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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), dated
September __, 1998, by and between Cryomedical Sciences, Inc., a Delaware
corporation with an office at 0000 Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxxxxx 00000 (the "Company"), and ValorInvest, Ltd., a corporation formed
pursuant to the laws of Ireland with an address at 00 Xxxx xxx Xxxxxxx, 0000
Xxxxxx, Xxxxxxxxxxx (the "ValorInvest").
W I T N E S S E T H :
WHEREAS, the Company is desirous of obtaining capital through
a bridge financing of $600,000 (the "Bridge Financing") and a public offering
of $4,000,000 to $10,000,000 (the "Public Offering") to further its business
development and purposes; and
WHEREAS, the Company has a current capitalization consisting
of (a) 50,000,000 shares of common stock, par value $.001 per share ("Common
Stock"), of which 33,454,302 shares are issued and outstanding and (b)
9,378,800 shares of preferred stock, par value $.001 per share ("Preferred
Stock"), of which no shares are issued and outstanding; and
WHEREAS, ValorInvest is a merchant banking organization that
is willing to provide the Company with the Bridge Financing and, subject to the
adoption by the Company and its shareholders of a Plan of Recapitalization and
Financing, use its best efforts to arrange for the Public Offering through an
underwriter to be designated or approved by ValorInvest (the "Underwriter");
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants contained herein, the parties agree as follows:
1. Plan of Recapitalization and Financing.
(a) On or as of the date hereof, the Company's
Board of Directors shall adopt or shall have adopted the following Plan of
Recapitalization and Financing(the "Plan"), pursuant to which:
(i) the Company's certificate of
incorporation shall be amended to (A) reduce the
authorized number of shares of (1) Common Stock from
50,000,000 shares to 25,000,000 shares, and (2)
Preferred Stock from 9,378,800 shares to 1,000,000
shares, and (B) effectuate a reverse stock split of
either (1) one for five, (2) one for six, (3) one for
seven, (4) one for eight, (5) one for nine, (6) one
for ten, (7) one for eleven, (8) one for twelve, (9)
one for thirteen, (10) one for fourteen, (11) one for
fifteen, or (12) one for sixteen, each of such
alternatives to be approved by the shareholders of
the Company and one of such approved alternatives to
be chosen by the Board of Directors of the Company;
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(ii) to appropriately incentivize and
compensate management, the Board of Directors and
others who have performed services for the Company,
the Company shall (A) adopt a 1998 Stock Option Plan
containing 20,000,000 shares (on a pre-reverse stock
split basis) of Common Stock, options for which may
be issued at an exercise price of not less than the
fair market value, and (B) grant 10 year stock
options/warrants (on a pre-reverse stock split
basis), exercisable at $.25 per share (on a
pre-reverse stock split basis), the vesting of which
shall be subject to the approval of the Plan by the
Company's shareholders, in the following amounts to
the following persons or entities: each director -
720,000 shares of Common Stock; Xx. Xxxxxxx Xxxxxxxx
- 6,480,000 shares of Common Stock; Xxxx Xxxxx -
2,160,000 shares of Common Stock; Xxxxxxx & Xxxxxx,
LLP - 2,880,000 shares of Common Stock; BWM
Investments - 3,600,000 shares of Common Stock; and
to other employees of the Company - up to an
aggregate of 2,500,000 shares of Common Stock; and
(iii) the Company will prepare and file a
registration statement (the "Registration Statement")
with the Securities and Exchange Commission ("SEC")
for the sale of securities of the Company on such
terms and conditions as may be mutually agreed to
between the Company and the Underwriter.
(b) Within 60 days from the date hereof, the
Company shall call a shareholders meeting to approve
the Plan.
2. Bridge Financing.
(a) Concurrently with the execution and delivery
of this Agreement, the Company is selling to ValorInvest or its designee, and
ValorInvest or its designee is purchasing from the Company, 128 Units ("Series
E Units") at a price of $1,562.50 per Unit (an aggregate of $200,000), each
Unit to consist of (1) one share of Series E Convertible Preferred Stock
("Series E Preferred Stock") each share of which Series E Preferred Stock (A)
is convertible into 10,000 shares (pre-reverse stock split) of Common Stock,
(B) has one vote for each share of Common Stock into which it is convertible,
and (C) automatically converts into Common Stock upon the effectuation of the
reverse stock split pursuant to the Plan, and (2) a warrant to purchase 5,000
shares (pre-reverse stock split) of Common Stock at $.25 per share (pre-reverse
stock split).
(b) On or before December 28, 1998, the Company
shall sell to ValorInvest or its designee, and ValorInvest or its designee will
purchase from the Company, an additional 256 Series E Units at a price of
$1,562.50 per Unit (an aggregate of $400,000).
(c) The Company covenants and agrees to (i)
include the shares of Common Stock issuable upon conversion of the Series E
Preferred Stock sold hereunder in the Registration Statement at the Company's
cost and expense, and to keep such Registration
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Statement effective until such time as such shares of Common Stock may be sold
pursuant to an exemption from registration pursuant to the Securities Act of
1933, as amended (the "Securities Act"), and (ii), at the request of
ValorInvest, redeem the Series E Units at a price, as to each Unit, equal to
the price paid under this Agreement plus an additional amount determined by
multiplying the price paid under this Agreement by a fraction, the denominator
of which is the number "120" and the numerator of which is the number of months
(rounded to a higher whole number) elapsed between the date on which such Units
were purchased and the redemption date, in the event the Plan is not approved
by the Company's shareholders within 120 days from the date hereof.
3. Representations and Warranties by the Company. The
Company represents and warrants to ValorInvest as follows:
(a) Organization and Qualification. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has the full corporate power and
authority to own, lease, and operate its properties as it now does and to carry
on its business as it presently is being conducted. The Company is duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which the property owned or leased by it or the nature of the activities
conducted by it requires qualification, except where the failure to be so
qualified would not have a material adverse effect on the Company's business,
operations, financial condition, properties, or assets (a "Material Adverse
Effect").
(b) Authorization.
(i) This Agreement constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as may be limited by bankruptcy, insolvency
or other similar laws affecting the enforcement of creditors' rights in general
and subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The Company
has the power and authority to execute, deliver, and perform this Agreement and
to consummate the transactions contemplated herein. The execution and delivery
of this Agreement and the performance by the Company of its obligations
hereunder has been duly authorized by the Company's Board of Directors. No
approval by the shareholders of the Company is required.
(ii) The Series E Units have been duly
authorized and, when issued in accordance with this Agreement, shall be validly
issued, fully paid, and nonassessable. The issuance, sale, and delivery of the
Series E Units is not subject to any preemptive right of any shareholder of the
Company or to any right of first refusal or other right in favor of any person.
(c) Required Filings and Consents; No Conflict.
Except for applicable requirements of the Securities and Exchange Act of 1934,
as amended, (the "Exchange Act") and the Securities Act, the Company is not
required to submit any notice, report or other filing with any governmental
authority in connection with the execution, delivery or performance of this
Agreement. The execution and delivery of this Agreement and consummation of
the
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transactions contemplated herein do not and will not (i) conflict with or
violate any law, regulation, judgment, order or decree binding upon the Company
or the provision of its Certificate of Incorporation or By-laws, or (ii)
conflict with or result in a breach of any condition or provision of, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or result in the creation of imposition of any
lien or charge upon any of the properties or assets of the Company pursuant to,
any contract, agreement, permit, license, franchise or other instrument to
which the Company is a party or which is or purports to be binding upon the
Company or any of its property; nor will the same result in the loss of any
license, legal privilege or legal right enjoyed or possessed by the Company.
(d) Capitalization. The authorized capital stock
of the Company consists of (a) 50,000,000 shares of common stock, par value
$.001 per share, of which 33,454,302 shares are issued and outstanding, and (b)
9,378,800 shares of preferred stock, par value $.001 per share, none of which
are issued and outstanding. Except as disclosed in the documents referred to
in Section 3(e) hereof and as contemplated by this Agreement, there are no
outstanding subscriptions, options, warrants, calls, commitments, agreements or
rights of any kind or nature in respect of the authorized but unissued shares
of capital stock of the Company and none of such shares are reserved for
issuance for any purpose.
(e) Securities and Exchange Commission Filings;
Financial Statements.
(i) The Company has filed all forms,
reports and documents required to be filed with the Securities and Exchange
Commission ("SEC") since January 1, 1996 and has heretofore delivered to
ValorInvest true and complete copies of the Company's (i) Form 10-KSB for the
fiscal year ended December 28, 1997, and (ii) Quarterly Report on Form 10-QSB
for each of the quarters ended March 29, 1998 and June 28, 1998 (collectively,
"the SEC Reports"). The SEC Reports (x) were prepared in accordance with the
requirements of the Exchange Act, and (y) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(ii) The financial statements contained
in the SEC Reports have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and fairly present
the financial position of the Company as at the respective dates thereof and
the results of operations of the Company for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount. Since the date of the Form 10-QSB for the quarter ended
June 28, 1998, there has not been any material adverse change in the financial
condition of the Company.
(f) Litigation; Claims; Investigations. There
are no suits, actions, or claims, or any investigations or inquiries, by any
administrative agency or governmental body, or legal,
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administrative agency or governmental body, or legal administrative or
arbitration proceedings pending or, to the best knowledge of the Company,
threatened against the Company or to which the Company is or, in the case of
threatened proceedings, might become a party and which if decided adversely to
the Company would have a Material Adverse Effect, and the Company does not know
or have any grounds to know of any basis or grounds for any such suit, action,
claim, investigation, inquiry or proceeding. There is no outstanding order,
writ, judgment, injunction or decree of any court, administrative agency or
governmental body or arbitration tribunal against or affecting the Company or
any of the properties, rights, assets or business of the Company.
(g) No Series E Units Offered in U.S. or to any
U.S. Person. The Company has not offered the Series E Units to ValorInvest in
the United States or to any other person in the United States or to any U.S.
person ("U.S. Person") as that term is defined in Regulation S ("Regulation S")
promulgated under the Securities Act of 1933, as amended (the "Act"), unless
such U.S. Person is a professional fiduciary of a non-U.S. Person (as described
in Regulation S).
(h) No Directed Selling Efforts in Regard to this
Transaction. Neither the Company, nor any person acting for the Company, has
conducted any "directed selling efforts" in the United States (as such term is
defined in Regulation S) with respect to the offering of the Series E Units.
(i) Taxes.
(i) The Company has filed all tax
reports and returns required to be filed by it, including all federal, state,
local, and foreign tax returns and reports (the "Tax Returns"), and has paid
all taxes shown to be due by such Tax Returns as well as all other taxes,
assessments, and governmental charges which have become due or payable,
including all taxes which the Company has been required to withhold from
amounts owing to employees, creditors, and third parties.
(ii) The Tax Returns have not been
examined by the Internal Revenue Service for any period during the past five
years. No audits, inquiries, investigations, or examinations relating to the
Tax Returns are pending or, to the Company's knowledge, threatened by any
Governmental Authority and no claims have been asserted relating to any of the
Tax Returns filed for any year which, if determined adversely, would result in
the assertion by any Governmental Authority of any tax deficiency against the
Company.
(j) Personal Property; Inventory; Other Assets.
The Company has valid title, free and clear of any Liens, to all personal
property used in its business or presently located on its premises, including,
but not limited to, all items of personal property reflected in its financials.
The assets owned by the Company, together with those leased or licensed from
unrelated third parties on an arm's-length basis, constitute all of the assets,
tangible and intangible, used in or needed to conduct the Company's business in
the manner in which it is
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presently conducted by the Company.
(k) Real Property. The company owns no real
property. The Company enjoys peaceful and undisturbed possession under all
real property leases under which it is operating and all such real property
leases are valid and subsisting and in full force and effect. The transactions
contemplated by this Agreement will not materially adversely affect the
Company's right to use those properties for the same purpose and to the same
extent as they were being used by the Company prior to the date of this
Agreement.
(l) Contracts and Commitments. Each material
contract, lease, commitment, and other agreement to which the Company is a
party (the "Contracts") is set forth in the SEC Reports and other filings with
the SEC and is in full force and effect in accordance with its terms. Neither
the Company nor, to Company's knowledge, any other party is in default in any
material respect under any of the provisions of any of the Contracts, and no
condition exists that, with notice or lapse of time or both, would constitute a
default by the Company or, to Company's knowledge, any other party to any
Contract. No party to any Contract has made, asserted, or, to Company's
knowledge, has any defense, set off, or counterclaim under any Contract or has
exercised any option granted to it to cancel or terminate its Contract, to
shorten the term of its Contract, or to renew or extend the term of its
Contract, and the Company has not received any notice to that effect.
(m) Employee Matters.
(i) Except as disclosed in the SEC
Reports and other filings with the SEC, the Company (A) is not a party to or
bound by any pension, annuity, retirement, stock option, stock purchase,
savings, profit sharing, or deferred compensation plan or agreement, or any
retainer, consultant, bonus, group insurance, or other incentive or benefit
contract, plan, or arrangement applicable to employees of the Company an (B)
does not have any severance policy and no employee or former employee of the
company is entitled to any severance payment (or similar payment), either by
law or by agreement, upon the termination of his or her employment. No
employee of the Company is represented by any union or other collective
bargaining agent, there are no collective bargaining or other labor agreements
with respect to such employees, and to the best of the knowledge of the
Company, no union is attempting to organize any such employees. The
transactions contemplated by this Agreement will not trigger any payments of
any kind to any employee of the Company.
(ii) Neither the Company nor any
predecessor has ever contributed to, contributes to, has ever been required to
contribute to, or otherwise participated in or participates in or in any way,
directly or indirectly, has any liability with respect to any "multi-employer
plan" (within the meaning of Sections 3(37) or 4001(a)(3) of the Employment
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 414(f)
of the Internal Revenue Code of 1986, as amended (the "Code")) or any single
employer pension plan (within the meaning of Section 4001(a)(15) or ERISA)
which is subject to Title IV of ERISA or Section 412 of the Code.
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(iii) No third party has claimed that any
employee of or consultant to the Company has (A) violated or may be in
violating the terms and conditions of an agreement between such employee or
consultant and the third party, (B) disclosed any trade secret of the third
party during the course of their employment by the Company, or (C) interfered
with the employment relationship between the employee or consultant and the
third party.
(n) Permits and Licenses. The Company has all
material permits, licenses, franchises, and other authorizations (collectively,
"Licenses") necessary for the conduct of its business as currently conducted,
and all such Licenses are valid and in full force and effect.
(o) Insurance. The Company maintains such
insurance policies as is customary for a Company engaged in the business in
which the Company is engaged.
(p) Intellectual Property. The Company owns or
possesses adequate licenses or other rights to use all material trademarks,
trade names, service marks, service names, domain names, copyrights, logos,
slogans, patents, licenses (including software licenses), and other
intellectual property (collectively, "Intellectual Property") necessary for the
conduct of its business as currently conducted. Except as disclosed on the
Company's filings with the SEC, no claim is pending or, to the Company's
knowledge, threatened to the effect that the operations of the Company infringe
upon or conflict with the asserted rights of any other person under any
Intellectual Property, and, to the knowledge of the Company, there is no basis
for any such claim.
(q) Illegal Payments. Neither the Company, nor
any officer, director, or employee of the Company, directly or indirectly, has
paid or delivered any fee, commission, or other sum of money or item or
property, however characterized, to any finder, agent, government official, or
other party, in the United States or any other country, which is in any manner
related to the business or operations of the Company, which the Company or such
person knows or has reason to believe to have been illegal under any federal,
state, or local laws of the United States or any other country having
jurisdiction, and the Company has not participated, directly or indirectly, in
any boycotts or other similar practices affecting any of its actual or
potential customers.
(r) Material Misstatements or Omissions. No
representation, warranty, or statement made by the Company in this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to be stated in order to make
such representation, warranty, or statement not misleading. All documents
delivered on behalf of the Company in connection with this Agreement and the
transaction contemplated herein are true, complete, and correct.
4. Representations and Warranties by ValorInvest.
ValorInvest represents and warrants to the Company as follows:
(a) Organization. ValorInvest is a corporation
duly organized, validly
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existing, and in good standing under the laws of Ireland.
(b) Authorization of Agreement. The execution,
delivery, and performance of this Agreement by ValorInvest has been duly
authorized by all necessary action of ValorInvest and this Agreement
constitutes a valid and binding obligation of ValorInvest enforceable against
ValorInvest in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights in general and subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(c) Consents of Third Parties.
(i) The execution, delivery and
performance of this Agreement by ValorInvest will not (A) conflict with or
result in the breach or termination of, or constitute a default (or an event
which, with notice or lapse of time or both, would become a default) under, any
lease, agreement, commitment or other instrument, or any order, judgment or
decree, to which ValorInvest is a party or by which it or any of its properties
is bound; or (B) constitute a violation by ValorInvest of any law, regulation,
order, writ, judgment, injunction or decree applicable to it.
(ii) No consent, approval or
authorization of, or designation, declaration or filing with, any court,
governmental authority, or any other person or entity is required on the part
of ValorInvest in connection with the execution, delivery, and performance of
this Agreement.
(d) Offshore Transaction. (a) ValorInvest is not
a U.S. Person; (b) the Series E Units were not offered to ValorInvest in the
United States; (c) at the time of execution of this Agreement and the time of
any offer to ValorInvest to purchase the Series E Units hereunder, ValorInvest
was physically outside the United States; (d) ValorInvest is purchasing the
Series E Units for its own account and not on behalf of or for the benefit of
any U.S. Person, and the sale and resale of the Series E Units have not been
prearranged with any U.S. Person or buyer in the United States; and (e)
ValorInvest is not an underwriter, dealer, distributor, or other person who is
participating, pursuant to a contractual arrangement, in the distribution of
the Series E Units offered or sold in reliance on Regulation S.
(e) ValorInvest's Investment Decision. In making
its investment decision to purchase the Series E Units, ValorInvest is not
relying on any oral or written representations or assurances from the Company
or any other person other than as set forth in this Agreement and SEC Reports.
ValorInvest has such experience in business and financial matters that it is
capable of evaluating the risk of its investment and determining the
suitability of its investment. ValorInvest is an accredited investor as
defined in Rule 501 of Regulation D promulgated under the Act.
(f) ValorInvest's Economic Risk. ValorInvest
understands and acknowledges that an investment in the Series E Units and
Common Stock issuable upon conversion/exercise
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thereof involves a high degree of risk. ValorInvest understands and
acknowledges that there are limitations on the liquidity of the Series E Units
and the Common Stock issuable upon conversion/exercise thereof. ValorInvest
represents that ValorInvest is able to bear the economic risk of an investment
in the Series E Units and the Common Stock issuable upon conversion/exercise
thereof, including a possible total loss of investment. In making this
statement ValorInvest hereby represents and warrants to the Company that
ValorInvest has adequate means of providing for its current needs and
contingencies; and that ValorInvest is able to afford to hold the Series E
Units and the Common Stock issuable upon conversion/exercise thereof for an
indefinite period. Further, ValorInvest represents, as of the date of signing
this Agreement, that ValorInvest has no present need for liquidity in the
Series E Units or the Common Stock issuable upon conversion/exercise thereof
and ValorInvest is willing to accept such investment risks.
(g) No Government Recommendation or Approval.
ValorInvest understands that no United States federal or state agency, or
similar agency of any other country, has reviewed, approved, passed upon, or
made any recommendation or endorsement of the Company or the purchase of the
Series E Units.
(h) No Directed Selling Efforts in Regard to This
Transaction. To the actual knowledge of ValorInvest, without any independent
investigation, neither the Company, nor any person acting for the Company, has
conducted any "directed selling efforts" in the United States as such term is
defined in Regulation S, which in general, means any activity undertaken for
the purpose of, or that could reasonably be expected to have the effect of,
conditioning the market in the United States for any of the Series E Units
being offered in reliance on Regulation S. Such activity includes, without
limitation, the mailing of printed material to investors residing in the United
States, the holding of promotional seminars in the United States, and the
placement of advertisements with radio or television stations broadcasting in
the United States or in publications with a general circulation in the United
States, that refers to the offering of the Series E Units in reliance on
Regulation S.
(i) Company's Reliance on Representations of
ValorInvest. ValorInvest understands that the Series E Units is being offered
and sold to it in reliance on specific exemptions from the registration
requirements of U.S. securities laws and that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments, and understandings of ValorInvest set forth herein in order to
determine the applicability of such exemptions and the suitability of
ValorInvest to acquire the Series E Units.
(j) Series E Units Not Registered Under the Act
or Any State Act. ValorInvest understands that the offer and sale of the
Series E Units have not been registered under the Securities Act or any state
securities laws ("State Acts") and is being offered and sold pursuant to
Regulation S based in part upon the representations of ValorInvest contained
herein.
(k) No Public Solicitation. ValorInvest knows
of no public solicitation or
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advertisement of an offer in connection with the issuance and sale of the
Series E Units.
(l) Investment Intent. ValorInvest is acquiring
the Series E Units and the Common Stock issuable upon conversion/exercise
thereof for its own account for investment and not as a nominee and not with a
view to the distribution thereof. ValorInvest understands that ValorInvest
must bear the economic risk of this investment indefinitely unless the Series E
Units or the Common Stock issuable upon conversion/exercise thereof is
registered pursuant to the Act and any applicable State Acts, or an exemption
from such registration is available, and that the Company has no present
intention of registering any such sale of the Series E Units, except as
provided in Section 2(c) with respect to the Common Stock issuable upon
conversion of the Series E Units. ValorInvest represents and warrants to the
Company, as of the date of this Agreement, that ValorInvest has no present plan
or intention to sell the Series E Units or the Common Stock issuable upon
conversion/exercise thereof in the United States at any predetermined time, and
has made no predetermined arrangements to sell the Series E Units or the Common
Stock issuable upon conversion/exercise thereof.
(m) No Tax Advice From Company or Its Agents.
ValorInvest has had an opportunity to review with its own tax advisors the
foreign, U.S. federal, state and local tax consequences of this investment, and
the transactions contemplated by this Agreement. ValorInvest is relying solely
on such advisors and not on any statements or representations of the Company or
any of its agents and understands that ValorInvest (and not the Company) shall
be responsible for ValorInvest's own tax liability that may arise as a result
of this investment or the transactions contemplated by this Agreement.
(n) No Legal Advice from Company or Its Agents.
ValorInvest acknowledges that it has had the opportunity to review this
Agreement and the transactions contemplated by this Agreement with its own
legal counsel. ValorInvest is relying solely on such counsel and not on any
statements or representations of the Company or any of its agents for legal
advice with respect to this investment or the transactions contemplated by this
Agreement, except for representations, warranties and covenants set forth
herein.
(o) No Scheme to Evade Registration.
ValorInvest's acquisition of the Series E Units is not a transaction (or any
element of a series of transactions) that is part of a plan or scheme to evade
the registration provisions of the Act.
5. Resales; Stock Legends.
(a) Resales of Series E Units. ValorInvest
cannot resell the Series E Units, or the Common Stock issuable upon
conversion/exercise thereof, in the U.S. or to a U.S. Person unless such sales
are made (a) pursuant to an exemption from registration under the Act and
applicable State Acts after the Distribution Compliance Period (as defined
below); or (b) pursuant to an effective and current registration statement
under the Act. A transferee of the Series E Units, or the Common Stock
issuable upon conversion/exercise thereof, during the Distribution Compliance
Period shall execute an agreement containing provisions substantially
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similar to this Section 5. For purposes hereof, the term Distribution
Compliance Period shall be, with respect to the Series E Units purchased
pursuant to Section 2(a) hereof, the period commencing on the date hereof (the
"Closing Date") and ending one year after the Closing Date, and, with respect
to the transaction contemplated by Sections 2(b) and 2(c) hereof, the period
commencing on the date of such transaction and ending one year after the date
thereof.
(b) Legend. To insure compliance with the
provisions of the Act and State Acts, the certificate(s) evidencing the Series
E Units, and the Common Stock issuable upon conversion/exercise thereof, shall
bear a legend (the "Regulation S Restrictive Legend") substantially as follows:
"THE ISSUANCE OF THE SECURITIES EVIDENCED HEREBY HAS
NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES
COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES
LAW. THE SECURITIES WERE ISSUED PURSUANT TO A SAFE
HARBOR FROM REGISTRATION UNDER REGULATION S
("REGULATION S") PROMULGATED UNDER THE ACT. THE
SECURITIES MAY NOT BE OFFERED, SOLD, OR OTHERWISE
TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS
(AS SUCH TERM IS DEFINED IN REGULATION S) UNLESS SUCH
OFFERS, SALES, AND TRANSFERS ARE REGISTERED UNDER THE
ACT AND APPLICABLE STATE SECURITIES LAWS OR ARE MADE
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS."
(c) Removal of Legend.
(i) The Regulation S Restrictive Legend
may be removed (and the restrictions on the transferability of the Series E
Units and the Common Stock, issuable upon conversion/exercise thereof shall
terminate) when (i) such securities have been registered under the Act and sold
by the holder thereof in accordance with such registration, (ii) a written
opinion to the effect that such restrictions are no longer required or
necessary under any federal or state securities law or regulation has been
received from counsel for the holder thereof (provided that such counsel, and
the form and substance of such opinion, are reasonably satisfactory to the
Company) or counsel for the Company, (iii) the Series E Units or the Common
Stock issuable upon conversion/exercise thereof has been sold without
registration under the Act in compliance with Rule 144 or Rule 144A promulgated
under the Act, (iv) the Company is reasonably satisfied that the holder of the
Series E Units or the Common Stock issuable upon conversion/exercise thereof,
in accordance with the terms of Subsection (k) of Rule 144 or of Rule 144A
promulgated under the Act, shall be entitled to sell the Series E Units or the
Common Stock issuable upon conversion/exercise thereof pursuant to such
Subsection, or (v) a letter or an order has been issued to the holder thereof
by the staff of the Securities and Exchange Commission (the "Commission")
stating that no enforcement action shall be
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recommended by such staff or taken by the Commission, as the case may be, if
the Series E Units or the Common Stock issuable upon conversion/exercise
thereof are transferred in the United States or to a U.S. Person without
registration under the Act in accordance with the conditions set forth in such
letter or order and such letter or order specifies that no subsequent
restrictions on transfer are required.
(vi) Whenever the restrictions imposed by
this Section 5 shall terminate as hereinabove provided, the holder of a
certificate representing any of the Series E Units or the Common Stock issuable
upon conversion/exercise thereof then outstanding as to which such restrictions
shall have terminated shall be entitled to receive from the Company, without
expense to such holder, one or more new certificates for Series E Units or the
Common Stock issuable upon conversion/exercise thereof not bearing the
restrictive legend set forth in Section 5(b).
6. Covenants of the Company.
(a) Until March 31, 1999, ValorInvest shall have
a right of first refusal with respect to bona fide third party financing offer
received by the Company. If the Company receives such an offer of financing,
then the Company will promptly give ValorInvest written notice of such offer,
and will offer ValorInvest the opportunity to provide financing to the Company
on the same terms and conditions. If ValorInvest fails to exercise its right
of first refusal with respect to such offer within ten business days after
notice thereof, then ValorInvest shall have no further claim or right with
respect thereto provided that such offer is accepted within ninety (90) days
after notice shall have been given to ValorInvest. If the offer is not
accepted within such 90-day period or is modified, the Company shall adopt the
same procedure as with respect to the original offer. An offer to purchase
securities of the Company by an entity with whom the Company is entering into a
partnering arrangement for manufacturing, distribution, etc., shall not be
deemed to be a third party financing offer.
(b) Except with the prior agreement of
ValorInvest, through March 31, 1999 the Company agrees not to issue additional
shares of any type, or right thereto, except as contemplated by this Agreement
(including the last sentence of Section 6(a) hereof), and each of the persons
listed in Section 1(a)(ii) hereof agrees not to sell, transfer or otherwise
dispose of their shares or any interest therein (and the Company agrees to
cause such persons listed or otherwise referred to in Section 1(a)(ii) to
deliver a letter to such effect to ValorInvest within 30 days from the date
hereof).
(c) Prior to March 31, 1999, the Company will:
(i) conduct business only in the normal and ordinary course and in
substantially the same manner as conducted previously; (ii) use best efforts to
preserve intact its business organization and goodwill; (iii) keep ValorInvest
advised of significant business developments and of any significant decisions
concerning business operation; (iv) not make any dividend or other unusual
distributions of any kind to stockholders; (v) use its best efforts to retain
the services of Xxxxxxx X. Xxxxxxxx, Ph.D. as its Chief Executive Officer; and
(vi) not make any material change to any material agreements or incur any
material liabilities without ValorInvest's prior written consent.
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(d) In consideration for the expenditures of
time, effort and expense to be undertaken by ValorInvest in connection with the
financings contemplated by this Agreement, the Company agrees that so long as
ValorInvest is providing financing and complying with its covenants as provided
herein, the Company will not, between the date of the execution of this
Agreement and March 31, 1999, solicit, entertain or enter into any agreement or
understanding with, or furnish any nonpublic information to, any person or
entity other than ValorInvest or its representative with respect to the
acquisition (by purchase, merger or otherwise) of any or all of the capital
stock of the Company or the sale of any material portion of its assets. The
Company will promptly notify ValorInvest if it receives an unsolicited offer
for such a transaction, or obtain information that such an offer is likely to
me made, which notice will include the identity of the prospective offeror and
the price and terms of the proposed offer.
(e) For such period of time that ValorInvest or
its designee owns Series E Preferred Stock or shares of Common Stock issuable
upon conversion thereof, and provided that ValorInvest is not in breach of its
representations, warranties, covenants and agreements contained herein, the
Company agrees, at the request of ValorInvest, to nominate and use its best
efforts to elect a designee of ValorInvest as a director of the Company.
7. Covenants of ValorInvest. ValorInvest hereby
covenants and agrees that:
(a) ValorInvest will not knowingly make any
sale, transfer, or other disposition of the Series E Units or the Common Stock
issuable upon conversion/exercise thereof, or engage in hedging transactions
with respect to the Series E Units or the Common Stock issuable upon
conversion/exercise thereof, in violation of the Act (including Regulation S),
the Securities Exchange Act of 1934, as amended, any applicable State Acts, or
the rules and regulations of the Commission or of any state securities
commissions or similar state authorities promulgated under any of the
foregoing; and
(b) ValorInvest will use its best efforts to
arrange for the Underwriting through the Underwriter on the following terms and
conditions: (i) in the event the Company's Common Stock is trading at a price
of $.50 or more (pre-reverse stock split), 16,000,000 shares (pre-reverse stock
split) of Common Stock at not less than $.50 per share (pre-reverse stock
split), or (ii), in the event the Company's Common Stock is trading at a price
of less than $.50 per share (pre-reverse stock split), 16,000 Units ("Series F
Units") at $500 per Unit, each Series F Unit to consist of (1) one share of
Series F Convertible Preferred Stock ("Series F Preferred Stock"), each share
of which Series F Preferred Stock shall be (x) convertible into 1,000 shares
(pre-reverse stock split) of Common Stock and automatically converted into
Common Stock if the closing and bid price of the Common Stock on any day is
$.50 or more (pre-reverse stock split), and (y) entitled to one vote for each
share of Common Stock into which it is convertible, and (2) a warrant to
purchase 250 shares (pre-reverse stock split) of Common Stock at $.75 per share
(pre-reverse stock split). The parties acknowledge that the final terms of the
Underwriting will be as negotiated between the Company and the Underwriter and
that there is no assurance that the terms of the Underwriting will be as set
forth herein. The exercise of the warrants included in the Series E Units
shall be conditioned upon the Underwriting being completed in
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accordance with (b)(i) or (ii) hereunder.
8. Indemnification.
(a) Company's Indemnity. The Company agrees to
indemnify and hold harmless ValorInvest and its officers, directors,
shareholders, agents, and employees, from and against, for and in respect of,
and promptly shall reimburse them for, any and all claims, losses, costs, and
expenses (including the cost of any investigation and reasonable attorneys'
fees), damages, lawsuits, obligations, deficiencies, and liabilities
(collectively "Losses") which arise or result from or are related to (b) the
inaccuracy or breach of any representation or warranty made by the Company
herein, (c) any breach or failure of the Company to perform any of its
covenants or agreements set forth herein, or (d) any claim against ValorInvest
arising out of or relating to events occurring prior to the date hereof.
(b) ValorInvest's Indemnity. ValorInvest agrees
to indemnify and hold harmless the Company and its officer, directors,
shareholders, agents, and employees, from and against, for and in respect of,
and shall promptly reimburse them for, any and all Losses which arise or result
from or are related to (a) the inaccuracy or breach of any representation or
warranty made by ValorInvest herein, or (b) any breach or failure of
ValorInvest to perform any of its covenants or agreements set forth herein.
(c) Indemnification Procedure. An indemnifying
party shall not be liable under this Section 7 with respect to any claim made
against an indemnified party unless such indemnifying party shall be notified
in writing of the nature of the claim within a reasonable time after the
assertion thereof, but failure so to notify such indemnifying party shall not
relieve it from any liability which it may have otherwise than on account of
this Section 8. If a claim is made against an indemnified party and it
notifies the indemnifying party as herein provided, then the indemnifying
party, subject to the provisions set forth herein, shall be entitled to
participate at its own expense in the defense thereof or, if it so elects
within a reasonable time after receipt of such notice, to assume the defense
thereof, which defense shall be conducted by counsel chosen by it and
reasonably satisfactory to the indemnified party defendant or defendants in any
suit so brought. The indemnified party will have the right to employ its own
counsel in any such action, but the fees, expenses, and other charges of such
counsel will be at the expense of such indemnified party unless (a) the
employment of counsel by the indemnified party has been authorized in writing
by the indemnifying party, (b) the indemnified party has reasonably concluded
(based on advice of counsel) that there may be legal defenses available to it
or other indemnified parties that are different from or in addition to those
available to the indemnifying party, (c) a conflict or potential conflict
exists (based on advice of counsel to the indemnified party) between the
indemnified party and the indemnifying party (in which case the indemnifying
party will not have the right to direct the defense of such action on behalf of
the indemnified party), or (d) the indemnifying party has not employed counsel
to assume the defense of such action within a reasonable time after receiving
notice of the commencement of the action, in each of which cases the reasonable
fees, disbursements, and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party
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shall not, in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for the indemnified parties.
(d) Cumulative Remedies. All remedies provided
herein shall be cumulative and shall not preclude the assertion by any party
hereto of any other rights or the seeking of any other remedies against the
other parties hereto.
(e) Survival of Representations and Warranties.
The representations, warranties, covenants, and agreements made by the parties
in this Agreement, or in any certificate, agreement, or document furnished
pursuant hereto, and the obligation to indemnify hereunder shall survive the
date hereof and the consummation of the transactions contemplated hereby,
notwithstanding any investigation made by or on behalf of any party; provided,
however, (i) except as set forth in (ii) hereof, no action (other than an
action for fraud) shall be brought by any party hereto against any other party
hereto more than three (3) years after the date hereof, and (ii) with respect
to an action for breach of the representations and warranties of Section 3(i)
hereof (Taxes), no action shall be brought against the Company after the end of
the statute of limitations for such actions.
9. Miscellaneous.
(a) Notices. Any notice or other communication
under this Agreement shall be in writing and shall be considered given when
delivered personally, two days after being sent by a major overnight courier,
or five days after being mailed by registered air mail, to the parties at their
respective addresses set forth above (or at such other address as a party may
specify by notice to the other), with copies as follows:
If to the Company, to:
Xxxxxxx & Xxxxxx, LLP
000 Xxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
If to ValorInvest, to:
Powell, Goldstein, Xxxxxx & Xxxxxx LLP
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
0xx Xxxxx
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
(b) Expenses. Each party shall bear its own
expenses in connection with this
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Agreement and in connection with all obligations required to be performed by it
under this Agreement.
(c) Finders. ValorInvest and the Company each
represent and warrant to the other that it has not retained or dealt with any
broker or finder in connection with the transactions contemplated by this
Agreement, except that the Company acknowledges that the transaction was
brought about by BWM Investments.
(d) Entire Agreement. This Agreement contains a
complete statement of all the arrangements between the parties with respect to
its subject matter and supersedes any previous agreements between them relating
to that subject matter.
(e) Headings. The section headings of this
Agreement are for reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement.
(f) Governing Law. This Agreement shall be
governed by and construed in accordance with the law of the State of Delaware.
(g) Separability. If any provision of this
Agreement is invalid or unenforceable, the balance of this Agreement shall
remain in effect.
(h) Amendment; Waiver. This Agreement cannot be
altered, amended, changed, waived, terminated, or modified in any respect
unless the same shall be in writing and signed by the party to be charged
therewith. No waiver of any provision shall be construed as a waiver of any
other provision.
(i) No Third Party Beneficiaries; Assignments.
Nothing in this Agreement shall create or be deemed to create any third party
beneficiary rights in any person or entity (including, without limitation, any
employees of the Company) not a party to this Agreement. The Company may not
assign any of its rights or delegate any of its duties under this Agreement
without the consent of ValorInvest and any attempted assignment or delegation
in violation of this provision shall be void. ValorInvest may not assign any
of its rights or delegate any of its duties under this Agreement without the
consent of the Company, except that ValorInvest may assign any of its rights
and delegate any of its duties under this Agreement to any affiliate of
ValorInvest, provided that no assignment shall relieve ValorInvest of any of
its obligations under this Agreement. As used herein, the term "affiliate"
means any person or entity directly or indirectly controlled by, controlling,
or under common control with, any other person or entity.
(j) Counterparts. This Agreement may be executed
in counterparts, which together shall constitute the same instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed by
the respective parties as of the day and year first above written.
CRYOMEDICAL SCIENCES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx, Ph.D.
---------------------------------
VALORINVEST, LTD.
By: /s/
---------------------------------
Authorized Signature
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