SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of July
28, 2006, by and among NANOSCIENCE TECHNOLOGIES, INC., a Nevada corporation,
with headquarters located at 00 Xxxxxxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxx, XX
00000 (the "COMPANY"), and the Buyer listed on Schedule I attached hereto (the
"BUYER").
WITNESSETH
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("REGULATION D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer and
the Buyer shall purchase up to One Hundred Twenty Thousand Dollars ($120,000)
(the "PURCHASE PRICE") of secured convertible debentures (the "CONVERTIBLE
DEBENTURES"), which shall be convertible into shares of the Company's common
stock, par value $0.001 (the "COMMON STOCK") (as converted, the "CONVERSION
SHARES") at the Closing (as defined herein);
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement (the "INVESTOR REGISTRATION RIGHTS AGREEMENT") pursuant to which the
Company has agreed to file a registration statement (the "REGISTRATION
STATEMENT") with the United States Securities and Exchange Commission (the
"SEC") and provide certain other rights under the Securities Act and the rules
and regulations promulgated thereunder, and applicable state securities laws;
and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Security Agreement
pursuant to which the Company has agreed to provide the Buyer a security
interest in Pledged Collateral (as this term is defined in the each Security
Agreement) to secure the Company's obligations under this Agreement, the
Transaction Documents, or any other obligations of the Company to the Buyer; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering Irrevocable Transfer
Agent Instructions (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS").
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer hereby agree as
follows:
1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
(a) PURCHASE OF CONVERTIBLE DEBENTURES. Subject to
the satisfaction (or waiver) of the terms and conditions of this Agreement, the
Buyer agrees to purchase at the Closing and the Company agrees to sell and issue
the Buyer at the Closing, Convertible Debentures in amounts up to the Purchase
Price.
(b) CLOSING DATE. The closing of the purchase and
sale of the Convertible Debentures (the "CLOSING") shall take place at 10:00
a.m. Eastern Standard Time on the fifth day following the date hereof, subject
to notification of satisfaction of the conditions to such Closing set forth in
Sections 6 and 7 below ( the "CLOSING DATE"). The Closing shall occur on the
respective Closing Date at the offices of Yorkville Advisors, LLC, 0000 Xxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxx Xxxxxx 00000 (or such other place as is
mutually agreed to by the Company and the Buyer).
(c) FORM OF PAYMENT. Subject to the satisfaction of
the terms and conditions of this Agreement, on the Closing Date, (i) the Buyer
shall deliver to the Company such aggregate proceeds for the Convertible
Debentures to be issued and sold to the Buyer, minus the fees to be paid
directly from the proceeds of the Closing as set forth herein, and (ii) the
Company shall deliver to the Buyer, Convertible Debentures which the Buyer is
purchasing, duly executed on behalf of the Company.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer represents and warrants that:
(a) INVESTMENT PURPOSE. The Buyer is acquiring the
Convertible Debentures and, upon conversion of Convertible Debentures, the Buyer
will acquire the Conversion Shares then issuable, for its own account for
investment only and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations herein, the Buyer reserves the right to dispose of the
Conversion Shares at any time in accordance with or pursuant to an effective
registration statement covering such Conversion Shares or an available exemption
under the Securities Act.
(b) ACCREDITED INVESTOR STATUS. The Buyer is an
"ACCREDITED INVESTOR" as that term is defined in Rule 501(a)(3) of Regulation D.
(c) RELIANCE ON EXEMPTIONS. The Buyer understands
that the Convertible Debentures 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 the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments 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 such securities.
(d) INFORMATION. The Buyer and its advisors (and his
or, its counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information deemed material
to making an informed investment decision regarding the purchase of the
Convertible Debentures and the Conversion Shares, which have been requested by
the Buyer. The Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and its management. Neither such
inquiries nor any other due diligence investigations conducted by the Buyer or
its advisors, if any, or its representatives shall modify, amend or affect the
Buyer's right to rely on the Company's
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representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Convertible Debentures and the Conversion
Shares involves a high degree of risk. The Buyer is in a position regarding the
Company, which, based upon employment, family relationship or economic
bargaining power, enabled and enables the Buyer to obtain information from the
Company in order to evaluate the merits and risks of this investment. The 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
Convertible Debentures and the Conversion Shares.
(e) NO GOVERNMENTAL REVIEW. 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 Convertible Debentures or the Conversion Shares, or the fairness or
suitability of the investment in the Convertible Debentures or the Conversion
Shares, nor have such authorities passed upon or endorsed the merits of the
offering of the Convertible Debentures or the Conversion Shares.
(f) TRANSFER OR RESALE. The Buyer understands that
except as provided in the Investor Registration Rights Agreement: (i) the
Convertible Debentures have not been and are not being registered under the
Securities Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered thereunder, or
(B) the Buyer shall have delivered to the Company an opinion of counsel, in a
generally acceptable form, to the effect that such securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration requirements; (ii) any sale of such securities
made in reliance on Rule 144 under the Securities 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 Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such securities
under the Securities Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder.
(g) LEGENDS. The Buyer understands that the
certificates or other instruments representing the Convertible Debentures and or
the Conversion Shares shall 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 SOLELY FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE
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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.
The legend set forth above shall be removed and the Company within two (2)
business days shall issue a certificate without such legend to the holder of the
Conversion Shares upon which it is stamped, unless otherwise required by state
securities laws, (i) in connection with a sale transaction, provided the
Conversion Shares are registered under the Securities Act or (ii) in connection
with a sale transaction, after such holder provides the Company with an opinion
of counsel, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Conversion Shares may be made without
registration under the Securities Act.
(h) AUTHORIZATION, ENFORCEMENT. 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, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
(i) RECEIPT OF DOCUMENTS. The Buyer and his or its
counsel has received and read in their entirety: (i) this Agreement and each
representation, warranty and covenant set forth herein and the Transaction
Documents (as defined herein); (ii) all due diligence and other information
necessary to verify the accuracy and completeness of such representations,
warranties and covenants; (iii) the Company's Form 10-KSB for the fiscal year
ended September 30, 2005; (iv) the Company's Form 10-QSB for the fiscal quarter
ended March 31, 2006 and (v) answers to all questions the Buyer submitted to the
Company regarding an investment in the Company; and the Buyer has relied on the
information contained therein and has not been furnished any other documents,
literature, memorandum or prospectus.
(j) DUE FORMATION OF CORPORATE AND OTHER BUYER. If
the Buyer is a corporation, trust, partnership or other entity that is not an
individual person, it has been formed and validly exists and has not been
organized for the specific purpose of purchasing the Convertible Debentures and
is not prohibited from doing so.
(k) NO LEGAL ADVICE FROM THE COMPANY. The Buyer
acknowledges, that it had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with his or its own legal counsel
and investment and tax advisors. The Buyer is relying solely on such counsel and
advisors and not on any statements or representations of the Company or any of
its representatives or agents for legal, tax or investment advice with respect
to this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants as of the date hereof to the Buyer
that, except as set forth in the SEC Documents (as defined herein) or in the
Disclosure Schedule attached hereto (the "DISCLOSURE SCHEDULE"):
(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, the Security Agreement, the Investor
Registration Rights Agreement, the Irrevocable Transfer Agent Instructions, and
any related agreements (collectively the "TRANSACTION DOCUMENTS") and to issue
the Convertible Debentures and the Conversion Shares in accordance with the
terms hereof and thereof; (ii) the execution and delivery of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Convertible Debentures and the Conversion Shares, and the reservation for
issuance and the issuance of the Conversion 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) the Transaction Documents have been duly
executed and delivered by the Company; (iv) the Transaction Documents constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies. The
authorized officer(s) of the Company executing the Transaction Documents knows
of no reason why the Company cannot file the registration statement as required
under the Investor Registration Rights Agreement or perform any of the Company's
other obligations under such documents.
(c) CAPITALIZATION. The authorized capital stock of
the Company consists of 100,000,000 shares of Common Stock of which 11,101,946
are issued and outstanding and no Classes of Preferred Stock are issued and
outstanding. All of such outstanding shares have been validly issued and are
fully paid and nonassessable. No shares of Common Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. As of the date of this Agreement, (i)
there are no outstanding options, warrants,
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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 Securities Act (except pursuant to the Investor
Registration Rights Agreement) and (iv) there are no outstanding registration
statements and there are no outstanding comment letters from the SEC or any
other regulatory agency. There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Convertible Debentures as described in this Agreement. The Company has
furnished to the Buyer true and correct copies of the Company's Articles of
Incorporation, as amended and as in effect on the date hereof (the "ARTICLES 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
other than stock options issued to employees and consultants.
(d) ISSUANCE OF SECURITIES. The Convertible
Debentures are duly authorized and, upon issuance in accordance with the terms
hereof, shall be duly issued, fully paid and nonassessable, are free from all
taxes, liens and charges with respect to the issue thereof. The Conversion
Shares issuable upon conversion of the Convertible Debentures have been duly
authorized and reserved for issuance. Upon conversion or exercise in accordance
with the Convertible Debentures the Conversion Shares will be duly issued, fully
paid and nonassessable.
(e) NO CONFLICTS. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated hereby will not (i) result in a
violation of the Articles of Incorporation, any certificate of designations of
any outstanding series of preferred stock of the Company or the By-laws or (ii)
conflict with or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party, or result in a 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 National Association of Securities Dealers Inc.'s
OTC Bulletin Board on which the Common Stock is quoted) applicable to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected. Neither the Company nor
its subsidiaries is in violation of any term of or in default under its Articles
of Incorporation or By-laws or their organizational charter or by-laws,
respectively, or any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries. The business of the
Company and its subsidiaries is not being conducted, and shall not be conducted
in violation of any material law, ordinance, or regulation of any governmental
entity. Except as specifically contemplated by this Agreement and as required
under the Securities Act and any applicable state securities laws, the Company
is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under or contemplated by this
Agreement or the Registration Rights Agreement in accordance with the terms
hereof or thereof. All consents, authorizations, orders, filings and
registrations which the
6
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.
(f) SEC DOCUMENTS: FINANCIAL STATEMENTS. The Company
has filed and is current with all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT") (all of the foregoing
filed prior to the date hereof or amended after the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to as the "SEC
DOCUMENTS"). The Company has delivered to the Buyer or their representatives, or
made available through the SEC's website at xxxx://xxx.xxx.xxx., true and
complete copies of the SEC Documents. As of their respective dates, the
financial statements of the Company disclosed in the SEC Documents (the
"FINANCIAL STATEMENTS") complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
Financial Statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and, fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). 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 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 circumstances under which they were made, not
misleading.
(g) 10(b)-5. The SEC Documents do not include any
untrue statements of material fact, nor do they omit to state any material fact
required to be stated therein necessary to make the statements made, in light of
the circumstances under which they were made, not misleading.
(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 against or
affecting the Company, the Common Stock or any of the Company's subsidiaries,
wherein an unfavorable decision, ruling or finding would (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) have a material adverse effect on the business,
operations, properties, financial condition or results of operations of the
Company and its subsidiaries taken as a whole.
(i) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF THE
CONVERTIBLE DEBENTURES. The Company acknowledges and agrees that the Buyer is
acting solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that the Buyer is not acting as a
7
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 the Buyer or any of their respective representatives or agents
in connection with this Agreement and the transactions contemplated hereby is
merely incidental to the Buyer's purchase of the Convertible Debentures or the
Conversion Shares. The Company further represents to the Buyer that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives.
(j) NO GENERAL SOLICITATION. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has engaged
in any form of general solicitation or general advertising (within the meaning
of Regulation D under the Securities Act) in connection with the offer or sale
of the Convertible Debentures or the Conversion Shares.
(k) 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 Convertible Debentures or the Conversion Shares under the
Securities Act or cause this offering of the Convertible Debentures or the
Conversion Shares to be integrated with prior offerings by the Company for
purposes of the Securities Act.
(l) 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. The Company
and its subsidiaries believe that their relations with their employees are good.
(m) INTELLECTUAL PROPERTY RIGHTS. The Company and its
subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service xxxx registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service xxxx registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
(n) ENVIRONMENTAL LAWS. The Company and its
subsidiaries are (i) in compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to
8
conduct their respective businesses and (iii) are in compliance with all terms
and conditions of any such permit, license or approval.
(o) TITLE. 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 interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries.
(p) 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.
(q) REGULATORY PERMITS. The Company and its
subsidiaries possess all material certificates, authorizations and permits
issued by the appropriate federal, state or foreign regulatory authorities
necessary to conduct their respective businesses, and neither the Company nor
any such subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit.
(r) INTERNAL ACCOUNTING CONTROLS. The Company and
each of its subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, and (iii) the recorded amounts for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(s) NO MATERIAL ADVERSE BREACHES, ETC. Neither the
Company nor any of its subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is expected in the future
to have a material adverse effect on the business, properties, operations,
financial condition, results of operations or prospects of the Company or its
subsidiaries. Neither the Company nor any of its subsidiaries is in breach of
any contract or agreement which breach, in the judgment of the Company's
officers, has or is expected to have a material adverse effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries.
(t) TAX STATUS. The Company and each of its
subsidiaries has made and filed all federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject and (unless and only to the extent that the Company and each of its
subsidiaries has set aside on its books provisions reasonably adequate for the
payment
9
of all unpaid and unreported taxes) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.
(u) CERTAIN TRANSACTIONS. Except for arm's length
transactions pursuant to which the Company makes payments in the ordinary course
of business upon terms no less favorable than the Company could obtain from
third parties and other than the grant of stock options disclosed in the SEC
Documents, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
(v) FEES AND RIGHTS OF FIRST REFUSAL. The Company is
not obligated to offer the securities offered hereunder on a right of first
refusal basis or otherwise to any third parties including, but not limited to,
current or former shareholders of the Company, underwriters, brokers, agents or
other third parties.
(w) RELIANCE. The Company acknowledges that the Buyer
is relying on the representations and warranties made by the Company hereunder
and that such representations and warranties are a material inducement for the
Buyer purchasing the Convertible Debentures and entering into the transactions
contemplated by the Transaction Documents. The Company further acknowledges that
without such representations and warranties of the Company made hereunder, the
Buyer would not enter into this Agreement.
(x) NON-PUBLIC INFORMATION. The Company confirms that
neither it nor any person acting on its behalf has provided the Buyer with any
information that the Company believes constitutes material, non-public
information. The Company understands and confirms that the Buyer will rely on
the foregoing representation in effecting transactions in securities of the
Company.
(y) XXXXXXXX-XXXXX. The Company is in compliance with
the applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and
the rules and regulations thereunder, and is actively taking steps to ensure
that it will be in compliance with other applicable provisions of such Act not
currently in effect at all times after the effectiveness of such provisions
except where such noncompliance would not have or reasonably be expected to have
a material adverse effect on the business, properties, operations, financial
condition, results of operations or prospects of the Company or its
subsidiaries.
10
4. COVENANTS.
(a) BEST EFFORTS. Each party shall use its best
efforts to timely satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
(b) FORM D. The Company agrees to file a Form D with
respect to the Conversion Shares as required under Regulation D and to provide a
copy thereof to the Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Conversion Shares, or obtain an exemption
for the Conversion Shares for sale to the Buyer at the Closing pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the states of the
United States, and shall provide evidence of any such action so taken to the
Buyer on or prior to the Closing Date.
(c) REPORTING STATUS. Until the earlier of (i) the
date as of which the Buyer may sell all of the Conversion Shares without
restriction pursuant to Rule 144(k) promulgated under the Securities Act (or
successor thereto), or (ii) the date on which (A) the Buyer shall have sold all
the Conversion Shares and (B) none of the Convertible Debentures are outstanding
(the "REGISTRATION PERIOD"), the Company shall file in a timely manner all
reports required to be filed with the SEC pursuant to the Exchange Act and the
regulations of the SEC thereunder, and the Company shall not terminate its
status as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would otherwise permit such
termination.
(d) USE OF PROCEEDS. The Company will use the
proceeds from the sale of the Convertible Debentures for general corporate and
working capital purposes, but in no event shall the Company use the proceeds to
repay any indebtedness of any Company insiders.
(e) RESERVATION OF SHARES. On the date hereof, the
Company shall reserve for issuance to the Buyer 2,500,000 shares for issuance
upon conversions of the Convertible Debentures and 1,000,000 shares for issuance
upon exercise of the Warrants (as defined below) (collectively, the "SHARE
RESERVE"). The Company represents that it has sufficient authorized and unissued
shares of Common Stock available to create the Share Reserve after considering
all other commitments that may require the issuance of Common Stock. The Company
shall take all action reasonably necessary to at all times have authorized, and
reserved for the purpose of issuance, such number of shares of Common Stock as
shall be necessary to effect the full conversion of the Convertible Debentures
and the full exercise of the Warrants. If at any time the Share Reserve is
insufficient to effect the full conversion of the Convertible Debentures or the
full exercise of the Warrants, the Company shall increase the Share Reserve
accordingly. If the Company does not have sufficient authorized and unissued
shares of Common Stock available to increase the Share Reserve, the Company
shall call and hold a special meeting of the shareholders within thirty (30)
days of such occurrence, for the sole purpose of increasing the number of shares
authorized. The Company's management shall recommend to the shareholders to vote
in favor of increasing the number of shares of Common Stock authorized.
Management shall also vote all of its shares in favor of increasing the number
of authorized shares of Common Stock.
(f) LISTINGS OR QUOTATION. The Company's Common Stock
shall be listed or quoted for trading on any of (a) the American Stock Exchange,
(b) New York Stock
11
Exchange, (c) the Nasdaq National Market, (d) the Nasdaq Capital Market, or (e)
the Nasdaq OTC Bulletin Board ("OTCBB") (each, a "PRIMARY MARKET") and the
Company shall promptly secure the listing or quotation of the Conversion Shares
and Warrant Shares for trading on the same Primary Market upon which the shares
of Common Stock are then listed or quoted.
(g) Fees and Expenses.
(i) Each of the Company and the Buyer shall
pay all costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery of the
Transaction Documents. The Company shall pay Yorkville Advisors LLC a fee equal
to ten percent (10%) of the Purchase Price which shall be paid proportionally
directly out of the proceeds of the Closing.
(ii) The Company shall pay a structuring fee
to Yorkville Advisors LLC of Eight Thousand Dollars ($8,000) which shall be paid
directly from the proceeds of the Closing.
(iii) The Company shall issue to the Buyer a
warrant to purchase 1,000,000 shares of the Company's Common Stock for a period
of five (5) years at an exercise price of $0.20 per share (the "WARRANT" or the
"WARRANTS"). The shares of Common Stock issuable under the Warrant shall
collectively be referred to as the "WARRANT SHARES." The Warrant Shares shall
have "piggy-back" and demand registration rights as set forth in the Investor
Registration Rights Agreement.
(h) CORPORATE EXISTENCE. So long as any of the
Convertible Debentures remain outstanding, the Company shall not directly or
indirectly consummate any merger, reorganization, restructuring, reverse stock
split consolidation, sale of all or substantially all of the Company's assets or
any similar transaction or related transactions (each such transaction, an
"ORGANIZATIONAL CHANGE") unless, prior to the consummation of an Organizational
Change, the Company obtains the written consent of the Buyer. In any such case,
the Company will make appropriate provision with respect to such holders' rights
and interests to insure that the provisions of this Section 4(h) will thereafter
be applicable to the Convertible Debentures.
(i) TRANSACTIONS WITH AFFILIATES. So long as any
Convertible Debentures are outstanding, 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 (2) years, stockholders who beneficially own five percent (5%)
or more of the Common Stock, or Affiliates (as defined below) 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 five percent (5%)
or more beneficial interest (each a "RELATED PARTY"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b) any
investment in an Affiliate of the Company, (c) 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, (d) any agreement, transaction, commitment, or arrangement which
is approved by a majority of the disinterested directors of the
12
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 ten percent
(10%) or more equity interest in that person or entity, (ii) has ten percent
(10%) 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.
(j) TRANSFER AGENT. The Company covenants and agrees
that, in the event that the Company's agency relationship with the transfer
agent should be terminated for any reason prior to a date which is two (2) years
after the Closing Date, the Company shall immediately appoint a new transfer
agent and shall require that the new transfer agent execute and agree to be
bound by the terms of the Irrevocable Transfer Agent Instructions (as defined
herein).
(k) RESTRICTION ON ISSUANCE OF THE CAPITAL STOCK. So
long as any Convertible Debentures are outstanding, except for Excluded
Securities (as defined in the Warrant), the Company shall not, without the prior
written consent of the Buyer: (i) issue or sell shares of Common Stock or
Preferred Stock without consideration or for a consideration per share less than
the bid price of the Common Stock determined immediately prior to its issuance,
(ii) issue any preferred stock, warrant, option, right, contract, call, or other
security or instrument granting the holder thereof the right to acquire Common
Stock without consideration or for a consideration less than such Common Stock's
Bid Price determined immediately prior to its issuance, (iii) enter into any
security instrument granting the holder a security interest in any and all
assets of the Company, or (iv) file any registration statement on Form S-8.
(l) Neither the Buyer nor any of its affiliates have
an open short position in the Common Stock of the Company, and the Buyer agrees
that it shall not, and that it will cause its affiliates not to, engage in any
short sales of or hedging transactions with respect to the Common Stock as long
as any Convertible Debentures shall remain outstanding.
(m) RIGHTS OF FIRST REFUSAL. So long as any portion
of Convertible Debentures are outstanding, if the Company intends to raise
additional capital by the issuance or sale of capital stock of the Company,
including without limitation shares of any class of common stock, any class of
preferred stock, options, warrants or any other securities convertible or
exercisable into shares of common stock (whether the offering is conducted by
the Company, underwriter, placement agent or any third party) the Company shall
be obligated to offer to the Buyer such issuance or sale of capital stock, by
providing in writing the principal amount of capital it intends to raise and
outline of the material terms of such capital raise, prior to the offering such
issuance or sale of capital stock to any third parties including, but not
limited to, current or former officers or directors, current or former
shareholders and/or investors of the obligor, underwriters, brokers, agents or
other third parties. The Buyer shall have ten (10) business days from receipt of
such notice of the sale or issuance of capital stock to accept or reject all or
a portion of such capital raising offer.
13
5. TRANSFER AGENT INSTRUCTIONS.
(a) The Company shall issue the Irrevocable Transfer
Agent Instructions to its transfer agent irrevocably appointing Xxxxx Xxxxxxxx,
Esq. as the Company's agent for purpose of having certificates issued,
registered in the name of the Buyer or its nominee(s), for the Conversion Shares
representing such amounts of Convertible Debentures as specified from time to
time by the Buyer to the Company upon conversion of the Convertible Debentures,
for interest owed pursuant to the Convertible Debenture, and for any and all
Liquidated Damages (as this term is defined in the Investor Registration Rights
Agreement). Xxxxx Xxxxxxxx, Esq. shall be paid a cash fee of Fifty Dollars ($50)
for every occasion he acts pursuant to the Irrevocable Transfer Agent
Instructions. The Company shall not change its transfer agent without the
express written consent of the Buyer, which may be withheld by the Buyer in its
sole and reasonable discretion. Prior to registration of the Conversion Shares
under the Securities 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(g)
hereof (in the case of the Conversion Shares prior to registration of such
shares under the Securities Act) will be given by the Company to its transfer
agent in respect thereof and that the Conversion Shares shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Investor Registration Rights Agreement, in
each instance subject to applicable securities laws. Nothing in this Section 5
shall affect in any way the Buyer's obligations and agreement to comply with all
applicable securities laws upon resale of Conversion Shares. If the Buyer
provides the Company with an opinion of counsel, in form, scope and substance
customary for opinions of counsel in comparable transactions to the effect that
registration of a resale by the Buyer of any of the Conversion Shares is not
required under the Securities Act, the Company shall within two (2) business
days instruct its transfer agent to issue one or more certificates in such name
and in such denominations as specified by the Buyer. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Buyer by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section 5, that the Buyer shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Convertible Debentures to the Buyer 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:
(a) The Buyer shall have executed the Transaction
Documents and delivered them to the Company.
14
(b) The Buyer shall have delivered to the Company the
Purchase Price for Convertible Debentures in the amount as set forth next to the
Buyer as outlined on Schedule I attached hereto, minus any fees to be paid
directly from the proceeds the Closing as set forth herein, by wire transfer of
immediately available U.S. funds pursuant to the wire instructions provided by
the Company.
(c) The representations and warranties of the Buyer
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 the 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 the Buyer at or prior to the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer hereunder to purchase the Convertible
Debentures at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions:
(a) The Company shall have executed the Transaction
Documents and delivered the
same to the Buyer.
(b) The Common Stock shall be authorized for
quotation on the OTCBB, trading in the Common Stock shall not have been
suspended for any reason.
(c) 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 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.
(d) The Company shall have executed and delivered to
the Buyer the Convertible Debentures being purchased at the Closing.
(e) The Buyer shall have received an opinion of
counsel from counsel to the Company in a form satisfactory to the Buyer.
(f) The Company shall have provided to the Buyer a
certificate of good standing from the secretary of state from the state in which
the Company is incorporated.
(g) The Company shall have filed a form UCC-1 or such
other forms as may be required to perfect the Buyer's interest in the Pledged
Property as detailed in the Security Agreement dated the date hereof and
provided proof of such filing to the Buyer.
15
(h) The Company shall have provided to the Buyer an
acknowledgement, to the satisfaction of the Buyer, from the Company's
independent certified public accountants as to its ability to provide all
consents required in order to file a registration statement in connection with
this transaction.
(i) The Company shall have reserved out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Convertible Debentures, shares of Common Stock to effect the
conversion of all of the Conversion Shares then outstanding.
(j) The Irrevocable Transfer Agent Instructions, in
form and substance satisfactory to the Buyer, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(k) The Company shall have certified, in a
certificate executed by two officers of the Company and dated as of the Closing
Date, that all conditions to such Closing have been satisfied.
8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and
delivery of this Agreement and acquiring the Convertible Debentures and the
Conversion Shares hereunder, and in addition to all of the Company's other
obligations under this Agreement, the Company shall defend, protect, indemnify
and hold harmless the Buyer and each other holder of the Convertible Debentures
and the Conversion Shares, and all of their officers, directors, employees and
agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "BUYER
INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any the Buyer Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "INDEMNIFIED
LIABILITIES"), incurred by the Buyer Indemnitees or any of them as a result of,
or arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement, the
Convertible Debentures or the Investor Registration Rights Agreement or any
other certificate, instrument or document contemplated hereby or thereby, (b)
any breach of any covenant, agreement or obligation of the Company contained in
this Agreement, or the Investor 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 parties hereto, any transaction financed
or to be financed in whole or in part, directly or indirectly, with the proceeds
of the issuance of the Convertible Debentures or the status of the Buyer or
holder of the Convertible Debentures the Conversion Shares, as a Buyer of
Convertible Debentures in the Company. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities, which is permissible under applicable law.
16
(b) In consideration of the Company's execution and
delivery of this Agreement, and in addition to all of the Buyer's other
obligations under this Agreement, the Buyer shall defend, protect, indemnify and
hold harmless the Company and all of its officers, directors, employees and
agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "COMPANY
INDEMNITEES") from and against any and all Indemnified Liabilities incurred by
the Indemnitees or any of them as a result of, or arising out of, or relating to
(a) any misrepresentation or breach of any representation or warranty made by
the Buyer in this Agreement, instrument or document contemplated hereby or
thereby executed by the Buyer, (b) any breach of any covenant, agreement or
obligation of the Buyer contained in this Agreement, the Investor Registration
Rights Agreement or any other certificate, instrument or document contemplated
hereby or thereby executed by the Buyer, or (c) any cause of action, suit or
claim brought or made against such Company Indemnitee based on material
misrepresentations or due to a material breach and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement, the
Investor Registration Rights Agreement or any other instrument, document or
agreement executed pursuant hereto by any of the parties hereto. To the extent
that the foregoing undertaking by the Buyer may be unenforceable for any reason,
the Buyer shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities, which is permissible under applicable law.
9. GOVERNING LAW: MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of New Jersey
without regard to the principles of conflict of laws. The parties further agree
that any action between them shall be heard in Xxxxxx County, New Jersey, and
expressly consent to the jurisdiction and venue of the Superior Court of New
Jersey, sitting in Xxxxxx County and the United States District Court for the
District of New Jersey sitting in Newark, New Jersey for the adjudication of any
claim under this Agreement or the Transaction Documents.
(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 and
all other agreements, exhibits, and schedules referred to in this Agreement
constitute the final, complete,
17
and exclusive statement of the terms of the agreement between the parties
pertaining to the subject matter of this Agreement and supersedes all prior and
contemporaneous understandings or agreements of the parties. This Agreement may
not be contradicted by evidence of any prior or contemporaneous statements or
agreements. No party has been induced to enter into this Agreement by, nor is
any party relying on, any representation, understanding, agreement, commitment
or warranty outside those expressly set forth in this Agreement. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
(f) NO HOLDING PERIOD REPRESENTATION. The Company
expressly recognizes and acknowledges that any Conversion Shares or Warrant
Shares obtained or acquired by the Buyer pursuant to this Agreement or the
Transaction Documents may be sold or otherwise traded by the Buyer at any time,
including the date they are acquired, and that the decision to trade such shares
is within the sole discretion of the Buyer. The Buyer has made no contrary
representations to the Company with regard to shares contemplated by, or
obtained or acquired pursuant, to this Agreement or the Transaction Documents,
or concerning or relating to the length of time it intends to hold any such
security obtained or acquired.
(g) NOTICES. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon confirmation of receipt, when sent
by facsimile; (iii) three (3) days after being sent by U.S. certified mail,
return receipt requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company: Nanoscience Technologies, Inc.
00 Xxxxxxxxxxx Xxxxx, Xxxxx 000 #00
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx
Telephone: 000-000-0000
Facsimile: 212-332-3401
With a copy to: Reitler Xxxxx & Xxxxxxxxxx LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Buyer, to its address and facsimile number on Schedule I,
with copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
18
(h) SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns. Neither the Company nor the Buyer shall assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other party hereto.
(i) 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.
(j) SURVIVAL. Unless this Agreement is terminated
under Section 9(m), the representations and warranties of the Company and the
Buyer contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall survive the Closing for a period of two (2) years following the date on
which the Convertible Debentures are converted in full. The Buyer shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
(k) PUBLICITY. The Company and the Buyer shall have
the right to approve, before issuance any press release or any other public
statement with respect to the transactions contemplated hereby made by any
party; provided, however, that the Company shall be entitled, without the prior
approval of the Buyer, to issue any press release or other public disclosure
with respect to such transactions required under applicable securities or other
laws or regulations (the Company shall use its best efforts to consult the Buyer
in connection with any such press release or other public disclosure prior to
its release and Buyer shall be provided with a copy thereof upon release
thereof).
(l) 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.
(m) TERMINATION. In the event that the Closing shall
not have occurred with respect to the Buyer on or before five (5) business days
from the date hereof due to the Company's or the Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the non-breaching party's
failure to waive such unsatisfied condition(s)), the non-breaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated by the
Company pursuant to this Section 9(m), the Company shall remain obligated to
reimburse the Buyer for the fees and expenses of Yorkville Advisors LLC
described in Section 4(g) above.
(n) NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
19
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY:
NANOSCIENCE TECHNOLOGIES, INC.
By: /s/ XXXXX XXXXXX
----------------------------
Name: Xxxxx Xxxxxx
Title: Chief Operating Officer
20
SCHEDULE I
SCHEDULE OF BUYER
ADDRESS/FACSIMILE AMOUNT OF
NAME SIGNATURE NUMBER OF BUYER SUBSCRIPTION
----------------------------- -------------------------------- --------------------------------- --------------
Cornell Capital Partners, LP By: Yorkville Advisors, LLC 000 Xxxxxx Xxxxxx - Xxxxx 0000 $120,000
Its: General Partner Xxxxxx Xxxx, XX 00000
Facsimile: 201) 985-8266
By: /s/ XXXX XXXXXX
--------------------
Name: Xxxx Xxxxxx
Its: Portfolio Manager
With a copy to: Xxxx Xxxxx, Esq. 000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
DISCLOSURE SCHEDULE
SCHEDULE 3(e)
The transactions contemplated by this Agreement require the consent of Highgate
House Funds, Ltd. pursuant to Section 4(m) of the Securities Purchase Agreement
dated as of December 14, 2005.
SCHEDULE 3(s)
The Company is currently in breach of its obligations under the following
instruments and agreements with Highgate House Funds, Ltd., each dated as of
December 14, 2005: (i) Investor Registration Rights Agreement, (ii) 8% Secured
Convertible Debenture due December 14, 2008 in the principal amount of
$1,050,359.20 and (iii) 8% Secured Convertible Debenture due December 14, 2008
in the principal amount of $320,000, which could result in an acceleration of
such debentures which, in turn, would have a material adverse effect on the
Company.
2
