1
Exhibit 4.4
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
April 3, 2001, by and among EMPYREAN BIOSCIENCE, INC., a Delaware corporation,
with headquarters located at 23800 Commerce Park Road, Suite A, Cleveland, Ohio
(the "COMPANY"), and the Buyers listed on Schedule I attached hereto
(individually, a "BUYER" or collectively "BUYERS").
WITNESSETH:
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("REGULATION D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase up to One Million Dollars
($1,000,000) of convertible debentures (the "CONVERTIBLE DEBENTURES") in up to
three (3) traunches, which shall be convertible into shares of the Company's
common stock, (the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), for
a total purchase price of up to One Million Dollars ($1,000,000) (the "PURCHASE
PRICE") in the respective amounts set forth opposite each Buyer(s) name on
Schedule I ( the "SUBSCRIPTION AMOUNT"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as Exhibit A (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated there under, and applicable state securities laws; and
WHEREAS, the Convertible Debentures are being offered through The May
Davis Group, Inc. (the "PLACEMENT AGENT"), as the Company's exclusive placement
agent for the offering; and
WHEREAS, the aggregate proceeds of the sale of the Convertible
Debentures contemplated hereby shall be held in escrow pursuant to the terms of
an escrow agreement substantially in the form of the Escrow Agreement attached
hereto as Exhibit B.
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s)hereby agree
as follows:
1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
-------------------------------------------
2
(a) PURCHASE OF CONVERTIBLE DEBENTURES. Subject to the
satisfaction (or waiver) of the terms and conditions of this Agreement,
each Buyer agrees, severally and not jointly, to purchase at Closing
(as defined herein below) and the Company agrees to sell and issue to
each Buyer, severally and not jointly, at Closing, Convertible
Debentures in amounts corresponding with the Subscription Amount set
forth opposite each Buyer's name on Schedule I hereto. Upon execution
hereof by a Buyer, the Buyer shall wire transfer the Subscription
Amount set forth opposite his name on Schedule I in same-day funds or a
check payable to "First Union National Bank, as Escrow Agent for
Empyrean Bioscience, Inc./ The May Davis Group, Inc.", which
Subscription Amount shall be held in escrow pursuant to the terms of
the Escrow Agreement (as hereinafter defined) and disbursed in
accordance therewith. Notwithstanding the foregoing, a Buyer may
withdraw his Subscription Amount and terminate this Agreement as to
such Buyer at any time after the execution hereof and prior to Closing
(as hereinafter defined).
(b) CLOSING DATE. The initial closing of the purchase and sale
of Five Hundred Thousand Dollars ($500,000) of Convertible Debentures
(the "INITIAL CLOSING") shall take place at 10:00 a.m. Eastern Standard
Time on the fifth (5th) business day ("INITIAL CLOSING DATE") following
the date hereof, subject to notification of satisfaction (or waiver) of
the conditions to the Closing set forth in Sections 6 and 7 below (or
such later date as is mutually agreed to by the Company and the
Buyers). The secondary closing of the purchase and sale of Two Hundred
and Fifty Thousand Dollars ($250,000) of Convertible Debentures (the
"SECONDARY CLOSING") shall take place at 10:00 a.m. Eastern Standard
Time on the fifth (5th) business day ("SECONDARY CLOSING DATE")
following the filing of a registration statement (the "REGISTRATION
STATEMENT") covering the shares of the Company's Common Stock issuable
upon conversion of the Convertible Debentures, subject to notification
of satisfaction (or waiver) of the conditions to the Closing set forth
in Sections 6 and 7 below (or such later date as is mutually agreed to
by the Company and the Buyers). A third closing of the purchase and
sale of Two Hundred and Fifty Thousand Dollars ($250,000) of
Convertible Debentures (the "THIRD CLOSING") shall take place at 10:00
a.m. Eastern Standard Time on the eleventh (11th) business day ("THIRD
CLOSING DATE") following the effectiveness of the Registration
Statement provided that for the ten (10) consecutive trading days
following the effectiveness of the Registration Statement the Company's
Common Stock is trading at an average daily volume of two hundred
thousand (200,000) shares with a minimum closing bid price of Sixty
Cents ($0.60) (the Initial Closing, Secondary Closing and the Third
Closing shall collectively be referred to as the "CLOSINGS") (the
Initial Closing Date, Secondary Closing Date and the Third Closing Date
shall collectively be referred to as the "CLOSING DATES"). The Closings
shall occur on the respective Closing Dates at the offices of Butler
Gonzalez, LLP, 1000 Stuyvesant Avenue, Suite 6, Union, NJ 07083 (or
such other place as is mutually agreed to by the Company and the
Buyers).
(c) ESCROW ARRANGEMENTS; FORM OF PAYMENT. Upon execution
hereof by Buyer(s) and pending the respective Closings, the aggregate
proceeds of the sale of the Convertible Debentures to Buyer(s) pursuant
hereto, plus the fees and expenses of the
2
3
Placement Agent, shall be deposited in a non-interest bearing escrow
account with First Union National Bank, as escrow agent ("ESCROW
AGENT"), pursuant to the terms of an escrow agreement between the
Company, the Placement Agent and the Escrow Agent in the form attached
hereto as Exhibit B (the "ESCROW AGREEMENT"). Subject to the
satisfaction of the terms and conditions of this Agreement, on the
respective Closing Dates, (i) the Escrow Agent shall deliver to the
Company in accordance with the terms of the Escrow Agreement such
aggregate gross proceeds for the Convertible Debentures to be issued
and sold to such Buyer(s) at the respective Closing minus the fees and
expenses of the Placement Agent, by wire transfer of immediately
available funds in accordance with the Company's written wire
instructions, and (ii) the Company shall deliver to each Buyer,
Convertible Debentures which such Buyer(s) is purchasing in amounts
indicated opposite such Buyer's name on Schedule I, duly executed on
behalf of the Company.
2. BUYER'S REPRESENTATIONS AND WARRANTEES.
--------------------------------------
Each Buyer represents and warrants, severally and not jointly,
that:
(a) INVESTMENT PURPOSE. Each Buyer is acquiring the
Convertible Debentures and, upon conversion of Convertible Debentures,
the Buyer will acquire the Conversion Shares then issuable, for its own
account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided,
however, that by making the representations herein, such Buyer reserves
the right to dispose of the Conversion Shares at any time in accordance
with or pursuant to an effective registration statement covering such
Conversion Shares or an available exemption under the 1933 Act.
(b) ACCREDITED INVESTOR STATUS. Each Buyer is an "Accredited
Investor" as that term is defined in Rule 501(a)(3) of Regulation D.
(c) RELIANCE ON EXEMPTIONS. Each Buyer understands that the
Convertible Debentures are being offered and sold to it in reliance on
specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying in
part upon the truth and accuracy of, and such Buyer's compliance with,
the representations, warranties, agreements, acknowledgments and
understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to
acquire such securities.
(d) INFORMATION. Each Buyer and its advisors (and his or, its
counsel), if any, have been furnished with the Company's 10-KSB for the
fiscal year ended December 31, 2000 and all materials relating to the
business, finances and operations of the Company and information he
deemed material to making an informed investment decision regarding his
purchase of the Convertible Debentures and the Conversion Shares, which
have been requested by such Buyer. Each Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company and
its management. Neither
3
4
such inquiries nor any other due diligence investigations conducted by
such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below. Each Buyer
understands that its investment in the Convertible Debentures and the
Conversion Shares involves a high degree of risk. Each Buyer is in a
position regarding the Company, which, based upon employment, family
relationship or economic bargaining power, enabled and enables such
Buyer to obtain information from the Company in order to evaluate the
merits and risks of this investment. Each Buyer has sought such
accounting, legal and tax advice, as it has considered necessary to
make an informed investment decision with respect to its acquisition of
the Convertible Debentures and the Conversion Shares.
(e) NO GOVERNMENTAL REVIEW. Such Buyer understands that no
United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or
endorsement of the Convertible Debentures or the Conversion Shares, or
the fairness or suitability of the investment in the Convertible
Debentures or the Conversion Shares, nor have such authorities passed
upon or endorsed the merits of the offering of the Convertible
Debentures or the Conversion Shares.
(f) TRANSFER OR RESALE. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Convertible
Debentures have not been and are not being registered under the 1933
Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered
thereunder, or (B) such Buyer shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect that
such securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration
requirements; (ii) any sale of such securities made in reliance on Rule
144 under the 1933 Act (or a successor rule thereto) ("RULE 144") may
be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale
is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC there under; and
(iii) neither the Company nor any other person is under any obligation
to register such securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption there
under. The Company reserves the right to place stop transfer
instructions against the shares and certificates for the Conversion
Shares.
(g) LEGENDS. Such Buyer understands that the certificates or
other instruments representing the Convertible Debentures and or the
Conversion Shares shall bear a restrictive legend in substantially the
following form (and a stop transfer order may be placed against
transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES
4
5
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED
SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of the Conversion
Shares upon which it is stamped, if, unless otherwise required by state
securities laws, (i) in connection with a sale transaction, provided
the Conversion Shares are registered under the 1933 Act or (ii) in
connection with a sale transaction, such holder provides the Company
with an opinion of counsel, in form acceptable to the Company and its
counsel, to the effect that a public sale, assignment or transfer of
the Conversion Shares may be made without registration under the 1933
Act.
(h) AUTHORIZATION, ENFORCEMENT. This Agreement has been duly
and validly authorized, executed and delivered on behalf of such Buyer
and is a valid and binding agreement of such Buyer enforceable in
accordance with its terms, except as such enforceability may be limited
by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating
to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.
(i) RECEIPT OF DOCUMENTS. Such Buyer and his or its counsel
has received and read in their entirety: (i) this Agreement and each
representation, warranty and covenant set forth herein, the
Registration Rights Agreement, and the Escrow Agreement; (ii) all due
diligence and other information necessary to verify the accuracy and
completeness of such representations, warranties and covenants; (iii)
the Company's Form 10-KSB for the fiscal year ended December 31, 2000;
and (iv) answers to all questions the Buyer submitted to the Company
regarding an investment in the Company; and the Buyer has relied on the
information contained therein and has not been furnished any other
documents, literature, memorandum or prospectus.
(j) DUE FORMATION OF CORPORATE AND OTHER BUYERS. If the
Buyer(s) is a corporation, trust, partnership or other entity that is
not an individual person, it has been formed and validly exists and has
not been organized for the specific purpose of purchasing the
Convertible Debentures and is not prohibited from doing so.
5
6
(k) DUE AUTHORIZATION OF FIDUCIARY BUYERS. If the Buyer(s) is
purchasing the Convertible Debentures in a fiduciary capacity for
another person or entity, including, without limitation, a corporation,
partnership, trust or any other entity, the Buyer(s) has been duly
authorized and empowered to execute this Agreement and such other
person fulfills all the requirements for purchase of the Convertible
Debentures and agrees to be bound by the obligations, representations,
warranties, and covenants contained herein. Upon request of the
Company, the Buyer(s) will provide true, complete and current copies of
all relevant documents creating the Buyers, authorizing its investment
in the Company and/or evidencing the satisfaction of the foregoing.
(l) FURTHER REPRESENTATIONS BY FOREIGN BUYERS. If the Buyer(s)
is not a U.S. Person (as defined below), such Buyer hereby represents
that such Buyer(s) is satisfied as to full observance of the laws of
such Buyer's jurisdiction in connection with any invitation to
subscribe for the securities or any use of this Agreement, including:
(i) the legal requirements of such Buyer's jurisdiction for the
purchase of the securities, (ii) any foreign exchange restrictions
applicable to such purchase, (iii) any governmental or other consents
that may need to be obtained, and (iv) the income tax and other tax
consequences, if any, which may be relevant to the purchase, holding,
redemption, sale, or transfer of the securities. Such Buyer's
subscription and payment for, and such Buyer's continued beneficial
ownership of, the securities will not violate any applicable securities
or other laws of such Buyer's jurisdiction. The term "U.S. Person" as
used herein shall mean any person who is a citizen or resident of the
United States or Canada, or any state, territory or possession thereof,
including, but not limited to, any estate of any such person, or any
corporation, partnership, trust or other entity created or existing
under the laws thereof, or any entity controlled or owned by any of the
foregoing.
(m) NO LEGAL ADVICE FROM THE COMPANY. Each Buyer acknowledges,
that it had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with his or its own legal
counsel and investment and tax advisors. Each Buyer is relying solely
on such counsel and advisors and not on any statements or
representations of the Company or any of its representatives or agents
for legal, tax or investment advice with respect to this investment,
the transactions contemplated by this Agreement or the securities laws
of any jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to each of the Buyers that:
(a) ORGANIZATION AND QUALIFICATION. The Company and its
subsidiaries are corporations duly organized and validly existing in
good standing under the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power to own their
properties and to carry on their business as now being conducted. Each
of the Company and its subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by
6
7
it makes such qualification necessary, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries taken as a
whole.
(b) AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER
INSTRUMENTS. (i) The Company has the requisite corporate power and
authority to enter into and perform this Agreement, the Registration
Rights Agreement and any related agreements, and to issue the
Convertible Debentures and the Conversion Shares in accordance with the
terms hereof and thereof, (ii) the execution and delivery of this
Agreement, the Registration Rights Agreement and any related agreements
by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including, without limitation, the
issuance of the Convertible Debentures the Conversion Shares and the
reservation for issuance and the issuance of the Conversion Shares
issuable upon conversion or exercise thereof, have been duly authorized
by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders, (iii) this Agreement and the Registration Rights
Agreement and any related agreements have been duly executed and
delivered by the Company, (iv) this Agreement, the Registration Rights
Agreement and any related agreements constitute the valid and binding
obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
(c) CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of 90,000,000 shares of Common
Stock, par value $0.0001 per share, of which as of April 3, 2001,
49,025,326 shares were issued and outstanding. All of such outstanding
shares have been validly issued and are fully paid and nonassessable.
Except as disclosed in the SEC Documents (as defined in Section 3(f))
as amended, no shares of Common Stock are subject to preemptive rights
or any other similar rights or any liens or encumbrances suffered or
permitted by the Company. Except as disclosed in the SEC Documents, 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, any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements
by which the Company or any of its subsidiaries is or may become bound
to issue additional shares of capital stock of the Company or any of
its subsidiaries or options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of
the Company or any of its subsidiaries, (ii) there are no outstanding
debt securities and (iii) there are no agreements or arrangements under
which the Company or any of its subsidiaries is obligated to register
the sale of any of their securities under the 1933 Act (except pursuant
to the Registration Rights Agreement). There are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Convertible Debentures as described in
this Agreement. The Company has attached as Schedule 3(C) true and
correct copies of the Company's Certificate of
7
8
Incorporation, as amended and as in effect on the date hereof (the
"CERTIFICATE OF INCORPORATION"), and the Company's By-laws, as in
effect on the date hereof (the "BY-LAWS"), and the terms of all
securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto other than
stock options issued to employees and consultants.
(d) ISSUANCE OF SECURITIES. The Convertible Debentures are
duly authorized and, upon issuance in accordance with the terms hereof,
shall be duly issued, fully paid and nonassessable, are free from all
taxes, liens and charges with respect to the issue thereof. The
Conversion Shares issuable upon conversion of the Convertible
Debentures have been duly authorized and reserved for issuance. Upon
conversion or exercise in accordance with the Convertible Debentures
the Conversion Shares will be duly issued, fully paid and
nonassessable.
(e) NO CONFLICTS. Except as disclosed in SEC Documents, the
execution, delivery and performance of this Agreement by the Company
and the consummation by the Company of the transactions contemplated
hereby will not (i) result in a violation of the Certificate of
Incorporation or the By-laws or (ii) conflict with or constitute a
default (or an event which with notice or lapse of time or both would
become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party,
or result in a violation of any law, rule, regulation, order, judgment
or decree (including federal and state securities laws and regulations
and the rules and regulations of The National Association of Securities
Dealers, Inc., OTC Bulletin Board on which the Common Stock is quoted)
applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound or
affected. Except as disclosed in the SEC Documents, neither the Company
nor its subsidiaries is in violation of any term of or in default under
its Certificate of Incorporation or By-laws or their organizational
charter or by-laws, respectively, or any material contract, agreement,
mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or
its subsidiaries. The business of the Company and its subsidiaries is
not being conducted in violation of any material law, ordinance, or
regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the 1933 Act and
any applicable state securities laws, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under or
contemplated by this Agreement or the Registration Rights Agreement in
accordance with the terms hereof or thereof. Except as disclosed in the
SEC Documents, all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the
date hereof. The Company and its subsidiaries are unaware of any facts
or circumstance, which might give rise to any of the foregoing.
8
9
(f) SEC DOCUMENTS: FINANCIAL STATEMENTS. Since January 1,
2000, the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC under of
the Securities Exchange Act of 1934, as amended (the "1934 ACT") (all
of the foregoing filed prior to the date hereof or amended after the
date hereof and all exhibits included therein and financial statements
and schedules thereto and documents incorporated by reference therein,
being hereinafter referred to as the "SEC DOCUMENTS"). The Company has
delivered to the Buyers or their representatives, or made available
through the SEC's website at http://www.sec.gov, true and complete
copies of the SEC Documents. As of their respective dates, the
financial statements of the Company disclosed in the SEC Documents (the
"FINANCIAL STATEMENTS") complied as to form in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such Financial Statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). No
other information provided by or on behalf of the Company to the Buyer
which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) and (i) of this
Agreement, contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(g) 10(b)-5. The SEC Documents do not include any untrue
statements of material fact, nor do they omit to state any material
fact required to be stated therein necessary to make the statements
made, in light of the circumstances under which they were made, not
misleading.
(h) ABSENCE OF LITIGATION. Except as disclosed in the SEC
Documents, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending against or affecting the
Company, the Common Stock or any of the Company's subsidiaries, wherein
an unfavorable decision, ruling or finding would (i) have a material
adverse effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any
of the documents contemplated herein, or (iii) except as expressly
disclosed in the SEC Documents, have a material adverse effect on the
business, operations, properties, financial condition or results of
operation of the Company and its subsidiaries taken as a whole.
(i) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF THE
CONVERTIBLE DEBENTURES. The Company acknowledges and agrees that the
Buyer(s) is acting solely in
9
10
the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that the Buyer(s) is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to
this Agreement and the transactions contemplated hereby and any advice
given by the Buyer(s) or any of their respective representatives or
agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to such Buyer's purchase of
the Convertible Debentures or the Conversion Shares.
(j) NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 1933 Act) in connection
with the offer or sale of the Convertible Debentures or the Conversion
Shares.
(k) NO INTEGRATED OFFERING. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would require registration of the Convertible Debentures or the
Conversion Shares under the 1933 Act or cause this offering of the
Convertible Debentures or the Conversion Shares to be integrated with
prior offerings by the Company for purposes of the 1933 Act.
(l) EMPLOYEE RELATIONS. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of
the Company or any of its subsidiaries, is any such dispute threatened.
None of the Company's or its subsidiaries' employees is a member of a
union and the Company and its subsidiaries believe that their relations
with their employees are good.
(m) INTELLECTUAL PROPERTY RIGHTS. Except as otherwise
disclosed in the SEC Documents, the Company and its subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to
conduct their respective businesses as now conducted. The Company and
its subsidiaries do not have any knowledge of any infringement by the
Company or its subsidiaries of trademark, trade name rights, patents,
patent rights, copyrights, inventions, licenses, service names, service
marks, service mark registrations, trade secret or other similar rights
of others, and, to the knowledge of the Company there is no claim,
action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its subsidiaries
regarding trademark, trade name, patents, patent rights, invention,
copyright, license, service names, service marks, service mark
registrations, trade secret or other infringement; and the Company and
its subsidiaries are unaware of any facts or circumstances which might
give rise to any of the foregoing.
10
11
(n) ENVIRONMENTAL LAWS. The Company and its subsidiaries are
(i) in compliance with any and all applicable foreign, federal, state
and local laws and regulations relating to the protection of human
health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have
received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of
any such permit, license or approval.
(o) TITLE. Any real property and facilities held under lease
by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its subsidiaries.
(p) INSURANCE. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the
Company and its subsidiaries are engaged. Neither the Company nor any
such subsidiary has been refused any insurance coverage sought or
applied for and neither the Company nor any such subsidiary has any
reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect
the condition, financial or otherwise, or the earnings, business or
operations of the Company and its subsidiaries, taken as a whole.
(q) REGULATORY PERMITS. The Company and its subsidiaries
possess all material certificates, authorizations and permits issued by
the appropriate federal, state or foreign regulatory authorities
necessary to conduct their respective businesses, and neither the
Company nor any such subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permit.
(r) INTERNAL ACCOUNTING CONTROLS. The Company and each of its
subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability,
and (iii) the recorded amounts for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(r) NO MATERIAL ADVERSE BREACHES, ETC. Except as set forth in
the SEC Documents, neither the Company nor any of its subsidiaries is
subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation which in the judgment of
the Company's officers has or is expected in the future to have a
material adverse effect on the business, properties, operations,
financial condition, results
11
12
of operations or prospects of the Company or its subsidiaries. Neither
the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company's officers, has
or is expected to have a material adverse effect on the business,
properties, operations, financial condition, results of operations or
prospects of the Company or its subsidiaries.
(s) TAX STATUS. The Company and each of its subsidiaries has
made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is
subject and (unless and only to the extent that the Company and each of
its subsidiaries has set aside on its books provisions reasonably
adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any
such claim.
(t) CERTAIN TRANSACTIONS. Except as set forth in the SEC
Documents and except for arm's length transactions pursuant to which
the Company makes payments in the ordinary course of business upon
terms no less favorable than the Company could obtain from third
parties and other than the grant of stock options disclosed in the SEC
Documents, none of the officers, directors, or employees of the Company
is presently a party to any transaction with the Company (other than
for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing
of services to or by, providing for rental of real or personal property
to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer,
director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
(u) FEES AND RIGHTS OF FIRST REFUSAL. The Company is not
obligated to offer the securities offered hereunder on a right of first
refusal basis or otherwise to any third parties including, but not
limited to, current or former shareholders of the Company,
underwriters, brokers, agents or other third parties.
4. COVENANTS.
---------
(a) BEST EFFORTS. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
(b) FORM D. The Company agrees to file a Form D with respect
to the Conversion Shares as required under Regulation D and to provide
a copy thereof to the
12
13
Placement Agent promptly after such filing. The Company shall, on or
before the respective Closing Date, take such action as the Company
shall reasonably determine is necessary to qualify the Conversion
Shares, or obtain an exemption for the Conversion Shares for sale to
the Buyers at the Closing pursuant to this Agreement under applicable
securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or
prior to the respective Closing Date.
(c) REPORTING STATUS. Until the earlier of (i) the date as of
which the Investor(s) (as that term is defined in the Registration
Rights Agreement) may sell all of the Conversion Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto), or (ii) the date on which (A) the Buyer(s) shall
have sold all the Conversion Shares and (B) none of the Convertible
Debentures are outstanding (the "REGISTRATION PERIOD"), the Company
shall use its commercially reasonable efforts to file in a timely
manner all reports required to be filed with the SEC pursuant to the
1934 Act and the regulations of the SEC there under, and the Company
shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations
there under would otherwise permit such termination.
(d) USE OF PROCEEDS. The Company will use the proceeds from
the sale of the Convertible Debentures for general corporate purposes.
(e) RESERVATION OF SHARES. The Company shall take all action
reasonably necessary to at all times have authorized, and reserved for
the purpose of issuance, such number of shares of Common Stock as shall
be necessary to effect the issuance of the Conversion Shares. If at any
time the Company does not have available such shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
of the Conversion Shares of the Company shall call and hold a special
meeting of the shareholders within sixty (60) days of such occurrence,
for the sole purpose of increasing the number of shares authorized. The
Company's management shall recommend to the shareholders to vote in
favor of increasing the number of shares of Common Stock authorized.
Management shall also vote all of its shares in favor of increasing the
number of authorized shares of Common Stock.
(f) LISTINGS OR QUOTATION. The Company shall promptly secure
the listing or quotation of the Conversion Shares upon each national
securities exchange, automated quotation system or Over-The-Counter
Bulletin Board or other market, if any, upon which shares of Common
Stock are then listed or quoted (subject to official notice of
issuance) and shall use its best efforts to maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable under the terms of this
Agreement. The Company shall maintain the Common Stock's authorization
for quotation in the over-the counter market
13
14
(g) EXPENSES. Each of the Company and the Buyer(s) shall pay
all costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery of this
Agreement and the Registration Rights Agreement. The costs and expenses
of the Placement Agent and its counsel as well as the issuer's counsel
shall be paid for by the Company at Closing in accordance with the
terms of the Placement Agent Agreement between the Company and the
Placement Agent, dated April 3, 2001.
(h) CORPORATE EXISTENCE. So long as any of the Convertible
Debentures remain outstanding, the Company shall not directly or
indirectly consummate any merger, reorganization, restructuring,
consolidation, sale of all or substantially all of the Company's assets
or any similar transaction or related transactions (each such
transaction, a "SALE OF THE COMPANY") unless, prior to the consummation
of a Sale of the Company, the Company makes appropriate provision to
insure that, upon the consummation of such Sale of the Company, each of
the holders of the Convertible Debentures will thereafter have the
right to acquire and receive such shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore acquirable and
receivable upon the conversion of such holder's Convertible Debentures
had such Sale of the Company not taken place. In any such case, the
Company will make appropriate provision with respect to such holders'
rights and interests to insure that the provisions of this Section 4(h)
will thereafter be applicable to the Convertible Debentures.
(i) TRANSACTIONS WITH AFFILIATES. So long as any Convertible
Debentures are outstanding, the Company shall not, and shall cause each
of its subsidiaries not to, enter into, amend, modify or supplement, or
permit any subsidiary to enter into, amend, modify or supplement any
agreement, transaction, commitment, or arrangement with any of its or
any subsidiary's officers, directors, person who were officers or
directors at any time during the previous two (2) years, stockholders
who beneficially own five percent (5%) or more of the Common Stock, or
Affiliates (as defined below) or with any individual related by blood,
marriage, or adoption to any such individual or with any entity in
which any such entity or individual owns a five percent (5%) or more
beneficial interest (each a "Related Party"), except for (a) customary
employment arrangements and benefit programs on reasonable terms and
customary agreements, (b) any investment in an Affiliate of the
Company, (c) any agreement, transaction, commitment, or arrangement on
an arms-length basis on terms no less favorable than terms which would
have been obtainable from a person other than such Related Party, (d)
any agreement transaction, commitment, or arrangement which is approved
by a majority of the disinterested directors of the Company, for
purposes hereof, any director who is also an officer of the Company or
any subsidiary of the Company shall not be a disinterested director
with respect to any such agreement, transaction, commitment, or
arrangement. "Affiliate" for purposes hereof means, with respect to any
person or entity, another person or entity that, directly or
indirectly, (i) has a ten percent (10%) or more equity interest in that
person or entity, (ii) has ten percent (10%) or more common ownership
with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or
14
15
entity. "Control" or "controls" for purposes hereof means that a person
or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
(j) TRANSFER AGENT. The Company covenants and agrees
that, in the event that the Company's agency relationship with the
transfer agent should be terminated for any reason prior to a date
which is two (2) years after the Closing Date, the Company shall
immediately appoint a new transfer agent and shall require that the
transfer agent execute and agree to be bound by the terms of the
Irrevocable Instructions (as defined herein) to Transfer Agent.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall issue irrevocable instructions in the form
attached hereto as Exhibit D to its transfer agent to issue
certificates, registered in the name of the Buyer(s) or its respective
nominee(s), for the Conversion Shares representing such amounts of
Convertible Debentures as specified from time to time by the Buyer(s)
to the Company upon conversion of the Convertible Debentures (the
"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to registration of
the Conversion Shares under the 1933 Act, all such certificates shall
bear the restrictive legend specified in Section 2(g) of this
Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5,
and stop transfer instructions to give effect to Section 2(f) hereof
(in the case of the Conversion Shares prior to registration of such
shares under the 1933 Act) will be given by the Company to its transfer
agent and that the Conversion Shares shall otherwise be freely
transferable on the books and records of the Company as and to the
extent provided in this Agreement and the Registration Rights
Agreement. Nothing in this Section 5 shall affect in any way the
Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of Conversion Shares. If the Buyer(s)
provides the Company with an opinion of counsel, reasonably
satisfactory in form, and substance to the Company, that registration
of a resale by the Buyer(s) of any of the Conversion Shares is not
required under the 1933 Act, the Company shall permit the transfer of
the Conversion Shares promptly instruct its transfer agent to issue one
or more certificates in such name and in such denominations as
specified by the Buyer. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Buyer by
vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law
for a breach of its obligations under this Section 5 will be inadequate
and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyer(s) 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.
15
16
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the
Convertible Debentures to the Buyer(s) at the respective Closing is
subject to the satisfaction, at or before the respective Closing Dates,
of each of the following conditions, provided that these conditions are
for the Company's sole benefit and may be waived by the Company at any
time in its sole discretion:
(a) Each Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
(b) The Buyer(s) shall have delivered to the Escrow Agent the
Purchase Price for Convertible Debentures in respective amounts as set
forth next to each Buyer as outlined on Schedule I attached hereto and
the Escrow Agent shall have delivered such funds to the Company by wire
transfer of immediately available U.S. funds pursuant to the wire
instructions provided by the Company.
(c) The representations and warranties of the Buyer(s) shall
be true and correct in all material respects as of the date when made
and as of the respective Closing Date as though made at that time
(except for representations and warranties that speak as of a specific
date), and the Buyer(s) shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with
by the Buyer(s) at or prior to the respective Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
------------------------------------------------
The obligation of the Buyer(s) hereunder to purchase the
Convertible Debentures at the respective Closing is subject to the
satisfaction, at or before the respective Closing Date, of each of the
following conditions, provided that these conditions are for the
Buyer's sole benefit and may be waived by the Buyer(s) at any time in
its sole discretion:
(a) The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer(s).
(b) The Common Stock shall be authorized for quotation on The
National Association of Securities Dealers, Inc. OTC Bulletin Board,
trading in the Common Stock shall not have been suspended for any
reason and all of the Conversion Shares issuable upon conversion of the
Convertible Debentures shall be approved for listing or quotation on
The National Association of Securities Dealers, Inc. OTC Bulletin
Board.
(c) The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that
any of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case, such representations and
warranties shall be true and correct without further qualification) as
16
17
of the date when made and as of the respective Closing Date as though
made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied
and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or
complied with by the Company at or prior to the respective Closing
Date. The Buyer shall have received a certificate, executed by the
President of the Company, dated as of the respective Closing Date, to
the foregoing effect and as to such other matters as may be reasonably
requested by the Buyer including, without limitation an update as of
the respective Closing Date regarding the representation contained in
Section 3(c) above.
(d) The Placement Agent on behalf of the Buyer(s), shall
receive an opinion letter from counsel to the Company (updated where
applicable) prior to the Initial Closing substantially in form
acceptable to the Investor.
(e) The Company shall have executed and delivered to the
Buyer(s) the Convertible Debentures in the respective amounts set forth
opposite each Buyer(s) name on Schedule I attached hereto.
(f) As of the respective Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Convertible Debentures,
shares of Common Stock to effect the conversion of all of the
Conversion then outstanding.
(g) The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyer, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
8. INDEMNIFICATION.
---------------
(a) In consideration of the Buyer's execution and delivery of
this Agreement and acquiring the Convertible Debentures and the
Conversion Shares hereunder, and in addition to all of the Company's
other obligations under this Agreement, the Company shall defend,
protect, indemnify and hold harmless the Buyer(s) and each other holder
of the Convertible Debentures and the Conversion Shares, and all of
their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "BUYER INDEMNITEES")
from and against any and all actions, causes of action, suits, claims,
losses, costs, penalties, fees, liabilities and damages, and expenses
in connection therewith (irrespective of whether any such Buyer
Indemnitee is a party to the action for which indemnification hereunder
is sought), and including reasonable attorneys' fees and disbursements
(the "INDEMNIFIED LIABILITIES"), incurred by the Buyer Indemnitees or
any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by
the Company in this Agreement, the
17
18
Convertible Debentures or the Registration Rights Agreement or any
other certificate, instrument or document contemplated hereby or
thereby, (b) any breach of any covenant, agreement or obligation of the
Company contained in this Agreement, or the Registration Rights
Agreement or any other certificate, instrument or document contemplated
hereby or thereby, or (c) any cause of action, suit or claim brought or
made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or
any other instrument, document or agreement executed pursuant hereto by
any of the Indemnities, any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the
issuance of the Convertible Debentures or the status of the Buyer or
holder of the Convertible Debentures the Conversion Shares, as a Buyer
of Convertible Debentures in the Company. To the extent that the
foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
(b) In consideration of the Company's execution and delivery
of this Agreement, and in addition to all of the Buyer's other
obligations under this Agreement, the Buyer shall defend, protect,
indemnify and hold harmless the Company and all of it's officers,
directors, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this
Agreement) (collectively, the "COMPANY INDEMNITEES") from and against
any and all Indemnified Liabilities incurred by the Indemnitees or any
of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by
the Buyer(s) in this Agreement, the Registration Rights Agreement, or
any other instrument or document contemplated hereby or thereby
executed by the Buyer, (b) any breach of any covenant, agreement or
obligation of the Buyer(s) contained in this Agreement, the
Registration Rights Agreement or any other certificate, instrument or
document contemplated hereby or thereby executed by the Buyer, or (c)
any cause of action, suit or claim brought or made against such Company
Indemnitee based on material misrepresentations or due to a material
breach and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement, the Registration Rights
Agreement, or any other instrument, document or agreement executed
pursuant hereto by any of the Company Indemnities. To the extent that
the foregoing undertaking by each Buyer may be unenforceable for any
reason, each Buyer shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
(C) Within five (5) business days after receipt by an indemnified party
of notice of commencement of any action covered by Section 8(a) or 8(b)
hereof, the party to be indemnified shall notify the indemnifying party
of the commencement thereof; provided, however, that the omission by
one indemnified party to so notify the indemnifying party shall not
relieve the indemnifying party of its obligation to indemnify any other
indemnified party that has given such notice and shall not relieve the
indemnifying party
18
19
of any liability outside of this indemnification if not materially
prejudiced thereby. In the event that any action is brought against the
indemnified party, the indemnifying party will be entitled to
participate therein and, to the extent it may desire, to assume and
control the defense thereof with counsel chosen by it which is
reasonably acceptable to the indemnified party. After notice from the
indemnifying party to such indemnified party of its election to so
assume the defense thereof, the indemnifying party will not be liable
to such indemnified party under such Section 8(a) or 8(b) for any legal
or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, but the indemnified party may, at
its own expense, participate in such defense by counsel chosen by it,
without, however, impairing the indemnifying party's control of the
defense. Subject to the proviso of this sentence and notwithstanding
any other statement to the contrary contained herein, the indemnified
party or parties shall have the right to choose its or their own
counsel and control the defense of any action, all at the expense of
the indemnifying party if (i) the employment of such counsel shall have
been authorized in writing by the indemnifying party in connection with
the defense of such action at the expense of the indemnifying party, or
(ii) the indemnifying party shall not have employed counsel reasonably
satisfactory to such indemnified party to have charge of the defense of
such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all
of the indemnifying parties (in which case the indemnifying parties
shall not have the right to direct the defense of such action on behalf
of the indemnified party or parties), in any of which events such fees
and expenses of one additional counsel shall be borne by the
indemnifying party; provided, however, that the indemnifying party
shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstance, be liable
for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for all such indemnified parties. No settlement
of any action or proceeding against an indemnified party shall be made
without the consent of the indemnifying party.
9. GOVERNING LAW: MISCELLANEOUS.
----------------------------
(a) GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws. The parties
further agree that any action between them shall be heard in New York
City, New York, and expressly consent to the jurisdiction and venue of
the Supreme Court of New York and the United States District Court for
the Southern District of New York for the adjudication of any civil
action asserted pursuant to this Paragraph.
(b) COUNTERPARTS. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the
19
20
other party. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall cause four
(4) additional original executed signature pages to be physically
delivered to the other party within five (5) days of the execution and
delivery hereof
(c) HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction.
(e) ENTIRE AGREEMENT, AMENDMENTS. This Agreement supersedes
all other prior oral or written agreements between the Buyer(s), the
Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the
instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company
nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in
writing signed by the party to be charged with enforcement.
(f) NOTICES. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of
this Agreement must be in writing and will be deemed to have been
delivered (i) upon receipt, when delivered personally; (ii) upon
confirmation of receipt, when sent by facsimile, (iii) three (3) days
after being sent by U.S. certified mail, return receipt requested, or
(iv) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company, to: Empyrean Bioscience, Inc.
23800 Commerce Park Road
Suite A
Cleveland, Ohio 44122
Attention: Richard C. Adamany
President & Chief Executive Officer
Telephone: (216) 360-7900
Facsimile: (216) 360-7909
20
21
With a copy to: Benesch, Friedlander, Coplan and Aronoff LLP
2300 BP America Building - 200 Public Square
Cleveland, OH 44114
Attention: Joseph G. Tegreene, Esq.
Telephone: (216) 363-4643
Facsimile: (216) 363-4588
If to the Transfer Agent, to: Jersey Transfer & Trust Company
201 Bloomfield Avenue
Verona, NJ 07044
Telephone: (973) 239-2712
Facsimile: (973) 239-2361
If to the Investor: At the address listed on Schedule A.
If to the Buyer(s), to its address and facsimile number on
Schedule I, with copies to the Buyer's counsel as set forth on Schedule
I. Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective
successors and assigns. Neither the Company nor any Buyer shall assign
this Agreement or any rights or obligations hereunder without the prior
written consent of the other party hereto.
(h) NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
(i) SURVIVAL. Unless this Agreement is terminated under
Section 9(l), the representations and warranties of the Company and the
Buyers contained in Sections 2 and 3, the agreements and covenants set
forth in Sections 4, 5 and 9, and the indemnification provisions set
forth in Section 8, shall survive the respective Closing for a period
of one (1) year following the date on which the Convertible Debentures
are converted in full. The Buyer(s) shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.
(j) PUBLICITY. The Company and the May Davis shall have the
right to approve, before issuance any press release or any other public
statement with respect to the transactions contemplated hereby made by
any party; provided, however, that the
21
22
Company shall be entitled, without the prior approval of May Davis, to
issue any press release or other public disclosure with respect to such
transactions required under applicable securities or other laws or
regulations (the Company shall use its best efforts to consult May
Davis in connection with any such press release or other public
disclosure prior to its release and May Davis shall be provided with a
copy thereof upon release thereof).
(k) FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and
shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in
order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
(1) TERMINATION. In the event that the respective Closing
shall not have occurred with respect to the Buyers on or before five
(5) business days from the date hereof due to the Company's or the
Buyer's failure to satisfy the conditions set forth in Sections 6 and 7
above (and the non-breaching party's failure to waive such unsatisfied
condition(s)), the non-breaching party shall have the option to
terminate this Agreement with respect to such breaching party at the
close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated
pursuant to this Section 9(l), the Company shall remain obligated to
reimburse the Buyer(s) for the expenses described in Section 4(g)
above.
(m) FINDER. The Company acknowledges that it has engaged The
May Davis Group, Inc., as the placement agent in connection with the
sale of the Convertible Debentures. The Company shall be responsible
for the payment of any placement agent fees (which includes cash)
relating to or arising out of the transactions contemplated hereby and
from the proceeds thereof.
(n) NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will
be applied against any party.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
22
23
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
EMPYREAN BIOSCIENCE, INC.
By: _____________________________________________
Name: Richard C. Adamany
Title: President & Chief Executive Officer
By: _____________________________________________
Name: ____________________________________
Title: ____________________________________
23