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ITEM 10.2
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below, is entered into by and between HARVARD SCIENTIFIC
CORPORATION, a Nevada corporation, with headquarters located at 000 Xxxxx
Xxxxxxxxx, Xxxxx 00X, Reno, Nevada 89501(the "Company"), and the undersigned
(the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 Act"), and/or Section
4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and
subject to the conditions of this Agreement, 6% Convertible Debentures (the
"Debenture"), of the Company which will be convertible into shares of Common
Stock, $.01 par value per share (the "Common Stock"), of the Company upon the
terms and subject to the conditions of such Debenture (the Common Stock and the
Debenture sometimes referred to herein as the "Securities"), and subject to
acceptance of this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. PURCHASE. The undersigned hereby agrees to purchase
from the Company, the Debentures of the Company, in the principal amount set
forth on the signature page of this Agreement, out of a total offering of
$15,000,000 in Debentures, and having the terms and conditions and being in the
form attached hereto as ANNEX I. The purchase price for the Debenture shall be
as set forth on the signature page hereto and shall be payable in United States
Dollars.
b. FORM OF PAYMENT. The Buyer shall pay the purchase
price for the Debenture by delivering immediately available good funds in
United States Dollars to the escrow agent (the "Escrow Agent") identified in
the Joint Escrow Instructions attached hereto as ANNEX II (the "Joint Escrow
Instructions") as set forth below. Promptly following payment by the Buyer to
the Escrow Agent of the purchase price of the Debentures, the Company shall
deliver the Debenture duly executed on behalf of the Company to the Escrow
Agent. By signing this Agreement, the Buyer and the Company, and subject to
acceptance by the Escrow Agent, each agrees to all of the terms and
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conditions of, and becomes a party to, the Joint Escrow Instructions, all of
the provisions of which are incorporated herein by this reference as if set
forth in full.
c. METHOD OF PAYMENT. Payment into escrow of the purchase
price for the Debenture shall be made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx, Esqs.
Account No. _________________________
Not later than 1:00 p.m., New York time, on the date which is three (3) New
York Stock Exchange trading days after the Company shall have accepted this
Agreement and returned a signed counterpart of this Agreement to the Escrow
Agent by facsimile, the Buyer shall deposit with the Escrow Agent the aggregate
purchase price for the Debenture, in currently available funds. Time is of the
essence with respect to such payment, and failure by the Buyer to make such
payment, shall allow the Company to cancel this Agreement.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock
pursuant to the Registration Statement, the Buyer is purchasing the Debenture
and will be acquiring the shares of Common Stock issuable upon conversion of
the Debenture for its own account for investment only and not with a view
towards the public sale or distribution thereof and not with a view to or for
sale in connection with any distribution thereof;
b. The Buyer is (i) an "accredited investor" as that term
is defined in Rule 501 of the General Rules and Regulations under the 1933 Act
by reason of Rule 501(a)(3), and (ii) experienced in making investments of the
kind described in this Agreement and the related documents, (iii) able, by
reason of the business and financial experience of its officers (if an entity)
and professional advisors (who are not affiliated with or compensated in any
way by the Company or any of its affiliates or selling agents), to protect its
own interests in connection with the transactions described in this Agreement,
and the related documents, and (iv) able to afford the entire loss of its
investment in the Securities;
c. All subsequent offers and sales of the Debenture and
the shares of Common Stock issuable upon conversion of, or issued as dividends
on, the Debenture (the "Shares" and,
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together with the Debenture, the "Securities") by the Buyer shall be made
pursuant to registration of the Shares under the 1933 Act or with respect to
the Debenture pursuant to an exemption from registration;
d. The Buyer understands that the Debenture is being
offered and sold, and the Shares are being offered, to it in reliance on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying upon the truth and
accuracy of, and the Buyer's compliance with, the representations, warranties,
agreements, acknowledgements and understandings of the Buyer set forth herein
in order to determine the availability of such exemptions and the eligibility
of the Buyer to acquire the Debenture and to receive an offer of the Shares;
e. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Debenture and the
offer of the Shares which have been requested by the Buyer, including ANNEX V
hereto. The Buyer and its advisors, if any, have been afforded the opportunity
to ask questions of the Company and have received complete and satisfactory
answers to any such inquiries. Without limiting the generality of the
foregoing, the Buyer has also had the opportunity to obtain and to review the
Company's (1) a draft of the Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996, (2) Quarterly Report on Form 10-QSB for the fiscal
quarter ended September 30, 1996, and (3) Form 10-SB (the "Company's SEC
Documents").
f. The Buyer understands that its investment in the
Securities involves a high degree of risk;
g. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities;
h. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors'
rights generally.
i. Neither Buyer, nor any affiliate of Buyer, has any
present intention of entering into, any put option, short position, or other
similar position with respect to the Debenture or the Shares.
j. Notwithstanding the provisions hereof or of the
Debenture, in no event (except with respect to an Event of Mandatory Conversion
upon the maturity of the Debenture) shall the holder be entitled to convert any
Debenture to the extent after such conversion, the sum of (1) the number of
shares of Common Stock beneficially owned by the Buyer and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the
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unconverted portion of the Debenture), and (2) the number of shares of Common
Stock issuable upon the conversion of the Debenture with respect to which the
determination of this proviso is being made, would result in beneficial
ownership by the Buyer and its affiliates of more than 4.9% of the outstanding
shares of Common Stock. For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulation 13 D-G thereunder, except as otherwise provided in clause (1) of
such proviso.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. CONCERNING THE SHARES. There are no preemptive rights
of any stockholder of the Company, as such, to acquire the Common Shares.
b. REPORTING COMPANY STATUS. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada. The Company has registered its Common Stock pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the Common Stock is listed and traded on the NASDAQ/Bulletin Board.
The Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such listing.
c. AUTHORIZED SHARES. The Company has sufficient
authorized and unissued Shares as may be reasonably necessary to effect the
conversion of the Debenture. The Common Shares have been duly authorized and,
when issued upon conversion of, or as interest on, the Debenture, will be duly
and validly issued, fully paid and non-assessable and will not subject the
holder thereof to personal liability by reason of being such holder.
d. SECURITIES PURCHASE AGREEMENT; REGISTRATION RIGHTS
AGREEMENT AND STOCK. This Agreement and the Registration Rights Agreement, the
form of which is attached hereto as ANNEX IV (the "Registration Rights
Agreement"), and the transactions contemplated thereby, have been duly and
validly authorized by the Company, this Agreement has been duly executed and
delivered by the Company and this Agreement is, and the Registration Rights
Agreement, when executed and delivered by the Company, will be, valid and
binding agreements of the Company enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally; and the Debenture will be duly and
validly authorized and, when executed and delivered on behalf of the Company in
accordance with this Agreement, will be a valid and binding obligation of the
Company in accordance with its terms, subject to general principles of equity
and to bankruptcy, insolvency, moratorium, or other similar laws affecting the
enforcement of creditors' rights generally.
e. NON-CONTRAVENTION. The execution and delivery of this
Agreement and the Registration Rights Agreement by the Company, the issuance of
the Securities, and the
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consummation by the Company of the other transactions contemplated by this
Agreement, the Registration Rights Agreement, and the Debenture do not and will
not conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under (i) the articles of incorporation
or by-laws of the Company, (ii) any indenture, mortgage, deed of trust, or
other material agreement or instrument to which the Company is a party or by
which it or any of its properties or assets are bound, including any listing
agreement for the Common Stock, (iii) any existing applicable law, rule, or
regulation or any applicable decree, judgment, or (iv) order of any court,
United States federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company or any of its properties
or assets, except such conflict, breach or default which would not have a
material adverse effect on the transactions contemplated herein.
f. APPROVALS. No authorization, approval or consent of
any court, governmental body, regulatory agency, self-regulatory organization,
or stock exchange or market or the Stockholders of the Company is required to
be obtained by the Company for the issuance and sale of the Securities to the
Buyer as contemplated by this Agreement, except such authorizations, approvals
and consents that have been obtained.
g. SEC FILINGS. None of the SEC Filings with the
Securities and Exchange Commission since the filing of the 10-QSB on September
30, 1996 contained, at the time they were filed, any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements made therein in light of the circumstances
under which they were made, not misleading. Except as set forth on Annex V
hereto, the Company has since September 30, 1996 timely filed all requisite
forms, reports and exhibits thereto with the Securities and Exchange
Commission.
h. ABSENCE OF CERTAIN CHANGES. Since September 30, 1996,
there has been no material adverse change and no material adverse development
in the business, properties, operations, financial condition, or results of
operations of the Company, except as disclosed in the documents referred to in
Section 2(e) hereof.
i. FULL DISCLOSURE. There is no fact known to the Company
(other than general economic conditions known to the public generally) that has
not been disclosed in writing to the Buyer that (i) could reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise) or in the earnings, business affairs, properties or assets of the
Company or (ii) could reasonably be expected to materially and adversely affect
the ability of the Company to perform its obligations pursuant to this
Agreement.
j. ABSENCE OF LITIGATION. Except as set forth in ANNEX V
hereto, and in the draft of the Form 10-QSB, which the Buyer has reviewed,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board or body pending or, to the knowledge of the Company or any
of its subsidiaries, threatened against or affecting the Company or any of its
subsidiaries, wherein an unfavorable decision, ruling or finding would have a
material adverse effect on the properties, business, condition (financial or
other), results of operations or prospects of the
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Company and its subsidiaries taken as a whole or the transactions contemplated
by this Agreement or any of the documents contemplated hereby or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any of such
other documents.
k. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in
ANNEX V hereto, no Event of Default, as defined in the respective agreement to
which the Company is a party, and no event which, with the giving of notice or
the passage of time or both, would become an Event of Default (as so defined),
has occurred and is continuing, which would have a material adverse effect on
the Company's financial condition or results of operations.
l. NO DEFAULT. The Company is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it or its property
is bound, and neither the execution, nor the delivery by the Company, nor the
performance by the Company of its obligations under this Agreement or the
Debenture, other than the conversion provision thereof, will conflict with or
result in the breach or violation of any of the terms or provisions of, or
constitute a default or result in the creation or imposition of any lien or
charge on any assets or properties of the Company under, any material
indenture, mortgage, deed of trust or other material agreement applicable to
the Company or instrument to which the Company is a party or by which it is
bound or any statute or the Certificate of Incorporation or By-Laws of the
Company, or any decree, judgment, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or its
properties, or the Company's listing agreement for its Common Stock.
m. PRIOR ISSUES. During the twelve (12) months preceding
the date hereof, the Company has not issued any securities except as set forth
in Exhibit 3(m). The presently outstanding unconverted principal amount of
each such issuance as at March 20, 1997 are set forth in Exhibit 3(m).
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1)
the Debenture has not been and is not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that
the Securities to be sold or transferred may be sold or transferred pursuant to
an exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or
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the rules and regulations of the SEC thereunder; and (3) neither the Company
nor any other person is under any obligation to register the Securities (other
than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.
b. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees
that the Debentures, and, until such time as the Common Stock has been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement and sold in accordance with such Registration Statement, the shares
of Common Stock issued to the Holder upon conversion of the Debentures shall
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Debenture and such
shares of Common Stock):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED.
c. REGISTRATION RIGHTS AGREEMENT. The parties hereto
agree to enter into the Registration Rights Agreement, in substantially the
form attached hereto as ANNEX IV, on or before the Closing Date.
d. FILINGS. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Debenture to the Buyer
under any United States laws and regulations, or by any domestic securities
exchange or trading market, and to provide a copy thereof to the Buyer promptly
after such filing.
e. REPORTING STATUS. So long as the Buyer beneficially
owns any of the Debentures, the Company shall file all reports required to be
filed with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and the Company shall not terminate
its status as an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would permit such termination.
f. USE OF PROCEEDS. The Company will use the proceeds
from the sale of the Debenture (excluding amounts paid by the Company for legal
fees and finder's fees in connection with the sale of the Debenture) for
internal working capital purposes and shall not, directly or indirectly, use
such proceeds for any loan to or investment in any other corporation,
partnership enterprise or other person, except its parent Biosphere Technology,
Inc.
g. CERTAIN AGREEMENTS. The Company covenants and agrees
that it will not (i)
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enter into any subsequent or further offer or sale of common stock or
securities convertible into common stock with any third party until the
expiration of a period of one hundred eighty (180) days after the effective
date of the Registration Statement under the Registration Rights Agreement.
However, clause g(i) will not apply to (i) the issuance of securities (other
than for cash) in connection with a merger, consolidation, sale of assets,
disposition of a business, product or license by the Company, strategic
alliance, public offering, securities issued at the then current market price,
in exercise of options, or (ii) the exchange of the capital stock of the
Company for assets, stock or other equity interests.
h. OPTION. Notwithstanding Section 4(g), during the six
(6) month period following the Closing Date, the Buyer agrees to purchase up to
an additional $10,000,000 principal amount of Debentures (the "Additional
Debentures") in two tranches of $5,000,000 each, commencing not less than sixty
(60) days after the Effective Date, upon the same terms and conditions as those
applicable to the Debentures issued pursuant to this Agreement, (the
"Additional Closing Date"). Buyer's obligation to purchase the Additional
Debentures on the Additional Closing Date shall be contingent upon the
satisfaction of the following conditions: On each the Additional Closing Date
(i) the Registration Statement required to be filed under the Registration
Rights Agreement is effective (the "Effective Date"), (ii) the representations
and warranties of the Company contained in Section 3 are true and correct in
all material respects, and (iii) the Market Price for the five trading days
prior to each Additional Closing Date exceeds $3.50. Each such Debenture shall
mature on the last day of the twelfth month following its issuance.
i. PERMISSIVE REDEMPTION. [T/B/D]
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the
aggregate purchase price for the Debenture in accordance with Section 1(c)
hereof, the Company will irrevocably instruct its transfer agent to issue
Common Stock from time to time upon conversion of the Debenture in such amounts
as specified from time to time by the Company to the transfer agent, bearing
the restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the Shares under the 1933 Act, registered in the name of the
Buyer or its nominee and in such denominations to be specified by the Buyer in
connection with each conversion of the Debenture. The Company warrants that no
instruction other than such instructions referred to in this Section 5 and stop
transfer instructions to give effect to Section 4(a) hereof prior to
registration and sale of the Shares under the 1933 Act will be given by the
Company to the transfer agent and that the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement, and applicable
law. Nothing in this Section shall affect in any way the Buyer's obligations
and agreement to comply with all applicable securities laws upon resale of the
Securities. If the Buyer provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of a resale by the
Buyer of any of the Securities in accordance with clause (1)(B) of Section 4(a)
of this Agreement is not required under the 1933 Act, the Company shall (except
as provided in clause (2) of Section 4(a) of this Agreement) permit the
transfer of the Securities and, in the case of the Shares, promptly instruct
the Company's
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transfer agent to issue one or more certificates for Common Stock without
legend in such name and in such denominations as specified by the Buyer.
b. The Company will permit the Buyer to exercise its right
to convert the Debenture by telecopying an executed and completed Notice of
Conversion to the Company with a copy to the Transfer Agent and delivering
within three business days thereafter, the original Notice of Conversion and
the Debenture representing the Shares to the Company by express courier to the
Transfer Agent. Each date on which a Notice of Conversion is telecopied to and
received by the Company in accordance with the provisions hereof shall be
deemed a Conversion Date. The Company will transmit the certificates
representing the Shares of Common Stock issuable upon conversion of any
Debenture (together with the Debenture representing the Shares not so
converted) to the Buyer via express courier, by electronic transfer or
otherwise, within three business days after receipt by the Company of the
original Notice of Conversion and the Debenture representing the Shares to be
converted (the "Delivery Date").
c. The Company understands that a delay in the issuance of
the Shares of Common Stock beyond the Delivery Date could result in economic
loss to the Buyer. As compensation to the Buyer for such loss, the Company
agrees to pay late payments to the Buyer for late issuance of Shares upon
Conversion in accordance with the following schedule (where "No. Business Days
Late" is defined as the number of business days beyond five (5) business days
from Delivery Date:
Late Payment For Each
$10,000 of Debenture
No. Business Days Late Principal Amount Being Converted
---------------------- --------------------------------
1 $50
2 $100
3 $150
4 $200
5 $250
6 $300
7 $350
8 $400
9 $450
10 $500
Greater than 10 $500 + $100 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit Buyer's right to
pursue actual damages for the Company's failure to issue and delivery Common
Stock to the Buyer. Furthermore, in addition to any other remedies which may
be available to the Buyer, in the event that the Company fails for any reason
to effect delivery of such shares of Common Stock within five business days
after the Delivery Date,
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the Buyer will be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such effect to the Company whereupon the Company and the
Buyer shall each be restored to their respective positions immediately prior to
delivery of such Notice of Conversion.
6. DELIVERY INSTRUCTIONS.
The Debenture shall be delivered by the Company to the Escrow
Agent pursuant to Section 1(b) hereof, or a delivery against payment basis at
the closing.
7. CLOSING DATE.
The date and time of the issuance and sale of the Debenture
(the "Closing Date") shall occur no later than 12:00 Noon, New York time on
Friday, March 21, 1997, after the fulfillment or waiver of all Closing
conditions pursuant to Sections 8 and 9, or such other mutually agreed to time.
The closing shall occur on the Closing Date at the offices of the Escrow Agent.
Notwithstanding anything to the contrary contained herein, the Escrow Agent
will be authorized to release the fund representing the Purchase Price for the
Debenture, and the Debenture only upon satisfaction of the conditions set forth
in Section 8 hereof.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
Debentures on the Closing Date and Additional Closing Date to the Buyer
pursuant to this Agreement is conditioned upon:
a. The receipt and acceptance by the Company of such
Agreement as evidenced by execution of this Agreement by the Company for at
least Five Million ($5,000,000.00) Dollars in Debenture (or such lesser amount
as the Company, in its sole discretion, shall determine);
b. Delivery by the Buyer to the Escrow Agent of good funds
as payment in full of an amount equal to the purchase price for the Debenture
in accordance with Section 1(c) hereof;
c. The accuracy on the Closing Date and Additional Closing
Date of the representations and warranties of the Buyer contained in this
Agreement as if made on the Closing Date and the performance by the Buyer on or
before the Closing Date and Additional Closing Date of all covenants and
agreements of the Buyer required to be performed on or before the Closing Date
and Additional Closing Date;
d. There shall not be in effect any law, rule or
regulation prohibiting or restricting the transactions contemplated hereby, or
requiring any consent or approval which shall not have been obtained.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
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The Company understands that the Buyer's obligation to purchase
the Debentures on the Closing Date and Additional Closing Date is conditioned
upon:
a. Acceptance by Buyer of an Agreement for the sale of
Debenture, as indicated by execution of this Agreement;
b. Delivery by the Company to the Escrow Agent of the
Debenture in accordance with this Agreement;
c. The accuracy in all material respects on the Closing
Date and Additional Closing Date of the representations and warranties of the
Company contained in this Agreement as if made on the Closing Date and
Additional Closing Date and the performance by the Company on or before the
Closing Date and Additional Closing Date of all covenants and agreements of the
Company required to be performed on or before the Closing Date and Additional
Closing Date; and
d. On the Closing Date and Additional Closing Date, the
Buyer having received an opinion of counsel for the Company, dated the Closing
Date and Additional Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer, to the effect set forth in ANNEX III attached
hereto, and the Registration Rights Agreement annexed hereto as ANNEX IV.
10. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties
consents to the jurisdiction of the federal courts whose districts encompass
any part of the City of New York or the state courts of the State of New York
sitting in the City of New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. A facsimile
transmission of this signed Agreement shall be legal and binding on all parties
hereto. This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto
with respect to the subject matter hereof.
11. NOTICES. Any notice required or permitted hereunder
shall be given in writing (unless otherwise specified herein) and shall be
deemed effectively given upon personal delivery or seven business days after
deposit in the United States Postal Service, by (a) advance copy by fax, and
(b) mailing by express courier or registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
days advance written notice to each of the other
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parties hereto.
COMPANY: Harvard Scientific Corporation
Suite 23P
000 Xxxxx Xxxxxxxxx
Xxxx, Xxxxxx 00000
Telecopier No. ( )
with a copy to:
Xxxxxxxxx X. Xxxxxx, Xx., Esq.
Nevada Agency & Trust Company
Xxxxx 000
00 Xxxx Xxxxxxx
Xxxx, Xxxxxx 00000
Telecopier: (000) 000-0000
PURCHASER: At the address set forth on the signature page of this
Agreement.
ESCROW AGENT: Xxxxxxx & Prager, Esqs.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each
parties representations and warranties shall survive the execution and delivery
hereof of this Agreement and the delivery of the Debenture.
12
13
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer or one of its officers thereunto duly authorized as of the date set
forth below.
AGGREGATE PURCHASE PRICE OF SUCH DEBENTURE: $15,000,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 21st day of March, 1997.
000 Xxxxxxxx Xxxxxx XXXXXXXXXXX INVESTMENT GROUP LTD.
----------------------------------- Printed Name of Subscriber
Address
-----------------------------------
By: /s/ XXXX SAINSFORD
---------------------------------
Telecopier No. (Signature of Authorized Person)
---------------------
XXXX SAINSFORD - DIRECTOR
British Virgin Islands ----------------------------------
----------------------------------- Printed Name and Title
Jurisdiction of Incorporation
or Organization
This Agreement has been accepted as of the date set forth below.
HARVARD SCIENTIFIC CORPORATION
By: /s/ XXX XXXXXXXX
---------------------------
Xxx Xxxxxxxx
Title: Secretary & Treasurer
Date: March 21, 1997
14
ANNEX I FORM OF DEBENTURE
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V COMPANY DISCLOSURE MATERIALS
15
FORM OF DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE RESTRICTED
AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT IN
ACCORDANCE WITH REGULATION S UNDER THE ACT, OR AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION OR SAFE HARBOR THEREFROM.
No. 1 US $5,000,000
HARVARD SCIENTIFIC CORPORATION
6% CONVERTIBLE DEBENTURE DUE MARCH 30, 1998
THIS DEBENTURE is one of a duly authorized issue of $15,000,000 in
Debentures of HARVARD SCIENTIFIC CORPORATION, a corporation duly organized and
existing under the laws of the State of Nevada (the "Company") designated as
its 6% Convertible Debenture Due [End Month] 1998.
FOR VALUE RECEIVED, the Company promises to pay to Springrange
Investment Group, Ltd., the registered holder hereof (the "Holder"), the
principal sum of Five Milllion Dollars (US $5,000,000) on [End Month] 1998 (the
"Maturity Date") and to pay interest on the principal sum outstanding from time
to time in arrears upon conversion as provided herein on [End Month] 1998 at
the rate of 6% per annum accruing from the date of initial issuance. Accrual
of interest shall commence on the first such business day to occur after the
date hereof until payment in full of the principal sum has been made or duly
provided for. Subject to the provisions of 4 below, the principal of, and
interest on, this Debenture are payable at the option of the Holder, in shares
of Common Stock of the Company, $.001 par value ("Common Stock"), or in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts, at the address last
appearing on the Debenture Register of the Company as designated in writing by
the Holder from time to time. The Company will pay the principal of and
interest upon this Debenture on the Maturity Date, less any amounts required by
law to be deducted, to the registered holder of this Debenture as of the tenth
day prior to the Maturity Date and addressed to such holder as the last address
appearing on the Debenture Register. The forwarding of such check shall
constitute a payment of principal and interest hereunder and shall satisfy and
discharge the liability for principal and interest on this Debenture to the
extent of the sum represented by such check plus any amounts so deducted.
16
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of One Hundred
Thousand Dollars (US$100,000) and integral multiples thereof. The Debentures
are exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders surrendering
the same. No service charge will be made for such registration or transfer or
exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws
or other applicable laws at the time of such payments, and Holder shall execute
and deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended (the
"Act"), and other applicable state and foreign securities laws. In the event
of any proposed transfer of this Debenture, the Company may require, prior to
issuance of a new Debenture in the name of such other person, that it receive
reasonable transfer documentation including opinions that the issuance of the
Debenture in such other name does not and will not cause a violation of the Act
or any applicable state or foreign securities laws. Prior to due presentment
for transfer of this Debenture, the Company and any agent of the Company may
treat the person in whose name this Debenture is duly registered on the
Company's Debenture Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this
Debenture be overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
4. (a) Subject to Section 4(b), the Holder of this Debenture is
entitled, at its option, to convert at any time (a) commencing the earlier of
(i) ninety (90) days after the closing of sale of the Debenture with respect to
one-half of the principal amount of this Debenture, (ii) one hundred twenty
(120) days after the closing of sale of the Debentures with respect to the
balance of the principal amount of this Debenture (the "Closing"), or (b) the
effective date of the Registration Statement filed pursuant to the Registration
Rights Agreement between the Company and the Holder, or the Holder's
predecessor in interest, the principal amount of this Debenture, provided that
the principal amount is at least US $10,000 (unless if at the time of such
election to convert the aggregate principal amount of all Debentures registered
to the Holder is less that Ten Thousand Dollars (US $10,000), then the whole
amount thereof) into shares of Common Stock of the Company at a conversion
price for each share of Common Stock equal to the lesser of (a) 100% of the
Market Price on March 21, 1997, or (b) 80% of the Market Price on the
Conversion Date. For purposes of this Section 4, the Market Price shall be the
average closing bid price of the Common Stock on the five (5) trading days
immediately preceding March 21,
17
1997 or Conversion Date, as may be applicable, as reported by the National
Association of Securities Dealers, or the closing bid price on the
over-the-counter market on such date or, in the event the Common Stock is
listed on a stock exchange or traded on NASDAQ, the Market Price shall be the
closing price on the exchange on such date, as reported in the Wall Street
Journal. Conversion shall be effectuated by surrendering the Debentures to be
converted to the Company with the form of conversion notice attached hereto as
Exhibit A, executed by the Holder of the Debenture evidencing such Holder's
intention to convert this Debenture or a specified portion (as above provided)
hereof, and accompanied, if required by the Company, by proper assignment
hereof in blank. Interest accrued or accruing from the date of issuance to the
date of conversion shall, at the option of the Company, be paid in cash or
Common Stock upon conversion. No fraction of Shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. The date on which notice
of conversion is given (the "Conversion Date") shall be deemed to be the date
on which the Holder has delivered this Debenture, with the conversion notice
duly executed, to the Company or, the date set forth in such facsimile delivery
of the notice of conversion if the Debenture is received by the Company within
three (3) business days therefrom. Facsimile delivery of the conversion notice
shall be accepted by the Company at telephone number (000-000-0000; ATT: Xxx
Xxxxxxxx). Certificates representing Common Stock upon conversion will be
delivered within three (3) business days from the date the notice of conversion
is delivered to the Company.
(b) (i) If such conversion price on the date of conversion
would be or is less than or equal to $1.60 per share,
the Company shall have the right to redeem any
Debentures for which a Notice of Conversion has not
theretofore been submitted by delivering a Notice of
Redemption to the Holder of the Debenture.
(ii) The redemption price shall be calculated at 125% of
the principal amount of the Debenture, plus accrued
and unpaid interest, and shall be paid to the Holder
within ten (10) days from the date of the Notice of
Redemption. Any such Notice of Redemption shall not
be effective, with respect to any Debentures for
which a Notice of Conversion is submitted to the
Company, within three (3) business days of the
Holder's receipt of the Company's Notice of
Redemption. Furthermore, in the event such payment
is not timely made, any rights of the Company to
redeem the Debenture shall terminate, and the Notice
of Redemption shall be null and void.
(iii) A Holder may also fax a notice to the Company, Attn:
Xxx Xxxxxxxx, requiring the Company to declare by
faxed notice within 24 hours of the Notice from the
Holder, whether it intends to effect any redemption
during the ten (10) business days following 24 hours
from the Holder's Notice. In the event the Company
does not reply during said 24 hour period, the
Company may not redeem that Holder's Debentures
during the ten (10) day period commencing 24 hours
after the Notice from the Holder.
18
5. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place, and rate, and
in the coin or currency, herein proscribed. This Debenture and all other
Debentures now or hereafter issued of similar terms are direct obligations of
the Company.
6. No recourse shall be had for the payment of the principal of,
or the interest on, this Debenture, or for any claim based hereon, or otherwise
in respect hereof, against any incorporator, shareholder, officer or director,
as such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
7. If the Company merges or consolidates with another corporation
or sells or transfers all or substantially all of its assets to another person
and the holders of the Common Stock are entitled to receive stock, securities
or property in respect of or in exchange for Common Stock, then as a condition
of such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which
shall be as nearly equivalent as may be practicable. In the event of any
proposed merger, consolidation or sale or transfer of all or substantially all
of the assets of the Company (a "Sale"), the Holder hereof shall have the right
to convert by delivering a Notice of Conversion to the Company within fifteen
(15) days of receipt of notice of such Sale from the Company. In the event the
Holder hereof shall elect not to convert, the Company may prepay all
outstanding principal and accrued interest on this Debenture, less all amounts
required by law to be deducted, upon which tender of payment following such
notice, the right of conversion shall terminate.
8. The Holder of the Debenture, by acceptance hereof, agrees that
this Debenture is being acquired for investment and that such Holder will not
offer, sell or otherwise dispose of this Debenture or the Shares of Common
Stock issuable upon conversion thereof except under circumstances which will
not result in a violation of the Act or any applicable state Blue Sky or
foreign laws or similar laws relating to the sale of securities.
9. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York. Each of the parties
consents to the jurisdiction of the federal courts whose districts encompass
any part of the City of New York or the state courts of the State of New York
sitting in the City of New York in connection with any dispute arising under
this
19
Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non coveniens, to the
bringing of any such proceeding in such jurisdictions.
10. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal
or interest on this Debenture; or
b. Any of the representations or warranties made by the
Company herein, in the Subscription Agreement, or in
any certificate or financial or other written
statements heretofore or hereafter furnished by the
Company in connection with the execution and delivery
of this Debenture or the Subscription Agreement shall
be false or misleading in any material respect at the
time made; or
c: The Company fails to issue shares of Common Stock to
the Holder or to cause its Transfer Agent to issue
shares of Common Stock upon exercise by the Holder of
the conversion rights of the Holder in accordance
with the terms of this Debenture, fails to transfer
or to cause its Transfer Agent to transfer any
certificate for shares of Common Stock issued to the
Holder upon conversion of this Debenture and when
required by this Debenture or the Registration Rights
Agreement, or fails to remove any restrictive legend
or to cause its Transfer Agent to transfer on any
certificate or any shares of Common Stock issued to
the Holder upon conversion of this Debenture as and
when required by this Debenture, the Agreement or the
Registration Rights Agreement and any such failure
shall continue uncured for five (5) business days.
d. The Company shall fail to perform or observe, in any
material respect, any other covenant, term,
provision, condition, agreement or obligation of the
Company under this Debenture and such failure shall
continue uncured for a period of thirty (30) days
after written notice from the Holder of such failure;
or
e. The Company shall (1) admit in writing its inability
to pay its debts generally as they mature; (2) make
an assignment for the benefit of creditors or
commence proceedings for its dissolution; or (3)
apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial
part of its property or business; or
f. A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
20
g. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole
or any substantial portion of the properties or
assets of the Company and shall not be dismissed
within sixty (60) days thereafter; or
h. Any money judgment, writ or warrant of attachment, or
similar process in excess of Two Hundred Thousand
($200,000) Dollars in the aggregate shall be entered
or filed against the Company or any of its properties
or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of sixty(60) days
or in any event later than five (5) days prior to the
date of any proposed sale thereunder; or
i. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company and, if
instituted against the Company, shall not be
dismissed within sixty (60) days after such
institution or the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceeding; or
j. The Company shall have its Common Stock suspended or
delisted from an exchange or over-the- counter market
from trading.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
11. Nothing contained in this Debenture shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.
21
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: March 21, 1997
HARVARD SCIENTIFIC CORPORATION
By: /s/ XXX XXXXXXXX
------------------------------------------
XXX XXXXXXXX
------------------------------------------
(Print Name)
SECRETARY/TREASURER
------------------------------------------
(Title)
ATTEST:
[TRANSFER AGENT]
By: /s/ XXXXXXXXX X. XXXXXX, XX.
XXXXXXXXX X. XXXXXX, XX.
CHAIRMAN OF THE BOARD
22
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $
________________ of the principal amount of the above Debenture No. ___ into
Shares of Common Stock of HARVARD SCIENTIFIC CORPORATION (the "Company")
according to the conditions hereof, as of the date written below.
The undersigned represents that it is not a U.S. Person as defined in
Regulation S promulgated under the Securities Act of 1933 and is not converting
the Debenture on Behalf of any U.S. Person.
Date of Conversion*
--------------------------------------------------------------------------------
Applicable Conversion Price
--------------------------------------------------------------------------------
Signature
--------------------------------------------------------------------------------
[Name]
Address:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
* This original Debenture and Notice of Conversion must be received by the
Company by the fifth business date following the Date of Conversion.
23
ANNEX IV
TO
STOCK PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 21, 1997
(this "Agreement"), is made by and between Harvard Scientific Corporation, a
Nevada corporation (the "Company"), and the person named on the signature page
hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of March 21, 1997, between the Initial
Investor and the Company (the "Securities Purchase Agreement"), the Company has
agreed to issue and sell to the Initial Investor 6% Convertible Debentures of
the Company and an option to acquire an additional $10,000,000 in two tranches
of $5,000,000 each in Debentures (said principal amount of $15,000,000
collectively the "Debentures") which will be convertible into shares of the
common stock, $.01 par value (the "Common Stock"), of the Company (the
"Conversion Shares") upon the terms and subject to the conditions of such
Debentures; and
WHEREAS, to induce the Initial Investor to execute and deliver
the Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and
the Initial Investor hereby agrees as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall
have the following meanings:
(i) "Investor" means the Initial Investor and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "Register," "Registered," and "Registration" refer to
a registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering
1
24
securities on a continuous basis ("Rule 415"), and the declaration or ordering
of effectiveness of such Registration Statement by the United States Securities
and Exchange Commission (the "SEC").
(iii) "Registrable Securities" means the Conversion Shares.
(iv) "Registration Statement" means a registration
statement of the Company under the Securities Act.
(b) As used in this Agreement, the term Investor includes
(i) each Investor (as defined above) and (ii) each person who is a permitted
transferee or assignee of the Registrable Securities pursuant to Section 9 of
this Agreement.
(c) Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the Securities
Purchase Agreement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall prepare
and file with the SEC, no later than thirty (30) days after the Closing Date,
either a Registration Statement on Form SB-2 covering a sufficient number of
shares of Common Stock for the Initial Investors(or any other available form),
but in no event less than 300% of the number of shares into which the
Debentures would be convertible at the time of filing of the Form SB-2, and
such Registration Statement shall state that, in accordance with the Securities
Act, it also covers such indeterminate number of additional shares of Common
Stock as may become issuable to prevent dilution resulting from stock splits,
or stock dividends). If at any time the number of shares of Common Stock into
which the Debenture may be converted exceeds the aggregate number of shares of
Common Stock then registered, the Company shall, within ten (10) business days
after receipt of a written notice from any Investor, either (i) amend the
Registration Statement filed by the Company pursuant to the preceding sentence,
if such Registration Statement has not been declared effective by the SEC at
that time, to register all shares of Common Stock into which the Debenture may
be converted, or (ii) if such Registration Statement has been declared
effective by the SEC at that time, file with the SEC an additional Registration
Statement on Form SB-2 to register the shares of Common Stock into which the
Debenture may be converted that exceed the aggregate number of shares of Common
Stock already registered.
(b) UNDERWRITTEN OFFERING. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors acting by majority in interest of the Registrable
Securities subject to such underwritten offering shall have the right to select
one legal counsel to represent their interests, and an investment banker or
bankers and manager or managers to administer the offering, which investment
banker or bankers or manager or managers shall be reasonably satisfactory to
the Company. The Investors who hold the Registrable Securities to be included
in such underwriting shall pay all underwriting discounts and commissions and
other fees and expenses of such investment banker or bankers and manager or
managers so selected in accordance with this Section 2(b) (other than fees and
expenses relating to registration of Registrable Securities under federal or
state securities laws, which are payable by the Company
2
25
pursuant to Section 5 hereof) with respect to their Registrable Securities and
the fees and expenses of such legal counsel so selected by the Investors.
(c) PAYMENTS BY THE COMPANY. If the Registration
Statement covering the Registrable Securities required to be filed by the
Company pursuant to Section 2(a) hereof is not effective within ninety (90)
days after the Closing Date (the "Initial Date"), then the Company will make
payments to the Initial Investor in such amounts and at such times as shall be
determined pursuant to this Section 2(c). The amount to be paid by the
Company to the Initial Investor shall be determined as of each Computation
Date, and such amount shall be equal to two (2%) percent of the purchase price
paid by the Initial Investor for the Debenture pursuant to the Securities
Purchase Agreement for the period from the Initial Date to the first
Computation Date, and three (3%) percent of the purchase price for each
Computation Date thereafter, to the date the Registration Statement is declared
effective by the SEC (the "Periodic Amount"). The full Periodic Amount shall
be paid by the Company in immediately available funds within three business
days after each Computation Date. Notwithstanding the foregoing, the amounts
payable by the Company pursuant to this provision shall not be payable to the
extent any delay in the effectiveness of the Registration Statement occurs
because of an act of, or a failure to act or to act timely by the Initial
Investor or its counsel.
As used in this Section 2(c), the following terms shall have
the following meanings:
"Computation Date" means the date which is the earlier of (a)
35 days after the Company is notified by the SEC that the Registration
Statement may be declared effective or (b) one hundred twenty (120) days after
the Closing Date and, if the Registration Statement required to be filed by the
Company pursuant to Section 2(a) has not theretofore been declared effective by
the SEC, each date which is thirty (30) days after the previous Computation
Date until such Registration Statement is so declared effective.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following.
(a) Prepare promptly, and file with the SEC within thirty
(30) days of the Closing Date, a Registration Statement with respect to not
less than the number of Registrable Securities provided in Section 2(a), above,
and thereafter use its best efforts to cause each Registration Statement
relating to Registrable Securities to become effective the earlier of (i) five
days after notice from the Securities and Exchange Commission that the
Registration Statement may be declared effective, or (b) ninety (90) days after
the Closing Date, and keep the Registration Statement effective at all times
until the earliest (the "Registration Period") of (i) the date that is two
years after the Closing Date (ii) the date when the Investors may sell all
Registrable Securities under Rule 144 or (iii) the date the Investors no longer
own any of the Registrable Securities, which Registration Statement (including
any amendments or supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading;
3
26
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and
the prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel identified to the
Company, (i) promptly after the same is prepared and publicly distributed,
filed with the SEC, or received by the Company, one (1) copy of the
Registration Statement, each preliminary prospectus and prospectus, and each
amendment or supplement thereto, and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(d) Use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions as the Investors who hold a
majority in interest of the Registrable Securities being offered reasonably
request and in which significant volumes of shares of Common Stock are traded,
(ii) prepare and file in those jurisdictions such amendments (including post-
effective amendments) and supplements to such registrations and qualifications
as may be necessary to maintain the effectiveness thereof at all times during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during
the Registration Period, and (iv) take all other actions reasonably necessary
or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (A) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (B) subject itself to general taxation in any such
jurisdiction, (C) file a general consent to service of process in any such
jurisdiction, (D) provide any undertakings that cause more than nominal expense
or burden to the Company or (E) make any change in its articles of
incorporation or by-laws, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders;
(e) As promptly as practicable after becoming aware of such
event, notify each Investor of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, and use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement or other appropriate
filing with the SEC to correct such untrue statement or omission, and deliver a
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request;
4
27
(f) As promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of any notice of effectiveness or any stop order or other
suspension of the effectiveness of the Registration Statement at the earliest
possible time;
(g) Use its commercially reasonable efforts, if eligible,
either to (i) cause all the Registrable Securities covered by the Registration
Statement to be listed on a national securities exchange and on each additional
national securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation of all the Registrable Securities covered by the
Registration Statement as a National Association of Securities Dealers
Automated Quotations System ("NASDAQ") "Small Capitalization" within the
meaning of Rule 11Aa2-1 of the SEC under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the quotation of the Registrable
Securities on the NASDAQ Small Cap Market; or if, despite the Company's
commercially reasonable efforts to satisfy the preceding clause (i) or (ii),
the Company is unsuccessful in doing so, to secure NASDAQ authorization and
quotation for such Registrable Securities and, without limiting the generality
of the foregoing, to arrange for at least two market makers to register with
the National Association of Securities Dealers, Inc. ("NASD") as such with
respect to such Registrable Securities;
(h) Provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request and registered in such names as the Investors
may request; and, within three (3) business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an appropriate instruction and opinion of such counsel; and
(j) Take all other reasonable actions necessary to expedite
and facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations
of the Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
the Registrable Securities held by it, as shall be reasonably required to
effect the registration of such Registrable
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Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least five (5) days
prior to the first anticipated filing date of the Registration Statement, the
Company shall notify each Investor of the information the Company requires from
each such Investor (the "Requested Information") if such Investor elects to
have any of such Investor's Registrable Securities included in the Registration
Statement. If at least two (2) business days prior to the filing date the
Company has not received the Requested Information from an Investor (a
"Non-Responsive Investor"), then the Company may file the Registration
Statement without including Registrable Securities of such Non-Responsive
Investor;
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
3(e) or 3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. EXPENSES OF REGISTRATION. All reasonable expenses,
other than underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 3, but including,
without limitation, all registration, listing, and qualifications fees,
printers and accounting fees, the fees and disbursements of counsel for the
Company and a fee for a single counsel for the Investor not exceeding $3,500,
shall be borne by the Company.
6. INDEMNIFICATION. In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Investor who holds such Registrable
Securities, the directors, if any, of such Investor, the officers, if any, of
such Investor, each person, if any, who controls any Investor within the
meaning of the Securities Act or the Exchange Act (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities or expenses (joint
or several) incurred (collectively, "Claims") to which any of them may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as
such Claims (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations in the Registration Statement, or any
post-effective amendment thereof, or any prospectus included therein: (i) any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact
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contained in any preliminary prospectus if used prior to the effective date of
such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in
the foregoing clauses (i) through (iii) being, collectively, "Violations").
The Company shall reimburse the Investors, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (I) apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (II) with respect to any preliminary
prospectus, inure to the benefit of any such person from whom the person
asserting any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such person) if
the untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by the Company pursuant to Section
3(b) hereof; (III) be available to the extent such Claim is based on a failure
of the Investor to deliver or cause to be delivered the prospectus made
available by the Company; or (IV) apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Each Investor will
indemnify the Company and its officers, directors and agents against any claims
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company, by or on
behalf of such Investor, expressly for use in connection with the preparation
of the Registration Statement, subject to such limitations and conditions as
are applicable to the Indemnification provided by the Company to this Section
6. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against
any indemnifying party under this Section 6, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate
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due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding. In such event, the Company shall pay for only one separate legal
counsel for the Investors; such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates. The failure to
deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party
of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced in
its ability to defend such action. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by
an indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which
it would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such
seller from the sale of such Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making
available to the Investors the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the SEC that may at
any time permit the Investors to sell securities of the Company to the public
without registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to each Investor so long as such Investor
owns Registrable Securities, promptly upon request, (i) a written statement by
the Company that it has complied with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so
filed by the Company and (iii) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to Rule 144
without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to
have the Company register Registrable Securities pursuant to this Agreement
shall be automatically assigned by the Investors to any transferee of in excess
of fifty (50%) percent or more of the Registrable Securities (or all or any
portion of any Debenture of the Company which is convertible into such
securities)
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only if: (a) the Investor agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (b) the Company is, within a
reasonable time after such transfer or assignment, furnished with written
notice of (i) the name and address of such transferee or assignee and (ii) the
securities with respect to which such registration rights are being transferred
or assigned, (c) immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is restricted
under the Securities Act and applicable state securities laws, and (d) at or
before the time the Company received the written notice contemplated by clause
(b) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein. In the event of
any delay in filing or effectiveness of the Registration Statement as a result
of such assignment, the Company shall not be liable for any damages arising
from such delay, or the payments set forth in Section 2(c) hereof.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of
this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold a majority in interest of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Notices required or permitted to be given hereunder
shall be in writing and shall be deemed to be sufficiently given when
personally delivered (by hand, by courier, by telephone line facsimile
transmission, receipt confirmed, or other means) or sent by certified mail,
return receipt requested, properly addressed and with proper postage pre-paid
(i) if to the Company, at Suite 23P, 000 Xxxxx Xxxxxxxxx, Xxxx, Xxxxxx 00000
ATT: Xxx Xxxxxxxx, with a copy to Xxxxxxxxx X. Xxxxxx, Xx., Esq., Nevada Agency
& Trust Company, Xxxxx 000, 00 Xxxx Xxxxxxx, Xxxx, Xxxxxx 00000; (ii) if to the
Initial Investor, at the address set forth under its name in the Securities
Purchase Agreement, with a copy to Xxxxxx Xxxxxxx, Esq., Xxxxxxx & Prager, 000
Xxxxx Xxxxxx, Xxxxx Xxxxx, Xxx Xxxx, XX 00000 and (iii) if to any other
Investor, at such address as such Investor shall have provided in writing to
the Company, or at such other address as each such party furnishes by notice
given in accordance with this Section 11(b), and shall be effective, when
personally delivered, upon receipt and, when so sent by certified mail, four
(4) calendar days after deposit with the United states Postal Service.
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(c) Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York. Each of the parties
consents to the jurisdiction of the federal courts whose districts encompass
any part of the City of New York or the state courts of the State of New York
sitting in the City of New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non coveniens, to the
bringing of any such proceeding in such jurisdictions. A facsimile
transmission of this signed Agreement shall be legal and binding on all parties
hereto. This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto
with respect to the subject matter hereof.
(e) This Agreement constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a
party, may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
HARVARD SCIENTIFIC CORPORATION
By: /s/ XXX XXXXXXXX
------------------------------------
Name: XXX XXXXXXXX
Title: SECRETARY/TREASURER
------------------------------------
SPRINGRANGE INVESTMENT GROUP LTD.
By: /s/ XXXX SAINSFORD
------------------------------------
Name: XXXX SAINSFORD
Title: DIRECTOR
11
