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EXHIBIT 10.87
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of March 21,
1997, by and among American BioMed, Inc., a Delaware corporation, with
headquarters located at 00000 Xxxxxx'x Xxxx Xxxx, Xxxxx 000, Xxx Xxxxxxxxx,
Xxxxx 00000 (the "COMPANY"), and the investors listed on the Schedule of Buyers
attached hereto (along with their successors and assigns, individually, a
"BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration pursuant
Section 4(2) of the Securities Act of 1933, as amended (the "1933 ACT");
B. The Company has authorized the following new series of its
Preferred Stock, $.001 par value per share (the "PREFERRED STOCK"): the
Company's Series C Convertible Preferred Stock (the "SERIES C PREFERRED
SHARES"), which shall be convertible into shares of the Company's Common Stock,
$.001 par value per share (the "COMMON STOCK") (as converted, the "CONVERSION
SHARES"), in accordance with the terms of the Company's Certificate of
Designations, Preferences and Rights of the Series C Preferred Shares,
substantially in the form attached hereto as Exhibit A (the "CERTIFICATE OF
DESIGNATIONS");
C. The Buyers wish to purchase, upon the terms and conditions stated
in this Agreement, an aggregate of up to 125 shares of the Series C Preferred
Shares in the respective amounts set forth opposite each Buyer's name on the
Schedule of Buyers;
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form attached hereto as Exhibit B (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws; and
E. As set forth in Section 4(l) hereof and Section 2(j)(ii) of the
Certificate of Designations, under certain circumstances holders of the Series
C Preferred Shares shall receive stock purchase warrants to acquire shares of
Common Stock substantially in the form attached hereto as Exhibit C (the
"WARRANTS").
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF SERIES C PREFERRED SHARES.
a. Purchase of Series C Preferred Shares. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to the Buyers and the Buyers shall purchase
from the Company an aggregate of 125 Series C Preferred Shares, in the
respective amounts set forth opposite each Buyer's name on the Schedule of
Buyers (the
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"CLOSING"). The per share purchase price (the "PURCHASE PRICE") of the Series C
Preferred Shares shall be $20,000.00.
b. Closing Date. The date and time of the Closing (the "CLOSING
DATE") shall be 10:00 a.m. Central Standard Time, within five (5) business days
following the date hereof, subject to notification of satisfaction (or waiver)
of the conditions to the Closing set forth in Sections 6 and 7 below (or such
later date as is mutually agreed to by the Company and the Buyers). The Closing
shall occur on the Closing Date at the offices of Xxxxxx Xxxxxx & Zavis, 000
Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000-0000.
c. Form of Payment. On the Closing Date, (i) each Buyer shall
pay the Purchase Price to the Company for the Series C Preferred Shares to be
issued and sold to such Buyer at the Closing, by wire transfer of immediately
available funds in accordance with the Company's written wire instructions, and
(ii) the Company shall deliver to each Buyer, a stock certificate representing
such number of the Series C Preferred Shares which such Buyer is then
purchasing (as indicated opposite such Buyer's name on the Schedule of Buyers),
duly executed on behalf of the Company and registered in the name of such Buyer
or its designee (the "STOCK CERTIFICATES").
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer (i) is acquiring the Series
C Preferred Shares, (ii) upon conversion of the Series C Preferred Shares, will
acquire the Conversion Shares then issuable and any Warrants issuable pursuant
to Section 4(l) hereof, (iii) will acquire any Warrants issuable pursuant to
Section 2(j)(ii) of the Certificate of Designations, and (iv) upon exercise of
the Warrants, will acquire the shares of Common Stock issuable upon exercise
thereof (the "WARRANT SHARES"), for its own account for investment only and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that by making the representations herein, such
Buyer does not agree to hold any Series C Preferred Shares, Conversion Shares,
Warrants or Warrant Shares for any minimum or other specific term and reserves
the right to dispose of Series C Preferred Shares, Conversion Shares, Warrants
or Warrant Shares at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D
("REGULATION D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the 1933 Act.
c. Reliance on Exemptions. Such Buyer understands that the
Series C Preferred Shares, the Conversion Shares, the Warrants and the Warrant
Shares are being offered and sold to it in reliance on specific exemptions from
the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of,
and such
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Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
d. Information. Such 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 Series C
Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither
such inquiries nor any other due diligence investigations conducted by such
Buyer or its advisors, if any, or its representatives shall modify, amend or
affect such Buyer's right to rely on the Company's representations and
warranties contained in Section 3 below. Such Buyer understands that its
investment in the Series C Preferred Shares, the Conversion Shares, the
Warrants and the Warrant Shares involves a high degree of risk. Such Buyer has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Series C Preferred Shares, the Conversion Shares, the Warrants and the Warrant
Shares.
e. No Governmental Review. Such 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 Series C
Preferred Shares, the Conversion Shares, the Warrants or the Warrant Shares or
the fairness or suitability of the investment in the Series C Preferred Shares,
the Conversion Shares, the Warrants or the Warrant Shares nor have such
authorities passed upon or endorsed the merits of the offering of the Series C
Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares.
f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Series C Preferred
Shares, the Conversion Shares, the Warrants and the Warrant Shares have not
been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (c) such
Buyer provides the Company with reasonable assurance that such securities can
be sold, assigned or transferred pursuant to Rule 144 promulgated under the
1933 Act (or a successor rule thereto); (ii) any sale of such securities made
in reliance on Rule 144 promulgated under the 1933 Act (or a successor rule
thereto) ("RULE 144") may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of 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 defined in the 0000 Xxx)
may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the Company nor
any other person is under any obligation to register such securities under the
1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
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g. Legends. Such Buyer understands that the certificates or other
instruments representing the Series C Preferred Shares, the Warrants and, until
such time as the sale of the Conversion Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares and the
Warrant Shares, shall, except as set forth below, bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Series C Preferred Shares,
the Conversion Shares, the Warrants or the Warrant Shares upon which it is
stamped, if, unless otherwise required by state securities laws, (i) the
Conversion Shares or the Warrant Shares are registered for sale under the 1933
Act, (ii) in connection with a sale transaction, such holder provides the
Company with an opinion of counsel, in a generally acceptable form, to the
effect that a public sale, assignment or transfer of the Series C Preferred
Shares, the Conversion Shares, the Warrants or the Warrant Shares may be made
without registration under the 1933 Act, or (iii) such holder provides the
Company with reasonable assurances that the Series C Preferred Shares, the
Conversion Shares, the Warrants or the Warrant Shares can be sold pursuant to
Rule 144 without any restriction as to the number of securities acquired as of
a particular date that can then be immediately sold. Each Buyer acknowledges,
covenants and agrees to sell the Series C Preferred Shares, the Conversion
Shares, the Warrants or the Warrant Shares represented by a certificate(s) from
which the legend has been removed, only pursuant to (i) a registration
statement effective under the 1933 Act, or (ii) advice of counsel that such
sale is exempt from registration required by Section 5 of the 1933 Act.. In the
event the above legend is removed from the Series C Preferred Shares, the
Conversion Shares, the Warrants or the Warrant Shares, the Company may, upon
reasonable advance notice to the holder, require that the above legend be
placed on any Series C Preferred Shares, Conversion Shares, Warrants or Warrant
Shares that cannot then be sold pursuant to an effective registration statement
or Rule 144(k) under the 1933 Act (or any successor rule thereto).
h. Authorization; Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with its
terms, subject as to enforceability to general principles
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of equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that country specified
in its address on the Schedule of Buyers.
j. Brokers. No broker or placement agent is entitled to any
brokerage commission or placement agent fee from the Company in connection with
the sale of the Series C Preferred Shares hereunder based upon an agreement
made by such Buyer.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its
subsidiaries are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power to own their properties and to carry on
their business as now being conducted. Each of the Company and its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted by
it makes such qualification necessary, except to the extent that the failure to
be so qualified or be in good standing would not have a material adverse effect
on the Company and its subsidiaries taken as a whole.
b. Authorization; Enforcement; Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement and the Registration Rights Agreement, and to issue
the Series C Preferred Shares, the Warrants, the Conversion Shares and the
Warrant Shares in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement, the Registration Rights Agreement and
the Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation the issuance of
the Series C Preferred Shares and the Warrants and the reservation for issuance
and the issuance of the Conversion Shares and the Warrant Shares issuable upon
conversion or exercise thereof, have been duly authorized by the Company's
Board of Directors and no further consent or authorization is required by the
Company, its Board of Directors or its stockholders, (iii) this Agreement and
the Registration Rights Agreement have been duly executed and delivered by the
Company, (iv) this Agreement, the Registration Rights Agreement and the
Warrants constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies, and (v) prior to the Closing Date, the Certificate of Designations
has been filed with the Secretary of State of the State of Delaware and will be
in full force and effect, enforceable against the Company in accordance with
its terms.
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c. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of 50,000,000 shares of Common Stock, of
which as of the date hereof, 14,015,529 shares were issued and outstanding, and
2,000,000 shares of Preferred Stock, of which as of the date hereof, (i) 1,500
shares of have been designated as 1996 Series A Convertible Preferred Stock,
1,390 of which shares are issued and outstanding and (ii) 2,500 shares of have
been designated as 1996 Series B Convertible Preferred Stock, all of which
shares are issued and outstanding. All of such outstanding shares have been
validly issued and are fully paid and nonassessable. Except as disclosed in
Schedule 3(c), no shares of Common Stock or Preferred Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. Except as disclosed in Schedule 3(c), as
of the effective date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities and (iii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration Rights Agreement).
Except as disclosed in Schedule 3(c), there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Series C Preferred Shares, the Warrants, the Conversion Shares
or the Warrant Shares as described in this Agreement. The Company has furnished
to the Buyer true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the "CERTIFICATE
OF INCORPORATION"), and the Company's By-laws, as in effect on the date hereof
(the "BY-LAWS"), and the terms of all securities convertible into or
exercisable for Common Stock and the material rights of the holders thereof in
respect thereto.
d. Issuance of Securities. The Series C Preferred Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable, (ii) free from all taxes, liens
and charges with respect to the issue thereof and (iii) entitled to the rights
and preferences set forth in the Certificate of Designations. 7,500,000 shares
of Common Stock have been duly authorized and reserved for issuance upon
conversion of the Series C Preferred Shares and upon exercise of the Warrants.
Upon conversion or exercise in accordance with the Certificate of Designations
or the Warrants, as the case may be, the Conversion Shares and the Warrant
Shares will be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Stock.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby will not
(i) result in a violation of the Certificate of Incorporation, any Certificate
of Designations, Preferences and Rights of any outstanding series of preferred
stock
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of the Company or By-laws or (ii) conflict with in any material respect, or
constitute a material default (or an event which with notice or lapse of time
or both would become a material default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a material violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the principal market or
exchange on which the Common Stock is traded or listed) applicable to the
Company or any of its subsidiaries or by which any material property or asset
of the Company or any of its subsidiaries is bound or affected. Except as
disclosed in Schedule 3(e), neither the Company nor its subsidiaries is in
violation of any term of or in default under its Certificate of Incorporation,
Certificate of Designations, Preferences and Rights of any outstanding series
of preferred stock or By-laws, or their organizational charter or by-laws,
respectively. Except as disclosed in Schedule 3(e), neither the Company nor its
subsidiaries is in material violation of any term of or in any contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
subsidiaries, which, in each case, is material to the Company and its
subsidiaries taken as a whole. The business of the Company and its subsidiaries
is not being conducted, and shall not be conducted in violation, in any
material respect, of any law, ordinance, regulation of any governmental entity,
which, in any case, is material to the Company and its subsidiaries taken as a
whole. Except as specifically contemplated by this Agreement and as required
under the 1933 Act, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or governmental agency in order for it to execute, deliver or perform any of
its obligations under or contemplated by this Agreement or the Registration
Rights Agreement in accordance with the terms hereof or thereof. Except as
disclosed in Schedule 3(e), all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof.
f. SEC Documents; Financial Statements. Since January 1,
1996, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934
ACT") (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein and the Company's Registration Statements on
Form S-3 which was declared effective by the SEC on August 23, 1996, and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein, being hereinafter referred to as
the "SEC DOCUMENTS"). The Company has delivered to the Buyer or its
representative true and complete copies of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form
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in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the notes thereto,
or (ii) in the case of unaudited interim statements, to the extent they may
exclude footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading.
g. Absence of Certain Changes. Except as disclosed in Schedule
3(g), since December 31, 1995 there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, results of operations or prospects of the Company or its
subsidiaries. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor does
the Company or its subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings.
h. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's subsidiaries, wherein an unfavorable
decision, ruling or finding could reasonably be expected to (i) have a material
adverse effect on the transactions contemplated hereby (ii) adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of the documents
contemplated herein or (iii), except as expressly set forth in the SEC Documents
or in Schedule 3(h), have a material adverse effect on the business, operations,
properties, financial condition or results of operation of the Company and its
subsidiaries taken as a whole.
i. Acknowledgment Regarding Buyers' Purchase of Series C
Preferred Shares. The Company acknowledges and agrees that each of the Buyers
is acting solely in the capacity of arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that each Buyer is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by any of the Buyers
or any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to such
Buyer's purchase of the Series C Preferred Shares, the Warrants, the Conversion
Shares or the Warrant Shares. The Company further represents to each Buyer that
the
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Company's decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur, with respect to the Company or its
subsidiaries or their respective business, properties, prospects, operations or
financial condition, which could be material but which has not been publicly
announced or disclosed in writing to the Buyers.
k. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Series C Preferred Shares, the Warrants, the Conversion Shares or the Warrant
Shares.
l. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Series C Preferred Shares, the Warrants, the Conversion Shares or the Warrant
Shares under the 1933 Act or cause this offering of Series C Preferred Shares,
the Warrants, the Conversion Shares or the Warrant Shares to be integrated with
prior offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions.
m. Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are
good.
n. Intellectual Property Rights. The Company and its subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 3(n), none of the
Company's trademarks, trade names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights which, in each case, is material to the Company and its
subsidiaries taken as a whole, have expired or terminated, or are expected to
expire or terminate in the near future. The Company and its subsidiaries do not
have any knowledge of any material infringement by the Company or its
subsidiaries of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service xxxx
registrations, trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others and, except as set forth on Schedule 3(n), there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge,
threatened against, the Company or its subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license, service names,
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service marks, service xxxx registrations, trade secret or other infringement;
and the Company and its subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company and its subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their material intellectual properties.
o. Environmental Laws. The Company and its subsidiaries are (i)
in compliance, in all material respects, with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received
all material permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance, in all material respects, with all terms and conditions of
any such permit, license or approval.
p. Title. The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(p) or such
as do not materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries. Any real property and facilities held under lease
by the Company and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such property
and buildings by the Company and its subsidiaries.
q. Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company
nor any such subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or operations of
the Company and its subsidiaries, taken as a whole.
r. Regulatory Permits. The Company and its subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct, in all material
respects, their respective businesses, and neither the Company nor any such
subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
s. Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i)
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transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
u. Tax Status. Except as set forth on Schedule 3(u), the Company
and each of its subsidiaries has made or filed all federal and state income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of
its subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and
other governmental assessments and charges that are material in amount, shown
or determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of the Company know of no basis for any
such claim.
v. Certain Transactions. Except as set forth on Schedule 3(v) and
in the SEC Documents and except for arm's length transactions pursuant to which
the Company makes payments in the ordinary course of business upon terms no
less favorable than the Company could obtain from third parties and other than
the grant of stock options disclosed on Schedule 3(c), none of the officers,
directors, or employees of the Company is presently a party to any transaction
with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
w. Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Series C
Preferred Shares will increase in certain circumstances and that the number of
Warrant Shares issuable upon exercise of the Warrants will increase in certain
circumstances. The Company further acknowledges that its obligation to issue
Conversion Shares and the Warrants upon conversion of the Series C Preferred
Shares in accordance with this Agreement and the Certificate of Designations
and its obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants, is, in each case, absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.
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4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
b. Transactions With Affiliates. So long as (i) any Series C
Preferred Shares are outstanding or (ii) any Buyer owns Conversion Shares and
Warrant Shares with a market value equal to or greater than $200,000, the
Company shall not, and shall cause each of its subsidiaries not to, enter into,
amend, modify or supplement, or permit any subsidiary to enter into, amend,
modify or supplement, any agreement, transaction, commitment or arrangement
with any of its or any subsidiary's officers, directors, person who were
officers or directors at any time during the previous two years, stockholders
who beneficially own 5% or more of the Common Stock, or affiliates or with any
individual related by blood, marriage or adoption to any such individual or
with any entity in which any such entity or individual owns a 5% or more
beneficial interest (each a "RELATED PARTY"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b) any
agreement, transaction, commitment or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable from a
person other than such Related Party, (c) any agreement, transaction,
commitment or arrangement which is approved by a majority of the disinterested
directors of the Company, for purposes hereof, any director who is also an
officer of the Company or any subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "Affiliate" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity. "Control" or
"controls" for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.
c. Reporting Status. Until the earlier of (i) the date as of
which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Conversion Shares and the Warrant Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto), or (ii) the date on which (A) the Investors shall have sold
all the Conversion Shares and the Warrant Shares and (B) none of the Series C
Preferred Shares or Warrants is outstanding (the "REGISTRATION PERIOD"), the
Company shall file all reports required to be filed with the SEC pursuant to
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 otherwise permit such termination.
d. Use of Proceeds. The Company shall use the proceeds from the
sale of the Series C Preferred Shares only for working capital and general
corporate purposes.
e. Financial Information. The Company agrees to send the following
to each Investors (as that term is defined in the Registration Rights
Agreement) during the Registration Period: (i) within five (5) days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements or amendments filed pursuant to the 1933 Act; (ii)
within one (1) day after
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release thereof, copies of all press releases issued by the Company or any of
its subsidiaries and (iii) copies of any notices and other information made
available to the security holders of the Company generally as soon as any such
notices or other information is made available to any security holders of the
Company.
f. Additional Financing; Right of First Refusal. The Company and
its subsidiaries shall not consummate any equity financing (including any debt
financing with an equity component) or issue any equity securities of the
Company or any subsidiary or securities convertible or exchangeable into or for
equity securities of the Company or any subsidiary (including any debt
securities with an equity component) in any form ("FUTURE OFFERINGS") during
the period beginning on the date hereof and ending 270 days after the Closing
Date unless it shall have first delivered to each Buyer or a designee appointed
by such Buyer, written notice (the "FUTURE OFFERING NOTICE") describing the
proposed Future Offering in all reasonable detail, including the terms and
conditions thereof, and providing each Buyer an option to participate in such
financing or purchase such securities, on the same terms and conditions
thereof, up to its Series C Aggregate Percentage (as defined below) of the
Series C Financing Amount (as defined below), as of the date of delivery of the
Future Offering Notice, in the Future Offering (the limitations referred to in
this sentence are collectively referred to as the "CAPITAL RAISING
LIMITATION"). For purposes of this Section 4(f), "SERIES C AGGREGATE
PERCENTAGE" at any time with respect to any Buyer shall mean the percentage
obtained by dividing (i) the aggregate number of Conversion Shares issued or
issuable, as if a conversion occurred on such date, upon conversion of the
Series C Preferred Shares then owned by such Buyer by (ii) the aggregate number
of Conversion Shares issued or issuable, as if a conversion occurred on such
date, upon conversion of all of the Series C Preferred Shares initially held by
all of the Buyers. For purposes of this Section 4(f), the "SERIES C FINANCING
AMOUNT" at any time shall mean (i) the Series C Financing Percentage (as
defined below) of the aggregate amount of such financing or securities, plus
(ii) any amount of such financing or securities which the holders of shares of
the Company's Series A Convertible Preferred Stock and the Company's Series B
Convertible Preferred Stock outstanding as of the date hereof have not agreed
to purchase in connection with such financing as stated in the Future Offering
Notice. For purposes of this Section 4(f), the "SERIES C FINANCING PERCENTAGE"
at any time shall mean the percentage of the face amount of the Series C
Preferred Shares outstanding at such time bears to the aggregate face amount of
the (i) shares of the Company's Series A Convertible Preferred Stock and the
Company's Series B Convertible Preferred Stock outstanding as of the date
hereof and outstanding at such time, and (ii) Series C Preferred Shares
outstanding at such time. A Buyer can exercise its option to participate in a
Future Offering by delivering written notice thereof to participate to the
Company within five (5) business days of receipt of a Future Offering Notice,
which notice shall state the quantity of securities being offered in the Future
Offering that such Buyer will purchase, up to its Series C Aggregate Percentage
of the Series C Financing Amount, and that number of securities it is willing
to purchase in excess thereof. In the event the Buyers and the holder of the
shares of the Company's Series A Convertible Preferred Stock or the Company's
Series B Convertible Preferred Stock fails to elect to fully participate in the
Future Offering within the periods described in this Section 4(f), the Company
shall have sixty (60) days thereafter to sell the securities of the Future
Offering respecting which such Buyer's rights were not exercised, upon the
terms and conditions no more favorable to the purchasers thereof than
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specified in the Future Offering Notice. In the event the Company has not sold
such securities of the Future Offering within such sixty (60) day period, the
Company shall not thereafter issue or sell such securities without first
offering such securities to the Buyers in the manner provided in this Section
4(f). The Capital Raising Limitation shall not apply to (i) a loan from a
commercial bank (ii) any transaction involving the Company's issuances of
securities in connection with (A) a merger, consolidation or sale of assets,
(B) any strategic partnership, joint venture or relationship (the primary
purpose of which is not to raise equity capital), or (C) the disposition or
acquisition of a business, product or license by the Company, (iii) the
issuance of securities pursuant to (A) a firm commitment, underwritten public
offering, (B) upon exercise or conversion of the Company's options, warrants or
other convertible securities outstanding as of the date hereof or issued after
the date hereof not in violation of this Agreement, (C) the grant of additional
options or warrants or the issuance of additional securities, under any Company
stock option or restricted stock plan for the benefit of the Company's
employees, directors or consultants which such plan exists as of the date
hereof and is set forth in any disclosure schedule attached hereto, or (iv) any
issuance of securities or financing whereby the net consideration received or
to be received by the Company and any of its subsidiaries is less than
$1,000,000 in (i) any single transaction, (ii) any series of related
transactions, or (iii) series of unrelated transactions to the same person or
entity or to a group of persons and/or entities acting in concert.
g. Authorized Shares of Common Stock; Reservation of Shares. The
Company shall at all times, so long as any of the Series C Preferred Shares or
Warrants are outstanding, reserve and keep available out of its authorized and
unissued Common Stock, solely for the purpose of effecting the conversion of
the Series C Preferred Shares and the exercise of the Warrants, such number of
shares of Common Stock at least equal to the greater of (i) 7,500,000 prior to
November 30, 1997, and 12,500,000 on or after November 30, 1997, in each case,
as adjusted to give effect to any stock splits or similar transactions, and
(ii) 125% of the number of shares of Common Stock needed to provide for the
issuance of the Conversion Shares and the Warrant Shares with respect to
Warrants which have not been issued and 100% of the number of shares of Common
Stock needed to provide for the issuance of the Warrant Shares with respect to
Warrants which have been issued but not exercised.
h. Listing. The Company shall use its best efforts to cause all
the Registrable Securities (as defined in the Registration Rights Agreement)
covered by a Registration Statement to be listed on each securities exchange
(including the Nasdaq National Market System or the Nasdaq SmallCap Market) on
which securities of the same class or series issued by the Company are then
listed or quoted, if any, if the listing or quotation of such Registrable
Securities is then permitted under the rules of such exchange. The Company
shall (i) at such time as the Common Stock meets the eligibility requirements
of the Nasdaq National Market System, use its reasonable efforts to secure the
inclusion of shares of the Common Stock for quotation on the Nasdaq National
Market System, or (ii) if, despite the Company's reasonable efforts to satisfy
the preceding clause (i), the Company is unsuccessful in satisfying the
preceding clause (i), at such time as the Common Stock meets the eligibility
requirements of the Nasdaq SmallCap Market, use its reasonable efforts to
secure the inclusion of shares of the Common Stock for quotation on the Nasdaq
SmallCap Market. If, despite
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the Company's reasonable efforts to satisfy clause (i) and clause (ii) of the
preceding sentence, the Company is unsuccessful in satisfying either clause (i)
or clause (ii) of the preceding sentence, the Company shall (i) maintain the
inclusion of shares of the Common Stock for quotation on the over-the-counter
market and (ii) secure the inclusion of such Registrable Securities for
quotation on the over-the-counter market. The Company shall promptly provide to
each holder of Series C Preferred Shares copies of any notices it receives
regarding the continued eligibility of the Common Stock for trading in the
over-the-counter market or, if applicable, any securities exchange (including
the Nasdaq National Market System or the Nasdaq SmallCap Market) on which
securities of the same class or series issued by the Company are then listed or
quoted, if any. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 4(h).
i. Expenses. Each of the Company and the Buyers shall each pay
its respective costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery of this
Agreement and the Registration Rights Agreement.
j. Intentionally Omitted
k. Corporate Existence. So long as any Series C Preferred
Shares remain outstanding, the Company shall not directly or indirectly (i)
consummate any merger, reorganization, restructuring, consolidation or similar
transaction by or involving the Company except (A) a merger or consolidation
where the Company is the survivor or (B) pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation
of the Company, (ii) consummate any sale of all or substantially all of the
assets of the Company or of all of its material subsidiaries or any similar
transaction or related transactions which effectively results in a sale of all
or substantially all of the assets of the Company and/or its subsidiaries, or
(iii) fail to continue to own, directly or indirectly, all of the capital stock
of all of its material subsidiaries (other than due to a merger or
consolidation of any subsidiary into the Company or a wholly-owned subsidiary
of the Company); (each such transaction, a "SALE OF THE COMPANY").
l. Warrant Issuances. Subject to the following sentence, the
Company shall issue to each Buyer, within five (5) business days after its
receipt of a Conversion Notice (as defined in the Certificate of Designations)
by such Buyer, a Warrant to acquire a number of shares of Common Stock equal
to: (i) 25% of the Conversion Shares to be received by such Buyer upon such
conversion if such Conversion Date (as defined in the Certificate of
Designations) is on or after the 271st day after the Closing Date but before
the 360th day after the Closing Date, (ii) 75% of the Conversion Shares to be
received by such Buyer upon such conversion if such Conversion Date is on or
after 361st day after the Closing Date but before the 450th day after the
Closing Date, or (iii) 100% of the Conversion Shares to be received by such
Buyer upon such conversion if such Conversion Date is on or after 451st day
after the Closing Date, in each case, with an exercise price equal to the Fixed
Conversion Price (as defined in the Certificate of Designations) in effect as
of such Conversion Date, subject to adjustment as provided in the Warrant. The
Company shall also issue to each Buyer, in the case of clauses (i), (ii) and
(iii) below, not later than five (5) business days prior to any consummation of
a Sale of the Company or, in the case of clause (iv) below, immediately upon a
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Redemption pursuant to Section 3(b) or 4 of the Certificate of Designations, a
Warrant to acquire a number of shares of Common Stock equal to: (i) 50% of the
Conversion Shares which such Buyer would be entitled to receive assuming
conversion of all outstanding Series C Preferred Shares then held by such Buyer
as of the fifth (5th) business day prior to any consummation of a Sale of the
Company if the fifth (5th) business day prior to any consummation of a Sale of
the Company is on or before the 360th day after the Closing Date, (ii) 75%of
the Conversion Shares which such Buyer would be entitled to receive assuming
conversion of all outstanding Series C Preferred Shares then held by such Buyer
as of the fifth (5th) business day prior to any consummation of a Sale of the
Company if the fifth (5th) business day prior to any consummation of a Sale of
the Company is on or after 361st day after the Closing Date but before the
450th day after the Closing Date, (iii) 100%of the Conversion Shares which such
Buyer would be entitled to receive assuming conversion of all outstanding
Series C Preferred Shares then held by such Buyer as of the fifth (5th)
business day prior to any consummation of a Sale of the Company if the fifth
(5th) business day prior to any consummation of a Sale of the Company is on or
after 451st day after the Closing Date, or (iv) 100%of the Conversion Shares
which such Buyer would be entitled to receive assuming conversion of all
outstanding Series C Preferred Shares being redeemed by such Buyer pursuant to
Section 3(b) or 4 of the Certificate of Designations, in each case, with an
exercise price equal to the Fixed Conversion Price in effect as of the fifth
(5th) business day prior to any consummation of a Sale of the Company or any
such Redemption, subject to adjustment as provided in the Warrant, but without
giving effect to any adjustment to the Fixed Conversion Price required by
Section 2((c) (ii) of the Certificate of Designations; provided however, upon
full compliance with the foregoing upon a Sale of the Company, the Company
shall have no further obligation to issue any additional Warrants upon the
conversion of any Series C Preferred Shares pursuant to the preceding sentence.
Notwithstanding the foregoing, the Company shall, in addition to the Warrants
otherwise issuable hereunder, issue to each Buyer such Warrants (the "LOCK-UP
WARRANTS") as may be issuable to a Buyer pursuant to Section 2(j)(ii) of the
Certificate of Designations. Each Warrant issued hereunder (including pursuant
to Section 2(j)(ii) of the Certificate of Designations) shall be immediately
exercisable and shall expire (to the extent not exercised) on the fifth (5th)
anniversary of its issuance date thereof. If the Company shall fail for any
reason or for no reason to issue to a Buyer within five (5) business days after
the time required under this Section 4(l) or Section 2(j)(ii) of the
Certificate of Designations, a Warrant for the number of shares of Common Stock
to which such Buyer is entitled, the Company shall, in addition to any other
remedies under this Agreement or otherwise available to such Buyer including
any indemnification pursuant to Section 8 hereof, pay as additional damages in
cash to such Buyer for each day such issuance is not timely effected after the
fifth (5th) business day following the time required under this Section 4(l) or
Section 2(j)(ii) of the Certificate of Designations, an amount equal to 0.1% of
the product of (x) the number of shares of Common Stock represented by the
Warrant not issued to the Buyer on a timely basis and to which such Buyer is
entitled and (y) the Closing Bid Price (as defined in the Certificate of
Designations) of the Common Stock on the last possible date which the Company
could have issued such Warrant to such Buyer without violating this Section
4(l) or Section 2(j)(ii) of the Certificate of Designations.
m. No Short Sales of the Common Stock. So long as (i) a Buyer or
any of its affiliates beneficially owns any Series C Preferred Shares, (ii) the
Company has not issued any publicly
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traded convertible securities and (iii) the Company is not in default under the
Certificate of Designations for failing to effect any requested Redemption (as
defined in the Certificate of Designations) or conversion of any Series C
Preferred Shares pursuant to the Certificate of Designations, such Buyer and
its affiliates shall not engage in any short sales, beneficial short sales or
third party short sales of the Common Stock.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent to issue certificates, registered in the name of each Buyer or
its respective nominee(s), for the Conversion Shares and the Warrant Shares in
such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Series C Preferred Shares or exercise of the Warrants (the
"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to registration of the
Conversion Shares and the Warrant Shares under the 1933 Act, all such
certificates shall bear the restrictive legend specified in Section 2(g) of
this Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop
transfer instructions to give effect to Section 2(f) hereof (in the case of the
Conversion Shares or Warrant Shares, prior to registration of such shares under
the 0000 Xxx) will be given by the Company to its transfer agent and that the
Series C Preferred Shares, the Warrants, the Conversion Shares and the Warrant
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 or the Warrant. Nothing in this Section 5 shall affect in any
way each Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of the Series C Preferred Shares, the Warrants,
Conversion Shares or the Warrant Shares. If a Buyer provides the Company with
an opinion of counsel, reasonably satisfactory in form, and substance to the
Company, that registration of a resale by such Buyer of any of the Series C
Preferred Shares, the Warrants, Conversion Shares or the Warrant Shares is not
required under the 1933 Act, the Company shall permit the transfer, and, in the
case of the Conversion Shares or the Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Buyers by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions
of this Section 5, that the Buyers shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Series C Preferred Shares to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:
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a. Such Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
b. The Certificate of Designations shall have been filed with the
Secretary of State of the State of Delaware.
c. Such Buyer shall have delivered to the Company the Purchase
Price for the Series C Preferred Shares being purchased by such Buyer at the
Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
d. The representations and warranties of such Buyer shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Series C
Preferred Shares at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion:
a. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to such Buyer.
b. The Certificate of Designations, shall have been filed with the
Secretary of State of the State of Delaware, and a copy thereof certified by
such Secretary of State shall have been delivered to such Buyer.
c. The Common Stock shall be authorized for quotation on the over-
the-counter market, AMEX, the Nasdaq National Market or The New York Stock
Exchange, Inc., trading in the Common Stock shall not have been suspended for
any reason and all of the Conversion Shares and Warrant Shares issuable upon
conversion of the Series C Preferred Shares or exercise of the Warrants, shall
be approved for listing on the over-the-counter market, AMEX, the Nasdaq
National Market or The New York Stock Exchange, Inc.
d. The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in
Section 3 above, in which case, such representations and warranties shall be
true and correct without further qualification) as of the date when made and as
of the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific
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date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Company at or
prior to the Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may be reasonably
requested by such Buyer including, without limitation, an update as of the
Closing Date regarding the representation contained in Section 3(c) above.
e. Such Buyer shall have received the opinion of the Company's
counsel dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to such Buyer and in substantially the form of Exhibit D attached
hereto.
f. The Company shall have executed and delivered to such Buyer the
Stock Certificates (in such denominations as such Buyer shall request) for the
Series C Preferred Shares being purchased by such Buyer at the Closing.
g. The Board of Directors of the Company shall have adopted the
resolutions in substantially the form of Exhibit E attached hereto.
h. As of the Closing Date, the Company shall as of the Closing
Date have reserved out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Series C Preferred Shares and
the exercise of the Warrants, 7,500,000 shares of Common Stock.
i. The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyers, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of this Agreement and acquiring the Series C Preferred Shares, the
Warrants, the Conversion Shares and the Warrant Shares hereunder and in
addition to all of the Company's other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless each Buyer and each
other holder of Series C Preferred Shares, the Warrants, the Conversion Shares
or the Warrant Shares and all of their officers, directors, employees and
agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "INDEMNITEES")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, the Warrants, the Certificate of Designations or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation
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of the Company contained in this Agreement, the Certificate of Designations,
the Warrants or the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made against such Indemnitee and arising out
of or resulting from the execution, delivery, performance or enforcement of
this Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Indemnitees, any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the issuance of
the Series C Preferred Shares or the status of such Buyer or holder of the
Series C Preferred Shares, the Warrants, the Conversion Shares or the Warrant
Shares, as an investor in the Company, except for any such Indemnified
Liabilities which directly and primarily results from the particular
Indemnitee's gross negligence or willful misconduct. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws.
b. Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes
all other prior oral or written agreements between the Buyers, the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
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f. Notices. Any notices consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided a
copy is mailed by U.S. certified mail, return receipt requested; (iii) three
(3) days after being sent by U.S. certified mail, return receipt requested, or
(iv) one (1) day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
American BioMed, Inc.
10077 Xxxxxx'x Xxxx Xxxx
Xxxxx 000
Xxx Xxxxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
With a copy to:
Klehr, Harrison, Xxxxxx, Branzburg & Xxxxxx
0000 Xxxxxx Xx.
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxxx, Esq
If to the Transfer Agent:
Continental Stock Transfer &
Trust Company
0 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxxx Xxxxxxxxx
If to a Buyer, to its address and facsimile number on the Schedule of Buyers,
with copies to such Buyer's counsel as set forth on the Schedule of Buyers.
Each party shall provide five (5) days' prior written notice to the other party
of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns including any purchasers of the
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Series C Preferred Shares. The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the Buyer
including by merger or consolidation except as expressly provided in Section
4(k) hereof. A Buyer may assign some or all of its rights hereunder without the
consent of the Company, provided, however, that any such assignment shall not
release such Buyer from its obligations hereunder unless such obligations are
assumed by such assignee and the Company has consented to such assignment and
assumption.
h. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company contained in Sections 3
(other than Sections 3(b), (d) and (w)) and the representations and warranties
of the Buyers contained in Sections 2, shall survive the Closing until three
years after the Closing Date. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company contained in Sections
3(b), (d) and (w), the agreements and covenants set forth in Sections 4, 5 and
9, the indemnification provisions set forth in Section 8, shall survive the
Closing until the expiration of the applicable statute of limitations. Each
Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right to
approve before issuance any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of any Buyer, to make any
press release or other public disclosure with respect to such transactions as
is required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
occurred with respect to a Buyer on or before five (5) business days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any party to
any other party; provided, however, that if this Agreement is terminated
pursuant to this Section 9(l), the Company shall remain obligated to reimburse
the Buyers for the expenses described in Section 4(i) above.
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m. Placement Agent. The Company acknowledges that it has engaged a
placement agent in connection with the sale of the Series C Preferred Shares,
which placement agent may have formally or informally engaged other agents on
its behalf. The Company shall be responsible for the payment of any placement
agent's fees or broker's commissions relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without
limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in
connection with any such claim.
n. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
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IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
AMERICAN BIOMED, INC. XXXXXX PARTNERS
By: /s/ XXXXXX XXXX By: /s/ XXXX XXXXX
---------------------------------------- ------------------------
Name: Xxxxxx Xxxx Name: Xxxx Xxxxx
Its: President and Chief Executive Its: Officer
Officer
25
SCHEDULE OF BUYERS
NUMBER OF
SERIES C
BUYER ADDRESS PREFERRED BUYER'S LEGAL COUNSEL
BUYER NAME AND FACSIMILE NUMBER SHARES AND COUNSEL'S ADDRESS
--------------------------- ----------------------------- --------- ---------------------
Xxxxxx Partners c/o Leeds Management Services 125 Citadel Investment Group, L.L.C.
000 Xxxxx Xxxxxx, 0xx Xxxxx 000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxx XX00 Xxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxx Attention: Xxx Xxxxx
Facsimile: (000) 000-0000 Xxx Simpler
Facsimile: (000) 000-0000
Xxxxxx Xxxxxx & Zavis
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
