall be dated as of
the Delivery Date and signed by a corporate officer who must verify under
penalties of perjury that the statement is correct to his knowledge and belief
pursuant to Section 1.897-2(h) of the Treasury Regulations.
-18-
8.5 Furnishing of Information. As long as any Purchaser owns Shares, the
Company covenants that it will use its commercially reasonable efforts 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
hereof pursuant to the Exchange Act. As long as any Purchaser owns Shares, if
the Company is not required to file reports pursuant to such laws, it will use
its commercially reasonable efforts to prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Shares under Rule 144.
8.6 Non-Public Information. The Company represents and warrants that
neither it nor, to the best of its knowledge, any subsidiary or any other Person
acting on its behalf, has provided any Purchaser or its agents or counsel with
any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and acknowledges that each Purchaser is relying on the foregoing
representations in effecting transactions in securities of the Company.
9. FOR RESIDENTS OF ALL STATES: NEITHER THE SECURITIES OFFERED HEREBY NOR
THE UNDERLYING SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND
SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT
AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD
BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE WARRANTS ARE NON-TRANSFERABLE.
10. No Waiver.
Notwithstanding any of the representations, warranties, acknowledgments or
agreements made herein by the Purchasers, the Purchasers do not thereby or in
any manner waive any rights granted to the Purchasers under federal or state
securities laws.
11. Miscellaneous.
11.1 Notices. Any notice or other communication given hereunder by any
party hereto to any other party hereto shall be in writing and delivered
personally or by facsimile transmission or sent by registered or certified mail
or by any express mail or overnight courier service, postage or fees prepaid:
If to the Company:
Bioaccelerate Holdings, Inc.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Reference: Series A Preferred Private Placement
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Purchasers:
To each Purchaser at such Purchaser's name and
address set forth on the signature page to this
Agreement.
-19-
Any notice that is delivered personally or by facsimile transmission
in the manner provided herein shall be deemed to have been duly given to the
party to whom it is directed upon actual receipt by such party or its agent. Any
notice that is addressed and mailed, postage prepaid for most rapid method of
delivery, or sent by courier in the manner herein provided shall be conclusively
presumed to have been duly given to the party to which it is addressed at the
close of business, local time of the recipient, on the fourth business day after
the day it is so placed in the mail or, if earlier, the date and time of actual
receipt.
11.2 Successors and Assigns. This Agreement will be binding upon and inure
to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns, provided, that no party may assign this
Agreement without the prior written consent of the other party, such consent not
to be unreasonably withheld; provided that any transfer of Securities or
Subsidiary Securities or the shares of Common Stock underlying such Securities
must be in compliance with the Transaction Documents and all applicable law.
11.3 Entire Agreement. This Agreement sets forth the entire agreement and
understanding among the parties as to the subject matter hereof and merges and
supersedes all prior discussions, agreements and understandings of any and every
nature among them; provided that any confidentiality agreement between the
Company and any Purchaser shall remain in effect. This Agreement may be amended
only by mutual written agreement of the Company and a majority in interest of
the Purchasers, and the Company may take any action herein prohibited or omit to
take any action herein required to be performed by it, and any breach of any
covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or waiver of the Purchasers purchasing
a majority of the Shares offered hereby.
11.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York with respect to contracts made
and to be fully performed therein, without regard to the conflicts of laws
principles thereof. The parties hereto hereby agree that any suit or proceeding
arising under this Agreement, or in connection with the consummation of the
transactions contemplated hereby, shall be brought solely in a federal or state
court located in the County of New York and State of New York. By its execution
hereof, the Company, on the one hand, and the Purchasers, on the other hand,
hereby consent and irrevocably submit to the in personam jurisdiction of the
federal and state courts located in the County of New York and State of New York
and agree that any process in any suit or proceeding commenced in such courts
under this Agreement may be served upon it personally or by certified or
registered mail, return receipt requested, or by Federal Express or other
courier service, with the same force and effect as if personally served upon the
applicable party in New York and in the city or county in which such other court
is located. The parties hereto each waive any claim that any such jurisdiction
is not a convenient forum for any such suit or proceeding and any defense of
lack of in personam jurisdiction with respect thereto.
11.5 Severability. The holding of any provision of this Agreement to be
invalid or unenforceable by a court of competent jurisdiction will not affect
any other provision of this Agreement, which will remain in full force and
effect. If any provision of this Agreement is declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, the provision will be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof will nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions will be deemed dependent upon any other covenant
or provision unless so expressed herein.
-20-
11.6 No Waiver. A waiver by either party of a breach of any provision of
this Agreement will not operate, or be construed, as a waiver of any subsequent
breach by that same party.
11.7 Further Assurances. The parties agree to execute and deliver all
further documents, agreements and instruments and take further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
11.8 Counterparts; Facsimile Signatures. This Agreement may be executed in
counterparts, each of which shall be deemed an original agreement, but all of
which together shall constitute one and the same instrument. Execution and
delivery of this Agreement and the Closing Documents pursuant to Section 3.4 of
this Agreement (the "Closing Documents") by facsimile transmission (including
the delivery of documents in Adobe PDF format) shall constitute execution and
delivery of this Agreement and the Closing Documents for all purposes, with the
same force and effect as execution and delivery of an original manually signed
copy hereof.
11.9 No Third Party Beneficiaries. Nothing in this Agreement creates in
any Person not a party to this Agreement any legal or equitable right, remedy or
claim under this Agreement, and this Agreement is for the exclusive benefit of
the parties hereto. The parties expressly recognize that this Agreement is not
intended to create a partnership, joint venture or other similar arrangement
between any of the parties or their respective affiliates.
11.10 Headings. The headings in this Agreement are solely for convenience
of reference and shall be given no effect in the construction or interpretation
of this Agreement.
11.11 Securities Laws Disclosure; Publicity Restrictions. The Company
shall issue a press release by 8:30 a.m. Eastern time on the trading day
following each applicable Closing, or file a Current Report on Form 8-K
disclosing the consummation of the transactions consummated on such Closing by
the fourth day following each applicable Closing. Except as may be required by
applicable Requirements of Law, none of the parties hereto shall issue a
publicity release or public announcement or otherwise make any disclosure
concerning this Agreement, the transactions contemplated hereby without prior
approval by the other party hereto; provided that each Purchaser may disclose on
its worldwide web pages and its offering materials, if any, the name of the
Company, the name of the Chief Executive Officer of the Company, a brief
description of the business of the Company consistent with the Commission
Documents or the Company's press releases or other public statements, the
Company's logo and the aggregate amount of such Purchaser's investment in the
Company. If any announcement is required by applicable law or the rules of any
securities exchange or market on which such securities are traded to be made by
any party hereto, prior to making such announcement such party will deliver a
draft of such announcement to the other parties and shall give the other parties
reasonable opportunity to comment thereon. The parties agree to attribute and
otherwise indicate ownership of the other party's trademarks and logos.
11.12 Certification. Each Purchaser certifies that such Purchaser has read
this entire Agreement and that every statement on such Purchaser's part made and
set forth herein is true and complete.
-21-
11.13 Exceptions to Representations, Warranties, Covenants and Agreements.
Notwithstanding anything to the contrary contained in this Agreement, the
parties hereto acknowledge and agree that as of September 1, 2005 the Company
and certain of its subsidiaries are not current in their respective obligations
to file all reports required to be filed by them under the Securities Act and
the Exchange Act and the rules and regulations adopted by the SEC thereunder,
and such currently existing condition shall be deemed to be an exception to, and
shall not be deemed to be a breach of, any representation, warranty, covenant or
agreement in this Agreement, or the basis for any penalty, pursuant to this
Agreement.
[Remainder of page intentionally left blank.]
-22-
IN WITNESS WHEREOF, the undersigned has executed this Securities Purchase
Agreement on the date his signature has been subscribed and sworn to below.
The shares of Series A
Preferred Stock and the
Warrants, and the Cynat Shares
and the Genaderm Shares are to
be issued in: --------------------------------------
Print Name of Purchaser
____ individual name ____________ shares of Series A Preferred Stock
subscribed for (together with (i) one accompanying
Warrant for every two Conversion Shares underlying
each Share of Series A Preferred Stock at the
applicable Closing Date, but with no fractional
Warrants, and (ii) four (4) Cynat Shares and four
(4) Genaderm Shares for each share of Series A
Preferred Stock acquired in the Offering)
Subscription price paid herewith for the
Securities (other than the exercise price for the
____ tenants in the entirety Warrants, which is not paid until the Warrants are
exercised): $______________ (being $6.00 x the number
of shares of Series A Preferred Stock listed above)
--------------------------------------
____ corporation (an officer must sign) Print Name of Joint Purchaser
(if applicable)
--------------------------------------
____ partnership (all general partners must sign) Signature of Purchaser
--------------------------------------
____ trust Signature of Joint Purchaser
--------------------------------------
____ limited liability company
--------------------------------------
(with a copy to:)
--------------------------------------
--------------------------------------
Address of Purchaser
Accepted as of the ___ day of ______________, 2005 as to _______________ shares
of Series A Preferred Stock (together with (i) one accompanying Warrant for
every two Conversion Shares underlying each Share of Series A Preferred Stock at
the applicable Closing Date, but with no fractional Warrants, and (ii) four (4)
Cynat Shares and four (4) Genaderm Shares for each share of Series A Preferred
Stock acquired in the Offering), the Purchase Price for which (other than the
exercise price for each Warrant to acquire Conversion Shares, which is not paid
until a Warrant is exercised) is $______________, being $6.00 x the number of
shares of Series A Preferred Stock as to which this Subscription is accepted,
subject to receipt of the entire Purchase Price in United States Dollars by wire
transfer of immediately available funds to the Company at its requested account
or accounts and performance of other closing conditions set forth in this
Agreement:
BIOACCELERATE HOLDINGS, INC.
By:
---------------------------------------------
Name:
Title:
Schedule 6.2
As of July 31, 2005, the capitalization of the Company was as follows, and
there were no other securities issued or outstanding:
43,405,372 shares of Common Stock issued and outstanding.
No shares of Preferred Stock issued and outstanding.
No options and warrants issued and outstanding to investors or placement agents
No options and warrants issued and outstanding to employees
The Company has also issued warrants to lenders to acquire, in the aggregate,
3,500,000 shares of the Company's Common Stock at the price of this financing.
The Company has subsequently issued Shares, Warrants and Placement Agent
Warrants in the initial Closing of this Offering, as contemplated by this
Agreement.
As of July 31, 2005, the authorized capital stock of Cynat consisted of
the following:
100,000,000 shares of common stock, par value, $0.001 per share and;
10,000,000 shares of preferred stock, par value, $0.001 per share.
As of July 31, 2005, the authorized capital stock of Genaderm consisted of
the following:
100,000,000 shares of common stock, par value, $0.001 per share and;
10,000,000 shares of preferred stock, par value, $0.001 per share
As of July 31, 2005, the capitalization of Cynat was as follows, and there
were no other securities issued or outstanding:
40,000,000 shares of Common Stock issued and outstanding.
No shares of Preferred Stock issued and outstanding.
No options and warrants issued and outstanding to investors or placement agents
No options and warrants issued and outstanding to employees
No options and warrants issued to lenders.
As of July 31, 2005, the capitalization of Genaderm was as follows, and
there were no other securities issued or outstanding:
40,000,000 shares of Common Stock issued and outstanding.
No shares of Preferred Stock issued and outstanding.
No options and warrants issued and outstanding to investors or placement agents
No options and warrants issued and outstanding to employees
No options and warrants issued to lenders.
-2-
Schedule 6.17
The Company has no contractual obligation to register any of its
securities other than pursuant to the Registration Rights Agreements and except
as set forth below:
The Company has a contractual obligation to register 5,100,000 shares of the
Company's Common Stock
Cynat has no contractual obligation to register any of its securities
other than pursuant to the Registration Rights Agreements.
Genaderm has no contractual obligation to register any of its securities
other than pursuant to the Registration Rights Agreements.
[Insert Purchaser Questionnaire]
Exhibit A
Form of Certificate of Designations
Exhibit B
Form of Registration Rights Agreements
Exhibit C
Form of Warrant
Exhibit D
Form of Legal Opinion of Company's Counsel
Xxxxxx Xxxxxx Xxxxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
000.000.0000 tel
000.000.0000 fax
Xxxxxxx Xxxxxxxxxx
xxxxxxx.xxxxxxxxxx@xxxxxxxxx.xxx
212.940.8511 direct
000.000.0000 fax
________ __, 2005
To the Purchasers Listed on Schedule 1 Hereto
Re: Securities Purchase Agreement among Bioaccelerate Holdings, Inc.
(the "Company") and the Purchasers Listed on Schedule 1 Hereto (the
"Purchasers")
Ladies and Gentlemen:
We have acted as special counsel to the Company in connection with the
execution and delivery by the Company of the Securities Purchase Agreement,
dated as of __________, 2005, by and among the Company and the Purchasers (the
"Securities Purchase Agreement"), the Securities and Subsidiary Securities
delivered pursuant thereto, the Registration Rights Agreements, dated as of
____________, 2005, by and among the Company and the Purchasers (the
"Registration Rights Agreements"), and the warrants delivered pursuant to the
Securities Purchase Agreement (the "Warrants"). The Securities Purchase
Agreement, the Registration Rights Agreements and the Warrants are sometimes
hereinafter referred to as the "Transaction Documents". This opinion is being
rendered to you pursuant to Section 3.4 of the Securities Purchase Agreement.
Capitalized terms not otherwise defined herein have the respective meanings
ascribed to them in the Securities Purchase Agreement.
We are not the Company's general counsel, and we are not the Company's
outside counsel for all purposes. We have not previously represented the Company
for any purpose whatsoever, and we expect that we will only represent the
Company in the future on such discreet matters as may be referred to us from
time to time by senior officers of the Company. Furthermore, we have not
heretofore represented the Company in connection with its Commission Documents
or any transactions which it has effected to date. Consequently, no inference
should be drawn concerning our knowledge of the Company or its affairs from the
fact that we are special counsel to the Company in this matter.
In connection with this opinion, we have examined the Articles of
Incorporation, as amended, and By-laws of the Company (collectively, the
"Charter Documents"), and we have reviewed the Transaction Documents, including
the schedules and exhibits thereto, if any.
In connection with this opinion, we also have relied on the following
documents:
1. the Transaction Documents;
2. a Certificate issued by the Secretary of State of the State of
Nevada on _______ __, 2005 (the "Nevada Certificate") certifying the
Company's good standing and legal corporate existence and a
Certificate issued by the Secretary of State of the State of Nevada
on ________ __, 2005 certifying the Articles of Incorporation and
other documents on file with the Secretary of State of the State of
Nevada relating to the Company;
3. Certificates issued by the Secretary of State of the State of
Delaware on ________ __, 2005 (the "Delaware Certificates")
certifying the good standing and legal corporate existence of Cynat
Oncology Inc. ("Cynat") and Genaderm, Inc. ("Genaderm" and, together
with Cynat, the "Subsidiaries") and Certificates issued by the
Secretary of State of the State of Delaware on ________ __, 2005
certifying the Certificate of Incorporation and other documents on
file with the Secretary of State of the State of Delaware relating
to the Subsidiaries;
4. a certificate of the Company's Chief Executive Officer, of even date
herewith (the "Officer's Certificate"), as to the truthfulness,
accuracy and completeness of the representations and warranties made
by the Company in the Securities Purchase Agreement and the closing
certificates delivered by the Company in connection with the
Securities Purchase Agreement (except as otherwise disclosed in such
certificate) and the satisfaction and performance of all covenants
and agreements required to be performed by the Company on or prior
to the applicable Closing;
5. a certificate of the Company's Chairman, of even date herewith (the
"Back-Up Certificate"), as to certain questions of fact relating to
this opinion;
6. a certificate of the Company's Secretary, of even date herewith, as
to, among other things, the Charter Documents and resolutions of the
Board of Directors of the Company relating to the transactions
contemplated by the Transaction Documents, delivered to you on the
date hereof; and
7. such other documents, corporate records, certificates and materials
as we have deemed necessary for the purposes of the opinions
rendered herein.
In such examination, we have assumed that (i) all signatures on any
executed documents are genuine, each of the parties' signatory(ies) thereto
other than the Company have all requisite legal capacity and the individuals
representing such parties have all requisite authority and legal capacity
necessary thereto; (ii) all documents, certificates, instruments and agreements
submitted to us as originals are authentic; and (iii) all documents,
certificates, instruments and agreements submitted to us as photostatic or
facsimile copies conform with the originals.
2
As to questions of fact relating to our opinion, we have relied solely
upon representations and warranties made by the Purchasers and by the Company in
the Transaction Documents, upon certificates obtained from and representations
made by officers of the Company and public officials and upon certain other
representations of officers of the Company, and we have undertaken no
independent verification. Any reference herein to "our knowledge," to matters
"known to us" or to matters "of which we have knowledge," or any variation
thereof, shall mean the actual knowledge of the individual attorneys in our firm
who participated in the preparation of this opinion. Although we have made
inquiries of officers of the Company with respect to the matters discussed in
this opinion and relied upon the representations and materials referred to
above, we have not made any docket searches or other independent investigations
including, without limitation, as to the existence of actions, suits,
investigations or proceedings, if any, pending or threatened against the
Company. No inference as to our knowledge of the existence or absence of such
facts should be drawn from the fact of our representation of the Company in
connection with this opinion.
For purposes of the opinions expressed below, we also have assumed that
the other parties to each of the Transaction Documents have all requisite power
and authority and have taken all necessary action to authorize, execute and
deliver the Transaction Documents and to consummate the transactions
contemplated thereby, that all representations and warranties made by such
persons or entities therein are true and correct, and that the other parties to
such Transaction Documents have executed and delivered, and are performing, the
same.
The opinions hereinafter expressed are qualified to the extent that the
validity or enforceability of any provision of any of the Transaction Documents,
or any other agreement or instrument executed in connection therewith, or of any
rights granted pursuant thereto, may be subject to or affected by (1) applicable
bankruptcy, insolvency, reorganization, moratorium, equitable subordination,
preference, fraudulent conveyance or transfer or other similar laws relating to
or affecting the rights and remedies of creditors generally and (2) general
equitable principles, including without limitation that the availability of the
remedy of specific enforcement or of injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
We express no opinion as to the validity or enforceability of any
provision in the Transaction Documents relating to (i) the enforceability of any
provisions of the Transaction Documents that purport to waive any rights or
remedies otherwise available under applicable law; (ii) the availability of
specific performance or other equitable remedies in connection with the
performance of the Transaction Documents; (iii) the enforceability of any
provisions of the Transaction Documents that purport to waive or change any
rules of civil procedure (including, without limitation, choice of law and the
consent to jurisdiction of courts located in a forum other than that in which
any party is located); and (iv) the enforceability of any provision regarding
non-competition or other matters determined to be contrary to public policy.
Furthermore, we express no opinion as to the validity or enforceability of the
indemnification and contribution provisions contained in the Transaction
Documents. We render or imply no opinion with respect to compliance with
applicable anti-fraud statutes or rules and regulations of applicable state or
federal law. For purposes of our opinions herein, we assume that the Purchasers
have paid for the Securities and Subsidiary Securities in full on the date
hereof.
3
Our opinion expressed in paragraph 1 below as to the due incorporation,
valid existence and good standing of the Company and the Subsidiaries is based
solely on a review of the Nevada Certificate and the Delaware Certificates, and
such opinion is limited accordingly and is rendered as of the date of such
Nevada Certificate and Delaware Certificates.
Except as specifically provided in paragraphs 7 and 8 below, we render no
opinion with respect to any federal or state securities laws, and our opinions
assume the filing by the Company in the appropriate time period post-closing of
a duly completed and executed Form D in respect of the offering made to the
Purchasers.
We further call your attention to the fact that the members of this firm
who have participated in the preparation of this opinion are not licensed to
practice law in any jurisdiction other than the State of New York. With respect
to any and all opinions rendered herein, to the extent such opinions would
otherwise purport to opine on matters governed by laws other than the laws of
the State of New York, the federal securities laws of the United States of
America, the Delaware General Corporation Law (the "DGCL") and the General
Corporation Law of Nevada (the "GCLN"), we have assumed with your consent that
the laws of such jurisdictions are identical to those of the State of New York.
Accordingly, we express no opinion with respect to the laws of any jurisdiction
other than the laws of the State of New York, the federal securities laws of the
United States of America, the DGCL and the GCLN. Without limiting the generality
of the foregoing, we also express no opinion concerning compliance with the
anti-fraud provisions of any applicable federal or state securities laws. For
clarity, we note that the Company is a corporation organized under the laws of
the State of Nevada, but its principal business operations are in Europe and in
a variety of States (including States other than New York), and its subsidiaries
are organized under the laws of a variety of jurisdictions other than New York,
and we are not opining on such laws except for the DGCL and the GCLN.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Nevada. Each of the Subsidiaries is
a corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware.
2. The Company has all necessary corporate power and authority to execute,
deliver, enter into and perform its obligations under each of the Transaction
Documents and to consummate the transactions contemplated thereby, including,
without limitation, to issue, sell and deliver the Securities and the shares of
Common Stock issuable upon exercise of the Warrants and to sell and deliver the
Subsidiary Securities. The execution, delivery and performance of each of the
Transaction Documents has been duly authorized by all necessary corporate action
on the part of the Company.
3. Transaction Documents has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its respective terms.
4
4. The Securities and the shares of Common Stock issuable upon exercise of
the Warrants have been duly authorized and, when issued in accordance with the
Securities Purchase Agreement or the Warrants, as applicable, will be validly
issued, fully paid and nonassessable and will be free and clear of all Liens
imposed by or through the Company other than restrictions imposed by the
Securities Purchase Agreement, the Warrants and applicable securities laws. The
Subsidiary Securities were duly authorized, validly issued, fully paid and
nonassessable, and, immediately prior to the consummation of the transactions
contemplated by the Transaction Documents, the Company was the sole registered
owner thereof. Upon delivery of the certificates for the Subsidiary Securities
to the Purchasers, properly endorsed for transfer to the Purchasers, and
assuming the Purchasers have purchased the Subsidiary Securities for value and
without notice of any adverse claim, the Purchasers will have acquired all of
the Company's rights in the Subsidiary Securities, free of any adverse claim.
Other than as disclosed in the Securities Purchase Agreement, no statutory or,
to our actual knowledge based solely upon the representations and warranties of
the Company in the Transaction Documents and upon the Officer's Certificate and
the Back-Up Certificate, contractual preemptive or other rights to subscribe for
or purchase equity securities of the Company exist with respect to the issuance
and sale of the Securities by the Company pursuant to the Transaction Documents.
5. The execution and delivery by the Company of the Transaction Documents
do not, and the consummation of the transactions contemplated thereby will not,
(A) violate any provision of the Articles of Incorporation or By-laws of the
Company, (B) violate any law, statute, rule, regulation, order, judgment or
decree of any court or Governmental Authority which, to our knowledge, is
applicable to the Company or (C) to our actual knowledge based solely upon the
representations and warranties of the Company in the Transaction Documents and
upon the Officer's Certificate and the Back-Up Certificate, breach or constitute
(with due notice or lapse of time or both) a default under any material
agreement to which the Company is a party or by which it is bound or to which
any of its properties or assets is subject, nor result in the creation or
imposition of any Lien (other than Liens contemplated by the Securities Purchase
Agreement) upon any of the properties or assets of the Company, except for, in
the case of clauses (B) and (C), any violation, breach or default which would
not have a Material Adverse Effect.
6. Except for filings, authorizations or approvals contemplated by the
Securities Purchase Agreement, no authorizations or approvals of, and no filings
with, any Governmental Authority are necessary or required by the Company for
the execution and delivery of the Transaction Documents or the consummation of
the transactions contemplated thereby.
7. The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
8. Assuming the accuracy of the representations and warranties of the
Purchasers in the Securities Purchase Agreement, the offer and sale of the
Securities is exempt from the registration requirements of the Securities Act of
1933, as amended, pursuant to Section 4(2) and/or Rule 506 under Regulation D of
the Securities Act.
5
This opinion is furnished for your sole benefit in connection with the
transactions described herein and may not be used, circulated, quoted, referred
to or relied upon for any other purpose or by any other party without our prior
written consent. Furthermore, without our prior written consent, the opinions
herein are not to be used, extracted from or otherwise referred to in connection
with any other financing or by any other person or entity. Our opinion is
expressly limited to the matters set forth above, and we render no opinion,
whether by implication or otherwise, as to any other matters relating to the
Company. We assume no obligation to advise you of facts, circumstances, events
or developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinions expressed herein.
Very truly yours,
XXXXXX XXXXXX XXXXXXXX LLP
By
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Xxxxxxx Xxxxxxxxxx, Partner
6
SCHEDULE 1
List of Purchasers
