Exhibit 99.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of July 25,
2002, by and among BOSTON LIFE SCIENCES, INC., a Delaware corporation (the
"Company"), and each of the purchasers set forth on the execution page hereof
(individually, a "Purchaser" and collectively, the "Purchasers").
WHEREAS:
A. The Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act").
B. The Company desires to sell, and the Purchasers desire to purchase, upon
the terms and conditions stated in this Agreement, (i) convertible senior
secured promissory notes of the Company in the aggregate principal amount of
Four Million Dollars ($4,000,000), in the form attached hereto as Exhibit A
(individually, a "Note" and collectively, the "Notes"), which principal amount
shall be convertible into shares of common stock of the Company, par value $.01
per share (the "Equity Securities"), at an initial conversion price of $2.16 per
share of Equity Securities (subject to adjustment as set forth in the Notes) and
(ii) Warrants (the "Warrants"), in the form attached hereto as Exhibit B, to
acquire 500,000 Equity Securities at an initial exercise price of $2.16 per
share (subject to adjustment as set forth in the Warrants). (The securities
issuable upon exercise of or otherwise pursuant to the Warrants are referred to
herein as the "Warrant Securities," and the securities, including Equity
Securities, issuable upon conversion of or otherwise pursuant to the Notes shall
be referred to collectively as "Conversion Securities"). The Notes, the
Warrants, the Conversion Securities and the Warrant Securities are individually
referred to herein as a "Security" and collectively referred to herein as the
"Securities."
C. All references herein to monetary denominations shall refer to lawful
money of the United States of America.
NOW, THEREFORE, the Company and the Purchasers, intending to be legally
bound, hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS
a. Purchase of Notes and Warrants. On the Closing Date, subject to the
satisfaction (or waiver) of the conditions set forth in Section 6 and Section 7
below, the Company shall issue and sell to each Purchaser, and each Purchaser
severally agrees to purchase from the Company, such Notes and Warrants for the
purchase price as is set forth on such Purchaser's execution page hereof (the
"Purchase Price"). Each Purchaser's obligation to purchase its Notes and
Warrants hereunder is distinct and separate from each other Purchaser's
obligation to purchase its Notes and Warrants, and no Purchaser shall be
required to purchase hereunder more than the number of
its Notes and Warrants set forth on such Purchaser's execution page hereto
notwithstanding any failure by any other Purchaser to purchase its Notes and
Warrants hereunder nor shall any Purchaser have any liability by reason of any
such failure by any other Purchaser.
b. Form of Payment. On the Closing Date, each Purchaser shall pay such
Purchaser's Purchase Price for the Notes and Warrants being purchased by such
Purchaser at the Closing by wire transfer to the Company, in accordance with the
Company's written wiring instructions, against delivery of the duly executed
Notes and Warrants being purchased by such Purchaser, and the Company shall
deliver such Notes and Warrants against delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or waiver) of the relevant
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Notes pursuant to this Agreement (the "Closing")
shall be 9:30 A.M. Eastern Time on July 25, 2002, or such other time as may be
mutually agreed upon by the Company and the Purchasers (the "Closing Date").
Subject to Section 8(b) hereof, the Closing shall occur at the offices of
Xxxxxxxx Kill & Olick, P.C., 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000.
2. PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser severally, but not jointly, represents and warrants to the
Company as follows:
a. Purchase for Own Account, Etc. Such Purchaser is acquiring the Notes in
the ordinary course of its business for such Purchaser's own account and not
with a present view toward the public sale or distribution thereof. Such
Purchaser understands that such Purchaser must bear the economic risk of this
investment indefinitely, unless the Securities are registered pursuant to the
Securities Act and any applicable state securities or blue sky laws or an
exemption from such registration is available, and that the Company has no
present intention of registering any such Securities other than as contemplated
by the Registration Rights Agreement (as defined in Section 4(l) hereof). Such
Purchaser understands that: (a) the Notes and Warrants (i) may not be sold or
transferred by the Purchaser without the prior written consent of the Company,
except as permitted pursuant to Section 8(g), (ii) are "restricted securities"
(as such term is defined in Rule 144 promulgated under the Securities Act),
(iii) the Company has no present intention of registering the Notes and Warrants
under the Securities Act and (iv) the Notes and Warrants may only be sold or
transferred pursuant to an exemption from registration under the Securities Act
and any applicable state securities laws; and (b) prior to the effective date of
a registration statement filed by the Company, the Conversion Securities and the
Warrant Securities and any other securities issuable upon conversion of the
Conversion Securities and the Warrant Securities, when issued, shall be
restricted securities and may only be sold or transferred pursuant to an
exemption from registration under the Securities Act and any applicable state
securities laws.
b. Accredited Investor and Interested Stockholder Status. (i) Such
Purchaser is an "Accredited Investor" as that term is defined in Rule 501(a) of
Regulation D.
(i) Such Purchaser has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks
of the purchase of the Notes and the Conversion Securities pursuant to this
Agreement.
(ii) Such Purchaser has the power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and
the transactions contemplated hereby have been duly authorized by all
necessary action on the part of such Purchaser. This Agreement has been
duly and validly executed and delivered by such Purchaser and constitutes
the legal, valid and binding obligation of such Purchaser, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(iii) No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of such
Purchaser is required in connection with the valid execution and delivery
by such Purchaser of this Agreement, or the consummation by such Purchaser
of the transactions contemplated hereby, except for such filings as have
been made prior to the Closing.
(iv) Such Purchaser, if other than an individual (A) is duly
organized or formed, validly existing under the laws of the jurisdiction of
its organization or formation and (B) has all requisite power and authority
to carry on its business as currently conducted. Such Purchaser, if an
individual, has the capacity to enter into this Agreement and perform such
person's obligations hereunder.
c. Reliance on Exemptions. Such Purchaser understands that the Securities
are being offered and sold to such Purchaser in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and such Purchaser's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein in order to determine the availability of such exemptions and the
eligibility of such Purchaser to acquire the Securities.
d. Information. Such Purchaser has received or had access to copies of the
Financial Statements (as defined below), as well as all other materials relating
to the business, finances and operations of the Company and its subsidiaries and
materials relating to the offer and sale of the Securities which have been
specifically requested by such Purchaser or which are publicly available in the
Company's filings with the Securities and Exchange Commission (the "SEC"). Such
Purchaser has been afforded the opportunity to ask questions of the Company and
has received what such Purchaser believes to be satisfactory answers to any such
inquiries. Neither such inquiries nor any other due diligence investigation
conducted by such Purchaser or any of its representatives shall modify, amend or
affect such Purchaser's right to rely on the Company's
representations and warranties contained in Section 3 below. Such Purchaser
understands that such Purchaser's investment in the Securities involves a high
degree of risk.
e. Governmental Review. Such Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. Such Purchaser understands that (i) the Securities
have not been and are not being registered under the Securities Act or any state
securities laws, and may not be transferred unless (a) subsequently registered
thereunder, or (b) the Securities to be sold or transferred may be sold or
transferred under an exemption from such registration (including any sale or
transfer to an affiliate of such Purchaser who is an Accredited Investor), or
(c) sold under Rule 144 promulgated under the Securities Act (or a successor
rule) ("Rule 144"), and (ii) 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 (in each case, other than pursuant to the Registration Rights
Agreement (as defined in Section 7(g) hereof).
g. Legends. Such Purchaser understands that the Notes and the Warrants, and
until such time as the Conversion Securities and Warrant Securities have been
registered under the Securities Act (including registration pursuant to Rule 415
thereunder) and such Conversion Securities have been sold pursuant to such
registration or otherwise may be sold by such Purchaser under Rule 144, the
certificates for the Conversion Securities and Warrant Securities will bear a
restrictive legend in substantially the following form:
These Securities have been acquired for investment purposes only and
have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), or under any applicable state securities laws.
These Securities may not be sold or otherwise transferred or pledged,
except pursuant to an effective registration statement under the
Securities Act and such applicable state securities laws or if the
proposed sale, transfer or pledge may be effected under an exemption
from registration under the Securities Act and under an exemption from
registration or qualification under applicable state securities laws.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Security is registered under the Securities Act and such Security is sold
pursuant to such registration, or (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Security may be made without registration under the Securities Act or
(c) such holder provides the Company with reasonable assurances that such
Security can be sold under Rule 144. Such Purchaser agrees to sell all
Securities pursuant to an effective registration statement or under an exemption
from the registration requirements of the Securities Act.
h. Authorization; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Purchaser and is a valid
and binding agreement of such Purchaser enforceable in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to
the enforcement of creditors' rights and remedies or by other equitable
principles of general application.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
For purposes of this Agreement, "Material Adverse Effect" shall mean any
material adverse effect on (i) the Securities, (ii) the ability of the Company
to perform its obligations hereunder and under the Notes and the Warrants or
(iii) the business, operations, properties, prospects or financial condition of
the Company and its subsidiaries, taken as a whole.
The Company represents and warrants to each Purchaser as follows:
a. Organization and Qualification. The Company and each of its subsidiaries
is a corporation duly organized and existing in good standing under the laws of
the jurisdiction in which it is incorporated, and has the requisite corporate
power to own its properties and to carry on its business as now being conducted.
The Company and each of 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 and where the failure so to qualify would have a Material Adverse
Effect.
b. Authorization; Enforcement. (i) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement, the Notes and the Warrants, to issue and sell the Notes and the
Warrants in accordance with the terms hereof, and to issue Conversion Securities
and Warrant Securities, upon conversion of the Notes and the Warrants,
respectively, in accordance with the respective terms thereof; (ii) the
execution, delivery and performance of this Agreement, the Notes 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 Notes and the Warrants, and the issuance and reservation for issuance of the
Conversion Securities and Warrant Securities), have been duly authorized by the
Company's Board of Directors and no further consent or authorization of the
Company, its Board of Directors or its stockholders is required; and (iii) this
Agreement constitutes, and, upon execution and delivery by the Company of the
Notes and the Warrants, such agreements will constitute, valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
c. Stockholder Authorization. Neither the execution, delivery or
performance by the Company of its obligations under this Agreement, the Notes or
the Warrants nor the consummation by the Company of the transactions
contemplated hereby or thereby (including, without limitation, the issuance of
the Notes or the Warrants and the issuance and reservation for
issuance of the Conversion Securities or Warrant Securities) require any consent
or authorization of the Company's stockholders.
d. Capitalization. The capitalization of the Company as of the date hereof,
including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Notes and the Warrants)
exercisable for, or convertible into or exchangeable for any shares of capital
stock and the number of Conversion Securities and Warrant Securities to be
reserved for issuance upon conversion of the Notes and the Warrants is set forth
on Schedule 3(d). All of such outstanding shares of capital stock have been, or
upon issuance will be, validly issued, fully paid and nonassessable. The
issuance of Notes and Warrants hereunder and the issuance of the Conversion
Securities and the Warrant Securities will not trigger any preemptive rights or
any other similar rights of the stockholders of the Company, except for any such
rights as disclosed on Schedule 3(d) and which shall have been waived prior to
the Closing Date. Except for the Securities, or as otherwise disclosed in
Schedule 3(d), as of the 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 or
exercisable or exchangeable for, any shares of capital stock of the Company or
any of its subsidiaries, 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, and (ii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of its or their securities under the Securities Act.
There are no securities or instruments of the Company containing antidilution or
similar provisions that, absent any adjustment of the Conversion Price of the
Notes (as "Conversion Price" is defined in the Notes) or adjustment of the
exercise of price of the Warrants, will or may be triggered by the issuance of
the Securities in accordance with the terms of this Agreement, the Notes or the
Warrants. To the extent required by the applicable rules and regulations of the
SEC, the Company has filed with the SEC true and correct copies of the Company's
Certificate of Incorporation as in effect on the date hereof and By-laws as in
effect on the date hereof and all instruments and agreements governing
securities of the Company or instruments convertible into or exercisable or
exchangeable for capital stock of the Company.
e. Issuance of Conversion Securities. Conversion Securities (and any other
securities issuable upon conversion, exercise or exchange thereof), upon
conversion of the Notes in accordance with the terms thereof (and any other
securities issuable upon conversion, exercise or exchange thereof), and Warrant
Securities (and any other securities issuable upon conversion, exercise or
exchange thereof) upon exercise of the Warrants in accordance with the terms
thereof, will be validly issued, fully paid and non-assessable, and free from
all taxes, liens, claims and encumbrances and will not be subject to preemptive
rights, rights of first refusal or other similar rights of stockholders of the
Company (other than any such rights which shall have been waived prior to the
Closing).
f. No Conflicts. The execution, delivery and performance of this Agreement,
the Notes and the Warrants by the Company, and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without
limitation, the issuance and reservation for issuance, as applicable, of the
Notes, the Warrants, the Conversion Securities and
the Warrant Securities) will not (i) result in a violation of the Certificate of
Incorporation or 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 material 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 U.S. federal and
state securities laws and regulations) 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 any of its
subsidiaries is in violation of its Certificate of Incorporation, By-laws or
other organizational documents and neither the Company nor any of its
subsidiaries is in default (and no event has occurred which, with notice or
lapse of time or both, would put the Company or any of its subsidiaries in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) 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. The respective businesses of the
Company and its subsidiaries are not being conducted, and shall not be conducted
so long as any Purchaser owns any of the Securities, in violation of any law,
ordinance, regulation, rule, decision or order of any governmental agency or
body or any court, domestic or foreign, except for possible violations the
sanctions for which, either singly or in the aggregate, would not have a
Material Adverse Effect. Except as disclosed on Schedule 3(f) or 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, approval, authorization or order of, or make any filing or registration
with, any governmental agency or body, court, any regulatory or self regulatory
agency or other third party in order for it to execute, deliver or perform any
of its obligations under this Agreement, the Notes, the Warrants, the Conversion
Securities, or the Warrant Securities in each case in accordance with the terms
hereof or thereof.
g. Financial Statements. The Company has filed with the SEC true and
correct copies of (i) the audited consolidated balance sheets of the Company and
its audited consolidated subsidiaries as of December 31, 2001, and the related
consolidated statements of operations, comprehensive loss and stockholders'
equity and cash flows for the year then ended, including footnotes thereto,
audited by PricewaterhouseCoopers LLP, independent public accountants and (ii)
the unaudited consolidated balance sheets of the Company and its consolidated
subsidiaries as of March 31, 2002, and the related consolidated statements of
operations, comprehensive loss and stockholders' equity and cash flows for the
three months then ended (collectively, the "Financial Statements"). As of their
respective dates, the Financial Statements complied in all material respects
with applicable accounting requirements. Such Financial Statements have been
prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, during the periods involved and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to immaterial year-end audit adjustments). Subject
to the next sentence of this Section 3(g), except as set forth in the Financial
Statements or as set forth on Schedule 3(g), the Company has no liabilities,
contingent or otherwise, other than (i) liabilities (other than liabilities for
borrowed money) incurred in the ordinary course of business subsequent to the
date of such Financial Statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally
accepted accounting principles to be reflected in such Financial Statements.
Except as set forth on Schedule 3(g), as of the Closing Date, the Company will
have no outstanding indebtedness (whether by way of direct or indirect
obligations, guaranties, contingencies or otherwise) for borrowed money other
than the Notes. The indebtedness evidenced by the Notes will be senior in right
of payment to all existing indebtedness of the Company, and the Liens (as
defined below) that secure the Notes will be senior in right of priority to all
other Liens that secure any other existing indebtedness of the Company.
h. Absence of Certain Changes. Except as set forth on Schedule 3(h) and as
contemplated herein, since March 31, 2002, neither the Company nor any of its
subsidiaries has:
(i) issued any stock, bonds or other corporate securities or any
rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except trade payables incurred in the
ordinary course of business;
(iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business consistent with past
practices;
(iv) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of
its capital stock;
(v) mortgaged or pledged any of its assets, tangible or intangible,
or subjected them to any lien, charge or other encumbrance, except for
Permitted Liens (as defined in Section 4(k));
(vi) sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, except in the ordinary course of business
consistent with past practices;
(vii) sold, assigned or transferred any patents, patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible
assets or Intangibles (as defined in Section 3(j)), including without
limitation, any rights to use any Intangibles, under any licenses, or
disclosed any proprietary confidential information to any persons except to
potential customers, investors or corporate or academic partners or
collaborators in the ordinary course of business consistent with past
practices;
(viii) suffered any substantial losses or waived any rights of material
value, whether or not in the ordinary course of business, or suffered the
loss of any material amount of prospective business except as reflected in
the Financial Statements;
(ix) made any changes in employee compensation except in the ordinary
course of business and consistent with past practices and not in excess of
$10,000;
(x) adopted any employee benefits;
(xi) made capital expenditures or commitments therefor that aggregate
in excess of $25,000 for the Company and its subsidiaries;
(xii) entered into any other material transaction other than in the
ordinary course of business;
(xiii) made charitable contributions or pledges in excess of $5,000 in
the aggregate;
(xiv) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
(xv) experienced any union organizing effort, strike problems with
labor or management in connection with the terms and conditions of their
employment; or
(xvi) effected or agreed to do any of the foregoing.
i. Absence of Litigation. Except as disclosed on Schedule 3(i), 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 the Company, any of its subsidiaries, or any of their respective
directors or officers in their capacities as such, which would be reasonably
likely to have a Material Adverse Effect.
j. Intellectual Property. Each of the Company and its subsidiaries owns or
is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, inventions, discoveries, processes, scientific, technical,
engineering and marketing data, object and source codes, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "Intangibles") necessary for the conduct of
its business as now being conducted. To the best knowledge of the Company,
neither the Company nor any subsidiary of the Company infringes or is in
conflict with any right of any other person with respect to any Intangibles,
except for any such infringement or conflict that would not, either singly or in
the aggregate, have a Material Adverse Effect. Neither the Company nor any of
its subsidiaries has received written notice of any pending conflict with or
infringement upon such third party Intangibles. Neither the Company nor any of
its subsidiaries has entered into any consent, indemnification, forbearance to
xxx or settlement agreements with respect to the validity of the Company's or
its subsidiaries' ownership or right to use its Intangibles and, to the best
knowledge of the Company, there is no reasonable basis for any such claim to be
successful. The Intangibles are valid and enforceable and no registration
relating thereto has lapsed, expired or been abandoned or canceled or is the
subject of cancellation or other adversarial proceedings, and all applications
therefor are pending and in good standing. The Company and its subsidiaries have
complied, in all material respects, with their respective contractual
obligations relating to the protection of the Intangibles used pursuant to
licenses. To the best knowledge of the Company, no person is infringing on or
violating the Intangibles owned or used by the Company or its subsidiaries.
Except as disclosed on Schedule 3(j), neither the Company nor any of its
subsidiaries has
sublicensed any licenses or rights thereunder in whole or in part held by the
Company or any of its subsidiaries in any Intangibles.
k. Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company or any of its subsidiaries, used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses; made any direct or indirect unlawful payment to any foreign or
domestic government official or employee from corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977; or
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
l. Disclosure. Neither this Agreement nor the Financial Statements nor any
other agreement, document, certificate or statement, whether oral or written,
furnished to any Purchaser or its counsel by or on behalf of the Company in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading.
m. Acknowledgment Regarding the Purchasers' Purchase of the Securities. The
Company acknowledges and agrees that none of the Purchasers is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement or the transactions contemplated hereby, and the
relationship between the Company and each Purchaser is "arms length" and that
any statement made by any Purchaser or any of its representatives or agents in
connection with this Agreement and the transactions contemplated hereby is not
advice or a recommendation and is merely incidental to such Purchaser's purchase
of Securities and has not been relied upon by the Company, its officers or
directors in any way. The Company further represents to each Purchaser that the
Company's decision to enter into this Agreement has been based solely on an
independent evaluation by the Company and its representatives.
n. No General Solicitation. Neither the Company nor any person
participating on the Company's behalf in the transactions contemplated hereby
has conducted any "general solicitation," as such term is defined in Regulation
D, with respect to any of the Securities being offered hereby.
o. 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 Securities being
offered hereby under the Securities Act or cause this offering of Securities to
be integrated with any prior offering of securities of the Company for purposes
of the Securities.
p. No Brokers. The Company has taken no action, that would give rise to any
claim by any person for brokerage commissions, finder's fees or similar payments
relating to this Agreement or the transactions contemplated hereby.
q. Acknowledgment Regarding Securities. The Company's executive officers
have studied and fully understand the nature of the Securities being sold
hereunder. The number and type of Conversion Securities issuable upon conversion
of the Notes and/or Warrant Securities issuable upon exercise of the Warrants
may increase substantially in certain circumstances. The Company's executive
officers and directors have studied and fully understand the terms of this
Agreement and the transactions contemplated hereby and the nature of the
securities being sold hereunder and recognize that they have a potential
dilutive effect. The Company acknowledges that its obligation to issue
Conversion Securities upon conversion of the Notes in accordance with the terms
of the Notes and to issue Warrant Securities upon the exercise of the Warrants
in accordance with the terms of the Warrants is absolute and unconditional,
regardless of the dilution that such issuance may have on the ownership
interests of other stockholders. Taking the foregoing into account, the
Company's Board of Directors has determined in its good faith business judgment
that the issuance of the Notes and the Warrants hereunder and the consummation
of the other transactions contemplated hereby are in the best interests of the
Company and its stockholders.
r. Tax Status. The Company and each of its subsidiaries has made or filed
all U.S. federal, state and local 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 provisions 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. The Company has not executed a
waiver with respect to any statute of limitations relating to the assessment or
collection of any federal, state or local tax. None of the Company's tax returns
is being audited by any taxing authority.
s. Title. Each of the Company and its subsidiaries has good and marketable
title in fee to such of its fixed assets that is real property, and good and
merchantable title to all of its other assets, now carried on its books, which
assets consist of those reflected in the most recent balance sheets of the
Company and its consolidated subsidiaries which are included in the Financial
Statements or acquired since the date of the balance sheets included in such
Financial Statements (except personal property disposed of since said date in
the ordinary course of business) free of any mortgages, pledges, charges, liens,
security interests or other encumbrances except as set forth on Schedule 3(s).
Each of the Company and its subsidiaries enjoy peaceful and undisturbed
possession under all leases under which it is operating, and all said leases are
valid and existing and in full force and effect and no default or event of
default exists thereunder.
t. Insurance. The Company has in force fire, casualty, directors' and
officers' liability, errors and omissions, professional liability, product
liability and other insurance policies, with extended coverage, sufficient in
amount to allow it to replace any of its presently existing material properties
or assets which might be damaged or destroyed or sufficient to cover liabilities
to which the Company may reasonably become subject, and such types and amounts
of other insurance with respect to its business and properties as presently
existing on both a per
occurrence and an aggregate basis, as are customarily carried by persons engaged
in the same or similar business as the Company. To the best knowledge of the
Company, no default or event has occurred that could give rise to a default
under any such policy.
u. Environmental Matters. There is no environmental litigation or other
environmental proceeding pending or, to the Company's knowledge, threatened by
any governmental or regulatory agency or others with respect to the current or
any former business of the Company or of any partnership or joint venture
currently or at any time affiliated with the Company. To the Company's
knowledge, no state of facts exists as to environmental matters or Hazardous
Substances (as defined below) that involves the reasonable likelihood of a
material capital expenditure by the Company or that would otherwise have a
Material Adverse Effect. No Hazardous Substances have been treated, stored or
disposed of, or otherwise deposited by the Company or, to the Company's
knowledge, any other person, in or on the properties leased by the Company or by
any partnership or joint venture currently or at any time affiliated with the
Company in violation of any applicable environmental laws. The environmental
compliance programs of the Company comply in all material respects with all
environmental laws, whether federal, state or local, currently in effect. As
used herein, "Hazardous Substances" means any substance, waste, contaminant,
pollutant or material that has been determined by any governmental authority to
be capable of posing a risk of injury to health, safety, property or the
environment.
v. Solvency. Immediately before and after giving effect to the transactions
contemplated by this Agreement, the Company (i) has not incurred and does not
intend to incur, or believe that it will incur, debts beyond its ability to pay
such debts as they become due, (ii) owns and will have assets, the fair saleable
value of which is (a) greater than the total amount of its liabilities
(including contingent liabilities) and (b) greater than the amount that will be
required to pay the probable liabilities of its then existing debts as they
become absolute and matured, and (iii) has and will have capital that is not
unreasonably small in relation to its business as presently conducted and as
proposed to be conducted.
w. Certain Agreements of Officers and Employees. To the Company's
knowledge, no officer, employee or consultant of the Company or any of its
subsidiaries is in violation of any material term of any employment contract,
patent disclosure agreement, proprietary information agreement, noncompetition
agreement, nonsolicitation agreement, confidentiality agreement, or any other
similar contract or agreement or any restrictive covenant relating to the right
of any such officer, employee, or consultant to be employed or engaged by the
Company or any of its subsidiaries because of the nature of the business
conducted or to be conducted by the Company or any of its subsidiaries or
relating to the use of trade secrets or proprietary information of others, and
to the Company's knowledge the continued employment or engagement of the
Company's and its subsidiaries' officers, employees or consultants shall not
subject the Company, or any of its subsidiaries or any Purchaser to any material
liability with respect to any of the foregoing matters.
No officer, consultant or key employee of the Company or any of its
subsidiaries whose termination, either individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect, has been terminated since
December 31, 2001, and to the knowledge of the Company, no such officer,
consultant or key employee has given notice to the Company or any
of its subsidiaries that he or she has any present intention of terminating, his
or her employment or engagement with the Company or any of its subsidiaries,
except as set forth on Schedule 3(v).
x. ERISA. Neither the Company nor any of its subsidiaries makes any
contributions to any employee pension benefit plan for its employees which plan
is subject to the Employee Retirement Income Security Act of 1974, as amended.
y. Transactions with Affiliates. Except as set forth in Schedule 3(y),
there are no loans, leases, royalty agreements or other transactions between (a)
the Company or any of its subsidiaries or any of their respective customers or
suppliers, and (b) any officer, employee, consultant or director of the Company
or any person owning five percent (5%) or more of the capital stock of the
Company or five percent (5%) or more of the ownership interests of the Company
or any of its subsidiaries or any member of the immediate family of such
officer, employee, consultant, director, stockholder or owner or any corporation
or other entity controlled by such officer, employee, consultant, director,
stockholder or owner, or a member of the immediate family of such officer,
employee, consultant, director, stockholder or owner.
z. Assumptions or Guaranties of Indebtedness of Other Persons. Neither the
Company nor any of its subsidiaries has assumed, guaranteed, endorsed, or
otherwise become directly or contingently liable on, any Indebtedness or any
other agreement of any other person except as set forth in Schedule 3(z).
aa. Investments in Other Persons. Except as set forth in Schedule 3(aa),
neither the Company nor any of its subsidiaries has made any loan or advance to
any person which is outstanding, nor is it committed or obligated to make any
such loan or advance, nor does the Company or any of its subsidiaries own any
capital stock, assets compromising the business of, obligations of, or any
equity, ownership or other interest in, any person. The Company's subsidiaries
are identified on Schedule 3(aa); except as disclosed on Schedule 3(aa), the
Company owns, directly or indirectly 100% of the outstanding equity interests in
the subsidiaries listed on Schedule 3(aa).
bb. Books and Records. The books of account, ledgers, order books, records
and documents of the Company and its subsidiaries accurately and completely
reflect all material information relating to the business of the Company and its
subsidiaries, the location and collection of their respective assets, and the
nature of all transactions giving rise to the obligations or accounts receivable
of the Company or any of its subsidiaries.
cc. U.S. Real Property Holding Corporation. Neither the Company nor any of
its subsidiaries is now or has ever been a "United States Real Property Holding
Corporation" as defined in section 897(c)(2) of the Code and section 1.897-2(b)
of the Regulations promulgated by the Internal Revenue Service.
dd. Permits. The Company and each of its subsidiaries have all licenses,
permits, exemptions, consents, waivers, authorizations, rights, certificates of
occupancy, franchises, orders or approvals of, and have made all required
registrations with any governmental body or agency, domestic or foreign, that
are material to the conduct of the business of or the intended use of any
properties of the Company and such subsidiaries ("Permits"), except where the
failure
to have any such Permit, either singly or in the aggregate, would not have a
Material Adverse Effect, and no material violations are or have been recorded in
respect of any Permit; and no proceeding is pending or, to the knowledge of the
Company or any of its subsidiaries, threatened to revoke or limit any Permit,
except for such violations or proceedings that would not, either singly or in
the aggregate, have a Material Adverse Effect.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts timely to satisfy
each of the conditions described in Section 6 and Section 7 of this Agreement.
b. Form D; Blue Sky Laws; Current Report. The Company shall file a Form D
with respect to the Securities as required under Regulation D and provide a copy
thereof to each Purchaser promptly after such filing. The Company shall take
such action at its own cost and expense, as the Company shall reasonably
determine is necessary to qualify the Securities for sale to each Purchaser
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to each Purchaser.
c. Use of Proceeds. The Company shall use the proceeds from the sale of the
Notes and the Warrants for working capital and general corporate purposes. No
portion of the proceeds shall be used to reduce the Company's indebtedness
referred to in Section 3(g) hereof.
d. Expenses. The Company shall pay to Xxxxxxx & Xxxxxx Value Partners, L.P.
("I&S"), or its designee, up to $20,000 as reimbursement for the actual expenses
incurred by I&S and its affiliates and advisors in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
agreements to be executed in connection herewith, including, without limitation,
I&S's attorney's fees and expenses (the "Expenses"). Such amount shall be paid
at the Closing.
e. Certain Reports and Other Information. Concurrently with the
distribution to holders of the Company's common stock, par value $.01 per share
(or holders of other Equity Securities of the Company) so long as any Notes or
Warrants remain outstanding, the Company will provide to each Purchaser copies
of all reports, notices, and other information as the Company shall make
available generally to the holders of its Equity Securities.
f. Loans to Certain Persons. Until the earlier to occur of (i) the first
date on which the aggregate principal amount of all of the Notes then
outstanding is less than $500,000 (the "Expiration Date") and (ii) an
Alternative Collateralization (as defined in Section 5(c)), without the prior
written approval of the holders of a majority-in-interest of the then
outstanding Notes (the "Majority Note Holders"), the Company will not lend, and
will cause its subsidiaries not to lend, money to any director, officer,
employee of or consultant to the Company or of any of its subsidiaries or to any
person who is an affiliate (as that term is defined for purposes of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") of the Company
or any subsidiary except for travel advances in the ordinary course of business.
g. Limitation on Repurchases. Until the earlier to occur of (i) the
Expiration Date and (ii) an Alternative Collateralization, without the prior
written approval of the then Majority
Note Holders, but subject to the Company's obligation to repay the Notes in
accordance with their terms, neither the Company nor any subsidiary shall
purchase, redeem or otherwise retire or cancel for value any outstanding shares
of the capital stock of the Company or any subsidiary (other than repurchases or
redemptions of any capital stock held by any employee or consultant employed or
engaged by the Company on the date hereof and disclosed on Schedule 4(g) hereof,
upon the termination of such employee's or consultant's employment or
engagement, respectively).
h. Corporate Existence. Until the earlier to occur of (i) the Expiration
Date and (ii) an Alternative Collateralization, the Company shall maintain its
corporate existence and will not, without the prior written approval of the then
Majority Note Holders, merge, consolidate or sell all or substantially all of
its assets.
i. Redemptions and Dividends. Until the earlier to occur of (i) the
Expiration Date and (ii) an Alternative Collateralization, without the prior
written approval of the then Majority Note Holders, the Company shall not
repurchase, redeem, or declare or pay any cash dividend or distribution on, any
shares of capital stock of the Company.
j. Indebtedness. Until the earlier to occur of (i) the Expiration Date and
(ii) an Alternative Collateralization, without the prior written approval of the
then Majority Note Holders, the Company and each of its subsidiaries will not
incur any indebtedness for borrowed money other than purchase money indebtedness
and capitalized leases incurred in the ordinary course of business not to exceed
$500,000 in the aggregate at any one time outstanding. In addition, until the
earlier to occur of (i) the Expiration Date and (ii) an Alternative
Collateralization, without the prior written approval of the then Majority Note
Holders, the Company and each of its subsidiaries will not: (i) prepay any
indebtedness, or (ii) enter into or modify any agreement as a result of which
the terms of payment of any indebtedness are amended or modified in a manner
which would accelerate its payment.
k. Liens. Until the earlier to occur of (i) the Expiration Date and (ii) an
Alternative Collateralization, without the prior written approval of the
Majority Note Holders, the Company shall not create or suffer to exist any Lien
upon any of its property now owned or hereafter acquired, other than Permitted
Liens and other than the Liens granted to the Purchasers in Article 5 hereof. As
used in this Agreement: (a) "Lien" means any mortgage, lien, title claim,
assignment, encumbrance, security interest, adverse claim, contract of sale,
restriction on use or transfer or other defect of title of any kind; and (b)
"Permitted Liens" means (i) Liens to secure taxes, assessments and other
governmental charges to the extent (a) such tax assessment or charge is not then
due or (b) the validity or amount of such tax, assessment or charge is contested
in good faith by the Company or any of its subsidiaries, and (c) the Company or
its subsidiaries shall have set aside on its books adequate reserves with
respect to such tax, assessment or charge; (ii) Liens incurred or deposits or
pledges made (a) in connection with, or to secure payment of, workers'
compensation, unemployment insurance, old age pensions or other social security,
(b) in connection with casualty insurance maintained by the Company or its
subsidiaries, (c) to secure the performance of bids, tenders, contracts (other
than contracts relating to indebtedness for borrowed money) or leases, (d) to
secure statutory obligations or surety, appeal or similar bonds, or (e) to
secure indemnity, performance or other similar bonds in the ordinary course of
business; (iii) Liens of carriers, warehouses, mechanics and similar Liens,
in each case (a) in existence less than 180 days from the creation thereof, (b)
being contested in good faith by the Company or any of its subsidiaries, or (c)
that would not materially detract from the value of the property or assets, or
the operations, of, the Company and its subsidiaries, taken as a whole; (iv)
encumbrances in the nature of (a) zoning restrictions, (b) easements, (c)
restrictions of record on the use of real property, (d) landlords' and lessors'
Liens on rented premises and (e) restrictions on transfers or assignment of
leases; (v) Liens constituting (a) purchase money security interests to the
extent permitted by Section 4(j) hereof, (including mortgages, conditional
sales, capitalized leases and any other title retention or deferred purchase
devices) in real property, interests in leases or tangible personal property
(other than inventory) existing or created on the date on which such property is
acquired or within 90 days thereafter; (vi) restrictions under federal and state
securities laws on the transfer of securities; (vii) the sale of doubtful
accounts receivable for collection in the ordinary course of business; (viii)
Liens as in effect on the date hereof and disclosed on Schedule 4(k) hereof and
Liens securing future indebtedness permitted hereunder; (ix) licenses and
sublicenses to other persons or entities; (x) setoff rights of depositary banks;
(xi) Liens on insurance policies and insurance proceeds securing the financing
of insurance premiums; and (xii) Liens in respect of judgments or awards;
provided that any such Lien shall automatically cease being a Permitted Lien
upon the occurrence of an Event of Default in the case of a specified judgment
or award pursuant to the provisions of Section 8(g) of the Notes.
5. SECURITY
x. Xxxxx of Security Interest. To secure the payment and performance of the
Company's obligations hereunder and under the Notes, (including all renewals,
extensions, restructurings and refinancings of any or all of the Company's
obligations under the Notes), including the re-payment of principal of and the
payment of interest on such Notes and all costs and expenses accrued or incurred
in connection therewith ("Obligations"), subject to the last sentence of this
Section 5(a) the Company hereby grants to the Purchasers for their pro rata
benefit, a first priority perfected security interest and continuing Lien in and
to all right, title and interest of the Company in the following property of the
Company, whether now owned or existing or hereafter acquired or arising and
regardless of where located (all being collectively referred to as the
"Collateral"): (A) accounts (as defined in the Uniform Commercial Code in effect
on the date hereof in the State of New York (the "UCC"), and all guaranties and
security therefor, and all goods and rights represented thereby or arising
therefrom including the rights of stoppage in transit, replevin and reclamation;
(B) inventory (as defined in the UCC); (C) general intangibles (as defined in
the UCC); (D) documents (as defined in the UCC) or other receipts covering,
evidencing or representing goods; (E) instruments (as defined in the UCC); (F)
chattel paper (as defined in the UCC); (G) equipment (as defined in the UCC),
other than leased equipment; (H) Intangibles, consisting of the rights of the
Company or its subsidiaries as licensees to use Intangibles; (I) all sublicenses
of any licenses to use Intangibles; (J) all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks and related data processing
software that at any time evidence or contain information relating to Collateral
or are otherwise necessary or helpful in the collection thereof or realization
thereon; and (K) proceeds, cash and non-cash, of all or any of the Collateral,
including, without limitation, the proceeds of any insurance policies covering
any of the Collateral. Notwithstanding the foregoing provisions of this Section
5(a), (i) the Collateral shall not include any property with respect to which
the Company is prohibited by law from granting a security interest in such
property for as long as
the Company is so prohibited by law (the "Prohibited Collateral") and (ii) the
Company and its subsidiaries may grant licenses or sublicenses of the
Intangibles to third parties or to one another in the ordinary course of the
Company's or such subsidiaries' business, and each of the Purchasers hereby
agrees that the rights of any licensee or sublicensee in any such Intangibles so
licensed or sublicensed shall be free of the security interest created under
this Agreement, except that the Purchasers shall be granted a first priority
perfected security interest and continuing Lien in and to all amounts which may
become due and owing to the Company under each of such licenses or sublicenses,
which amounts shall be deemed Collateral hereunder. The Company represents and
warrants to each Purchaser that it does not presently have any Prohibited
Collateral. The Company shall immediately notify the Purchasers when any
Collateral becomes Prohibited Collateral. The Company will not grant any
security interest or Lien to any other person in Prohibited Collateral.
b. Preservation of Collateral and Perfection of Security Interests Therein.
The Company shall, at any Purchaser's reasonable request, at any time and from
time to time, execute and deliver to the Purchasers such financing statements,
documents and other agreements and instruments (and pay the cost of filing or
recording the same in all public offices deemed reasonably necessary or
desirable by the Purchasers) and do such other acts and things as any Purchaser
may deem necessary or desirable in order to establish and maintain a valid,
attached and perfected security interest in the Collateral in favor of
Purchasers (free and clear of all other liens, claims and rights of third
parties whatsoever other than Permitted Liens), whether voluntarily or
involuntarily created), to secure payment of the Obligations, and in order to
facilitate the collection of the Collateral. The Company agrees that it execute
such financing statements, documents and other agreements and instruments and do
such other acts and things as may be reasonably necessary to preserve and
perfect the Purchasers' security interest in the Collateral. The Company further
agrees that a carbon, photographic, photostatic or other reproduction of this
Agreement or of a financing statement shall be sufficient as a financing
statement.
c. Release of Security Interests. All liens and security interests created
in the Collateral by this Agreement shall be released upon the earliest to occur
of (i) payment of the Obligations, (ii) conversion of all outstanding Notes,
(iii) delivery to I&S, as agent for the ratable benefit of all of the
Purchasers, of immediately available funds in an amount equal to the sum (such
sum, the "Remaining Obligation") of (a) the aggregate unpaid principal amount of
the Notes then outstanding plus (b) the aggregate amount of interest that would
be payable in respect of such unpaid principal amount as of the Maturity Date
(as defined in the Notes) calculated assuming the Company did not make any
interest payments under the Notes during the period beginning on the date on
which such funds are delivered to I&S and ending on the Maturity Date, which
funds shall be held by I&S in an interest-bearing account as collateral security
for the Obligations pursuant to an agreement satisfactory to the Company and
I&S) (which agreement shall provide that the amount of funds held in such
account shall be reduced from time to time to reflect any payment of principal
and interest on, or conversion of, the Notes), or (iv) the issuance for the
benefit of I&S, as agent for the ratable benefit of all of the Purchasers, of an
irrevocable standby letter of credit to cover the Remaining Obligations on terms
and conditions satisfactory to the Company and I&S (which terms and conditions
shall provide that the principal amount of such letter of credit shall be
reduced from time to time to reflect payments of principal and interest on, or
conversion of, the Notes). Each of the events described
in clauses (iii) and (iv) of this Section 5(c) is referred to in this Agreement
as an "Alternative Collateralization". The Purchasers agree that they will
execute such UCC termination statements, documents and other agreements and
instruments, and do such other acts and things, as may be reasonably requested
by the Company in order to release all liens and security interests required to
be released pursuant to clause (ii) of the last sentence of Section 5(a) and
this Section 5(c). In addition, in connection with any transfer pursuant to
Section 8(g) below, such transferor shall release its security interest
simultaneously with the effectiveness of the transfer in accordance with the
provisions of Section 8(g), and the Notes so transferred shall be unsecured.
d. Application of Proceeds. The Purchasers agree to act cooperatively in
the event the Company defaults in the payment of its Obligations under the
Notes. In furtherance of the foregoing, the Purchasers agree that actions to
foreclosure on the Collateral may be taken by any Purchaser, as agent for all of
the Purchasers (provided that the appointment of Purchaser as agent for all
Purchasers shall have been approved by the then Majority Note Holders which
approval shall not be unreasonably withheld) and the proceeds of any collection
or sale of the Collateral, as well as any Collateral consisting of cash be
applied as follows:
First, to the payment of all reasonable costs and expenses incurred by the
agent of the Purchasers in connection with such collection or sale, including
but not limited to, all court costs, the repayment of all advances made by the
agent on behalf of the Company and the reasonable fees and expenses of its
agents and legal counsel and any other reasonable costs and expenses incurred in
connection with the exercise of any rights or remedy hereunder.
Second, to the payment in full of principal and interest in respect of any
Notes outstanding pro rata as among the Purchasers and thereafter, to all other
Obligations then outstanding.
e. Exculpatory Provisions. No Purchaser acting as the agent of the other
Purchasers as provided in this Article 5 shall be liable for any action lawfully
taken or omitted to be taken by it in connection with this Agreement or the
Notes except for such person's gross negligence or willful misconduct.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The obligation of the Company hereunder to issue and sell the Notes and
the Warrants to each Purchaser hereunder is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions thereto, 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. Each Purchaser shall have executed such Purchaser's signature page to
this Agreement and delivered the same to the Company.
b. Each Purchaser shall have delivered such Purchaser's Purchase Price in
accordance with Section 1(b) above.
c. The representations and warranties of each Purchaser 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, which representations and warranties shall be true and correct as of such
date), and each Purchaser 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 Purchaser at or
prior to the Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE
The obligation of each Purchaser hereunder to purchase such Purchaser's
Notes and the Warrants hereunder is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions, provided that these
conditions are for such Purchaser's sole benefit and may be waived by such
Purchaser at any time in such Purchaser's sole discretion:
a. The Company shall have executed the signature page to this Agreement and
delivered the same to such Purchaser.
b. The Company shall have delivered to such Purchaser duly executed Notes
and Warrants (in such denominations as such Purchaser shall request) in
accordance with Section 1(a) above.
c. The representations and warranties of the Company 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, which representations and warranties shall be true
and correct as of such 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. Each Purchaser shall have received a
certificate, executed by the Chief Executive Officer or Executive Vice President
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 any Purchaser.
d. No statute, rule, regulation, executive order, decree, ruling,
injunction, action or proceeding shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent jurisdiction or
any self-regulatory organization having authority over the matters contemplated
hereby which questions the validity of, or challenges or prohibits the
consummation of, any of the transactions contemplated by this Agreement.
e. The Purchasers shall have received a copy of resolutions, duly adopted
by the Board of Directors of the Company, which shall be in full force and
effect at the time of the Closing, authorizing the execution, delivery and
performance by the Company of this Agreement, the Notes and the Warrants and the
consummation by the Company of the
transactions contemplated hereby and thereby, certified as such by the Secretary
or Assistant Secretary of the Company.
f. Each Purchaser shall have received an opinion of the Company's counsel,
dated as of the Closing Date in form and substance reasonably satisfactory to
the Purchasers.
g. Each Purchaser shall have received a copy of the registration rights
agreement in the form attached hereto as Exhibit C (the "Registration Rights
Agreement") duly executed by the Company.
8. MISCELLANEOUS
a. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the conflict of laws provisions thereof. The parties hereto irrevocably consent
to the jurisdiction of the United States federal courts and the state courts
located in the State of New York in any suit or proceeding based on or arising
under this Agreement and irrevocably agree that all claims in respect of such
suit or proceeding may be determined in such courts. The parties hereto
irrevocably waive the defense of an inconvenient forum to the maintenance of
such suit or proceeding. Each of the parties hereto further agrees that service
of process upon it mailed by first class mail shall be deemed in every respect
effective service of process upon it in any such suit or proceeding. Nothing
herein shall affect the right of any Purchaser or the Company to serve process
in any other manner permitted by law. The parties hereto agree that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
b. Counterparts. This Agreement may be executed in two or more
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. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed execution page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof, provided that the failure to so deliver any manually executed
signature page shall not affect the validity or enforceability of this
Agreement.
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 or the
validity or enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. 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
Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived other than
by an instrument in writing signed by the party to be charged with enforcement
(the Company or the Majority Note Holders, as the case may be), and no provision
of this Agreement may be amended other than by an instrument in writing signed
by the Company and by the Majority Note Holders.
f. Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be delivered personally or by responsible overnight
carrier or by confirmed telecopy, and shall be effective upon receipt or refusal
of receipt, if delivered personally or by responsible overnight carrier or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
Boston Life Sciences, Inc.
00 Xxxxxxx Xxxxxx
0/xx/ Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention:
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to any Purchaser, to the address set forth under such Purchaser's name
on the execution page hereto executed by such Purchaser.
Each party shall provide notice to the other parties of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns. Except as
provided below with respect to the right to assign rights to affiliates and to
transferees and pledges of Securities, neither the Company nor any Purchaser
shall assign this Agreement or any rights or obligations hereunder, except, upon
the prior written consent of the other, which consent shall not be unreasonably
withheld. No Purchaser shall assign, transfer, sell or otherwise dispose of this
Agreement, the Notes or the Warrants or any rights or obligations hereunder or
thereunder without the prior written consent of the Company, except that a
Purchaser may assign some or all of its rights hereunder or thereunder (i) to an
"affiliate" of such Purchaser (as such term is defined in the Exchange Act
subject to such affiliate demonstrating to the reasonable satisfaction of the
Company its satisfaction of the representations and warranties of the Purchaser
set forth in
Section 2 hereof)) or (ii) to any other Purchaser, without the consent of the
Company, provided that each permitted assignee agrees to be bound by and to
comply with the provisions of this Agreement or (iii), upon ten (10) days prior
written notice to the Company, to any other person, without the consent of the
Company, provided that (A) such person demonstrates to the reasonable
satisfaction of the Company its satisfaction of the representations and
warranties of the Purchaser set forth in Section 2 hereof, (B) such person
agrees to be bound by and to comply with the provisions of this Agreement and
the Notes, and (C) such assigning Purchaser releases its security interest in
the Collateral in the manner contemplated by Section 5(c) above.
h. Trading Restrictions. Each Purchaser agrees that it shall not, directly
or indirectly, through one or more intermediaries, engage in any short sales of
the Company's Equity Securities, unless within seven (7) Trading Days after the
initiation of such short sale the Purchaser shall have delivered to the Company
a Notice of Conversion, in accordance with Section 7(b) of the Note, pursuant to
which the Purchaser shall convert such principal amount of Notes held by such
Purchaser into the number of shares of Equity Securities as shall be sufficient
to cover, and shall use such shares to so cover in full, the shares required to
be delivered by such Purchaser in satisfaction of and in connection with such
short sale. The parties agree that the provisions of this Section 8(h) shall be
specifically enforceable. For purposes of this Section 8(h), "Trading Day" shall
mean a day on which the Nasdaq National Market (or in the event the Equity
Securities are not traded on the Nasdaq National Market, such other securities
market on which the Equity Securities are listed) is open for trading.
i. 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. The representations and warranties of the Purchasers set forth
in Section 2, the representations and warranties of the Company set forth in
Section 3, and the agreements and covenants set forth in Sections 4, 5 and 8
shall survive the Closing until the expiration of the applicable statute of
limitations notwithstanding any due diligence investigation conducted by or on
behalf of any Purchaser. Moreover, none of the representations and warranties
made by the Purchaser of the Company herein shall act as a waiver of any rights
or remedies the Company or any Purchaser, respectively, may have under
applicable U.S. federal or state securities laws. The Company agrees to
indemnify and hold harmless each Purchaser and each other permitted transferee
of the Securities and all of their stockholders, officers, directors, employees,
partners, members, agents and direct or indirect investors and affiliates and
any of the foregoing person's agents or other representatives (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 any cause of action, suit or
claim brought or made by any person or entity (other than the Company or an
affiliate of such Indemnitee) against such Indemnitee prior to one year from the
Expiration Date and arising out of or resulting from (a) any misrepresentation
or breach of any representation or warranty made by the Company in this
Agreement, the Notes or the Warrants 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, the Notes or the Warrants or any other certificate, instrument or
document contemplated hereby or thereby, (c) the execution, delivery,
performance or enforcement of this Agreement, the Notes or the Warrants or any
other certificate, instrument or document contemplated hereby or thereby or (d)
any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities. 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. In no event shall the Company have any indemnification or
contribution obligation with respect to any settlement entered into by any
Indemnitee without the prior consent of the Company, which shall not be
unreasonably withheld or delayed. Notwithstanding any of the foregoing, no
Indemnitee shall be entitled to any indemnification or contribution to the
extent such losses are found in a final judgment by a court of competent
jurisdiction to have resulted primarily and directly from the gross negligence
or willful misconduct of such Indemnitee.
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 on or
before July 25, 2002, unless the parties agree otherwise, this Agreement shall
terminate at the close of business on such date. Notwithstanding any termination
of this Agreement, any party not in breach of this Agreement shall preserve all
rights and remedies it may have against another party hereto for a breach of
this Agreement prior to or relating to the termination hereof.
m. Joint Participation in Drafting. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement, the Notes, the
Warrants and the Registration Rights Agreement. As such, the language used
herein and therein shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction will
be applied against any party to this Agreement.
n. Equitable Relief. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to each Purchaser by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
hereunder will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement, that each Purchaser
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.
o. Additional Acknowledgment. Each Purchaser acknowledges that it has
independently evaluated the merits of the transactions contemplated by this
Agreement and the Notes and the Warrants, that it has independently determined
to enter into the transactions
contemplated hereby and thereby, that it is not relying on any advice from or
evaluation by any other Purchaser, and that it is not acting in concert with any
other Purchaser in making its purchase of securities hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Purchasers and the Company have caused this
Agreement to be duly executed as of the date first above written.
BOSTON LIFE SCIENCES, INC.
By: /s/ S. Xxxxx Xxxxxxx
--------------------------
Name: S. Xxxxx Xxxxxxx
Title: Chief Executive Officer
PURCHASER:
XXXXXXX & XXXXXX VALUE PARTNERS, L.P.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxx
Title: General Partner
ADDRESS FOR NOTICES:
00 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Xx.
Telephone: (000) 000-0000
Telecopy: (212)
with copies of all notices to:
Xxxxxxxx Kill & Olick, P.C.
1251 Avenue of the Americas 10020-1182
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Bring, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Original Principal Amount of Notes:
$4,000,000.00