CEL-SCI CORPORATION
Schedule Required by Instruction 2 to Item 601
of Regulation S-K
Amount of
Name and Address Convertible Notes Number of Warrants
of Purchasers Purchased Purchased by Series
--------------------- ---------------- --------------------
Palisades Equity Fund L.P. $250,000 A: 213,068
c/o HPC Capital Management B: 468,750
1215 Hightower Trail C: 312,500
Atlanta, Georgia 30350 D: 234,375
Alpha Capital AG $450,000 A: 383,522
Lettstrasse 32 B: 843,750
Furstentum 9490 C: 562,500
Vaduz, Liechtenstein D: 421,875
HPC Capital Management -- A: 28,000
1215 Hightower Trail
Suite B220
Atlanta, GA 30350
Maturity date of convertible notes: November 1, 2005
Original issue date of warrants: November 1, 2002
Exercise price of Series A warrants: $0.35
Exercise price of Series B warrants: $0.80
Exercise price of Series C warrants: $1.20
Exercise price of Series D warrants: $1.60
Expiration date for all warrants: November 1, 2007
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
October 18, 2002, among L.A.M. Pharmaceutical Corp., a Delaware corporation (the
"Company"), and the purchasers identified on the signature pages hereto (each,
including its successors and assigns, a "Purchaser" and collectively the
"Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Rule 506 promulgated thereunder, the Company desires to
issue and sell to the Purchasers, and the Purchasers, severally and not jointly,
desire to purchase from the Company, securities of the Company as more fully
described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debenture (as defined herein), and (b) the
following terms have the meanings indicated in this Section 1.1:
"Actual Minimum" means, as of any date, the maximum aggregate number
of shares of Common Stock then issued or potentially issuable in the
future pursuant to the Transaction Documents, including any Underlying
Shares issuable upon exercise or conversion in full of all Warrants and
Debentures, ignoring any conversion or exercise limits set forth therein,
and assuming that any previously unconverted Debentures are held until the
third anniversary of the Closing Date or, if earlier, until maturity, and
all interest thereon is accreted to the principal amount of Debentures.
"Affiliate" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed
under Rule 144 under the Securities Act.
"Capital Shares" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having
the right to participate in the distribution of earnings and assets of the
Company.
"Capital Shares Equivalents" shall mean any securities, rights, or
obligations that are convertible into or exchangeable for or give any
right to subscribe for or purchase, directly or indirectly, any Capital
Shares of the Company or any warrants, options or other rights to
subscribe for or purchase, directly or indirectly, Capital Shares or any
such convertible or exchangeable securities.
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"Closing Bid Price" means on any particular date (a) the closing bid
price per share of Common Stock on such date on the Principal Market (as
reported by Bloomberg L.P. at 4:15 PM (New York time), or (b) if there is
no such price on such date, then the closing bid price on the Principal
Market on the date nearest preceding such date (as reported by Bloomberg
L.P. at 4:15 PM (New York time) for the closing bid price for regular
session trading on such day), or (c) if the shares of Common Stock are not
then reported on the Principal Market, then the average of the "Pink
Sheet" quotes for the relevant conversion period, as determined in good
faith by the Purchasers, or (c) if the shares of Common Stock are not then
publicly traded the fair market value of a share of Common Stock as
determined by an appraiser selected in good faith by the Purchasers of a
majority in interest of the principal amount of Debentures then
outstanding.
"Closing Date" means the date of the Closing, which date shall occur
within 10 days from the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value
$0.0001 per share, and any securities into which such common stock may
hereinafter be reclassified into.
"Company Counsel" means Hart and Trinen L.L.P., outside counsel
to the Company.
"Debentures" means the 0% Convertible Debentures due 36 months from
their date of issuance, unless otherwise set forth therein, issued by the
Company to the Purchasers hereunder, in the form of Exhibit A.
"Disclosure Schedules" shall have the meaning ascribed to such term
in Section 3.1.
"Effective Date" means the date that the Registration Statement is
first declared effective by the Commission.
"Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.
"Escrow Agreement" shall mean the Escrow Agreement in substantially
the form of Exhibit F hereto executed and delivered contemporaneously with
this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h).
"Liens" shall have the meaning ascribed to such term in Section
3.1(a).
"Losses" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including without limitation costs of
preparation and reasonable attorneys' fees.
"Material Adverse Effect" shall have the meaning assigned to such
term in Section 3.1(b).
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"Pledge and Security Agreement" means the Pledge and Security
Agreement in the form of Exhibit G attached hereto, granting a security
interest in the Pledge Stock in favor of the Purchasers.
"Pledge Stock" means the 2,000,000 shares of Common Stock held by
the affiliates of the Company for at least one year (for the purpose of
calculating the holding period of such securities constituting the Pledged
Stock under Rule 144(d) of the Securities Act) and pledged to the
Purchasers pursuant to the terms of the Pledge and Security Agreement.
"Principal Market" shall initially mean the OTC Bulletin Board and
shall also include the American Stock Exchange, the New York Stock
Exchange, the NASDAQ National Market or the NASDAQ Small-Cap Market,
whichever is at the time the principal trading exchange or market for the
Common Stock, based upon share volume.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Purchasers' Counsel" means Feldman Weinstein LLP with offices at
420 Lexington Avenue, New York, New York 10170.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the Closing Date, among the Company and the Purchasers,
in the form of Exhibit B.
"Required Approvals" shall have the meaning ascribed to such term in
Section 3.1(e).
"Required Minimum" means, as of any date, the maximum aggregate
number of shares of Common Stock then issued or potentially issuable in
the future pursuant to the Transaction Documents, including any Underlying
Shares issuable upon exercise or conversion in full of all Warrants and
Debentures, ignoring any conversion or exercise limits set forth therein,
and assuming that (a) any previously unconverted Debentures are held until
the third anniversary of the Closing Date or, if earlier, until maturity,
and all interest thereon is accreted to principal, and (b) the Set Price
(as defined in the Debenture) at all times on and after the date of
determination equals 50% of the actual Set Price on the Trading Day
immediately prior to the date of determination.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(h).
"Securities" means the Debentures, the Warrants and the Underlying
Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Subscription Amount" as to each Purchaser, the principal amount of
Debentures purchased at the Closing as indicated on the signature pages
hereto below such Purchaser's address for notice.
"Subsidiary" means any subsidiary of the Company that is required to
be listed in Schedule 3.1(a).
"Trading Day" shall mean any day during which the Principal Market
shall be open for business.
"Transaction Documents" means this Agreement, the Debentures, the
Warrants, the Escrow Agreement, the Registration Rights Agreement, the
Pledge and Security Agreement and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of the Debentures and upon exercise of the Warrants.
"Underlying Shares Registration Statement" or "Registration
Statement" means a registration statement meeting the requirements set
forth in the Registration Rights Agreement and covering the resale of the
Underlying Shares by the Purchasers.
"Warrants" means collectively the Common Stock purchase warrants, in
the form of Exhibit C delivered to the Purchasers at the Closing in
accordance with Section 2.2.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to the Purchasers,
and the Purchasers shall, severally and not jointly, purchase from the Company,
the principal amount of Debentures equal to the Subscription Amount and the
Warrants. The Closing shall take place at the offices of Purchasers' Counsel
immediately following the execution hereof, or at such other location or time as
the parties may agree.
2.2 Closing Deliveries.
(a) At or prior to the Closing, the Company shall deliver or cause
to be delivered to the Escrow Agent the following:
(i) Debentures in the Subscription Amount indicated below such
Purchaser's name on the signature page of this Agreement, registered
in the name of such Purchaser;
(ii) 4 Warrants registered in the name of each such Purchaser
with the following terms:
(A) a Warrant to purchase up to such Purchaser's pro-rata
share of 426,136 shares of Common Stock with a term of
5 years and an exercise price of $0.35 per Warrant
Share, subject to adjustment therein, which Warrant
shall not include a forced exercise provision;
(B) a Warrant to purchase such Purchaser's pro-rata share
of 937,500 shares of Common Stock with a term of 5
years and an exercise price of $0.80 per Warrant Share,
subject to adjustment therein, which shares shall be
include a forced exercise provision at the option of
the Company in the event the Closing Bid Price of the
Common Stock exceeds $1.20 for 10 consecutive Trading
Days, subject to certain other conditions included
therein;
(C) a Warrant to purchase such Purchaser's pro-rata share
of 625,000 shares of Common Stock with a term of 5
years and an exercise price of $1.20 per Warrant Share,
subject to adjustment therein, which shares shall be
include a forced exercise provision at the option of
the Company in the event the Closing Bid Price of the
Common Stock exceeds $2.00 for 10 consecutive Trading
Days, subject to certain other conditions included
therein; and
(D) a Warrant to purchase such Purchaser's pro-rata share
of 468,750 shares of Common Stock with a term of 5
years and an exercise price of $1.60 per Warrant Share,
subject to adjustment therein, which shares shall be
include a forced exercise provision at the option of
the Company in the event the Closing Bid Price of the
Common Stock exceeds $2.50 for 10 consecutive Trading
Days, subject to certain other conditions included
therein.
(iii) the legal opinion of Company Counsel, in the form of
Exhibit D attached hereto, addressed to the Purchasers;
(iv) the Pledge and Security Agreement;
(v) the Pledged Stock and irrevocable stock powers in blank,
each executed by the respective non-affiliate with medallion guarantee;
(vi) the Escrow Agreement duly executed by the Company; and
(viii) the Registration Rights Agreement duly executed by the
Company.
(b) At or prior to the Closing, each Purchaser shall deliver or cause to be
delivered to the Escrow Agent the following:
(i) the Subscription Amount indicated below such Purchaser's
name on the signature page of this Agreement, in United
States dollars and in immediately available funds, by wire
transfer;
(ii) the Escrow Agreement duly executed by such Purchaser;
(iii) the Security and Pledge Agreement duly executed by such
Purchaser; and
(iv) the Registration Rights Agreement duly executed by such
Purchaser.
(c) All representations and warranties of the other party contained herein
shall remain true and correct as of the Closing Date;
(d) There shall have been no Material Adverse Effect (as defined in Section
3.1(b)) with respect to the Company since the date hereof; and
(e) From the date hereof to the Closing Date, trading in the Common Stock shall
not have been suspended by the Commission (except for any suspension of
trading of limited duration agreed to by the Company, which suspension
shall be terminated prior to the Closing), and, at any time prior to the
Closing Date, trading in securities generally as reported by Bloomberg
Financial Markets shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are
reported by such service, or on the Principal Market, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities, nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity of
such magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of the
Purchasers, makes it impracticable or inadvisable to purchase the
Debentures at the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the disclosure schedules attached hereto (the
"Disclosure Schedules"), the Company hereby makes the following representations
and warranties to the Purchasers:
(a) Subsidiaries. The Company has no direct or indirect
subsidiaries. The Company owns, directly or indirectly, all of the capital
stock or other equity interests of each Subsidiary free and clear of any
lien, charge, security interest, encumbrance, right of first refusal or
other restriction (collectively, "Liens"), and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar
rights. If the Company has no subsidiaries, then references in the
Transaction Documents to the Subsidiaries will be disregarded.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation or organization (as applicable), with the requisite
power and authority to own and use its properties and assets and to carry
on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational
or charter documents. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the
case may be, could not, individually or in the aggregate: (i) adversely
affect the legality, validity or enforceability of any Transaction
Document, (ii) have or result in or be reasonably likely to have or result
in a material adverse effect on the results of operations, assets,
prospects, business or condition (financial or otherwise) of the Company
and the Subsidiaries, taken as a whole, or (iii) adversely impair the
Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (i), (ii) or (iii), a "Material
Adverse Effect").
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations hereunder or thereunder. The
execution and delivery of each of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated hereby or
thereby have been duly authorized by all necessary action on the part of
the Company and no further consent or action is required by the Company.
Each of the Transaction Documents has been (or upon delivery will be) duly
executed by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally and general principles of equity. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, by-laws or other organizational
or charter documents.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated thereby do not and will not: (i) conflict
with or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other organizational
or charter documents, or (ii) subject to obtaining the Required Approvals
(as defined below), conflict with, or constitute a default (or an event
that 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 (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of
the Company or any Subsidiary is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to
which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each
of clauses (ii) and (iii), such as could not, individually or in the
aggregate, have or result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental authority or
other Person in connection with the execution, delivery and performance by
the Company of the Transaction Documents, other than (i) the filings
required under Section 4.8, (ii) the filing with the Commission of the
Underlying Shares Registration Statement, (iii) the application(s) to each
applicable Principal Market for the listing of the Underlying Shares for
trading thereon in the time and manner required thereby, and (iv)
applicable Blue Sky filings (collectively, the "Required Approvals").
(f) Issuance of the Securities. The Securities are duly authorized
and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and non
assessable, free and clear of all Liens. The Company has reserved from its
duly authorized capital stock a number of shares of Common Stock for
issuance of the Underlying Shares at least equal to the Required Minimum
on the date hereof.
(g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company is set forth in the
Disclosure Schedules attached hereto. No securities of the Company are
entitled to preemptive or similar rights, and no Person has any right of
first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the Transaction
Documents. Except as a result of the purchase and sale of the Securities,
there are no outstanding options, warrants, script rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of
Common Stock, or contracts, commitments, understandings or arrangements by
which the Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The issuance and sale of the
Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such securities.
(h) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC Reports" and,
together with the Schedules to this Agreement, the "Disclosure Materials")
on a timely basis or has received a valid extension of such time of filing
and has filed any such SEC Reports prior to the expiration of any such
extension. The Company has delivered to the Purchasers a copy of all SEC
Reports filed within the 10 days preceding the date hereof. As of their
respective dates, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the
SEC Reports, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis during the periods involved ("GAAP"), except as may be otherwise
specified in such financial statements or the notes thereto, and fairly
present in all material respects the financial position of the Company and
its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject,
in the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.
(i) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports: (i) there has been no event, occurrence or
development that has had or that could result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in
the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made
with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to purchase
or redeem any shares of its capital stock, and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option or similar plans.
(j) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or
any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) (collectively, an "Action") which: (i)
adversely affects or challenges the legality, validity or enforceability
of any of the Transaction Documents or the Securities or (ii) could, if
there were an unfavorable decision, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor any director or officer thereof, is or
has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. The Company does not have pending before the Commission
any request for confidential treatment of information. There has not been,
and to the knowledge of the Company, there is not pending or contemplated,
any investigation by the Commission involving the Company or any current
or former director or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.
(k) Compliance. Neither the Company nor any Subsidiary: (i) is in
default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has
been waived), (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is or has been in violation of any statute,
rule or regulation of any governmental authority, except in each case as
could not, individually or in the aggregate, have or result in a Material
Adverse Effect.
(l) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits could not, individually
or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect ("Material Permits"), and neither the Company nor
any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(n) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to
the business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for Liens as do not materially affect the value
of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries.
Any real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable
leases of which the Company and the Subsidiaries are in compliance.
(o) Patents and Trademarks. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses
and other similar rights that are necessary or material for use in
connection with their respective businesses as described in the SEC
Reports and which the failure to so have could have a Material Adverse
Effect (collectively, the "Intellectual Property Rights"). Neither the
Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. To the knowledge of
the Company, all such Intellectual Property Rights are enforceable and
there is no existing infringement by another Person of any of the
Intellectual Property Rights.
(p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged. A list of the
Company's insurance contracts and policies are set forth on the Disclosure
Schedules. The Company has delivered to the Purchasers, prior to the
Closing, such contracts and policies. To the best of Company's knowledge,
such insurance contracts and policies are accurate and complete. Neither
the Company nor any 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 without a significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as set forth
in SEC Reports, none of the officers or directors of the Company and, to
the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary
(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 entity in which
any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
(r) Internal Accounting Controls. The Company and the 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, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
(s) Solvency. Based on the financial condition of the Company as of
the Closing Date: (i) the Company's fair saleable value of its assets
exceeds the amount that will be required to be paid on or in respect of
the Company's existing debts and other liabilities (including known
contingent liabilities) as they mature; (ii) the Company's assets do not
constitute unreasonably small capital to carry on its business for the
current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected
capital requirements and capital availability thereof; and (iii) the
current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into
account all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its debt when such amounts are required to be
paid. The Company does not intend to incur debts beyond its ability to pay
such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).
(t) Certain Fees. No brokerage or finder's fees or commissions are
or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by this Agreement,
and the Company has not taken any action that would cause any Purchaser to
be liable for any such fees or commissions. The Company agrees that the
Purchasers shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of any Person for fees of the
type contemplated by this Section with the transactions contemplated by
this Agreement.
(u) Private Placement. Assuming the accuracy of the representations
and warranties of the Purchasers set forth in Sections 3.2(b)-(f), the
offer, issuance and sale of the Securities to the Purchasers as
contemplated hereby are exempt from the registration requirements of the
Securities Act. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Principal Market and no
shareholder approval is required for the Company to fulfill its
obligations under the Transaction Documents.
(v) Listing and Maintenance Requirements. The Company has not, in
the 12 months preceding the date hereof, received notice from any
Principal Market on which the Common Stock is or has been listed or quoted
to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Principal Market. The Company is, and has
no reason to believe that it will not in the foreseeable future continue
to be, in compliance with all such listing and maintenance requirements.
(w) Registration Rights. The Company has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the
Commission or any other governmental authority that have not been
satisfied.
(x) Application of Takeover Protections. The Company and its Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company's Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation as a result of the Company's issuance of the Securities and the
Purchasers' ownership of the Securities.
(y) Seniority. As of the date of this Agreement, no indebtedness of
the Company is senior to the Debentures in right of payment, whether with
respect to interest or upon liquidation or dissolution, or otherwise,
other than indebtedness secured by purchase money security interests
(which is senior only as to underlying assets covered thereby) and capital
lease obligations (which is senior only as to the property covered
thereby).
(z) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any information that constitutes or might
constitute material, nonpublic information. The Company understands and
confirms that the Purchasers will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure
provided to the Purchasers regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this
Agreement, furnished by or on behalf of the Company with respect to the
representations and warranties made herein are true and correct with
respect to such representations and warranties and do not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section
3.2.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The purchase by such Purchaser of
the Securities hereunder has been duly authorized by all necessary action
on the part of such Purchaser. Each of this Agreement, and the
Registration Rights Agreement has been duly executed by such Purchaser,
and when delivered by such Purchaser in accordance with the terms hereof,
will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities as
principal for its own account for investment purposes only and not with a
view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser's right, subject to
the provisions of this Agreement, at all times to sell or otherwise
dispose of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act or under an exemption from
such registration and in compliance with applicable federal and state
securities laws. Nothing contained herein shall be deemed a representation
or warranty by such Purchaser to hold Securities for any period of time.
Such Purchaser is acquiring the Securities hereunder in the ordinary
course of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any
of the Securities.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on
which it exercises any Warrants or converts any Debentures, it will be an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
Such Purchaser has not been formed solely for the purpose of acquiring the
Securities. Such Purchaser is not a registered broker-dealer under Section
15 of the Exchange Act.
(d) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment.
(f) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
(g) Reliance. Such Purchaser understands and acknowledges that: (i)
the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act and (ii) the availability of
such exemption depends in part on, and the Company will rely upon the
accuracy and truthfulness of, the foregoing representations and such
Purchaser hereby consents to such reliance.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement, to the Company,
to an Affiliate of a Purchaser, to an entity managed by a Purchaser or in
connection with a pledge as contemplated in Section 4.1(b), the Company may
require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under
the Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall have
the rights of a Purchaser under this Agreement and the Registration Rights
Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 4.1(b), of the following legend on any certificate
evidencing Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE [EXERCISABLE] [CONVERTIBLE]] HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement or grant a
security interest in some or all of the Securities and, if required under
the terms of such arrangement, such Purchaser may transfer pledged or
secured Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no legal
opinion of the pledgee, secured party or pledgor shall be required in
connection therewith. Further, no notice shall be required of such pledge.
At the appropriate Purchaser's expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer
of the Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.
(c) Certificates evidencing Underlying Securities shall not contain
any legend (including the legend set forth in Section 4.1(b)): (i) while a
registration statement (including the Underlying Shares Registration
Statement) covering the resale of such security is effective under the
Securities Act, or (ii) following any sale of such Securities pursuant to
Rule 144, or (iii) if such Securities are eligible for sale under Rule
144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). In the event that
any certificate does not bear the legend set forth in Section 4.1(b), and,
to the knowledge of the holder, none of the above-referenced conditions
exist, then the holder shall submit the certificate to the Company for
application of such legend to the certificate. If all or any portion of a
Debenture or Warrant is converted or exercised (as applicable) at a time
when there is an effective registration statement to cover the resale of
the Underlying Shares, or if such Underlying Shares may be sold under Rule
144(k) or if such legend is not otherwise required under applicable
requirements of the Securities Act (including judicial interpretations
thereof) then such Underlying Shares shall be issued free of all legends.
The Company agrees that following the Effective Date or at such time as
such legend is no longer required under this Section 4.1(c), it will, no
later than three Trading Days following the delivery by a Purchaser to the
Company or the Company's transfer agent of a certificate representing
Common Stock issued with a restrictive legend, deliver or cause to be
delivered to such Purchaser a certificate representing such Securities that
is free from all restrictive and other legends. The Company may not make
any notation on its records or give instructions to any transfer agent of
the Company that enlarge the restrictions on transfer set forth in this
Section.
(d) In addition to such Purchaser's other available remedies, the
Company shall pay to a Purchaser, in cash, as liquidated damages and not
as a penalty, for each $1,000 of Underlying Shares (based on the Closing
Bid Price of the Common Stock on the date such Securities are submitted to
the Company's transfer agent) subject to this Section 4.1(c), $10 per
Trading Day (increasing to $20 per Trading Day 3 Trading Days after such
damages have begun to accrue) for each Trading Day after such third
Trading Day until such certificate is delivered.
4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Securities will result in dilution of the outstanding shares of Common
Stock, which dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim that the Company may
have against any Purchaser.
4.3 Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any Purchaser, the Company shall deliver
to such Purchaser a written certification of a duly authorized officer as
to whether it has complied with the preceding sentence. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as
is required for the Purchasers to sell the Securities under Rule 144. The
Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required
from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.
4.4 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers, or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Principal Market.
4.5 Reservation and Listing of Securities.
(a) The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction Documents
in such amount as may be required to fulfill its obligations in full under
the Transaction Documents.
(b) If, on any date, the number of authorized but unissued (and
otherwise unreserved) shares of Common Stock is less than 125% of (i) the
Actual Minimum on such date, minus (ii) the number of shares of Common
Stock previously issued pursuant to the Transaction Documents, then the
Board of Directors of the Company shall use its best efforts to amend the
Company's certificate or articles of incorporation to increase the number
of authorized but unissued shares of Common Stock to at least the Required
Minimum at such time (minus the number of shares of Common Stock
previously issued pursuant to the Transaction Documents), as soon as
possible and in any event not later than the 60th day after such date;
provided that the Company will not be required at any time to authorize a
number of shares of Common Stock greater than the maximum remaining number
of shares of Common Stock that could possibly be issued after such time
pursuant to the Transaction Documents.
(c) The Company shall: (i) in the time and manner required by each
Principal Market, prepare and file with such Principal Market an
additional shares listing application covering a number of shares of
Common Stock at least equal to the greater of (A) the Required Minimum on
the Closing Date and (B) the Required Minimum on the date of such
application, (ii) take all steps necessary to cause such shares of Common
Stock to be approved for listing on each Principal Market as soon as
possible thereafter, (iii) provide to the Purchasers evidence of such
listing, and (iv) maintain the listing of such Common Stock on each such
Principal Market or another Principal Market.
(d) If, on any date, the number of shares of Common Stock previously
listed on a Principal Market is less than 125% of the Actual Minimum on
such date, then the Company shall take the necessary actions to list on
such Principal Market, as soon as reasonably possible, a number of shares
of Common Stock at least equal to the Required Minimum on such date;
provided that the Company will not be required at any time to list a
number of shares of Common Stock greater than the maximum number of shares
of Common Stock that could possibly be issued pursuant to the Transaction
Documents.
4.6 Conversion and Exercise Procedures. The form of Election to Purchase
included in the Warrants and the forms of Conversion Notice included in the
Debentures set forth the totality of the procedures required in order to
exercise the Warrants or convert the Debentures. No additional legal opinion or
other information or instructions shall be necessary to enable the Purchasers to
exercise their Warrants or convert their Debentures. The Company shall honor
exercises of the Warrants and conversions of the Debentures and shall deliver
Underlying Shares in accordance with the terms, conditions and time periods set
forth in the Transaction Documents.
4.7 Securities Laws Disclosure; Publicity. The Company shall, within 1
Trading Day after the Closing Date, issue a press release or file a Current
Report on Form 8-K reasonably acceptable to the Purchasers disclosing all
material terms of the transactions contemplated hereby. The Company and the
Purchasers shall consult with each other in issuing any press releases with
respect to the transactions contemplated hereby. Notwithstanding the foregoing,
other than in any registration statement filed pursuant to the Registration
Rights Agreement and filings related thereto, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Principal Market, without
the prior written consent of such Purchaser, except to the extent such
disclosure is required by law or Principal Market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure.
4.8 Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
4.9 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables, capital lease obligations, and accrued expenses in the ordinary course
of the Company's business and prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.
4.10 Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company,
solely as a result of such Purchaser's acquisition of the Securities under this
Agreement and without causation by any other activity, obligation, condition or
liability pertaining to such Purchaser and not to the transactions contemplated
by this Agreement, the Company will reimburse such Purchaser for its reasonable
legal and other expenses (including the cost of any investigation preparation
and travel in connection therewith) incurred in connection therewith, as such
expenses are incurred. The reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the
Purchasers who are actually named in such action, proceeding or investigation,
and partners, directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement.
4.11 Indemnification of Purchasers. The Company will indemnify and hold
the Purchasers and their directors, officers, shareholders, partners, employees
and agents (each, a "Purchaser Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Purchaser Party may
suffer or incur as a result of or relating to: (a) any misrepresentation, breach
or inaccuracy, or any allegation by a third party that, if true, would
constitute a breach or inaccuracy, of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents; or (b) any cause of action, suit or claim brought or made
against such Purchaser Party and arising solely out of or solely resulting from
the execution, delivery, performance or enforcement of this Agreement or any of
the other Transaction Documents and without causation by any other activity,
obligation, condition or liability pertaining to such Purchaser. The Company
will reimburse such Purchaser for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in connection
therewith) incurred in connection therewith, as such expenses are incurred.
4.12 Shareholders Rights Plan. In the event that a shareholders rights
plan is adopted by the Company, no claim will be made or enforced by the Company
or any other Person that any Purchaser is an "Acquiring Person" under the plan
or in any way could be deemed to trigger the provisions of such plan by virtue
of receiving Securities under the Transaction Documents.
4.13 Limitations on Short Sales. The Purchasers agree that they will not
enter into any Short Sales (as hereinafter defined) from the period commencing
on the Closing Date and ending on the date that all of the Debenture has been
converted and all of the Warrant has been exercised and such Underlying Shares
are covered by the Registration Statement. For purposes of this Section 4.15, a
"Short Sale" by any Purchaser shall mean a sale of Common Stock by such
Purchaser that is marked as a short sale and that is made at a time when there
is no equivalent offsetting long position in Common Stock held by such
Purchaser. For purposes of determining whether there is an equivalent offsetting
long position in Common Stock held by the Purchasers, Underlying Shares that
have not yet been converted pursuant to the Debenture and that have not yet been
issued upon exercise of the Warrant, irrespective of whether such Underlying
Shares are then registered for resale, shall be deemed to be held long by the
Purchasers, and the amount of shares of Common Stock held in a long position
shall be the number of Underlying Shares issuable pursuant to the Debenture
assuming such holder converted all the outstanding principal amount of the
Debenture on such date, and (ii) the number of Underlying Shares issuable
pursuant to the Warrant.
4.14. Participation in Future Financing. From the date hereof until 180
days after the Effective Date, the Company shall not effect a financing of its
Capital Shares or Capital Shares Equivalents (a "Subsequent Financing") unless
(i) the Company delivers to each of such Purchasers a written notice (the
"Subsequent Financing Notice") of its intention to effect such Subsequent
Financing, which Subsequent Financing Notice shall describe in reasonable detail
the proposed terms of such Subsequent Financing, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Financing is
proposed to be effected, and attached to which shall be a term sheet or similar
document relating thereto and (ii) such Purchaser shall not have notified the
Company by 6:30 p.m. (New York City time) on the 1st Trading Day after its
receipt of the Subsequent Financing Notice of its willingness to provide (or to
cause its designee to provide), subject to completion of mutually acceptable
documentation, all or part of such financing to the Company on the same terms
set forth in the Subsequent Financing Notice. If the Purchasers shall fail to so
notify the Company of their willingness to participate in the full Subsequent
Financing, the Company may effect the remaining portion of such Subsequent
Financing on the terms and to the Persons set forth in the Subsequent Financing
Notice; provided that the Company must provide the Purchasers with a second
Subsequent Financing Notice, and the Purchasers will again have the right of
first refusal set forth above in this Section 4.16, if the Subsequent Financing
subject to the initial Subsequent Financing Notice is not consummated for any
reason on the terms set forth in such Subsequent Financing Notice within 45
Trading Days after the date of the initial Subsequent Financing Notice with the
Person identified in the Subsequent Financing Notice. This Section 4.16 shall
not be required or effective in connection with any strategic partnership or
joint venture or acquisition or key consulting agreements (the primary purpose
of which is not to raise equity capital for the Company).
4.15 Pledged Stock. The Company agrees and acknowledges that upon an
"Event of Default", as that term is defined in the Pledge and Security
Agreement, the holding period of the affiliate shall "tack" to the holding
period of the Purchasers (for the purpose of calculating the holding period of
such securities constituting the Pledged Shares under Rule 144(d) of the
Securities Act) and as such, the Pledge Stock may be immediately sold by the
Purchasers pursuant to Rule 144, subject to the volume, manner limitations and
current information requirements set forth therein. The Company further
covenants that it will take such further action as any Purchaser may reasonably
request, all to the extent required from time to time to enable such Purchaser
to immediately resell the Pledged Stock upon an Event of Default without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
ARTICLE V
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third business day following the date of this Agreement;
provided that no such termination will affect the right of any party to sue for
any breach by the other party (or parties).
5.2 Fees and Expenses. Upon the Closing, the Company shall have paid the
Purchasers an aggregate of $15,000 for their legal fees and expenses incurred in
connection with the preparation and negotiation of the Transaction Documents.
Except as expressly set forth in the Transaction Documents to the contrary, each
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all transfer agent fees, stamp taxes and other
taxes and duties levied in connection with the issuance of any Securities.
5.3 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 5:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 5:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The addresses for such notices and communications are those set forth on the
signature pages hereof, or such other address as may be designated in writing
hereafter, in the same manner, by such Person. Set forth on the Disclosure
Schedule is a list of names and contact information for the Company's Board of
Directors, executive officers, key employees (including organization chart of
the Company), corporate counsel, including, if applicable, in-house counsel, the
Company's outside counsel (including securities counsel, if different than
corporate counsel), the Company's accountants and the Company's transfer agent.
The Company hereby represents that it has no present intent to change the
information set forth in such list.
5.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. 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.
5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement and the Registration Rights Agreement to any
Person to whom such Purchaser assigns or transfers any Securities.
5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Sections 4.8.
5.9 Governing Law; Venue; Waiver of Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by and construed and enforced in accordance with the internal
laws of the State of New York, without regard to the principles of conflicts of
law thereof. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in the City of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is improper or inconvenient
venue for such proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. The parties hereby waive all rights to a trial
by jury. If either party shall commence an action or proceeding to enforce any
provisions of this Agreement, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery, exercise and/or
conversion of the Securities, as applicable.
5.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
5.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the "Maximum Rate"),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate of interest applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law. If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to any Purchaser with
respect to indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser's election.
5.18 Independent Nature of Purchasers' Obligations and Rights. The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under any
Transaction Document. Nothing contained herein or in any Transaction Document,
and no action taken by any Purchaser pursuant thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Document. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
5.19 Liquidated Damages. The Company's obligations to pay any liquidated damages
or other amounts owing under the Transaction Documents is a continuing
obligation of the Company and shall not terminate until all unpaid liquidated
damages and other amounts have been paid notwithstanding the fact that the
instrument or security pursuant to which such liquidated damages or other
amounts are due and payable shall have been canceled.
***********************
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
L.A.M. PHARMACEUTICAL CORP.
By: /s/ Joseph Slechta
---------------------
Name: Joseph Slechta
Title: President
Address for Notice:
800 Sheppard Avenue West
Commercial Unit 1
North York, Ontario, Canada M3H 6B4
Attn: Alan Drizen
Tel: (416) 633-3004
With a copy to: Hart and Trinen L.L.P.
(which shall not constitute 1624 Washington Street
notice) Denver, CO 80203
Attn: William Hart, Esq.
Tel: (303) 839-0061
Fax: (303) 839-5414
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
PURCHASERS SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
PALISADES EQUITY FUND L.P. Address for Notice:
------------------
C/o Hyperion Partners Corp.
1215 Hightower Trail
By: /s/ Andrew Reckles Suite B220
------------------- Atlanta, Georgia 30350
Name: Andrew Reckles Attn: Paul T. Mannion
Title: General Partner
Subscription Amount: $250,000
ALPHA CAPITAL AG Address for Notice:
------------------
Lettstrasse 32
Furstentum 9490
By: /s/ Konrad Ackermann Vaduz, Liechtenstein
------------------------------- Fax: 011-423 232 3196
Name: Konrad Ackermann
Title: Authorized Signatory
Subscription Amount: $250,000
With a copy to:
- --------------
Feldman Weinstein LLP
420 Lexington Avenue
New York, New York 10170
Attn: Robert F. Charron
Tel: (212) 869-7000
Fax: (212) 401-4741
L.A.M. PHARMACEUTICAL, CORP.
DISCLOSURE SCHEDULE TO
SECURITIES PURCHASE AGREEMENT
Shares outstanding as of October 18, 2002: 26,864,151
Other Shares Which May Be Issued:
Number of Note
Shares Reference
Shares issuable upon exercise of options and 12,836,473 A
warrants granted to L.A.M.'s officers, directors,
employees, private investors, and financial
consultants.
A. Options and warrants are exercisable at prices between $0.58 and $7.50 per
share and expire between October 2002 and June 2011.
Substantially all of the shares issuable upon the exercise of options and
warrants, and which are referred to in Note A, have been registered for public
sale by means of separate registration statements on SB-2 and Form S-8.
EXHIBIT A
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Date of Issuance: October 18, 2002
$250,000
0% CONVERTIBLE DEBENTURE
DUE OCTOBER 18, 2005
THIS DEBENTURE is one of a series of duly authorized and issued debentures of
L.A.M. Pharmaceutical Corp., a Delaware corporation, having a principal place of
business at 800 Sheppard Avenue West, Commercial Unit 1, North York, Ontario,
Canada M3H 6B4 (the "Company"), designated as its 0% Convertible Debentures, due
November 1, 2005 in the aggregate principal amount of $500,000 (the
"Debentures").
FOR VALUE RECEIVED, the Company promises to pay to Alpha Capital AG or its
registered assigns (the "Holder"), the principal sum of $250,000 on November 1,
2005 or such earlier date as the Debentures are required or permitted to be
repaid as provided hereunder (the "Maturity Date"). The Company may not prepay
any portion of the principle amount on this Debenture without the prior written
consent of the Holder. No interest, other than as set forth herein, is payable
on this Debenture.
This Debenture is subject to the following additional provisions:
Section 1. This Debenture is exchangeable for an equal aggregate principal
amount of Debentures of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such
registration of transfer or exchange.
Section 2. This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement (as
defined in Section 5) and may be transferred or exchanged only in compliance
with the Purchase Agreement. Prior to due presentment to the Company for
transfer of this Debenture, the Company and any agent of the Company may treat
the Person (as defined in Section 5) in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
Section 3. Events of Default.
(a) "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(i) any default in the payment of the principal of, or
liquidated damages in respect of, any Debentures, free of any claim
of subordination, as and when the same shall become due and payable
(whether on a Conversion Date or the Maturity Date or by
acceleration or otherwise);
(ii) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit
any breach of any of the Transaction Documents (as defined in
Section 5);
(iii) the Company or any of its subsidiaries shall commence,
or there shall be commenced against the Company or any such
subsidiary a case under any applicable bankruptcy or insolvency laws
as now or hereafter in effect or any successor thereto, or the
Company commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether
now or hereafter in effect relating to the Company or any subsidiary
thereof or there is commenced against the Company or any subsidiary
thereof any such bankruptcy, insolvency or other proceeding which
remains undismissed for a period of 60 days; or the Company or any
subsidiary thereof is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding
is entered; or the Company or any subsidiary thereof suffers any
appointment of any custodian or the like for it or any substantial
part of its property which continues undischarged or unstayed for a
period of 60 days; or the Company or any subsidiary thereof makes a
general assignment for the benefit of creditors; or the Company
shall fail to pay, or shall state that it is unable to pay, or shall
be unable to pay, its debts generally as they become due; or the
Company or any subsidiary thereof shall call a meeting of its
creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or the Company or any subsidiary thereof
shall by any act or failure to act expressly indicate its consent
to, approval of or acquiescence in any of the foregoing; or any
corporate or other action is taken by the Company or any subsidiary
thereof for the purpose of effecting any of the foregoing;
(iv) the Company shall default in any of its obligations under
any other Debenture or any mortgage, credit agreement or other
facility, indenture agreement, factoring agreement or other
instrument under which there may be issued, or by which there may be
secured or evidenced any indebtedness for borrowed money or money
due under any long term leasing or factoring arrangement of the
Company in an amount exceeding $100,000, whether such indebtedness
now exists or shall hereafter be created and such default shall
result in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and
payable;
(v) the Common Stock shall not be eligible for quotation on or
quoted for trading on the OTC Bulletin Board or listed for trading
on the Nasdaq SmallCap Market, New York Stock Exchange, American
Stock Exchange or the Nasdaq National Market (each, a "Subsequent
Market") and shall not again be eligible for and quoted or listed
for trading thereon within five Trading Days;
(vi) the Company shall be a party to any Change of Control
Transaction (as defined in Section 5), shall agree to sell or
dispose all or in excess of 33% of its assets in one or more
transactions (whether or not such sale would constitute a Change of
Control Transaction), or shall redeem or repurchase more than a de
minimis number of shares of Common Stock or other equity securities
of the Company (other than redemptions of Underlying Shares (as
defined in Section 5));
(vii) an Underlying Shares Registration Statement (as defined
in Section 5) shall not have been declared effective by the
Commission (as defined in Section 5) on or prior to the 150th
calendar day after the Original Issue Date;
(viii) if, during the Effectiveness Period (as defined in the
Registration Rights Agreement (as defined in Section 5)), the
effectiveness of the Underlying Shares Registration Statement lapses
for any reason or the Holder shall not be permitted to resell
Registrable Securities (as defined in the Registration Rights
Agreement) under the Underlying Shares Registration Statement, in
either case, for more than 15 consecutive Trading Days or 25
non-consecutive days in the aggregate during any 12 month period;
(ix) an Event (as defined in the Registration Rights
Agreement) shall not have been cured to the satisfaction of the
Holder prior to the expiration of thirty days from the Event Date
(as defined in the Registration Rights Agreement) relating thereto
(other than an Event resulting from a failure of an Underlying
Shares Registration Statement to be declared effective by the
Commission on or prior to the 120th calendar day after the Original
Issue Date, which shall be covered by Section 3(a)(vii));
(x) the Company shall fail for any reason to deliver
certificates to a Holder prior to the fifth Trading Day after a
Conversion Date pursuant to and in accordance with Section 4(b) or
the Company shall provide notice to the Holder, including by way of
public announcement, at any time, of its intention not to comply
with requests for conversions of any Debentures in accordance with
the terms hereof; or
(xi) the Company shall fail for any reason to deliver the
payment in cash pursuant to a Buy-In (as defined herein) within five
days after notice thereof is delivered hereunder.
(b) If any Event of Default occurs and is continuing, the full
principal amount of this Debenture (and, at the Holder's option, all other
Debentures then held by such Holder) and other amounts owing in respect thereof,
to the date of acceleration shall become at the Holder's election, immediately
due and payable in cash. The aggregate amount payable upon an Event of Default
shall be equal to the sum of: (i) the Mandatory Prepayment Amount (as defined in
Section 5) plus (ii) the product of (A) the number of Underlying Shares issued
in respect of conversions hereunder within thirty days of the date of a
declaration of an Event of Default and then held by the Holder and (B) the
Closing Bid Price (as defined in Section 5) on the date prepayment is due or the
date the full prepayment price is paid, whichever is greater. Interest shall
accrue on the prepayment amount hereunder from the seventh day after such amount
is due (being the date of an Event of Default) through the date of prepayment in
full thereof in an amount equal to 18% per annum, to accrue daily from the date
such payment is due hereunder through and including the date of payment. All
Debentures and Underlying Shares for which the full prepayment price hereunder
shall have been paid in accordance herewith shall promptly be surrendered to or
as directed by the Company. The Holder need not provide and the Company hereby
waives any presentment, demand, protest or other notice of any kind, and the
Holder may immediately and without expiration of any grace period enforce any
and all of its rights and remedies hereunder and all other remedies available to
it under applicable law. Such declaration may be rescinded and annulled by
Holder at any time prior to payment hereunder and the Holder shall have all
rights as a Debenture holder until such time, if any, as the full payment under
this Section shall have been received by it. No such rescission or annulment
shall affect any subsequent Event of Default or impair any right consequent
thereon.
Section 4. Conversion.
(a) (i) At any time after the Closing Date, this Debenture shall
be convertible into shares of Common Stock at the option of the
Holder, in whole or in part at any time and from time to time (subject
to the limitations on conversion set forth in Section 4(a)(ii)
hereof). The Holder shall effect conversions by delivering to the
Company the form of conversion notice attached hereto as Annex A (a
"Conversion Notice"), specifying therein the principal amount of
Debentures to be converted and the date on which such conversion is to
be effected (a "Conversion Date") and shall contain a completed
schedule in the form of Schedule 1 to the Conversion Notice (as
amended on each Conversion Date, the "Conversion Schedule") reflecting
the remaining principal amount of this Debenture subsequent to the
conversion at issue. If no Conversion Date is specified in a
Conversion Notice, the Conversion Date shall be the date that such
Conversion Notice is provided hereunder. To effect conversions
hereunder, the Holder shall not be required to physically surrender
Debentures to the Company unless the entire principal amount of this
Debenture has been so converted. Conversions hereunder shall have the
effect of lowering the outstanding principal amount of this Debenture
in an amount equal to the applicable conversion, which shall be
evidenced by entries set forth in the Conversion Schedule. The Holder
and the Company shall maintain records showing the principal amount
converted and the date of such conversions. In the event of any
dispute or discrepancy, the records of the Holder shall be controlling
and determinative in the absence of manifest error. The Holder and any
assignee, by acceptance of this Debenture, acknowledge and agree that,
by reason of the provisions of this paragraph, following conversion of
a portion of this Debenture, the unpaid and unconverted principal
amount of this Debenture may be less than the amount stated on the
face hereof.
(ii) Certain Conversion Restrictions. A Holder may not convert
Debentures to the extent such conversion would result in the Holder,
together with its affiliates, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules
promulgated thereunder) in excess of 4.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon
conversion of the Debentures held by such Holder after application
of this Section. To ensure compliance with this restriction, the
Holder will be deemed to represent to the Company each time it
delivers a Conversion Notice that such Conversion Notice has not
violated the restrictions set forth in this paragraph. If the Holder
has delivered a Conversion Notice for a principal amount of
Debentures that, without regard to any other shares that the Holder
or its affiliates may beneficially own, would result in the issuance
in excess of the permitted amount hereunder, the Company shall
notify the Holder of this fact and shall honor the conversion for
the maximum principal amount permitted to be converted on such
Conversion Date in accordance with the periods described in Section
4(b) and, at the option of the Holder, either retain any principal
amount tendered for conversion in excess of the permitted amount
hereunder for future conversions or return such excess principal
amount to the Holder. In the event of a merger or consolidation of
the Company with or into another Person, this paragraph shall not
apply with respect to a determination of the number of shares of
common stock issuable upon conversion in full of the Debentures if
such determination is necessary to establish the Securities or other
assets which the holder of Common Stock shall be entitled to receive
upon the effectiveness of such merger or consolidation.
(iii) Underlying Shares Issuable Upon Conversion.
(A) The number of shares of Common Stock issuable upon a
conversion hereunder shall be equal to the quotient obtained
by dividing (1) the outstanding principal amount of this
Debenture to be converted and (2) the Conversion Price.
(B) Notwithstanding anything to the contrary contained
herein, if on any Conversion Date:
(1) the number of shares of Common Stock at the
time authorized, unissued and unreserved for all
purposes, or held as treasury stock, is insufficient to
honor such conversion;
(2) the Common Stock shall fail to be listed or
quoted for trading on the OTC Bulletin Board or a
Subsequent Market; or
(3) the Company has failed to timely satisfy its
conversion obligations hereunder.
then, at the option of the Holder, the Company, in lieu
of delivering shares of Common Stock pursuant to this Section
4, shall deliver, within three Trading Days of each applicable
Conversion Date, an amount in cash equal to the product of the
number of shares of Common Stock otherwise deliverable to the
Holder in connection with such Conversion Date and the highest
Closing Bid Price during the period commencing on the
Conversion Date and ending on the Trading Day prior to the
date such payment is made.
(b) (i) Not later than three Trading Days after any Conversion Date,
the Company will deliver to the Holder, at an address in the United
States, a certificate or certificates which shall be free of
restrictive legends and trading restrictions (other than those
required by the Purchase Agreement) representing the number of
shares of Common Stock being acquired upon the conversion of
Debentures. The Company shall, upon request of the Holder, if
available, use its best efforts to deliver any certificate or
certificates required to be delivered by the Company under this
Section electronically through the Depository Trust Corporation or
another established clearing corporation performing similar
functions. If in the case of any Conversion Notice such certificate
or certificates are not delivered to or as directed by the
applicable Holder by the third Trading Day after a Conversion Date,
the Holder shall be entitled by written notice to the Company at any
time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company
shall immediately return the certificates representing the principal
amount of Debentures tendered for conversion.
(ii) If the Company fails for any reason to deliver to the Holder
such certificate or certificates pursuant to Section 4(b)(i) by the
third Trading Day after the Conversion Date, the Company shall pay
to such Holder, in cash, as liquidated damages and not as a penalty,
for each $5,000 of principal amount being converted, $50 per Trading
Day (increasing to $100 per Trading Day after 3 Trading Days and
increasing to $200 per Trading Day 6 Trading Days after such damages
begin to accrue) for each Trading Day after such third Trading Day
until such certificates are delivered. Nothing herein shall limit a
Holder's right to pursue actual damages or declare an Event of
Default pursuant to Section 3 herein for the Company's failure to
deliver certificates representing shares of Common Stock upon
conversion within the period specified herein and such Holder shall
have the right to pursue all remedies available to it at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such
rights shall not prohibit the Holders from seeking to enforce
damages pursuant to any other Section hereof or under applicable
law.
(iii) In addition to any other rights available to the Holder, if
the Company fails for any reason to deliver to the Holder such
certificate or certificates pursuant to Section 4(b)(i) by the fifth
Trading Day after the Conversion Date, and if after such third
Trading Day the Holder purchases (in an open market transaction or
otherwise) Common Stock to deliver in satisfaction of a sale by such
Holder of the Underlying Shares which the Holder anticipated
receiving upon such conversion (a "Buy-In"), then the Company shall
(A) pay in cash to the Holder (in addition to any remedies available
to or elected by the Holder) the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for
the Common Stock so purchased exceeds (y) the product of (1) the
aggregate number of shares of Common Stock that such Holder
anticipated receiving from the conversion at issue multiplied by (2)
the market price of the Common Stock at the time of the sale giving
rise to such purchase obligation and (B) at the option of the
Holder, either reissue Debentures in principal amount equal to the
principal amount of the attempted conversion or deliver to the
Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its delivery
requirements under Section 4(b)(i). For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of Debentures
with respect to which the market price of the Underlying Shares on
the date of conversion was a total of $10,000 under clause (A) of
the immediately preceding sentence, the Company shall be required to
pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of
the Buy-In. Notwithstanding anything contained herein to the
contrary, if a Holder requires the Company to make payment in
respect of a Buy-In for the failure to timely deliver certificates
hereunder and the Company timely pays in full such payment, the
Company shall not be required to pay such Holder liquidated damages
under Section 4(b)(ii) in respect of the certificates resulting in
such Buy-In.
(c) (i) The conversion price in effect on any Conversion Date shall
be equal to $0.294 (subject to adjustment herein)(the "Set Price").
(ii) If the Company, at any time while the Debentures are
outstanding: (A) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any
other equity or equity equivalent securities payable in shares of
Common Stock, (B) subdivide outstanding shares of Common Stock into
a larger number of shares, (C) combine (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller
number of shares, or (D) issue by reclassification of shares of the
Common Stock any shares of capital stock of the Company, then the
Set Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this
Section shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend
or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.
(iii) If the Company, at any time while Debentures are outstanding,
shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the
Per Share Market Value at the record date mentioned below, then the
Set Price shall be multiplied by a fraction, of which the
denominator shall be the number of shares of the Common Stock
(excluding treasury shares, if any) outstanding on the date of
issuance of such rights or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and of
which the numerator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding on the date of
issuance of such rights or warrants plus the number of shares which
the aggregate offering price of the total number of shares so
offered would purchase at such Per Share Market Value. Such
adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date
for the determination of stockholders entitled to receive such
rights, options or warrants.
(iv) If the Company or any subsidiary thereof, as applicable, at any
time while Debentures are outstanding, shall offer, sell, grant any
option to purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer,
sale, grant or any option to purchase or other disposition) any
Common Stock or any equity or equity equivalent securities
(including any equity, debt or other instrument that is at any time
over the life thereof convertible into or exchangeable for Common
Stock) (collectively, "Common Stock Equivalents") entitling any
Person to acquire shares of Common Stock, at a price per share less
than the Set Price (if the holder of the Common Stock or Common
Stock Equivalent so issued shall at any time, whether by operation
of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which is issued in connection
with such issuance, be entitled to receive shares of Common Stock at
a price per share which is less than the Set Price, such issuance
shall be deemed to have occurred for less than the Set Price), then,
the Set Price shall be adjusted to mirror the conversion, exchange
or purchase price for such Common Stock or Common Stock Equivalents
(including any reset provisions thereof). Such adjustment shall be
made whenever such Common Stock or Common Stock Equivalents are
issued. The Company shall notify the Holder in writing, no later
than the business day following the issuance of any Common Stock or
Common Stock Equivalent subject to this section, indicating therein
the applicable issuance price, or of applicable reset price,
exchange price, conversion price and other pricing terms.
(v) If the Company, at any time while Debentures are outstanding,
shall distribute to all holders of Common Stock (and not to Holders)
evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the
Set Price shall be determined by multiplying such price in effect
immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of
which the denominator shall be the Per Share Market Value determined
as of the record date mentioned above, and of which the numerator
shall be such Per Share Market Value on such record date less the
then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one
outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be
described in a statement provided to the Holders of the portion of
assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned
above.
(vi) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, the Holders shall
have the right thereafter to, at their option, (A) convert the then
outstanding principal amount and any other amounts then owing
hereunder in respect of this Debenture only into the shares of stock
and other securities, cash and property receivable upon or deemed to
be held by holders of the Common Stock following such
reclassification or share exchange, and the Holders of the
Debentures shall be entitled upon such event to receive such amount
of securities, cash or property as the shares of the Common Stock of
the Company into which the then outstanding principal amount and any
other amounts then owing hereunder in respect of this Debenture
could have been converted immediately prior to such reclassification
or share exchange would have been entitled or (B) require the
Company to prepay the aggregate of its outstanding principal amount
of Debentures at a price determined in accordance with Section 3(b).
The entire prepayment price shall be paid in cash. This provision
shall similarly apply to successive reclassifications or share
exchanges.
(vii) All calculations under this Section 4 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(viii) Whenever the Set Price is adjusted pursuant to any of Section
4(c)(ii) - (v), the Company shall promptly mail to each Holder a
notice setting forth the Set Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
(ix) If (A) the Company shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Company shall declare a
special nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company,
of any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; (E) the Company
shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company; then, in
each case, the Company shall cause to be filed at each office or
agency maintained for the purpose of conversion of the Debentures,
and shall cause to be mailed to the Holders at their last addresses
as they shall appear upon the stock books of the Company, at least
20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock of
record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of
record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such
notice. Holders are entitled to convert Debentures during the 20-day
period commencing the date of such notice to the effective date of
the event triggering such notice.
(x) Fundamental Transactions. If, at any time while this Debenture
is outstanding, (A) the Company effects any merger or consolidation
of the Company with or into another Person, (B) the Company effects
any sale of all or substantially all of its assets in one or a
series of related transactions, (C) any tender offer or exchange
offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D)
the Company effects any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash
or property (in any such case, a "Fundamental Transaction"), then
upon any subsequent conversion of this Debenture, the Holder shall
have the right to receive, for each Underlying Share that would have
been issuable upon such conversion absent such Fundamental
Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of one
share of Common Stock (the "Alternate Consideration"). For purposes
of any such conversion, the determination of the Conversion Price
shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Conversion Price
among the Alternate Consideration in a reasonable manner reflecting
the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any conversion of this
Debenture following such Fundamental Transaction. To the extent
necessary to effectuate the foregoing provisions, any successor to
the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new debenture consistent with the
foregoing provisions and evidencing the Holder's right to convert
such debenture into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity
to comply with the provisions of this paragraph (c) and insuring
that this Debenture (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a
Fundamental Transaction. If any Fundamental Transaction constitutes
or results in a Change of Control Transaction, then at the request
of the Holder delivered before the 90th day after such Fundamental
Transaction, the Company (or any such successor or surviving entity)
will purchase the Debenture from the Holder for a purchase price,
payable in cash within five Trading Days after such request (or, if
later, on the effective date of the Fundamental Transaction), equal
to the Black-Scholes value of the remaining unconverted portion of
this Debenture on the date of such request.
(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock solely
for the purpose of issuance upon conversion of the Debentures, each as
herein provided, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holders, not less
than such number of shares of the Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such shares
set forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 4(b)) upon the conversion of the
outstanding principal amount of the Debentures. The Company covenants that
all shares of Common Stock that shall be so issuable shall, upon issue, be
duly and validly authorized, issued and fully paid, nonassessable and, if
the Underlying Shares Registration Statement has been declared effective
under the Securities Act, registered for public sale in accordance with
such Underlying Shares Registration Statement.
(e) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of the Common
Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the Closing Bid Price at such time.
If the Company elects not, or is unable, to make such a cash payment, the
Holder shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
(f) The issuance of certificates for shares of the Common Stock on
conversion of the Debentures shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in
respect of any transfer involved in the issuance and delivery of any such
certificate upon conversion in a name other than that of the Holder of
such Debentures so converted and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
(g) Any and all notices or other communications or deliveries to be
provided by the Holders hereunder, including, without limitation, any
Conversion Notice, shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service or
sent by certified or registered mail, postage prepaid, addressed to the
Company, at the address set forth above, facsimile number (416) 633-2363,
Attn: Joseph Slechta or such other address or facsimile number as the
Company may specify for such purposes by notice to the Holders delivered
in accordance with this Section. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall
be in writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service or sent by certified or registered
mail, postage prepaid, addressed to each Holder at the facsimile telephone
number or address of such Holder appearing on the books of the Company, or
if no such facsimile telephone number or address appears, at the principal
place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest
of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in
this Section prior to 5:30 p.m. (New York City time), (ii) the date after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section
later than 5:30 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) four days after
deposit in the United States mail, (iv) the Business Day following the
date of mailing, if sent by nationally recognized overnight courier
service, or (v) upon actual receipt by the party to whom such notice is
required to be given.
Section 5. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
"Business Day" means any day except Saturday, Sunday and any day
which shall be a federal legal holiday in the United States or a day on
which banking institutions in the State of New York are authorized or
required by law or other government action to close.
"Change of Control Transaction" means the occurrence of any of (i)
an acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange
Act) of effective control (whether through legal or beneficial ownership
of capital stock of the Company, by contract or otherwise) of in excess of
33% of the voting securities of the Company, (ii) a replacement at one
time or over time of more than one-half of the members of the Company's
board of directors which is not approved by a majority of those
individuals who are members of the board of directors on the date hereof
(or by those individuals who are serving as members of the board of
directors on any date whose nomination to the board of directors was
approved by a majority of the members of the board of directors who are
members on the date hereof), (iii) the merger of the Company with or into
another entity that is not wholly-owned by the Company, consolidation or
sale of 50% or more of the assets of the Company in one or a series of
related transactions, or (iv) the execution by the Company of an agreement
to which the Company is a party or by which it is bound, providing for any
of the events set forth above in (i), (ii) or (iii).
"Closing Bid Price" means on any particular date (a) the closing bid
price per share of Common Stock on such date on the Principal Market (as
reported by Bloomberg L.P. at 4:15 PM (New York time), or (b) if there is
no such price on such date, then the closing bid price on the Principal
Market on the date nearest preceding such date (as reported by Bloomberg
L.P. at 4:15 PM (New York time) for the closing bid price for regular
session trading on such day), or (c) if the shares of Common Stock are not
then reported on the Principal Market, then the average of the "Pink
Sheet" quotes for the relevant conversion period, as determined in good
faith by the Purchasers, or (c) if the shares of Common Stock are not then
publicly traded the fair market value of a share of Common Stock as
determined by an appraiser selected in good faith by the Purchasers of a
majority in interest of the principal amount of Debentures then
outstanding.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $0.0001 par value per share,
of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Mandatory Prepayment Amount" for any Debentures shall equal the sum
of (i) the greater of: (A) 120% of the principal amount of Debentures to
be prepaid plus all other accrued and unpaid amounts due hereunder, and
(B) the principal amount of Debentures to be prepaid plus all other
accrued and unpaid amounts due hereunder, divided by the Conversion Price
on (x) the date the Mandatory Prepayment Amount is demanded or otherwise
due or (y) the date the Mandatory Prepayment Amount is paid in full,
whichever is less, multiplied by the Per Share Market Value on (x) the
date the Mandatory Prepayment Amount is demanded or otherwise due or (y)
the date the Mandatory Prepayment Amount is paid in full, whichever is
greater, and (ii) all other amounts, costs, expenses and liquidated
damages due in respect of such Debentures.
"Original Issue Date" shall mean the date of the first issuance of
the Debentures regardless of the number of transfers of any Debenture and
regardless of the number of instruments which may be issued to evidence
such Debenture.
"Per Share Market Value" means on any particular date the Closing
Bid Price on such date.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Purchase Agreement" means the Securities Purchase Agreement, dated
as of the Original Issue Date, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to time
in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, to which the Company and
the original Holder are parties, as amended, modified or supplemented from
time to time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Trading Day" means (a) a day on which the shares of Common Stock
are traded on the OTC Bulletin Board or on such Subsequent Market on which
the shares of Common Stock are then listed or quoted, or (b) if the shares
of Common Stock are not quoted on the OTC Bulletin Board or a Subsequent
Market, a day on which the shares of Common Stock are quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its
functions of reporting prices); provided, that in the event that the
shares of Common Stock are not listed or quoted as set forth in (a), (b)
and (c) hereof, then Trading Day shall mean a Business Day.
"Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of Debentures.
"Underlying Shares Registration Statement" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares
and naming the Holder as a "selling stockholder" thereunder.
Section 6. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and liquidated damages (if any) on,
this Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture is a direct obligation of the Company and is secured
by a security interest in certain pledged securities of the Company's
shareholders as set forth in that certain Security and Pledge Agreement, dated
as of the Original Issue Date, among the original holders of the Convertible
Debentures and the shareholders signatory to said agreement. This Debenture
ranks pari passu with all other Debentures now or hereafter issued under the
terms set forth herein. As long as there are Debentures outstanding, the Company
shall not and shall cause it subsidiaries not to, without the consent of the
Holders, (a) amend its certificate of incorporation, bylaws or other charter
documents so as to adversely affect any rights of the Holders; (b) repay,
repurchase or offer to repay, repurchase or otherwise acquire shares of its
Common Stock or other equity securities other than as to the Underlying Shares
to the extent permitted or required under the Transaction Documents; or (c)
enter into any agreement with respect to any of the foregoing.
Section 7. If this Debenture shall be mutilated, lost, stolen or destroyed,
the Company shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Debenture, or in lieu of or in substitution for a
lost, stolen or destroyed debenture, a new Debenture for the principal amount of
this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Debenture, and of the
ownership hereof, and indemnity, if requested, all reasonably satisfactory to
the Company.
Section 8. No indebtedness of the Company is senior to this Debenture in
right of payment, whether with respect to damages or upon liquidation or
dissolution or otherwise. The Company will not and will not permit any of its
subsidiaries to, directly or indirectly, enter into, create, incur, assume or
suffer to exist any indebtedness of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest therein or
any income or profits therefrom that is senior in any respect to the Company's
obligations under the Debentures.
Section 9. All questions concerning the construction, validity, enforcement
and interpretation of this Debenture shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced in the state and federal
courts sitting in the City of New York, Borough of Manhattan (the "New York
Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Debenture and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Debenture or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Debenture,
then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its attorneys fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.
Section 10. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
Section 11. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on the Debentures as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
Section 12. Whenever any payment or other obligation hereunder shall be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
*********************
IN WITNESS WHEREOF, the Company has caused this Convertible Debenture to
be duly executed by a duly authorized officer as of the date first above
indicated.
L.A.M. PHARMACEUTICAL CORP.
By:_____________________________________
Name:
Title:
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the 0% Convertible
Debenture of L.A.M. Pharmaceutical Corp., (the "Company") due on October 18,
2005, into shares of common stock, $0.0001 par value per share (the "Common
Stock"), of the Company according to the conditions hereof, as of the date
written below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.
By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of the Company's Common Stock does
not exceed the amounts determined in accordance with Section 13(d) of the
Exchange Act, specified under Section 4 of this Debenture.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debentures to be Converted
Number of shares of Common Stock to be Issued:
Applicable Conversion Price:
Signature:
Name:
Address:
Schedule 1
CONVERSION SCHEDULE
0% Convertible Debentures due on October 18, 2005, in the aggregate principal
amount of $250,000 issued by L.A.M. Pharmaceutical Corp.. This Conversion
Schedule reflects conversions made under Section 4 of the above referenced
Debenture.
Dated:
================= =============== ============== =============== ==============
Aggregate
Principal
Date of Amount
Conversion Remaining
(or for first Subsequent
entry, Original to Conversion
Issue Date) Amount of (or original Company Attest
Conversion Principal
Amount)
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EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of October 18, 2002, among L.A.M. Pharmaceutical Corp., a Delaware
corporation (the "Company"), and the purchasers signatory hereto (each such
purchaser is a "Purchaser" and all such purchasers are, collectively, the
"Purchasers").
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"Business Day" means any day except Saturday, Sunday and
any day which shall be a legal holiday or a day on which banking
institutions in the State of New York or the State of California are
authorized or required by law or other government actions to close.
"Effectiveness Date" means, with respect to the initial
Registration Statement required to be filed hereunder, the earlier of (i)
the 120th day following the Closing Date and (ii) the fifth day following
the date on which the Company is notified by the Commission that such
Registration Statement will not be reviewed or is no longer subject to
further review and comments.
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Filing Date" means, with respect to the initial
Registration Statement required to be filed hereunder, the 45th day
following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the
case may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Prospectus" means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by a Registration Statement, and all other amendments
and supplements to the Prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
"Registrable Securities" means all of the shares of Common Stock
issuable upon conversion in full of the Debentures, assuming the lowest
possible conversion price that occurred since the Closing Date
(notwithstanding any limitations on conversion or resets in the
Debentures), exercise in full of the Warrants, shares issuable in lieu of
the payment of liquidated damages, together with any securities issued or
issuable upon any stock split, dividend or other distribution
recapitalization or similar event with respect to the foregoing or pursuant
to any anti-dilution provisions contained in the Debentures or the
Warrants, and the shares underlying the Warrants held by HPC Capital
Management.
"Registration Statement" means the registration statements required to
be filed hereunder and any additional registration statements contemplated
by Section 3(c), including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre-
and post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Special Counsel" means one special counsel to the Holders, for which
the Holders will be reimbursed by the Company pursuant to Section 4.
"Warrants" shall mean the Common Stock purchase warrants issued to the
Purchasers pursuant to the Purchase Agreement.
2. Shelf Registration
(a) On or prior to each Filing Date, the Company shall prepare
and file with the Commission a "Shelf" Registration Statement covering the
resale of all Registrable Securities applicable to such Filing Date for an
offering to be made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form SB-2 and shall contain (except if otherwise directed
by the Holders) substantially the "Plan of Distribution" attached hereto as
Annex A. The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the applicable
Effectiveness Date, and shall use its best efforts to keep such Registration
Statement continuously effective under the Securities Act until the date which
is two years after the date that such Registration Statement is declared
effective by the Commission or such earlier date when all Registrable Securities
covered by such Registration Statement have been sold or may be sold without
volume restrictions pursuant to Rule 144(k) as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent and the affected Holders (the
"Effectiveness Period").
(b) The Registration Statements to be filed hereunder shall include 150% of
the Registrable Securities.
(c) If: (i) a Registration Statement is not filed on or prior to its Filing
Date (if the Company files a Registration Statement without affording the Holder
the opportunity to review and comment on the same as required by Section 3(a),
the Company shall not be deemed to have satisfied clause (i)), or (ii) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act, within five
Trading Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be "reviewed," or not subject to further review, or (iii) prior to its Effective
Date, the Company fails to file a pre-effective amendment and otherwise respond
in writing to comments made by the Commission in respect of such Registration
Statement within fifteen Trading Days after the receipt of comments by or notice
from the Commission that such amendment is required in order for a Registration
Statement to be declared effective, or (iv) a Registration Statement filed or
required to be filed hereunder is not declared effective by the Commission by
its Effectiveness Date, or (v) after the Effective Date, a Registration
Statement ceases for any reason to remain continuously effective as to all
Registrable Securities for which it is required to be effective, or the Holders
are not permitted to utilize the Prospectus therein to resell such Registrable
Securities, for in any such cases an aggregate of twenty Trading Days (which
need not be consecutive Trading Days) (any such failure or breach being referred
to as an "Event", and for purposes of clause (i) or (iv) the date on which such
Event occurs, or for purposes of clause (ii) the date on which such five Trading
Day period is exceeded, or for purposes of clauses (iii) the date which such
fifteen Trading Day period is exceeded, or for purposes of clause (v) the date
on which such twenty Trading Day period is exceeded being referred to as "Event
Date"), then, on each such Event Date and every monthly anniversary thereof
until the applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as liquidated damages and not as a penalty, equal to 2.0% of (i)
the purchase price paid by such Holder pursuant to the Purchase Agreement, and
(ii) if the Warrants are "in the money", the value of any outstanding Warrants
(valued at the difference between the average VWAP during the applicable month
and the Exercise Price multiplied by the number of shares of Common Stock the
Warrants are exercisable into) for the first month following such Event Date and
2.0% per month thereafter. If the Company fails to pay any liquidated damages
pursuant to this Section in full within seven days after the date payable, the
Company will pay interest thereon at a rate of 18% per annum (or such lesser
maximum amount that is permitted to be paid by applicable law) to the Holder,
accruing daily from the date such liquidated damages are due until such amounts,
plus all such interest thereon, are paid in full and at the option of the
Holder, such liquidated damages be paid in shares of Common Stock under the
Warrant. The liquidated damages pursuant to the terms hereof shall apply on a
pro-rata basis for any portion of a month prior to the cure of an Event.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Not less than five Business Days prior to the filing of each
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall, (i) furnish to the
Holders and their Special Counsel copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders and
their Special Counsel, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities and their Special Counsel shall reasonably object,
provided, the Company is notified of such objection no later than 5 Business
Days after the Holders have been so furnished copies of such documents.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to a Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep a Registration Statement
continuously effective as to the applicable Registrable Securities for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
promptly as reasonably possible, and in any event within ten days, to any
comments received from the Commission with respect to a Registration Statement
or any amendment thereto and as promptly as reasonably possible provide the
Holders true and complete copies of all correspondence from and to the
Commission relating to a Registration Statement; and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all Registrable Securities covered by a
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in such
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) If the number of Registrable Securities issuable at any time exceeds
85% of the number of shares of Common Stock then registered in a Registration
Statement, then the Company shall file an additional Registration Statement
covering the resale of by the Holders of not less than 150% of the number of
Registrable Securities required in order that all Underlying Shares and all
Warrant Shares issuable upon exercise of the Warrants would then be registered
in accordance with this Agreement.
(d) Notify the Holders of Registrable Securities to be sold and their
Special Counsel as promptly as reasonably possible (and, in the case of (i)(A)
below, not less than five Business Days prior to such filing) and (if requested
by any such Person) confirm such notice in writing no later than one Business
Day following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to a Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a "review" of
such Registration Statement and whenever the Commission comments in writing on
such Registration Statement (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders); and (C) with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to a
Registration Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of a
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations and warranties of the Company contained in any agreement
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event or passage
of time that makes the financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in a Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to a Registration Statement, Prospectus or other
documents so that, in the case of a Registration Statement or the Prospectus, as
the case may be, it will not contain any untrue statement of a material fact or
omit to state any 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.
(e) Promptly deliver to each Holder and their Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
(f) Prior to any public offering of Registrable Securities, use its best
efforts to register or qualify or cooperate with the selling Holders and their
Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(g) Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any such Holders may request.
(h) Upon the occurrence of any event contemplated this Section 3, as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to a Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither a Registration Statement nor such Prospectus will
contain an 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.
(i) Comply with all applicable rules and regulations of the Commission.
(j) Use its best efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of a Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(k) Furnish to each Holder and their Special Counsel, without charge, at
least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
4. Registration Expenses. All fees and expenses incident to the performance
of or compliance with this Agreement by the Company shall be borne by the
Company whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the OTCBB and any Subsequent Market on which the Common
Stock is then listed for trading, and (B) in compliance with applicable state
securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Company in connection with Blue Sky
qualifications or exemptions of the Registrable Securities and determination of
the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as requested by the Holders )), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the Holders),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and Special Counsel for the Holders (fees and expenses
to Special Counsel limited to, in the aggregate, in addition to the amounts owed
pursuant to the Purchase Agreement, $5,000) and (v) fees and expenses of all
other Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement. In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit and the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
5. Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls any such Holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and attorneys' fees) and expenses (collectively, "Losses"),
as incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in a Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (1) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in a Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto or (2) in the case of an
occurrence of an event of the type specified in Section 3(d)(ii)-(vi), the use
by such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 6(e).
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in any Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (1) such untrue statements or
omissions are based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (2) in the case of an occurrence of an event of the type
specified in Section 3(d)(ii)-(vi), the use by such Holder of an outdated or
defective Prospectus after the Company has notified such Holder in writing that
the Prospectus is outdated or defective and prior to the receipt by such Holder
of the Advice contemplated in Section 6(e). In no event shall the liability of
any selling Holder hereunder be greater in amount than the dollar amount of the
net proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party. Notwithstanding anything contained
herein to the contrary, the Company will only be liable for the fees and
expenses of one separate counsel for all indemnified parties.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten
Business Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b)
is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Miscellaneous
(a) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders of
at least two-thirds of the then outstanding Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or any of
its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. Except as and to the extent specified in
Schedule 6(b) hereto, neither the Company nor any of its subsidiaries has
previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person that have not been satisfied in
full.
(c) No Piggyback on Registrations. Except as and to the extent specified in
Schedule 6(c) hereto, neither the Company nor any of its security holders (other
than the Holders in such capacity pursuant hereto) may include securities of the
Company in the Registration Statement other than the Registrable Securities, and
the Company shall not after the date hereof enter into any agreement providing
any such right to any of its security holders.
(d) Compliance. Each Holder covenants and agrees that it will comply with
the prospectus delivery requirements of the Securities Act as applicable to it
in connection with sales of Registrable Securities pursuant to the Registration
Statement.
(e) Discontinued Disposition. Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Sections 3(d), such Holder will
forthwith discontinue disposition of such Registrable Securities under a
Registration Statement until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 3(h), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph.
(f) Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written notice of such
determination and, if within fifteen days after receipt of such notice, any such
Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered; provided, that, the Company shall not be
required to register any Registrable Securities pursuant to this Section 6(f)
that are eligible for resale pursuant to Rule 144(k) promulgated under the
Securities Act.
(g) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be delivered as set forth
in the Purchase Agreement.
(h) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. The Company may not assign its
rights or obligations hereunder without the prior written consent of each
Holder. Each Holder may assign their respective rights hereunder in the manner
and to the Persons as permitted under the Purchase Agreement.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(j) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of this Agreement, then the
prevailing party in such Proceeding shall be reimbursed by the other party for
its attorneys fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.
(k) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(n) Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.
********************
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
L.A.M. PHARMACEUTICAL CORP.
By: ____________________________________
Name:
Title:
PALISADES EQUITY FUND L.P.
By:________________________________
Name:
Title:
ALPHA CAPITAL AG
By: _________________________________
Name:
Title:
Plan of Distribution
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales
o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus. Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
Selling Stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.
The selling stockholder may from time to time pledge or grant a security
interest in some or all of the Shares or common stock or Warrant owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus.
The selling stockholders also may transfer the shares of common stock in
other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this
prospectus.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The Selling Stockholders have
informed the Company that it does not have any agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock.
The Company is required to pay all fees and expenses incident to the
registration of the shares. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
EXHIBIT C
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES
STOCK PURCHASE WARRANT
SERIES A
To Purchase __________ Shares of Common Stock of
L.A.M. Pharmaceutical Corp.
THIS CERTIFIES that, for value received, _____________ (the
"Holder"), is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after
November 1, 2002 (the "Initial Exercise Date") and on or prior to the close of
business on the fifth anniversary of the Initial Exercise Date (the "Termination
Date") but not thereafter, to subscribe for and purchase from L.A.M.
Pharmaceutical Corp., a corporation incorporated in the State of Delaware (the
"Company"), up to ____________ shares (the "Warrant Shares") of Common Stock,
par value $0.0001 per share, of the Company (the "Common Stock"). The purchase
price of one share of Common Stock (the "Exercise Price") under this Warrant
shall be $0.35, subject to adjustment hereunder. The Exercise Price and the
number of Warrant Shares for which the Warrant is exercisable shall be subject
to adjustment as provided herein. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the "Purchase Agreement"), dated October 18, 2002, between
the Company and the investors signatory thereto.
1. Title to Warrant. Prior to the Termination Date and subject to compliance
with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company
by the Holder in person or by duly authorized attorney, upon surrender of
this Warrant together with the Assignment Form annexed hereto properly
endorsed.
2. Authorization of Shares. The Company covenants that all Warrant Shares
which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by
this Warrant, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
3. Exercise of Warrant.
(a) Except as provided in Section 4 herein, exercise of the purchase rights
represented by this Warrant may be made at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by the surrender of
this Warrant and the Notice of Exercise Form annexed hereto duly executed, at
the office of the Company (or such other office or agency of the Company as it
may designate by notice in writing to the registered Holder at the address of
such Holder appearing on the books of the Company) and upon payment of the
Exercise Price of the shares thereby purchased by wire transfer or cashier's
check drawn on a United States bank [or by means of a cashless exercise], the
Holder shall be entitled to receive a certificate for the number of Warrant
Shares so purchased. Certificates for shares purchased hereunder shall be
delivered to the Holder at an address in the U.S. within three (3) Trading Days
after the date on which this Warrant shall have been exercised as aforesaid.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Exercise Price and all taxes required
to be paid by the Holder, if any, pursuant to Section 5 prior to the issuance of
such shares, have been paid. If the Company fails to deliver to the Holder a
certificate or certificates representing the Warrant Shares pursuant to this
Section 3(a) by the third Trading Day after the date of exercise, then the
Holder will have the right to rescind such exercise. In addition to any other
rights available to the Holder, if the Company fails to deliver to the Holder a
certificate or certificates representing the Warrant Shares pursuant to an
exercise by the fifth Trading Day after the date of exercise, and if after such
fifth Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving upon such
exercise (a "Buy-In"), then the Company shall (1) pay in cash to the Holder the
amount by which (x) the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (A) the number of Warrant Shares that the Company
was required to deliver to the Holder in connection with the exercise at issue
times (B) the closing bid price of the Common Stock at the time of the
obligation giving rise to such purchase obligation, and (2) at the option of the
Holder, either reinstate the portion of the Warrant and equivalent number of
Warrant Shares for which such exercise was not honored or deliver to the Holder
the number of shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations hereunder. For
example, if the Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with a market price on the date of exercise totaled $10,000, under
clause (1) of the immediately preceding sentence the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In. Nothing
herein shall limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.
(b) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of Holder to
purchase the unpurchased Warrant Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant.
(c) Notwithstanding anything herein to the contrary, in no event shall the
Holder be permitted to exercise this Warrant for Warrant Shares to the extent
that (i) the number of shares of Common Stock owned by such Holder (other than
Warrant Shares issuable upon exercise of this Warrant) plus (ii) the number of
Warrant Shares issuable upon exercise of this Warrant, would be equal to or
exceed 4.9999% of the number of shares of Common Stock then issued and
outstanding, including shares issuable upon exercise of this Warrant held by
such Holder after application of this Section 3(c). As used herein, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act. To the extent that the limitation contained in this Section 3(c) applies,
the determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder) and of which a portion of this Warrant is
exercisable shall be in the sole discretion of such Holder, and the submission
of a Notice of Exercise shall be deemed to be such Holder's determination of
whether this Warrant is exercisable (in relation to other securities owned by
such Holder) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. Nothing
contained herein shall be deemed to restrict the right of a Holder to exercise
this Warrant into Warrant Shares at such time as such exercise will not violate
the provisions of this Section 3(c). The provisions of this Section 3(c) may be
waived by the Holder upon, at the election of the Holder, not less than 61 days'
prior notice to the Company, and the provisions of this Section 3(c) shall
continue to apply until such 61st day (or such later date, as determined by the
Holder, as may be specified in such notice of waiver). No exercise of this
Warrant in violation of this Section 3(c) but otherwise in accordance with this
Warrant shall affect the status of the Warrant Shares as validly issued,
fully-paid and nonassessable.
(d) This Warrant may also be exercised by means of a "cashless exercise" in
which the Holder shall be entitled to receive a certificate for the number of
Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:
(A) = the average of the high and low trading prices per share of
Common Stock on the Trading Day preceding the date of such
election;
(B) = the Exercise Price of the Warrants; and
(X) = the number of Warrant Shares issuable upon exercise of the
Warrants in accordance with the terms of this Warrant.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares
shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant.
7. Transfer, Division and Combination.
(a) Subject to compliance with any applicable securities laws, transfer of
this Warrant and all rights hereunder, in whole or in part, shall be registered
on the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company, together with a written
assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of Warrant
Shares without having a new Warrant issued.
(b) This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 7(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books for the
registration and the registration of transfer of the Warrants.
8. No Rights as Shareholder until Exercise. This Warrant does not entitle
the Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price [(or by means of a cashless exercise)], the
Warrant Shares so purchased shall be and be deemed to be issued to such Holder
as the record owner of such shares as of the close of business on the later of
the date of such surrender or payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.
11. Adjustments of Exercise Price and Number of Warrant Shares.
(a) Stock Splits, etc. The number and kind of securities purchasable upon
the exercise of this Warrant and the Exercise Price shall be subject to
adjustment from time to time upon the happening of any of the following. In case
the Company shall (i) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to holders of its outstanding Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or (iv) issue any shares of its
capital stock in a reclassification of the Common Stock, then the number of
Warrant Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which it
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the Holder shall thereafter be entitled to purchase the number of
Warrant Shares or other securities resulting from such adjustment at an Exercise
Price per Warrant Share or other security obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares purchasable pursuant hereto immediately prior to such adjustment and
dividing by the number of Warrant Shares or other securities of the Company
resulting from such adjustment. An adjustment made pursuant to this paragraph
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) Anti-Dilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares issuable hereunder and for which this
Warrant is then exercisable pursuant to Section 1 hereof shall be subject to
adjustment from time to time as provided in this Section 11(b). In the event
that any adjustment of the Exercise Price as required herein results in a
fraction of a cent, such Exercise Price shall be rounded up or down to the
nearest cent.
(i) Adjustment of Exercise Price. If and whenever the Company
issues or sells, or in accordance with Section 8(b) hereof is deemed
to have issued or sold, any shares of Common Stock for a
consideration per share of less than the then the Exercise Price or
for no consideration (such lower price, the "Base Share Price" and
such issuances collectively, a "Dilutive Issuance"), then, the
Exercise Price shall be reduced to equal the Base Share Price,
provided, that for purposes hereof, all shares of Common Stock that
are issuable upon conversion, exercise or exchange of Capital Share
Equivalents shall be deemed outstanding immediately after the
issuance of such Common Stock. Such adjustment shall be made
whenever such shares of Common Stock or Capital Share Equivalents
are issued.
(ii) Effect on Exercise Price of Certain Events. For purposes
of determining the adjusted Exercise Price under Section 11(b)
hereof, the following will be applicable:
(A) Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common
Stock or other securities exercisable, convertible into or
exchangeable for Common Stock ("Convertible Securities") (such
warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "Options")
and the price per share for which Common Stock is issuable upon
the exercise of such Options is less than the Exercise Price
("Below Base Price Options"), then the maximum total number of
shares of Common Stock issuable upon the exercise of all such
Below Base Price Options (assuming full exercise, conversion or
exchange of Convertible Securities, if applicable) will, as of
the date of the issuance or grant of such Below Base Price
Options, be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For purposes of the
preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Below Base Price Options"
is determined by dividing (i) the total amount, if any, received
or receivable by the Company as consideration for the issuance or
granting of all such Below Base Price Options, plus the minimum
aggregate amount of additional consideration, if any, payable to
the Company upon the exercise of all such Below Base Price
Options, plus, in the case of Convertible Securities issuable
upon the exercise of such Below Base Price Options, the minimum
aggregate amount of additional consideration payable upon the
exercise, conversion or exchange thereof at the time such
Convertible Securities first become exercisable, convertible or
exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Below Base
Price Options (assuming full conversion of Convertible
Securities, if applicable). No further adjustment to the Exercise
Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Below Base Price Options or upon the
exercise, conversion or exchange of Convertible Securities
issuable upon exercise of such Below Base Price Options.
(B) Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable
upon the exercise of Options) and the price per share for which
Common Stock is issuable upon such exercise, conversion or
exchange is less than the Exercise Price, then the maximum total
number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities will,
as of the date of the issuance of such Convertible Securities, be
deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For the purposes of the
preceding sentence, the "price per share for which Common Stock
is issuable upon such exercise, conversion or exchange" is
determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or
sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to
the Company upon the exercise, conversion or exchange thereof at
the time such Convertible Securities first become exercisable,
convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities. No further
adjustment to the Exercise Price will be made upon the actual
issuance of such Common Stock upon exercise, conversion or
exchange of such Convertible Securities.
(C) Change in Option Price or Conversion Rate. If there is a change
at any time in (i) the amount of additional consideration payable
to the Company upon the exercise of any Options; (ii) the amount
of additional consideration, if any, payable to the Company upon
the exercise, conversion or exchange of any Convertible
Securities; or (iii) the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock (in each
such case, other than under or by reason of provisions designed
to protect against dilution), the Exercise Price in effect at the
time of such change will be readjusted to the Exercise Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or sold.
(D) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor for purposes of this
Warrant will be the amount received by the Company therefor,
before deduction of reasonable commissions, underwriting
discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant
or sale. In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration part or all of
which shall be other than cash, the amount of the consideration
other than cash received by the Company will be the fair market
value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration
received by the Company will be the Market Price thereof as of
the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued in connection with any merger
or consolidation in which the Company is the surviving
corporation, the amount of consideration therefor will be deemed
to be the fair market value of such portion of the net assets and
business of the non-surviving corporation as is attributable to
such Common Stock, Options or Convertible Securities, as the case
may be. The fair market value of any consideration other than
cash or securities will be determined in good faith by an
investment banker or other appropriate expert of national
reputation selected by the Company and reasonably acceptable to
the holder hereof, with the costs of such appraisal to be borne
by the Company.
(E) Exceptions to Adjustment of Exercise Price. No adjustment to the
Exercise Price will be made (i) upon the exercise of this Warrant
or any other warrant of this series or of any other series issued
by the Company in connection with the offer and sale of this
Company's securities pursuant to the Purchase Agreement; (ii)
upon the exercise of or conversion of any Convertible Securities,
options or warrants issued and outstanding on the initial
issuance date of this Warrant; (iii) upon the grant or exercise
of any Convertible Securities which may hereafter be granted or
exercised under any employee benefit plan of the Company now
existing or to be implemented in the future, so long as the
issuance of such Convertible Securities is approved by a majority
of the non-employee members of the Board of Directors of the
Company or a majority of the members of a committee of
non-employee directors established for such purpose; (iv) upon
the issuance of Common Stock or Convertible Securities in any
transaction of the nature contemplated by Rule 145, promulgated
under the Securities Act; or (v) in connection with any strategic
partnership or joint venture or acquisition or key consulting
agreements (the primary purpose of which is not to raise equity
capital for the Company).
(iii) Minimum Adjustment of Exercise Price. No adjustment of
the Exercise Price shall be made in an amount of less than 1% of the
Exercise Price in effect at the time such adjustment is otherwise
required to be made, but any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next
subsequent adjustment which, together with any adjustments so
carried forward, shall amount to not less than 1% of such Exercise
Price.]
12. Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then the Holder shall have the right thereafter to receive, at
their option, (a) upon exercise of this Warrant, the number of shares of Common
Stock of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a Holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event, or (b) cash equal to the value of
this Warrant as determined in accordance with the Black-Sholes option pricing
formula. In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring corporation
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined in good faith by resolution of the Board of Directors
of the Company) in order to provide for adjustments of Warrant Shares for which
this Warrant is exercisable which shall be as nearly equivalent as practicable
to the adjustments provided for in this Section 12. For purposes of this Section
12, "common stock of the successor or acquiring corporation" shall include stock
of such corporation of any class which is not preferred as to dividends or
assets over any other class of stock of such corporation and which is not
subject to redemption and shall also include any evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for any such stock, either immediately or upon the arrival of a specified date
or the happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this
Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
13. Voluntary Adjustment by the Company. The Company may at any time during
the term of this Warrant reduce the then current Exercise Price to any amount
and for any period of time deemed appropriate by the Board of Directors of the
Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or number
or kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
Holder notice of such adjustment or adjustments setting forth the number of
Warrant Shares (and other securities or property) purchasable upon the exercise
of this Warrant and the Exercise Price of such Warrant Shares (and other
securities or property) after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the computation by
which such adjustment was made. Such notice, in the absence of manifest error,
shall be conclusive evidence of the correctness of such adjustment.
15. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, or any right to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class or any
other securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any sale,
transfer or other disposition of all or substantially all the property,
assets or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to Holder at the
last address of Holder appearing on the books of the Company and delivered in
accordance with Section 17(d).
16. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the Exercise
Price, the Company shall obtain all such authorizations or exemptions thereof,
or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.
17. Miscellaneous.
(a) Jurisdiction. This Warrant shall constitute a contract under the laws of
New York, without regard to its conflict of law, principles or rules.
(b) Restrictions. The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice Holder's rights, powers
or remedies, notwithstanding all rights hereunder terminate on the
Termination Date. If the Company willfully and knowingly fails to
comply with any provision of this Warrant, which results in any
material damages to the Holder, the Company shall pay to Holder such
amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including
those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or permitted to be
given or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
(e) Limitation of Liability. No provision hereof, in the absence of
affirmative action by Holder to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of Holder, shall give rise
to any liability of Holder for the purchase price of any Common Stock or
as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
(f) Remedies. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and
hereby agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the
successors and permitted assigns of Holder. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of
this Warrant and shall be enforceable by any such Holder or holder of
Warrant Shares.
(h) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
(i) Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Warrant.
(j) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this
Warrant.
********************
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: November 1, 2002
L.A.M. PHARMACEUTICAL CORP.
By:_____________________________________________
Name: Joseph Slechta
Title: President
EXHIBIT C
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES
STOCK PURCHASE WARRANT
SERIES B
To Purchase __________ Shares of Common Stock of
L.A.M. Pharmaceutical Corp.
THIS CERTIFIES that, for value received, _____________ (the
"Holder"), is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after
November 1, 2002 (the "Initial Exercise Date") and on or prior to the close of
business on the fifth anniversary of the Initial Exercise Date (the "Termination
Date") but not thereafter, to subscribe for and purchase from L.A.M.
Pharmaceutical Corp., a corporation incorporated in the State of Delaware (the
"Company"), up to ____________ shares (the "Warrant Shares") of Common Stock,
par value $0.0001 per share, of the Company (the "Common Stock"). The purchase
price of one share of Common Stock (the "Exercise Price") under this Warrant
shall be $0.80, subject to adjustment hereunder. The Exercise Price and the
number of Warrant Shares for which the Warrant is exercisable shall be subject
to adjustment as provided herein. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the "Purchase Agreement"), dated October 18, 2002, between
the Company and the investors signatory thereto.
1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all Warrant Shares
which may be issued upon the exercise of the purchase rights represented by this
Warrant will, upon exercise of the purchase rights represented by this Warrant,
be duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant.
(a) Except as provided in Section 4 herein, exercise of the purchase rights
represented by this Warrant may be made at any time or times on or after
the Initial Exercise Date and on or before the Termination Date by the
surrender of this Warrant and the Notice of Exercise Form annexed hereto
duly executed, at the office of the Company (or such other office or agency
of the Company as it may designate by notice in writing to the registered
Holder at the address of such Holder appearing on the books of the Company)
and upon payment of the Exercise Price of the shares thereby purchased by
wire transfer or cashier's check drawn on a United States bank, the Holder
shall be entitled to receive a certificate for the number of Warrant Shares
so purchased. Certificates for shares purchased hereunder shall be
delivered to the Holder at an address in the United States within three (3)
Trading Days after the date on which this Warrant shall have been exercised
as aforesaid. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and Holder
or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the
date the Warrant has been exercised by payment to the Company of the
Exercise Price and all taxes required to be paid by the Holder, if any,
pursuant to Section 5 prior to the issuance of such shares, have been paid.
If the Company fails to deliver to the Holder a certificate or certificates
representing the Warrant Shares pursuant to this Section 3(a) by the third
Trading Day after the date of exercise, then the Holder will have the right
to rescind such exercise. In addition to any other rights available to the
Holder, if the Company fails to deliver to the Holder a certificate or
certificates representing the Warrant Shares pursuant to an exercise by the
fifth Trading Day after the date of exercise, and if after such fifth
Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by
the Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a "Buy-In"), then the Company ------ shall (1) pay in
cash to the Holder the amount by which (x) the Holder's total purchase
price (including brokerage commissions, if any) for the shares of Common
Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver to the
Holder in connection with the exercise at issue times (B) the closing bid
price of the Common Stock at the time of the obligation giving rise to such
purchase obligation, and (2) at the option of the Holder, either reinstate
the portion of the Warrant and equivalent number of Warrant Shares for
which such exercise was not honored or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company timely
complied with its exercise and delivery obligations hereunder. For example,
if the Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted exercise of shares
of Common Stock with a market price on the date of exercise totaled
$10,000, under clause (1) of the immediately preceding sentence the Company
shall be required to pay the Holder $1,000. The Holder shall provide the
Company written notice indicating the amounts payable to the Holder in
respect of the Buy-In. Nothing herein shall limit a Holder's right to
pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon exercise of the
Warrant as required pursuant to the terms hereof.
(b) If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing
Warrant Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with
this Warrant.
(c) Notwithstanding anything herein to the contrary, in no event shall the
Holder be permitted to exercise this Warrant for Warrant Shares to the
extent that (i) the number of shares of Common Stock owned by such Holder
(other than Warrant Shares issuable upon exercise of this Warrant) plus
(ii) the number of Warrant Shares issuable upon exercise of this Warrant,
would be equal to or exceed 4.9999% of the number of shares of Common Stock
then issued and outstanding, including shares issuable upon exercise of
this Warrant held by such Holder after application of this Section 3(c). As
used herein, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act. To the extent that the limitation
contained in this Section 3(c) applies, the determination of whether this
Warrant is exercisable (in relation to other securities owned by the
Holder) and of which a portion of this Warrant is exercisable shall be in
the sole discretion of such Holder, and the submission of a Notice of
Exercise shall be deemed to be such Holder's determination of whether this
Warrant is exercisable (in relation to other securities owned by such
Holder) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such determination.
Nothing contained herein shall be deemed to restrict the right of a Holder
to exercise this Warrant into Warrant Shares at such time as such exercise
will not violate the provisions of this Section 3(c). The provisions of
this Section 3(c) may be waived by the Holder upon, at the election of the
Holder, not less than 61 days' prior notice to the Company, and the
provisions of this Section 3(c) shall continue to apply until such 61st day
(or such later date, as determined by the Holder, as may be specified in
such notice of waiver). No exercise of this Warrant in violation of this
Section 3(c) but otherwise in accordance with this Warrant shall affect the
status of the Warrant Shares as validly issued, fully-paid and
nonassessable.
(d) (Resereved)
(e) Within 2 days after the end of any period of 10 consecutive Trading
Days that the Closing Bid Price has exceeded $1.20, the Company shall
have the right, upon 15 days advance written notice to the Holder, to
cause the Holder to exercise the unexercised portion of this Warrant.
Notwithstanding anything to the contrary herein, the Company may only
exercise its rights hereunder if each of the following shall be true:
(i) the Company shall have duly honored all notices of exercise to
occur or occurring prior to the date of the redemption, (ii) there is
an effective Underlying Shares Registration Statement pursuant to
which the Holder is permitted to utilize the prospectus thereunder to
resell all of the Warrant Shares issued to the Holder and all of the
Warrant Shares as are issuable to the Holder upon exercise in full of
this Warrant (and the Company believes, in good faith, that such
effectiveness will continue uninterrupted for the foreseeable future),
(iii) the Common Stock is listed for trading on a Principal Market
(and the Company believes, in good faith, that trading of the Common
Stock on a Principal Market will continue uninterrupted for the
foreseeable future), (iv) all liquidated damages and other amounts
owing in respect of the Warrant and Warrant Shares shall have been
paid or will, concurrently with the issuance of the Warrant Shares, be
paid in cash; (v) there is a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the
issuance of all the Warrant Shares as are issuable to the Holder upon
exercise in full of this Warrant; and (vi) no public announcement of a
pending or proposed event subject Section 12 has occurred that has not
been consummated. Furthermore, subject to the terms and conditions
herein, the Holder shall have the right to exercise this Warrant at
anytime prior to the date such forced exercise notice is delivered or
such forced exercise occurs.]
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares
shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant.
7. Transfer, Division and Combination.
(a) Subject to compliance with any applicable securities laws, transfer of
this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such
purpose, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer
taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees and
in the denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing
the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without
having a new Warrant issued.
(b) This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together
with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or
attorney. Subject to compliance with Section 7(a), as to any transfer
which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for
the Warrant or Warrants to be divided or combined in accordance with
such notice.
(c) The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books for the
registration and the registration of transfer of the Warrants.
8. No Rights as Shareholder until Exercise. This Warrant does not entitle
the Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price [(or by means of a cashless exercise)], the
Warrant Shares so purchased shall be and be deemed to be issued to such Holder
as the record owner of such shares as of the close of business on the later of
the date of such surrender or payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.
11. Adjustments of Exercise Price and Number of Warrant Shares.
Stock Splits, etc. The number and kind of securities purchasable upon
the exercise of this Warrant and the Exercise Price shall be subject to
adjustment from time to time upon the happening of any of the following. In
case the Company shall (i) pay a dividend in shares of Common Stock or make
a distribution in shares of Common Stock to holders of its outstanding
Common Stock, (ii) subdivide its outstanding shares of Common Stock into a
greater number of shares, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock, or (iv) issue any
shares of its capital stock in a reclassification of the Common Stock, then
the number of Warrant Shares purchasable upon exercise of this Warrant
immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive the kind and number of Warrant Shares or other
securities of the Company which it would have owned or have been entitled
to receive had such Warrant been exercised in advance thereof. Upon each
such adjustment of the kind and number of Warrant Shares or other
securities of the Company which are purchasable hereunder, the Holder shall
thereafter be entitled to purchase the number of Warrant Shares or other
securities resulting from such adjustment at an Exercise Price per Warrant
Share or other security obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
purchasable pursuant hereto immediately prior to such adjustment and
dividing by the number of Warrant Shares or other securities of the Company
resulting from such adjustment. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
12. Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then the Holder shall have the right thereafter to receive, at
their option, (a) upon exercise of this Warrant, the number of shares of Common
Stock of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a Holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event, or (b) cash equal to the value of
this Warrant as determined in accordance with the Black-Sholes option pricing
formula. In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring corporation
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined in good faith by resolution of the Board of Directors
of the Company) in order to provide for adjustments of Warrant Shares for which
this Warrant is exercisable which shall be as nearly equivalent as practicable
to the adjustments provided for in this Section 12. For purposes of this Section
12, "common stock of the successor or acquiring corporation" shall include stock
of such corporation of any class which is not preferred as to dividends or
assets over any other class of stock of such corporation and which is not
subject to redemption and shall also include any evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for any such stock, either immediately or upon the arrival of a specified date
or the happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this
Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
13. Voluntary Adjustment by the Company. The Company may at any time during
the term of this Warrant reduce the then current Exercise Price to any amount
and for any period of time deemed appropriate by the Board of Directors of the
Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or number
or kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
Holder notice of such adjustment or adjustments setting forth the number of
Warrant Shares (and other securities or property) purchasable upon the exercise
of this Warrant and the Exercise Price of such Warrant Shares (and other
securities or property) after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the computation by
which such adjustment was made. Such notice, in the absence of manifest error,
shall be conclusive evidence of the correctness of such adjustment.
15. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences
of its indebtedness, any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any
sale, transfer or other disposition of all or substantially all the
property, assets or business of the Company to, another corporation
or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to Holder at the
last address of Holder appearing on the books of the Company and delivered in
accordance with Section 17(d).
16. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the Exercise
Price, the Company shall obtain all such authorizations or exemptions thereof,
or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.
17. Miscellaneous.
(a) Jurisdiction. This Warrant shall constitute a contract under the laws of
New York, without regard to its conflict of law, principles or rules.
(b) Restrictions. The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or
remedies, notwithstanding all rights hereunder terminate on the Termination
Date. If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the
Holder, the Company shall pay to Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by
Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or permitted to be
given or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
(e) Limitation of Liability. No provision hereof, in the absence of affirmative
action by Holder to purchase Warrant Shares, and no enumeration herein of
the rights or privileges of Holder, shall give rise to any liability of
Holder for the purchase price of any Common Stock or as a stockholder of
the Company, whether such liability is asserted by the Company or by
creditors of the Company.
(f) Remedies. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Warrant and hereby
agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the
successors and permitted assigns of Holder. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of
this Warrant and shall be enforceable by any such Holder or holder of
Warrant Shares.
(h) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
(i) Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Warrant.
(j) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this
Warrant.
********************
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: November 1, 2002
L.A.M. PHARMACEUTICAL CORP.
By:_____________________________________________
Name: Joseph Slechta
Title: President
EXHIBIT C
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES
STOCK PURCHASE WARRANT
SERIES C
To Purchase __________ Shares of Common Stock of
L.A.M. Pharmaceutical Corp.
THIS CERTIFIES that, for value received, _____________ (the
"Holder"), is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after
November 1, 2002 (the "Initial Exercise Date") and on or prior to the close of
business on the fifth anniversary of the Initial Exercise Date (the "Termination
Date") but not thereafter, to subscribe for and purchase from L.A.M.
Pharmaceutical Corp., a corporation incorporated in the State of Delaware (the
"Company"), up to ____________ shares (the "Warrant Shares") of Common Stock,
par value $0.0001 per share, of the Company (the "Common Stock"). The purchase
price of one share of Common Stock (the "Exercise Price") under this Warrant
shall be $1.20, subject to adjustment hereunder. The Exercise Price and the
number of Warrant Shares for which the Warrant is exercisable shall be subject
to adjustment as provided herein. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the "Purchase Agreement"), dated October 18, 2002, between
the Company and the investors signatory thereto.
1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all Warrant Shares
which may be issued upon the exercise of the purchase rights represented by this
Warrant will, upon exercise of the purchase rights represented by this Warrant,
be duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant.
(a) Except as provided in Section 4 herein, exercise of the purchase rights
represented by this Warrant may be made at any time or times on or after
the Initial Exercise Date and on or before the Termination Date by the
surrender of this Warrant and the Notice of Exercise Form annexed hereto
duly executed, at the office of the Company (or such other office or agency
of the Company as it may designate by notice in writing to the registered
Holder at the address of such Holder appearing on the books of the Company)
and upon payment of the Exercise Price of the shares thereby purchased by
wire transfer or cashier's check drawn on a United States bank, the Holder
shall be entitled to receive a certificate for the number of Warrant Shares
so purchased. Certificates for shares purchased hereunder shall be
delivered to the Holder at an address in the United States within three (3)
Trading Days after the date on which this Warrant shall have been exercised
as aforesaid. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and Holder
or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the
date the Warrant has been exercised by payment to the Company of the
Exercise Price and all taxes required to be paid by the Holder, if any,
pursuant to Section 5 prior to the issuance of such shares, have been paid.
If the Company fails to deliver to the Holder a certificate or certificates
representing the Warrant Shares pursuant to this Section 3(a) by the third
Trading Day after the date of exercise, then the Holder will have the right
to rescind such exercise. In addition to any other rights available to the
Holder, if the Company fails to deliver to the Holder a certificate or
certificates representing the Warrant Shares pursuant to an exercise by the
fifth Trading Day after the date of exercise, and if after such fifth
Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by
the Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a "Buy-In"), then the Company shall (1) pay in cash to
the Holder the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (A) the number of
Warrant Shares that the Company was required to deliver to the Holder in
connection with the exercise at issue times (B) the closing bid price of
the Common Stock at the time of the obligation giving rise to such purchase
obligation, and (2) at the option of the Holder, either reinstate the
portion of the Warrant and equivalent number of Warrant Shares for which
such exercise was not honored or deliver to the Holder the number of shares
of Common Stock that would have been issued had the Company timely complied
with its exercise and delivery obligations hereunder. For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of Common
Stock with a market price on the date of exercise totaled $10,000, under
clause (1) of the immediately preceding sentence the Company shall be
required to pay the Holder $1,000. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in respect of
the Buy-In. Nothing herein shall limit a Holder's right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company's failure to timely deliver certificates
representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.
(b) If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing
Warrant Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with
this Warrant.
(c) Notwithstanding anything herein to the contrary, in no event shall the
Holder be permitted to exercise this Warrant for Warrant Shares to the
extent that (i) the number of shares of Common Stock owned by such Holder
(other than Warrant Shares issuable upon exercise of this Warrant) plus
(ii) the number of Warrant Shares issuable upon exercise of this Warrant,
would be equal to or exceed 4.9999% of the number of shares of Common Stock
then issued and outstanding, including shares issuable upon exercise of
this Warrant held by such Holder after application of this Section 3(c). As
used herein, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act. To the extent that the limitation
contained in this Section 3(c) applies, the determination of whether this
Warrant is exercisable (in relation to other securities owned by the
Holder) and of which a portion of this Warrant is exercisable shall be in
the sole discretion of such Holder, and the submission of a Notice of
Exercise shall be deemed to be such Holder's determination of whether this
Warrant is exercisable (in relation to other securities owned by such
Holder) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such determination.
Nothing contained herein shall be deemed to restrict the right of a Holder
to exercise this Warrant into Warrant Shares at such time as such exercise
will not violate the provisions of this Section 3(c). The provisions of
this Section 3(c) may be waived by the Holder upon, at the election of the
Holder, not less than 61 days' prior notice to the Company, and the
provisions of this Section 3(c) shall continue to apply until such 61st day
(or such later date, as determined by the Holder, as may be specified in
such notice of waiver). No exercise of this Warrant in violation of this
Section 3(c) but otherwise in accordance with this Warrant shall affect the
status of the Warrant Shares as validly issued, fully-paid and
nonassessable.
(d) (Resereved)
(e) Within 2 days after the end of any period of 10 consecutive Trading Days
that the Closing Bid Price has exceeded $2.00, the Company shall have the
right, upon 15 days advance written notice to the Holder, to cause the
Holder to exercise the unexercised portion of this Warrant. Notwithstanding
anything to the contrary herein, the Company may only exercise its rights
hereunder if each of the following shall be true: (i) the Company shall
have duly honored all notices of exercise to occur or occurring prior to
the date of the redemption, (ii) there is an effective Underlying Shares
Registration Statement pursuant to which the Holder is permitted to utilize
the prospectus thereunder to resell all of the Warrant Shares issued to the
Holder and all of the Warrant Shares as are issuable to the Holder upon
exercise in full of this Warrant (and the Company believes, in good faith,
that such effectiveness will continue uninterrupted for the foreseeable
future), (iii) the Common Stock is listed for trading on a Principal Market
(and the Company believes, in good faith, that trading of the Common Stock
on a Principal Market will continue uninterrupted for the foreseeable
future), (iv) all liquidated damages and other amounts owing in respect of
the Warrant and Warrant Shares shall have been paid or will, concurrently
with the issuance of the Warrant Shares, be paid in cash; (v) there is a
sufficient number of authorized but unissued and otherwise unreserved
shares of Common Stock for the issuance of all the Warrant Shares as are
issuable to the Holder upon exercise in full of this Warrant; and (vi) no
public announcement of a pending or proposed event subject Section 12 has
occurred that has not been consummated. Furthermore, subject to the terms
and conditions herein, the Holder shall have the right to exercise this
Warrant at anytime prior to the date such forced exercise notice is
delivered or such forced exercise occurs.]
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares
shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant.
7. Transfer, Division and Combination.
(a) Subject to compliance with any applicable securities laws, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered
on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company, together
with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and
funds sufficient to pay any transfer taxes payable upon the making of such
transfer. Upon such surrender and, if required, such payment, the Company
shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in
such instrument of assignment, and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned, may
be exercised by a new holder for the purchase of Warrant Shares without
having a new Warrant issued.
(b) This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 7(a), as to any transfer which may be involved in
such division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books for the
registration and the registration of transfer of the Warrants.
8. No Rights as Shareholder until Exercise. This Warrant does not entitle
the Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price [(or by means of a cashless exercise)], the
Warrant Shares so purchased shall be and be deemed to be issued to such Holder
as the record owner of such shares as of the close of business on the later of
the date of such surrender or payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.
11. Adjustments of Exercise Price and Number of Warrant Shares.
Stock Splits, etc. The number and kind of securities purchasable
upon the exercise of this Warrant and the Exercise Price shall be subject
to adjustment from time to time upon the happening of any of the
following. In case the Company shall (i) pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock to holders
of its outstanding Common Stock, (ii) subdivide its outstanding shares of
Common Stock into a greater number of shares, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of
Common Stock, or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall
be adjusted so that the Holder shall be entitled to receive the kind and
number of Warrant Shares or other securities of the Company which it would
have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and
number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the Holder shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such
adjustment at an Exercise Price per Warrant Share or other security
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of Warrant Shares purchasable pursuant
hereto immediately prior to such adjustment and dividing by the number of
Warrant Shares or other securities of the Company resulting from such
adjustment. An adjustment made pursuant to this paragraph shall become
effective immediately after the effective date of such event retroactive
to the record date, if any, for such event.
12. Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then the Holder shall have the right thereafter to receive, at
their option, (a) upon exercise of this Warrant, the number of shares of Common
Stock of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a Holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event, or (b) cash equal to the value of
this Warrant as determined in accordance with the Black-Sholes option pricing
formula. In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring corporation
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined in good faith by resolution of the Board of Directors
of the Company) in order to provide for adjustments of Warrant Shares for which
this Warrant is exercisable which shall be as nearly equivalent as practicable
to the adjustments provided for in this Section 12. For purposes of this Section
12, "common stock of the successor or acquiring corporation" shall include stock
of such corporation of any class which is not preferred as to dividends or
assets over any other class of stock of such corporation and which is not
subject to redemption and shall also include any evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for any such stock, either immediately or upon the arrival of a specified date
or the happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this
Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
13. Voluntary Adjustment by the Company. The Company may at any time during
the term of this Warrant reduce the then current Exercise Price to any amount
and for any period of time deemed appropriate by the Board of Directors of the
Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or number
or kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
Holder notice of such adjustment or adjustments setting forth the number of
Warrant Shares (and other securities or property) purchasable upon the exercise
of this Warrant and the Exercise Price of such Warrant Shares (and other
securities or property) after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the computation by
which such adjustment was made. Such notice, in the absence of manifest error,
shall be conclusive evidence of the correctness of such adjustment.
15. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences
of its indebtedness, any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any
sale, transfer or other disposition of all or substantially all the
property, assets or business of the Company to, another corporation
or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to Holder at the
last address of Holder appearing on the books of the Company and delivered in
accordance with Section 17(d).
16. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the Exercise
Price, the Company shall obtain all such authorizations or exemptions thereof,
or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.
17. Miscellaneous.
(a) Jurisdiction. This Warrant shall constitute a contract under the laws of
New York, without regard to its conflict of law, principles or rules.
(b) Restrictions. The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or
remedies, notwithstanding all rights hereunder terminate on the Termination
Date. If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the
Holder, the Company shall pay to Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by
Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or permitted to be
given or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
(e) Limitation of Liability. No provision hereof, in the absence of affirmative
action by Holder to purchase Warrant Shares, and no enumeration herein of
the rights or privileges of Holder, shall give rise to any liability of
Holder for the purchase price of any Common Stock or as a stockholder of
the Company, whether such liability is asserted by the Company or by
creditors of the Company.
(f) Remedies. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and
hereby agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the
successors and permitted assigns of Holder. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of
this Warrant and shall be enforceable by any such Holder or holder of
Warrant Shares.
(h) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
(i) Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Warrant.
(j) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this
Warrant.
********************
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: November 1, 2002
L.A.M. PHARMACEUTICAL CORP.
By:_____________________________________________
Name: Joseph Slechta
Title: President
EXHIBIT C
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES
STOCK PURCHASE WARRANT
SERIES D
To Purchase __________ Shares of Common Stock of
L.A.M. Pharmaceutical Corp.
THIS CERTIFIES that, for value received, _____________ (the
"Holder"), is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after
November 1, 2002 (the "Initial Exercise Date") and on or prior to the close of
business on the fifth anniversary of the Initial Exercise Date (the "Termination
Date") but not thereafter, to subscribe for and purchase from L.A.M.
Pharmaceutical Corp., a corporation incorporated in the State of Delaware (the
"Company"), up to ____________ shares (the "Warrant Shares") of Common Stock,
par value $0.0001 per share, of the Company (the "Common Stock"). The purchase
price of one share of Common Stock (the "Exercise Price") under this Warrant
shall be $1.60, subject to adjustment hereunder. The Exercise Price and the
number of Warrant Shares for which the Warrant is exercisable shall be subject
to adjustment as provided herein. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the "Purchase Agreement"), dated October 18, 2002, between
the Company and the investors signatory thereto.
1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all Warrant Shares
which may be issued upon the exercise of the purchase rights represented by this
Warrant will, upon exercise of the purchase rights represented by this Warrant,
be duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant.
(a) Except as provided in Section 4 herein, exercise of the purchase rights
represented by this Warrant may be made at any time or times on or after
the Initial Exercise Date and on or before the Termination Date by the
surrender of this Warrant and the Notice of Exercise Form annexed hereto
duly executed, at the office of the Company (or such other office or agency
of the Company as it may designate by notice in writing to the registered
Holder at the address of such Holder appearing on the books of the Company)
and upon payment of the Exercise Price of the shares thereby purchased by
wire transfer or cashier's check drawn on a United States bank, the Holder
shall be entitled to receive a certificate for the number of Warrant Shares
so purchased. Certificates for shares purchased hereunder shall be
delivered to the Holder at an address in the United States within three (3)
Trading Days after the date on which this Warrant shall have been exercised
as aforesaid. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and Holder
or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the
date the Warrant has been exercised by payment to the Company of the
Exercise Price and all taxes required to be paid by the Holder, if any,
pursuant to Section 5 prior to the issuance of such shares, have been paid.
If the Company fails to deliver to the Holder a certificate or certificates
representing the Warrant Shares pursuant to this Section 3(a) by the third
Trading Day after the date of exercise, then the Holder will have the right
to rescind such exercise. In addition to any other rights available to the
Holder, if the Company fails to deliver to the Holder a certificate or
certificates representing the Warrant Shares pursuant to an exercise by the
fifth Trading Day after the date of exercise, and if after such fifth
Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by
the Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a "Buy-In"), then the Company shall (1) pay in cash to
the Holder the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (A) the number of
Warrant Shares that the Company was required to deliver to the Holder in
connection with the exercise at issue times (B) the closing bid price of
the Common Stock at the time of the obligation giving rise to such purchase
obligation, and (2) at the option of the Holder, either reinstate the
portion of the Warrant and equivalent number of Warrant Shares for which
such exercise was not honored or deliver to the Holder the number of shares
of Common Stock that would have been issued had the Company timely complied
with its exercise and delivery obligations hereunder. For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of Common
Stock with a market price on the date of exercise totaled $10,000, under
clause (1) of the immediately preceding sentence the Company shall be
required to pay the Holder $1,000. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in respect of
the Buy-In. Nothing herein shall limit a Holder's right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company's failure to timely deliver certificates
representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.
(b) If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing
Warrant Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with
this Warrant.
(c) Notwithstanding anything herein to the contrary, in no event shall the
Holder be permitted to exercise this Warrant for Warrant Shares to the
extent that (i) the number of shares of Common Stock owned by such Holder
(other than Warrant Shares issuable upon exercise of this Warrant) plus
(ii) the number of Warrant Shares issuable upon exercise of this Warrant,
would be equal to or exceed 4.9999% of the number of shares of Common Stock
then issued and outstanding, including shares issuable upon exercise of
this Warrant held by such Holder after application of this Section 3(c). As
used herein, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act. To the extent that the limitation
contained in this Section 3(c) applies, the determination of whether this
Warrant is exercisable (in relation to other securities owned by the
Holder) and of which a portion of this Warrant is exercisable shall be in
the sole discretion of such Holder, and the submission of a Notice of
Exercise shall be deemed to be such Holder's determination of whether this
Warrant is exercisable (in relation to other securities owned by such
Holder) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such determination.
Nothing contained herein shall be deemed to restrict the right of a Holder
to exercise this Warrant into Warrant Shares at such time as such exercise
will not violate the provisions of this Section 3(c). The provisions of
this Section 3(c) may be waived by the Holder upon, at the election of the
Holder, not less than 61 days' prior notice to the Company, and the
provisions of this Section 3(c) shall continue to apply until such 61st day
(or such later date, as determined by the Holder, as may be specified in
such notice of waiver). No exercise of this Warrant in violation of this
Section 3(c) but otherwise in accordance with this Warrant shall affect the
status of the Warrant Shares as validly issued, fully-paid and
nonassessable.
(d) (Resereved)
(e) Within 2 days after the end of any period of 10 consecutive Trading Days
that the Closing Bid Price has exceeded $2.50, the Company shall have the
right, upon 15 days advance written notice to the Holder, to cause the
Holder to exercise the unexercised portion of this Warrant. Notwithstanding
anything to the contrary herein, the Company may only exercise its rights
hereunder if each of the following shall be true: (i) the Company shall
have duly honored all notices of exercise to occur or occurring prior to
the date of the redemption, (ii) there is an effective Underlying Shares
Registration Statement pursuant to which the Holder is permitted to utilize
the prospectus thereunder to resell all of the Warrant Shares issued to the
Holder and all of the Warrant Shares as are issuable to the Holder upon
exercise in full of this Warrant (and the Company believes, in good faith,
that such effectiveness will continue uninterrupted for the foreseeable
future), (iii) the Common Stock is listed for trading on a Principal Market
(and the Company believes, in good faith, that trading of the Common Stock
on a Principal Market will continue uninterrupted for the foreseeable
future), (iv) all liquidated damages and other amounts owing in respect of
the Warrant and Warrant Shares shall have been paid or will, concurrently
with the issuance of the Warrant Shares, be paid in cash; (v) there is a
sufficient number of authorized but unissued and otherwise unreserved
shares of Common Stock for the issuance of all the Warrant Shares as are
issuable to the Holder upon exercise in full of this Warrant; and (vi) no
public announcement of a pending or proposed event subject Section 12 has
occurred that has not been consummated. Furthermore, subject to the terms
and conditions herein, the Holder shall have the right to exercise this
Warrant at anytime prior to the date such forced exercise notice is
delivered or such forced exercise occurs.]
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares
shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant.
7. Transfer, Division and Combination.
(a) Subject to compliance with any applicable securities laws, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered
on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company, together
with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and
funds sufficient to pay any transfer taxes payable upon the making of such
transfer. Upon such surrender and, if required, such payment, the Company
shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in
such instrument of assignment, and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned, may
be exercised by a new holder for the purchase of Warrant Shares without
having a new Warrant issued.
(b) This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 7(a), as to any transfer which may be involved in
such division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own expense (other than
transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books for the
registration and the registration of transfer of the Warrants.
8. No Rights as Shareholder until Exercise. This Warrant does not entitle
the Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price [(or by means of a cashless exercise)], the
Warrant Shares so purchased shall be and be deemed to be issued to such Holder
as the record owner of such shares as of the close of business on the later of
the date of such surrender or payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.
11. Adjustments of Exercise Price and Number of Warrant Shares.
Stock Splits, etc. The number and kind of securities purchasable upon
the exercise of this Warrant and the Exercise Price shall be subject to
adjustment from time to time upon the happening of any of the following. In
case the Company shall (i) pay a dividend in shares of Common Stock or make
a distribution in shares of Common Stock to holders of its outstanding
Common Stock, (ii) subdivide its outstanding shares of Common Stock into a
greater number of shares, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock, or (iv) issue any
shares of its capital stock in a reclassification of the Common Stock, then
the number of Warrant Shares purchasable upon exercise of this Warrant
immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive the kind and number of Warrant Shares or other
securities of the Company which it would have owned or have been entitled
to receive had such Warrant been exercised in advance thereof. Upon each
such adjustment of the kind and number of Warrant Shares or other
securities of the Company which are purchasable hereunder, the Holder shall
thereafter be entitled to purchase the number of Warrant Shares or other
securities resulting from such adjustment at an Exercise Price per Warrant
Share or other security obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
purchasable pursuant hereto immediately prior to such adjustment and
dividing by the number of Warrant Shares or other securities of the Company
resulting from such adjustment. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
12. Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then the Holder shall have the right thereafter to receive, at
their option, (a) upon exercise of this Warrant, the number of shares of Common
Stock of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a Holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event, or (b) cash equal to the value of
this Warrant as determined in accordance with the Black-Sholes option pricing
formula. In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring corporation
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined in good faith by resolution of the Board of Directors
of the Company) in order to provide for adjustments of Warrant Shares for which
this Warrant is exercisable which shall be as nearly equivalent as practicable
to the adjustments provided for in this Section 12. For purposes of this Section
12, "common stock of the successor or acquiring corporation" shall include stock
of such corporation of any class which is not preferred as to dividends or
assets over any other class of stock of such corporation and which is not
subject to redemption and shall also include any evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for any such stock, either immediately or upon the arrival of a specified date
or the happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this
Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
13. Voluntary Adjustment by the Company. The Company may at any time during
the term of this Warrant reduce the then current Exercise Price to any amount
and for any period of time deemed appropriate by the Board of Directors of the
Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or number
or kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
Holder notice of such adjustment or adjustments setting forth the number of
Warrant Shares (and other securities or property) purchasable upon the exercise
of this Warrant and the Exercise Price of such Warrant Shares (and other
securities or property) after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the computation by
which such adjustment was made. Such notice, in the absence of manifest error,
shall be conclusive evidence of the correctness of such adjustment.
15. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences
of its indebtedness, any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any
sale, transfer or other disposition of all or substantially all the
property, assets or business of the Company to, another corporation
or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to Holder at the
last address of Holder appearing on the books of the Company and delivered in
accordance with Section 17(d).
16. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the Exercise
Price, the Company shall obtain all such authorizations or exemptions thereof,
or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.
17. Miscellaneous.
(a) Jurisdiction. This Warrant shall constitute a contract under the laws of
New York, without regard to its conflict of law, principles or rules.
(b) Restrictions. The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or
remedies, notwithstanding all rights hereunder terminate on the Termination
Date. If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the
Holder, the Company shall pay to Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by
Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or permitted to be
given or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
(e) Limitation of Liability. No provision hereof, in the absence of
affirmative action by Holder to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of Holder, shall give rise
to any liability of Holder for the purchase price of any Common Stock or
as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
(f) Remedies. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and
hereby agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the
successors and permitted assigns of Holder. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of
this Warrant and shall be enforceable by any such Holder or holder of
Warrant Shares.
(h) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
(i) Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Warrant.
(j) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this
Warrant.
********************
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: November 1, 2002
L.A.M. PHARMACEUTICAL CORP.
By:_____________________________________________
Name: Joseph Slechta
Title: President
EXHIBIT D
October __, 2002
Palisades Equity Fund L.P.
C/o Hyperion Partners Corp.
1215 Hightower Trail
Suite B220
Atlanta, Georgia 30350
Attn: Paul T. Mannion
Alpha Capital AG
Lettstrasse 32
Furstentum 9490
Vaduz, Liechtenstein
Re: Securities Purchase Agreement
Ladies and Gentlemen:
This opinion is furnished to you pursuant to the Securities Purchase
Agreement (the "Purchase Agreement") by and among the investors signatory
thereto (the "Investors") and L.A.M. Pharmaceutical Corp., a Delaware
corporation (the "Company"), dated as of October 18, 2002 (the "Purchase
Agreement"), which provides for the issuance and sale by the Company of $500,000
principal amount of 8% Convertible Debentures and Warrants to purchase shares of
the Company's Common Stock. All terms used herein have the meanings defined for
them in the Purchase Agreement unless otherwise defined herein.
We have acted as counsel for the Company in connection with the negotiation
of the Purchase Agreement, the 8% Convertible Debentures, the Warrants and the
Registration Rights Agreement between the Investors and the Company, dated as of
October 18, 2002 (the "Registration Rights Agreement"), and the Escrow Agreement
between the Investors, the Company and Feldman Weinstein LLP dated as of October
18, 2002 (the "Escrow Agreement", and together with the Purchase Agreement, the
8% Convertible Debentures, the Warrants and the Registration Rights Agreement,
the "Agreements"). As counsel, we have made such legal and factual examinations
and inquiries as we have deemed advisable or necessary for the purpose of
rendering this opinion. In addition, we have examined, among other things,
originals or copies of such corporate records of the Company, certificates of
public officials and such other documents and questions of law that we consider
necessary or advisable for the purpose of rendering this opinion. In such
examination we have assumed the genuineness of all signatures on original
documents, the authenticity and completeness of all documents submitted to us as
originals, the conformity to original documents of all copies submitted to us as
copies thereof, the legal capacity of natural persons, and the due execution and
delivery of all documents (except as to due execution and delivery by the
Company) where due execution and delivery are a prerequisite to the
effectiveness thereof.
As used in this opinion, the expression "to our knowledge" refers to the
current actual knowledge of the attorneys of this firm who have worked on
matters for the Company solely in connection with the Agreements and the
Warrants and the transactions contemplated thereby, and without any independent
investigation of any underlying facts or situations.
For purposes of this opinion, we have assumed that you have all requisite
power and authority, and have taken any and all necessary corporate action, to
execute and deliver the Agreements, and we are assuming that the representations
and warranties made by each Investor in the Agreements and pursuant thereto are
true and correct.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business and to own, lease and
operate its properties and assets as described in the Company's SEC Documents.
To our knowledge, the Company does not have any subsidiaries and does not own
more than fifty percent (50%) of the outstanding capital stock of or control any
other business entity other than as disclosed in the SEC Documents.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Agreements and to issue the
Convertible Debentures and Warrants and the Conversion Shares and the Warrant
Shares. The execution and delivery of the Agreements by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required, except that the issuance of Conversion Shares and Warrant Shares may
be limited by the corporate governance rules until the receipt of stockholder
approval. Each of the Agreements has been duly executed and delivered, and the
Convertible Debentures and Warrants have been duly executed, issued and
delivered by the Company and each of the Agreements, the Convertible Debentures
and the Warrants constitutes valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
3. The execution, delivery and performance of the Agreements by the Company
and the consummation by the Company of the transactions contemplated thereby,
including, without limitation, the issuance of the Convertible Debentures, the
Warrants, the Conversion Shares and the Warrant Shares, do not and will not (i)
result in a violation of the Company's Certificate of Incorporation or By-Laws;
(ii) conflict with, or constitute a material default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture, instrument or any "lock-up", refusal or similar
provision of any underwriting or similar agreement to which the Company is a
party; or (iii) result in a violation of any federal or state law, rule or
regulation applicable to the Company or by which any property or asset of the
Company is bound or affected, except for such violations as would not,
individually or in the aggregate, have a Material Adverse Effect. To our
knowledge, the Company is not in violation of any terms of its Certificate of
Incorporation or Bylaws.
4. The issuance of the Convertible Debentures, the Warrants, the Conversion
Shares and the Warrant Shares in accordance with the Purchase Agreement will be
exempt from registration under the Securities Act of 1933, as amended. When so
issued, the Conversion Shares and Warrant Shares will be duly and validly
issued, fully paid and nonassessable, and free of any liens, encumbrances and
preemptive or similar rights contained in the Company's Certificate of
Incorporation or Bylaws or, to our knowledge, in any agreement to which the
Company is party.
5. We have not been engaged to devote substantive attention to any claims,
actions, suits, proceedings or investigations that are pending against the
Company or its properties, or against any officer or director of the Company in
his or her capacity as such. To our knowledge, the Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality.
6. The authorized capital stock of the Company consists of [____________]
shares of Common Stock, $0.001 par value per share, of which shares
[____________] are outstanding.
7. The Pledge Stock, upon an "Event of Default" as that term is defined in
the Pledge and Security Agreement, may be immediately sold by the Purchasers
pursuant to Rule 144, subject to the volume, manner limitations and current
information requirements set forth therein.
This opinion is furnished to the Purchasers for their benefit in
connection with the transactions described above and may not be relied upon by
any other person or for any other purpose without our prior written consent,
except that the Company's transfer agent, Corporate Stock Transfer, Inc., or its
successor agent, and the Purchasers' respective brokers, or their successor
agents, may rely upon this opinion in acting as transfer agent with respect to
the transactions contemplated by the Agreements.
Very truly yours,
EXHIBIT E
-Not Used-
EXHIBIT F
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of October 18,
2002, by and among L.A.M. Pharmaceutical Corp., a corporation incorporated under
the laws of Delaware (the "Company"), the investors signatory hereto (each an
"Investor" and together the "Investors"), and Feldman Weinstein LLP, with an
address at 420 Lexington Avenue, Suite 2620, New York, New York 10170 (the
"Escrow Agent"). Capitalized terms used but not defined herein shall have the
meanings set forth in the Securities Purchase Agreement referred to in the first
recital.
W I T N E S S E T H:
WHEREAS, the Investors will be purchasing from the Company, in the
aggregate, up to US$500,000 of the Convertible 0% Debentures (the "Debentures")
and Warrants as set forth in the Securities Purchase Agreement (the "Purchase
Agreement") dated the date hereof between the Investors and the Company, which
will be issued as per the terms contained herein and in the Purchase Agreement;
and
WHEREAS, it is intended that the purchase of the securities be
consummated in accordance with the requirements set forth by Sections 4(2)
and/or 4(6) and/or Regulation D promulgated under the Securities Act of 1933, as
amended; and
WHEREAS, the Company and the Investors have requested that the
Escrow Agent hold the Purchase Price with respect to the Closing in escrow until
the Escrow Agent has received the Release Notice in the form attached hereto
from the Company and each Investor;
NOW, THEREFORE, in consideration of the covenants and mutual
promises contained herein and other good and valuable consideration, the receipt
and legal sufficiency of which are hereby acknowledged and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE 1
TERMS OF THE ESCROW
1.1. The parties hereby agree to establish an escrow account with the Escrow
Agent whereby the Escrow Agent shall hold the funds for the purchase of up to
US$750,000, in the aggregate, of the Debentures and the Warrants at the Closing
as contemplated by the Purchase Agreement.
1.2. Closing.
(a) Upon the Escrow Agent's receipt of the Purchase Price for the Closing
into its master escrow account, together with executed counterparts of this
Agreement, the Purchase Agreement, the Pledge and Security Agreement and the
Registration Rights Agreement, it shall telephonically advise the Company, or
the Company's designated attorney or agent, of the amount of funds it has
received into its master escrow account.
(b) Wire transfers to the Escrow Agent shall be made as follows:
Chase Manhattan Bank, NA
510 Fifth Avenue
New York, NY 10036 USA
ABA Routing Number: 021000021
Account Number: 987074342668
Name of Account: Feldman Weinstein LLP Master
Escrow Account
Remark: LAMP
(c) The Company, upon receipt of said notice, shall deliver to the Escrow
Agent the certificates representing the certificates evidencing the Debentures
and the Warrants to be issued to each Investor at the Closing together with:
(i) the original executed Registration Rights Agreement substantially in
the form of Exhibit B to the Purchase Agreement;
(ii) the original executed opinions of Hart and Trinen L.L.P. in the form
of Exhibit D to the Purchase Agreement;
(iii) the Pledge and Security Agreement and all documents required to be
delivered thereunder;
(iv) a warrant in the form of the Warrant to purchase up to 20,000 shares
of Common Stock with an exercise price of $0.294 issued to HPC Capital
Management; and
(v) an original counterpart of this Escrow Agreement.
(d) In the event that the foregoing items are not in the Escrow Agent's
possession within three (3) Trading Days of the Escrow Agent notifying the
Company that the Escrow Agent has custody of the Purchase Price applicable to
such Debentures, then each Investor shall have the right to demand the return of
their Purchase Price.
(e) Once the Escrow Agent receives a Release Notice in the form attached
hereto as Exhibit X executed by the Company and each Investor, it shall wire 91%
of that amount of funds necessary to purchase the applicable Debentures and the
Warrants per the written instructions of the Company and the remaining 9% per
the instructions of HPC Capital Management as its fee in connection with the
transaction described herein.
(f) Once the funds (as set forth above) have been sent per the Company's
instructions, the Escrow Agent shall then arrange to have the Purchase
Agreement, the Warrants, the Pledge and Security Agreements, the Debentures, the
Registration Rights Agreement, the Escrow Agreement, the opinion of counsel and
the Instructions to Transfer Agent delivered to the appropriate parties.
ARTICLE 2
MISCELLANEOUS
2.1. No waiver or any breach of any covenant or provision herein contained
shall be deemed a waiver of any preceding or succeeding breach thereof, or of
any other covenant or provision herein contained. No extension of time for
performance of any obligation or act shall be deemed an extension of the time
for performance of any other obligation or act.
2.2. All notices or other communications required or permitted hereunder
shall be in writing, and shall be sent as set forth in the Purchase Agreement.
2.3. This Escrow Agreement shall be binding upon and shall inure to the benefit
of the permitted successors and permitted assigns of the parties hereto.
2.4. This Escrow Agreement is the final expression of, and contains the
entire agreement between, the parties with respect to the subject matter hereof
and supersedes all prior understandings with respect thereto. This Escrow
Agreement may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by its agent duly authorized in writing or as otherwise
expressly permitted herein.
2.5. Whenever required by the context of this Escrow Agreement, the
singular shall include the plural and masculine shall include the feminine. This
Escrow Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Escrow Agreement.
2.6. The parties hereto expressly agree that this Escrow Agreement shall be
governed by, interpreted under and construed and enforced in accordance with the
laws of the State of New York. Any action to enforce, arising out of, or
relating in any way to, any provisions of this Escrow Agreement shall only be
brought in a state or Federal court sitting in New York City.
2.7. The Escrow Agent's duties hereunder may be altered, amended, modified
or revoked only by a writing signed by the Company, each Investor and the Escrow
Agent.
2.8. The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed by
the Escrow Agent to be genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent shall not be personally liable for any
act the Escrow Agent may do or omit to do hereunder as the Escrow Agent while
acting in good faith, and any act done or omitted by the Escrow Agent pursuant
to the advice of the Escrow Agent's attorneys-at-law shall be conclusive
evidence of such good faith.
2.9. The Escrow Agent is hereby expressly authorized to disregard any and
all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
2.10. The Escrow Agent shall not be liable in any respect on account of the
identity, authorization or rights of the parties executing or delivering or
purporting to execute or deliver the Purchase Agreement or any documents or
papers deposited or called for thereunder.
2.11. The Escrow Agent shall be entitled to employ such legal counsel and
other experts as the Escrow Agent may deem necessary properly to advise the
Escrow Agent in connection with the Escrow Agent's duties hereunder, may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor which shall be paid by the Escrow Agreement unless
otherwise provided for in Section 3.14. The Escrow Agent has acted as legal
counsel for the Investors, and may continue to act as legal counsel for the
Investors, from time to time, notwithstanding its duties as the Escrow Agent
hereunder. The Company consents to the Escrow Agent in such capacity as legal
counsel for the Investors and waives any claim that such representation
represents a conflict of interest on the part of the Escrow Agent. The Company
understands that the Investors and the Escrow Agent are relying explicitly on
the foregoing provision in entering into this Escrow Agreement.
2.12. The Escrow Agent's responsibilities as escrow agent hereunder shall
terminate if the Escrow Agent shall resign by written notice to the Company and
the Investors. In the event of any such resignation, the Investors and the
Company shall appoint a successor Escrow Agent.
2.13. If the Escrow Agent reasonably requires other or further instruments
in connection with this Escrow Agreement or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
2.14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the documents
or the escrow funds held by the Escrow Agent hereunder, the Escrow Agent is
authorized and directed in the Escrow Agent's sole discretion (1) to retain in
the Escrow Agent's possession without liability to anyone all or any part of
said documents or the escrow funds until such disputes shall have been settled
either by mutual written agreement of the parties concerned by a final order,
decree or judgment or a court of competent jurisdiction after the time for
appeal has expired and no appeal has been perfected, but the Escrow Agent shall
be under no duty whatsoever to institute or defend any such proceedings or (2)
to deliver the escrow funds and any other property and documents held by the
Escrow Agent hereunder to a state or Federal court having competent subject
matter jurisdiction and located in the City of New York in accordance with the
applicable procedure therefor.
2.15. The Company and each Investor agree jointly and severally to
indemnify and hold harmless the Escrow Agent and its partners, employees, agents
and representatives from any and all claims, liabilities, costs or expenses in
any way arising from or relating to the duties or performance of the Escrow
Agent hereunder or the transactions contemplated hereby or by the Purchase
Agreement other than any such claim, liability, cost or expense to the extent
the same shall have been determined by final, unappealable judgment of a court
of competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the Escrow Agent.
[SIGNATURE PAGE FOLLOWS]
[SIGNATURE PAGE TO ESCROW AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
this __ day of October, 2002.
L.A.M. PHARMACEUTICAL CORP.
By:______________________________________
Name:
Title:
INVESTORS:
PALISADES EQUITY FUND L.P.
By:_____________________________________
Name:
Title:
ALPHA CAPITAL AG
By: _________________________________
Name:
Title:
ESCROW AGENT:
FELDMAN WEINSTEIN LLP
By:___________________________________
Name:
Title:
Exhibit X to
Escrow Agreement
RELEASE NOTICE
The UNDERSIGNED, pursuant to the Escrow Agreement, dated as of October __,
2002 among L.A.M. Pharmaceutical Corp., the Investors signatory thereto and
Feldman Weinstein LLP, as Escrow Agent (the "Escrow Agreement"; capitalized
terms used herein and not defined shall have the meaning ascribed to such terms
in the Escrow Agreement), hereby notify the Escrow Agent that each of the
conditions precedent to the purchase and sale of the Debentures set forth in the
Securitites Purchase Agreement have been satisfied. The Company and the
undersigned Investor hereby confirm that all of their respective representations
and warranties contained in the Purchase Agreement remain true and correct and
authorize the release by the Escrow Agent of the funds and documents to be
released at the Closing as described in the Escrow Agreement. This Release
Notice shall not be effective until executed by the Company and the Investor.
This Release Notice may be signed in one or more counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the undersigned have caused this Release Notice to be
duly executed and delivered as of this __ day of October, 2002.
L.A.M. PHARMACEUTICAL CORP.
By: ___________________________________
Name:
Title:
INVESTORS:
PALISADES EQUITY FUND L.P.
By:_____________________________________
Name:
Title:
ALPHA CAPITAL AG
By: _________________________________
Name:
Title:
EXHIBIT G
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated October 18, 2002,
made by the pledgors signatory hereto (each a "Pledgor" and collectively the
"Pledgors") in favor of PALISADES EQUITY FUND L.P., and ALPHA CAPTIAL AG
(collectively, the "Pledgees").
W I T N E S S E T H:
WHEREAS, pursuant to the provisions of that certain Securities Purchase
Agreement of even date herewith between L.A.M. Pharmaceutical Corp. (the
"Company") and the Pledgees (the "Purchase Agreement"), the Pledgees have agreed
to lend to the Company and the Company has agreed to borrow from the Pledgee
$500,000 under certain terms and conditions set forth in the Purchase Agreement;
and
WHEREAS, pursuant to the provisions of the Purchase Agreement, and as a
condition to the obligation of the Pledgees to lend thereunder, the Pledgors
have agreed to make the pledge contemplated by this Agreement in order to induce
the Pledgees to perform its obligations under the Purchase Agreement
WHEREAS, the Pledgors are shareholders of the Company, and as such, will
derive direct and indirect benefits from the Purchase Agreement; and
WHEREAS, all capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises, covenants and promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. Pledge and Security Interest. Each Pledgor hereby pledges to the
Pledgees, and grants to the Pledgee a continuing security interest in, the
following (collectively, the "Pledged Collateral"):
(a) 2,000,000 shares of common stock (the "Pledged Shares") of the Company, in
the aggregate, owned by such Pledgor represented by the certificates
identified in Schedule 1(a) annexed hereto representing the Pledged
Shares, and all dividends, cash, instruments and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares; and
(b) all proceeds of any and all of the foregoing Pledged Collateral, in
whatever form (including, without limitation, proceeds that constitute
property of the types described above).
SECTION 2. Security for Obligations. This Agreement secures the payment and
performance of the following obligations (collectively, the "Obligations"): all
present and future indebtedness, obligations, covenants, duties and liabilities
of any kind or nature of the Company to the Pledgees (or any of them) now
existing or hereafter arising under or in connection with this Agreement, the
Purchase Agreement, the Debentures, the Warrants, the Escrow Agreement, the
Registration Rights Agreement and any and all related agreements, documents and
instruments, each as now existing and as hereafter amended, modified and
supplemented (collectively, the "Transaction Documents").
SECTION 3. Delivery of Pledged Collateral. Concurrently herewith, all
certificates representing or evidencing the Pledged Shares, in suitable form for
transfer by delivery, or accompanied by instruments of transfer or assignment
duly executed in blank with medallion guarantee, are being deposited with and
delivered to each Pledgee pro-rata in proportion to such Pledgee's purchase of
Debentures pursuant to the Purchase Agreement. In lieu of delivering actual
certificates representing the Pledged Shares and accompanying instruments of
transfer, the Pledgors may deliver the Pledged Shares electronically to the DTC
account set forth on the signature page hereto. The Pledgees shall have the
right, at any time after the occurrence of an Event of Default (as hereinafter
defined), without notice to the Pledgor, to transfer to or to register in the
name of the Pledgee or its nominees any or all of the Pledged Collateral. In
addition, the Pledgees shall have the right at any time to exchange certificates
or instruments representing or evidencing Pledged Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 4. Representations and Warranties. Each Pledgor represents and
warrants as follows:
(a) The Pledged Shares have been beneficially owned by the Pledgor for not
less than two years prior to the date of this Agreement and as such the
Pledged Shares shall not be subject to any restrictions upon resale
(following a default by the Company) by the Pledgees other than the
limitations on volume, manner of sale and current information requirements
of Rule 144.
(b) The Pledgor is the legal, record and beneficial owner of the Pledged
Collateral, free and clear of any lien, security interest, restriction,
option or other charge or encumbrance (collectively, "Liens") except for
the security interest created by this Agreement.
(c) The pledge of the Pledged Collateral pursuant to this Agreement creates a
valid and perfected first priority security interest in the Pledged
Collateral, securing payment and performance of the Obligations.
(d) No consent of any other person or entity and no authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required (i) for the
pledge by the Pledgor of the Pledged Collateral pursuant to this
Agreement or for the execution, delivery or performance of this
Agreement by the Pledgor, (ii) for the perfection or maintenance of the
security interest created hereby (including the first priority nature
of such security interest), or (iii) for the exercise by the respective
Pledgees of the voting or other rights provided for in this Agreement
or the remedies in respect of the Pledged Collateral pursuant to this
Agreement (except as may be required in connection with any disposition
of any portion of the Pledged Collateral by laws affecting the offering
and sale of securities generally).
(e) There are no conditions precedent to the effectiveness of this Agreement
that have not been satisfied or waived.
(f) The mailing address of each Pledgor is set forth on the signature page
hereto and the Pledgor will not change its address except upon not less
than thirty (30) days' prior written notice to the Pledgees.
SECTION 5. Further Assurances. The Pledgor agrees that at any time and from
time to time, at the expense of the Pledgor, the Pledgor shall promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that the Pledgees may reasonably request,
in order to perfect and protect any security interest granted or purported to be
granted hereby or to enable any Pledgee to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral.
SECTION 6. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default shall have occurred:
(i) The Pledgor shall be entitled to exercise or refrain from exercising
any and all voting and other consensual rights pertaining to the
Pledged Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement; provided, however, that
the Pledgor shall not exercise or refrain from exercising any such
right if, in the reasonable judgment of the Pledgees, such action
would have a material adverse effect on the value of the Pledged
Collateral or any material part thereof; provided, further, that the
Pledgor shall give the Pledgees at least ten (10) days' prior written
notice of the manner in which it intends to exercise, or the reasons
for refraining from exercising, any such right.
(ii) The Pledgor shall be entitled to receive and retain any and all cash
dividends and interest paid in respect of the Pledged Collateral;
provided, however, that any and all:
(A) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange
for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any
Pledged Collateral,
shall be, and shall be forthwith delivered to the Pledgees to hold
as Pledged Collateral, and shall, if received by the Pledgor, be
received in trust for the benefit of the Pledgees, be segregated
from the other property or funds of the Pledgor, and be forthwith
delivered to the Pledgees as Pledged Collateral in the same form as
so received (with any necessary endorsement or assignment).
(b) Upon and after the occurrence of any Event of Default:
(i) All rights of the Pledgor to exercise or refrain from exercising the
voting and other consensual rights which it would otherwise be
entitled to exercise pursuant to Section 6(a)(i) and to receive the
dividends and interest payments which it would otherwise be authorized
to receive and retain pursuant to Section 6(a)(ii) shall cease, and
all such rights shall thereupon become vested in the Pledgee holding
the applicable Pledged Collateral who shall thereupon have the sole
right to exercise or refrain from exercising such voting and other
consensual rights and to receive and hold as Pledged Collateral such
dividends and interest payments.
(ii) All dividends and interest payments which are received by the Pledgor
contrary to the provisions of paragraph (i) of this Section 6(b) shall
be received in trust for the benefit of the Pledgees, shall be
segregated from other funds of the Pledgor and shall be forthwith paid
over to the respective Pledgors pro-rata as Pledged Collateral in the
same form as so received (with any necessary endorsement).
SECTION 7. Transfers and Other Liens; Additional Shares. The Pledgor agrees
that it shall not (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the Pledged
Collateral, or (ii) create or permit to exist any Lien upon or with respect to
any of the Pledged Collateral, except for the security interest granted pursuant
to this Agreement.
SECTION 8. Pledgees Appointed Attorney-in-Fact. The Pledgor hereby appoints
the Pledgees as the Pledgor's attorney-in-fact, with full authority in the place
and stead of the Pledgor and in the name of the Pledgor or otherwise, from time
to time in each Pledgee's discretion to take any action and to execute any
instrument which such Pledgee may deem necessary or desirable to accomplish the
purposes of this Agreement, including, without limitation, to receive, endorse
and collect all instruments made payable to the Pledgor representing any
dividend, interest payment or other distribution in respect of the Pledged
Collateral or any part thereof and to give full discharge for the same.
SECTION 9. Pledgees May Perform. If the Pledgor fails to perform any
agreement contained herein, Any Pledgee may itself perform, or cause performance
of, such agreement, and the expenses of such Pledgee incurred in connection
therewith shall be payable by the Pledgor under Section 14.
SECTION 10. The Pledgee's Duties. Except for the safe custody of any
Pledged Collateral in its possession and the accounting for moneys actually
received it hereunder, neither no Pledgee shall have any duty as to any Pledged
Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not such party has or is to have knowledge of
such matters, or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Pledged Collateral.
Each Pledgee shall be deemed to have exercised reasonable care in the custody
and preservation of any Pledged Collateral in its possession if such Pledged
Collateral is accorded treatment substantially equal to that which such party
accords its own property.
SECTION 11. Event of Default. The occurrence of any of the following events
shall constitute an event of default under this Agreement (each, an "Event of
Default"):
(a) The failure of the Company to observe, perform or comply with any act,
duty, covenant, agreement or obligation under this Agreement;
(b) If any of the representation or warranty of the Pledgor set forth in this
Agreement shall be breached or shall be untrue or incorrect in any
material respect;
(c) The filing of any financing statement with regard to any of the Pledged
Collateral other than pursuant to this Agreement, or the attachment of any
additional Lien to any portion of the Pledged Collateral in favor of any
Person other than the Pledgees; or
(d) the initial Underlying Shares Registration Statement (as defined in the
Purchase Agreement) shall not have been declared effective by the
Securities and Exchange Commission on or prior to the 150th calendar day
after the Closing Date (as defined in the Purchase Agreement).
SECTION 12. Cross-Default; Cross-Collateralization. The Pledgor
acknowledges and agrees that any default under the terms of this Agreement shall
constitute a default by the Company under the Debentures and the other
Transaction Documents. The security interests, liens and other rights and
interests in and relative to any of the real or personal property of the Pledgor
now or hereafter granted to the Pledgees by the Pledgor pursuant to any
agreement, document or instrument, including, but not limited to, this
Agreement, the Purchase Agreement, the Warrants or the Debentures, shall serve
as security for any and all of the Obligations, and, for the repayment thereof,
Pledgees may resort to any such collateral in such order and manner as they may
elect.
SECTION 13. Remedies upon Event of Default. Upon and after the occurrence
of any Event of Default:
(a) Each Pledgee may exercise in respect of the Pledged Collateral held by
it, in addition to other rights and remedies provided for herein or
otherwise available to the Pledgee (including, without limitation, the
vesting in the Pledgee pursuant to Section 6(b)(i) of the sole right to
exercise voting rights pertaining to the Pledged Collateral, including,
without limitation, voting rights with respect to the sale of assets of
the Company), all the rights and remedies of a secured party on default
under the Uniform Commercial Code in effect in the State of New York at
that time (the "UCC") (whether or not the UCC applies to the affected
Collateral), and may also, without notice except as specified below,
sell the Pledged Collateral or any part thereof in one or more parcels
at public or private sale, at any exchange, broker's board or at any of
the Pledgees' offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Pledgees may deem
commercially reasonable. The Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten (10) days' notice to the
Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. Each Pledgee shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. The
Pledgee may adjourn any public or private sale from time to time
without notice. The Pledgor acknowledges and agrees that the Pledged
Collateral consisting of the Pledged Shares, and/or any other shares of
common stock of the Company, is of a type customarily sold on a
recognized market, and accordingly that no notice of the sale thereof
need be given.
(b) Any cash held by any Pledgee as Pledged Collateral and all cash
proceeds received by any Pledgee in respect of any sale of, collection
from, or other realization upon all or any part of the Pledged
Collateral may, in the discretion of such Pledgee, be held as
collateral for, and/or then or at any time thereafter be applied (after
payment of any amounts payable pursuant to Section 14) in whole or in
part against, all or any part of the Obligations, pro rata to the
respective Obligations of each Pledgee in proportion to their
respective principal amounts of Debentures. Any surplus of such cash
or cash proceeds held by any Pledgee and remaining after payment in
full of all the Obligations shall be paid over to the Pledgor or to
whomsoever may be lawfully entitled to receive such surplus.
SECTION 14. Expenses. The Pledgor shall upon demand pay to the the
applicable Pledgee the amount of any and all reasonable expenses, including
reasonable attorneys' fees and expenses and the reasonable fees and expenses of
any experts and agents, which such Pledgee may incur in connection with (a) the
administration of this Agreement, (b) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Pledged
Collateral, (c) the exercise or enforcement of any of the rights of such Pledgee
hereunder or (d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
SECTION 15. Continuing Security Interest; Termination. This Agreement shall
create a continuing security interest in the Pledged Collateral and shall remain
in full force and effect until the earlier of (a) the indefeasible payment in
full of the Obligations, or (b) the initial Registration Statement to be filed
pursuant to the Registration Rights Agreement is declared effective by the
Commission registering for resale all of the Underlying Shares. Upon the
indefeasible payment in full of the Obligations or the effectiveness of the
Registration Statement, the security interest granted hereby shall terminate and
all rights to the Pledged Collateral shall revert to the Pledgor. Upon any such
termination, the respective Pledgees shall, at the Pledgor's expense, return to
the Pledgor such of the Pledged Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof and execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence such
termination.
SECTION 16. Governing Law; Terms. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to principles of conflict of laws. The Pledgor agrees to submit itself to the in
personam jurisdiction of the state and federal courts situated within the
Southern District of the State of New York with regard to any controversy
arising out of or relating to this Agreement. Unless otherwise defined herein,
terms defined in Article 9 of the UCC are used herein as therein defined.
SECTION 17. Notice. All notices and other communications hereunder shall be
in writing and shall be deemed to have been received when delivered personally
(which shall include, without limitation, via express overnight courier) or if
mailed, three (3) business days after having been mailed by registered or
certified mail, return receipt requested, postage prepaid, to the addresses of
the parties as set forth in the Purchase Agreement.
SECTION 18. Waivers.
(a) Waivers. The Pledgor waives any right to require the Pledgees to (i)
proceed against any person, (ii) proceed against any other collateral
under any other agreement, (iii) pursue any other remedy, or (iv) make
presentment, demand, dishonor, notice of dishonor, acceleration and/or
notice of non-payment.
(b) Waiver of Defense. No course of dealing between the Pledgor and the
Pledgees, nor any failure to exercise nor any delay in exercising on
the part of any Pledgee, any right, power, or privilege under this
Agreement or under any of the other Transaction Documents shall operate
as a waiver. No single or partial exercise of any right, power, or
privilege under this Agreement or under any of the other Transaction
Documents shall preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or
privilege.
SECTION 19. Rights Are Cumulative. All rights and remedies of the Pledgees
with respect to the Pledged Collateral, whether established by this Agreement,
the other Transaction Documents or by law, shall be cumulative and may be
exercised concurrently or in any order.
SECTION 20. Indemnity. The Pledgor agrees to indemnify and hold harmless
the Pledgees and their respective successors and assigns against and from all
liabilities, losses, and costs (including, without limitation, reasonable
attorneys' fees) arising out of or relating to the taking or the failure to take
action in respect of any transaction effected under this Agreement or in
connection with the lien provided for herein, including, without limitation, any
and all excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Pledged Collateral. The liabilities of the
Pledgor under this Section 20 shall survive the termination of this Agreement.
SECTION 21. Severability. The provisions of this Agreement are severable.
If any provision of this Agreement is held invalid or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such provision or part thereof in any other jurisdiction,
or any other provision of this Agreement in any jurisdiction.
SECTION 22. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be considered an original, but all of which
together shall constitute one and the same instrument.
SECTION 23. Amendments; Entire Agreement. This Agreement is subject to
modification only by a writing signed by the parties. To the extent that any
provision of this Agreement conflicts with any provision of the Purchase
Agreement or the Debentures, the provision giving Pledgees greater rights or
remedies shall govern, it being understood that the purpose of this Agreement is
to add to, and not detract from, the rights granted to Pledgees under the
Purchase Agreement and the Debentures. This Agreement, the Purchase Agreement,
the Debentures and the other Transaction Documents constitute the entire
agreement of the parties with respect to the subject matter of this Agreement.
SECTION 24. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, legal representatives, successors and assigns; provided, however,
that the Pledgor may not, without the prior written consent of the Pledgees,
assign or delegate any rights, powers, duties or obligations hereunder, and any
such purported assignment or delegation without such consent shall be null and
void.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
PLEDGORS:
SHASHQUA LIMITED
By: __________________________________
Name:
Title:
[SIGNATURE PAGE OF PLEDGEES TO PLEDGE AND SECURITY AGREEMENT]
PALISADES EQUITY FUND L.P.
By: __________________________________
Name:
Title:
ALPHA CAPITAL AG
By: _________________________________
Name:
Title:
SCHEDULE 1(a)
Pledged Shares
2,000,000 shares of Common Stock of L.A.M. Pharmaceutical Corp. in the
aggregate, certificated as follows:
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Pledgor Number of Shares Certificate No.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
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L.A.M. PHARMACEUTICAL CORP.
800 Sheppard Avenue West
Commercial Unit 1
North York, Ontario, Canada M3H 6B4
November 18, 2002
ALPHA CAPITAL AG PALISADES EQUITY FUND L.P.
Lettstrasse 32 c/o HPC Capital Management
Furstentum 9490 1215 Hightower Trail
Vaduz, Liechtenstein Atlanta, Georgia 30350
Attn: Konrad Ackermann Attn: Andrew Reckles
FELDMAN WEINSTEIN LLP
420 Lexington Avenue
New York, New York 10170-0002
Attn: Robert F. Charron
Re: First Amendment to the Securities Purchase Agreement
Gentlemen:
Reference is made to that certain Securities Purchase Agreement (the
"Purchase Agreement"), dated October 18, 2002, between L.A.M. Pharmaceutical
Corp. (the "Company"), Alpha Capital AG and Palisades Equity Fund L.P., and
the exhibits entered into pursuant thereto. Capitalized terms used but not
defined herein shall have the meanings set forth in the Purchase Agreement.
In consideration of the mutual covenants and agreements contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. Purchase Agreement. The "Subscription Agreement" with respect to
the purchase of Debentures and Warrants by Alpha Capital AG ("Alpha")
shall be increased to $450,000 from $250,000, retroactive to the Closing.
Additionally, the number of Warrants to be issued pursuant to Section
2.2(a)(ii) shall be increased in proportion to the increase in the
Subscription Amount hereunder. On the date hereof, Alpha shall deliver to
the Escrow Agent, in immediately available funds by wire transfer,
$200,000. Upon receipt by the Escrow Agent of executed signature pages
hereto by all by all of the parties hereto, the Escrow Agent shall release
the additional Subscription Amount per the terms of the Escrow Agreement.
The parties acknowledge and agree that the "Closing Date", as that term is
defined in the Purchase Agreement, shall be November 1, 2002 for all
securities purchased pursuant to the Purchase Agreement, including Alpha's
additional purchase hereunder. All references to pro-rata rights or
distributions in the Transaction Documents will incorporate Alpha's
increase in the Subscription Amount hereunder.
2. Authorization. The Company has the requisite power and authority
to enter into and perform this letter agreement, to sell the Debentures
and Warrants, and to issue the Conversion Shares and Warrant Shares, as
the case may be, upon conversion or exercise thereof. The execution,
delivery and performance of this letter agreement by the Company and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and shall constitute valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms.
3. Representations and Warranties. Except as set forth on the
schedules attached hereto or the SEC Documents, the representations and
warranties of the Company set forth in the Purchase Agreement are true and
correct in all material respects as though made on and as of the date
hereof and all SEC Documents are as represented in the Purchase Agreement.
4. Covenants. Except as set forth on the schedules hereto, the
Company has performed in all material respects all covenants and
agreements to be performed by the Company under the Purchase Agreement on
or prior to the date hereof and has complied and will comply in all
material respects with all of the Company's obligations and conditions
contained in the Purchase Agreement.
Except as specifically amended by the terms of this amendment, the
Purchase Agreement and its exhibits shall remain unmodified and in full force
and effect, and shall not be in any way changed, modified or superseded by the
terms set forth herein.
This amendment may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument and shall become
effective when counterparts have been signed by each party and delivered to the
other parties hereto, it being understood that all parties need not sign the
same counterpart. Execution may be made by delivery by facsimile.
[SIGNATURE PAGE FOLLOWS]
If the foregoing correctly sets forth our understanding and agreement,
please so indicate by signing where indicated below.
L.A.M. PHARMACEUTICAL CORP.
By: /s/ Joseph Slechta
__________________________
Name: Joseph Slechta
Title: President
ACCEPTED AND AGREED TO:
ALPHA CAPITAL AG
By: /s/ Konrad Ackermann
____________________________
Konrad Ackermann,
Authorized Signatory
PALISADES EQUITY FUND L.P.
By: /s/ Andrew Reckles
__________________________
Name: Andrew Reckles
Title: General Partner
FELDMAN WEINSTEIN LLP
By: /s/ Robert Charron
__________________________
Name: Robert Charron
Title: Partner