EXHIBIT 99.1
November 16, 1998
Agreement dated this 16th day of November, 1998 by and between ADVANCED
VIRAL RESEARCH CORP., a Delaware corporation (the "Company"), with offices at
200 Corporate Boulevard South, Yonkers, New York 10701 and RBB Bank
Aktiengesellschaft (the "Purchaser" or "you") with offices at Burgring 16, 8010
Graz, Austria.
ARTICLE I
AUTHORIZATION OF THE SECURITIES
The Company represents that it has taken all corporate action necessary
to authorize the issuance and sale of (a) its 7% Convertible Debenture due
October 31, 2008 in the principal amount of $1,500,000 (the "Debenture") and (b)
warrants to purchase an aggregate of 750,000 shares of Common Stock, par value
$.00001 per share ("Common Stock"), of the Company (the "Warrants"). The
Debenture and the Warrants (collectively, the "Securities") are to be sold
pursuant to this Agreement to you. Interest on the Debenture is payable at the
rate of 7% per annum, as more parti8cularly specified in the form of Debenture
attached hereto as Exhibit A. The Debenture is convertible from time to time
into shares of Common Stock as provided therein. For purposes of this Agreement
the term "Shares" shall mean the shares of Common Stock which may be issued upon
conversion of all or a portion of the principal amount of the Debenture and the
shares of Common Stock that may be issued from time to time pursuant to the
exercise of the Warrants.
ARTICLE II
SALE AND PURCHASE OF THE SECURITIES; CLOSING
2.1. SALE AND PURCHASE OF THE SECURITIES. Subject to the terms and
conditions hereof and in reliance on the representations and warranties
contained herein, or made pursuant hereto, the Company will issue and sell to
the Purchaser for the account of its participants (each a "Participant") as more
particularly referred to below, and the Purchaser will purchase from the
Company, on the Closing Date specified in Section 2.2, the Securities for the
aggregate purchase price of $1,500,000 (the "Aggregate Purchase Price").
2.2. CLOSING.
(a) The closing of the purchase and sale of the Securities (the
"Closing") shall be deemed to occur when this Agreement has been executed by
both the Company and the Purchaser
and the Company has received payment for the Securities. Such date is herein
called the "Closing Date."
(b) On the Closing Date there will be delivered to the Purchaser
(i) a Debenture dated the Closing Date, in the principal amount set forth
opposite the Purchaser's name on Exhibit B and (ii) warrant certificates in the
forms of Exhibits D-1 and D-2 registered in the Purchaser's name representing
the right to purchase the number of shares of Common Stock set forth opposite
the Purchaser's name on Exhibit B. The foregoing Securities shall be delivered
by the Company, against delivery by the Purchaser to the Company of an
unendorsed certified or official bank check drawn upon or issued by a bank which
is a member of the New York Clearinghouse for banks (or wire transfer) for
$1,395,000 (the "Net Proceeds") payable to the order of the Company. The Company
agrees that the Purchaser will retain 7% of the Aggregate Purchase Price as a
placement fee as more particularly described in Section 13.8.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
3.1. REGULATION S OFFERING. The Purchaser understands and agrees with
the Company that the offer and sale of the Securities are intended to be exempt
from the registration requirements under the Securities Act of 1933, as amended
(the "Securities Act"), by virtue of Regulation S under the Securities Act
("Regulation S").
3.2. THE PURCHASE AND THE PURCHASER. The Purchaser represents and
warrants to the Company that:
(a) The Purchaser has full authority to bind each Participant as
if such Participant were a party to this Agreement and all representations,
warranties and agreements herein were made directly to the Company by such
Participant.
(b) Each Participant has authorized the Purchaser to make all of
the representations made in this Article III with respect to such Participant
and the Purchaser has verified the accuracy thereof which respect to such
Participant.
3.3. OFFSHORE TRANSACTION. The Purchaser represents, warrants and
covenants to the Company that (a) no Participant is a "U.S. person" (the "U.S.
Person") as that term is defined in Rule 902(k) of Regulation S; (b) no
Participant is an affiliate of the Company; (c) at the time of execution of this
Agreement, each Participant was outside the United States and no offer to
purchase the Securities was made in the United States; (d) all offers and sales
of the Securities prior to the expiration of a one-year period commencing on the
Closing Date (the "Restricted Period") shall not be made to U.S. Persons or for
the account or benefit of U.S. Persons and shall otherwise be made in compliance
with the provisions of Regulation S; (e) the transactions contemplated hereby
(i) have not been and will not be pre-arranged with a purchaser located in the
United States or a purchaser which is a U.S. Person, and (ii) are not and will
not be part of a plan or scheme to evade the
registration provisions of the Securities Act; (f) the Purchaser and each of the
Participants shall take all reasonable steps to ensure its compliance with
Regulation S; (g) prior to the expiration of the Restricted Period, the
Purchaser shall promptly send to each person buying the Securities from the
Purchaser, who is a distributor, dealer (as defined in Section 2(a)(12) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) or a person
receiving a selling concession, fee or other remuneration in respect of any of
the Securities, a confirmation or other notice stating that such buyer is
subject to the same restrictions on offers and sales as a distributor of such
Securities pursuant to Section 903(b)(3)(iv) of Regulation S; and (h) neither
the Purchaser nor any Participant, nor any of their affiliates or persons acting
on their behalf have conducted any "directed selling efforts" as that term is
defined in Rule 902(c) of Regulation S; nor has the Purchaser or any of the
Participants, their affiliates or persons acting on their behalf conducted any
general solicitation to the offer and sale of any of the Securities in the
United States or elsewhere.
3.4. OFFERING RESTRICTIONS. The Purchaser will, prior to the expiration
of the Restricted Period (a) make offers and sales of the Securities only in
accordance with provisions of Rule 903 or Rule 904 of Regulation S, pursuant to
an effective registration statement under the Securities Act; or pursuant to an
available exemption from the registration requirements under the Securities Act;
and (b) not engage in hedging transactions with regard to the Securities, unless
a hedging transaction is permissible under the Securities Act.
3.5. BENEFICIAL OWNER. Each Participant is purchasing the Securities
for its own account with respect to the Securities. Neither the Purchaser nor
any Participant owns, or upon completion of this transaction, or upon conversion
of all or any part of the Debenture, and/or exercise of any Warrant will
beneficially own, more than 4.9% of the Common Stock of the Company.
3.6. DIRECTED SELLING EFFORTS. Neither the Purchaser nor any
Participant has engaged or will engage in any activity for the purpose of, or
that could reasonably be expected to have the effect of, conditioning the market
in the United States for any of the Securities sold hereunder. To the best
knowledge of the Purchaser, neither the Company nor any person acting for the
Company has conducted any "directed selling efforts" as that term is defined in
Rule 902 of Regulation S.
3.7. SHORT POSITION. Neither the Purchaser nor any Participant or any
of their affiliates will directly or indirectly maintain any short position in
any securities of the Company until after the end of the Restricted Period.
3.8. CERTIFICATE OF PARTICIPANT. Prior to the execution of this
Agreement the Purchaser has received from each Participant a certificate in the
form attached hereto as Exhibit E, executed by such Participant.
3.9. INDEPENDENT INVESTIGATION. Each Participant in electing to
purchase the Securities hereunder, has relied solely upon the representations
and warranties of the Company set forth in this Agreement and on independent
investigation made by it and its representatives, if any, and no Participant has
been given any oral or written representations or assurance from the Company or
any
representation of the Company other than as set forth in this Agreement or in a
document executed by a duly authorized representative of the Company making
reference to this Agreement.
3.10. NO GOVERNMENT RECOMMENDATION OR APPROVAL. Each Participant
understands that no United States federal or state agency, or similar agency of
any other country, has passed upon or made any recommendation or endorsement of
the Company, this transaction or the purchase of the Securities.
3.11. FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, each Participant further agrees not to make
any disposition of all or any portion of the Securities (or the Shares issuable
upon the conversion or exercise thereof) unless and until (a) there is then in
effect a registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with such registration
statement, (b) the disposition is made in compliance with Regulation S; or (c)
the disposition is made pursuant to an available exemption from the registration
requirements of the Securities Act and in the case of clauses (b) and (c) the
Participant shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not violate
any of the securities laws of the United States.
3.12. LEGAL REPRESENTATION. The Purchaser has the opportunity to be
represented in this transaction by counsel of its own choice and has been so
advised by counsel for the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Other than as provided in the Schedule of Exceptions attached hereto as
Exhibit C, the Company represents and warrants to you as follows:
4.1. ORGANIZATION AND EXISTENCE, ETC. The Company is a corporation duly
organized and validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all requisite corporate power and
authority to carry on its business as now conducted and proposed to be
conducted; the Company has all requisite corporate power and authority to enter
into this Agreement, to issue the Securities as contemplated herein and to carry
out and perform its obligations under the terms and conditions of this
Agreement. The Company does not own or lease any property or engage in any
activity in any jurisdiction which might require qualification to do business as
a foreign corporation in such jurisdiction and where the failure to so qualify
would have a material adverse effect on the financial condition of the Company
or subject the Company to a material liability. To the extent the Company has
not qualified to do business in such jurisdictions, it has, as of the date
hereof, prepared the necessary applications or documents to be filed with the
appropriate authorities in such jurisdictions to obtain such qualifications. The
Company has furnished you with true, correct and complete copies of its
Certificate of Incorporation, By-laws and all amendments thereto to date.
4.2. SUBSIDIARIES AND AFFILIATES. Except as set forth in the Schedule
of Exceptions, the Company has no subsidiaries and does not, and upon the
Closing will not, own of record or beneficially any capital stock or equity
interest or investment in any corporation, association or business entity.
4.3. CAPITALIZATION.
(a) As of the date hereof, the Company's authorized capital stock
consists of 1,000,000,000 shares of Common Stock, par value $.00001 per share,
of which 296,422,907 are outstanding, 55,800,549 of which are reserved for
issuance to certain persons for the purposes stated in the Schedule of
Exceptions, 15,000,000 of which have been reserved for issuance upon conversion
of the Debenture and 750,000 of which have been reserved for issuance upon
exercise of the Warrants. As of the date hereof, the Company does not hold any
shares of its capital stock in its treasury.
(b) All the issued and outstanding shares of capital stock of the
Company shall, as of the Closing, (i) have been duly authorized and validly
issued, (ii) be fully paid and nonassessable, and (iii) have been offered,
issued, sold and delivered by the Company in compliance with applicable federal
and state securities laws. Other than as set forth in Section 4.3(a), there are
no outstanding preemptive, conversion or other rights, options, warrants, calls,
agreements or commitments granted or issued by or binding upon the Company, for
the purchase or acquisition of any shares of its capital stock.
4.4. AUTHORIZATION. All corporate action on the part of the Company
and the directors and stockholders of the Company necessary for the
authorization, execution, delivery and performance by the Company of this
Agreement and the transactions contemplated herein, and for the authorization,
issuance and delivery of the Securities, has been taken or will have been taken
prior to the Closing.
4.5. BINDING OBLIGATIONS; NO MATERIAL ADVERSE CONTRACTS, ETC. This
Agreement is a valid and binding obligation of the Company enforceable in
accordance with its terms. The execution, delivery and performance by the
Company of this Agreement and compliance herewith will not result in any
violation of and will not conflict with, or result in a breach of any of the
terms of, or constitute a default under, any provision of state or Federal law
to which the Company is subject, the Certificate of Incorporation, as amended,
or the By-laws, as amended, of the Company, or any mortgage, indenture,
agreement, instrument, judgment, decree, order, rule or regulation or other
restriction to which the Company is a party or by which it is bound, or, result
in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of the Company pursuant to any such term. Except as set
forth herein no stockholder of the Company has or will have any preemptive
rights or rights of first refusal by reason of the issuance of the Securities.
4.6. FINANCIAL INFORMATION. The Company has delivered to the Purchaser
true and complete copies of the financial information concerning the Company
identified in the Schedule of
Exceptions. Except as may be indicated thereon, all financial statements
included in the information given to the Purchaser fairly present the financial
position and results of operations of the Company as at their respective dates
and for their respective periods in conformity with generally accepted
accounting principles consistently applied throughout the periods covered
thereby. As of their respective dates the Company had no liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) which
would normally be reflected on a balance sheet and which are not reflected on
any balance sheet contained in the financial information given to the Purchaser
or disclosed in accordance with generally accepted auditing standards.
4.7. COMPLIANCE WITH INSTRUMENTS, ETC. The Company is not in default
past any grace, notice or cure period under any indenture, agreement or
instrument to which it is a party or by which it is bound, in violation of its
Certificate of Incorporation, By-laws or of any applicable law, in default with
respect to any order, writ, injunction or decree of any court, administrative
agency or arbitrator, or in default under any order, license, regulation or
demand of any government agency, which default or violation would materially and
adversely affect the business, properties, condition (financial or otherwise) or
business prospects of the Company.
4.8. LITIGATION. Except as set forth in the Schedule of Exceptions,
there is no action, suit or proceeding pending, or, to the knowledge of the
Company, threatened, against the Company before any court, administrative agency
or arbitrator or any action, suit or proceeding pending, or, to the knowledge of
the Company, threatened, which challenges the validity of any action taken or to
be taken pursuant to or in connection with this Agreement or the issuance of the
Securities.
4.9. OFFERING. Subject in part to the truth and accuracy of the
representations made by the Purchaser herein and the compliance by the Purchaser
and the Participants with its covenants set forth in this Agreement, the offer,
sale and issuance of the Securities as contemplated by this Agreement are not
subject to the registration requirements of the Securities Act, and the Company,
or anyone acting on its behalf, will not take any action hereafter that would
cause such registration requirements to be applicable.
4.10. PERMITS; GOVERNMENTAL AND OTHER APPROVALS. The Company possesses
such franchises, licenses, permits and other authority as are necessary for the
conduct of its business as now being conducted and proposed to be conducted by
the Company and the Company is not in default under any of such franchises,
licenses, permits or other authority. No approval, consent, authorization or
other order of, and no designation, filing, registration, qualification or
recording with, any governmental authority or any other person or entity is
required in connection with the Company's valid execution, delivery and
performance of this Agreement or the offer, issuance and sale of the Securities
by the Company to the Purchaser or the consummation of any other transaction
contemplated on the part of the Company hereby.
4.11. REPORTING COMPANY STATUS. The Company is a "Reporting Issuer" as
defined in Rule 902 of Regulation S. The Company has filed all material required
to be filed pursuant to all reporting obligations under Section 15(d) of the
Exchange Act, for a period of at least twelve (12) months immediately preceding
the offer or sale of the Securities.
4.12. OFFSHORE TRANSACTION. The Company has not offered or sold the
Securities to any person in the United States, or, to the best knowledge of the
Company, any identifiable groups of U.S. citizens abroad, or any U.S. Person as
that term is defined in Regulation S. At the time the buy order of the
Securities was originated the Company and/or its agents reasonably believed the
Purchaser was outside the United States and was not a U.S. Person.
4.13. PREARRANGED SALE. The Company and/or its agents believe that the
transaction contemplated hereby has not been pre-arranged with a buyer in the
United States.
4.14. NO DIRECTED SELLING EFFORTS. The Company has not conducted any
"directed selling efforts" as that term is defined in Rule 902 of Regulation S
nor has Company conducted any general solicitation relating to the offer and
sale of the Securities to any person who is a resident within the United States
or any other U.S. Person as that term is defined in Rule 902 of Regulation S.
4.15. COPYRIGHTS, TRADEMARKS AND PATENTS. Set forth in the Schedule of
Exceptions is a list of all the copyrights, trademark registrations and patents
and applications therefor owned by the Company.
4.16. NO RELATIONSHIP BETWEEN PARTIES. The Company is not an owner of
any shares of the stock of or equity interest in the Purchaser. No officer,
director or owner of any shares of the stock of the Company or its subsidiaries
or his close relatives is an officer or director of or owns any shares of the
stock of or equity interest in the Purchaser.
4.17. OTHER MATERIAL CONTRACTS. Set forth in the Schedule of
Exceptions is a list of contracts material to the operations of the Company to
which reference is not made elsewhere in this Article IV.
4.18. REGISTRATION OF TRANSFER OF SECURITIES. The Company agrees not
to register the transfer of the Securities or Shares not made in accordance with
the provisions of Regulation S, pursuant to registration under the Securities
Act or pursuant to an available exemption from registration.
4.19. DISCLOSURE. The information heretofore provided and to be
provided pursuant to this Agreement, including the Schedules of Exceptions and
the Exhibits hereto, and each of the agreements, documents, certificates and
writings previously delivered to the Purchaser or its representatives, do not
and will not contain any untrue statement of a material fact and do not and will
not omit to state a material fact required to be stated herein or therein or
necessary in order to make the statements and writings contained herein and
therein not false or misleading in the light of the circumstances under which
they were made. To the knowledge of the Company, there is no fact which
materially adversely affects the business, prospects or condition (financial or
otherwise) of the Company which has not been set forth herein.
ARTICLE V
CONDITIONS TO CLOSING OF THE PURCHASER
The obligation of the Purchaser to purchase the Securities at the
Closing is subject to the fulfillment to the Purchaser's satisfaction on or
prior to the Closing Date of each of the following conditions, any of which may
be waived by the Purchaser:
5.1. REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties in Article IV hereof shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
the Closing Date with the same force and effect as if they had been made on and
as of the Closing Date.
5.2. PERFORMANCE. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with by the Company in
all material respects.
5.3. NO IMPEDIMENTS. Neither the Company nor the Purchaser shall be
subject to any order, decree or injunction of a court or administrative agency
of competent jurisdiction which would impose any material limitation on the
ability of the Purchaser to exercise full rights of ownership of the Securities.
5.4. OTHER AGREEMENTS. The Company shall have issued to the Purchaser
all of the Securities.
5.5. LEGAL INVESTMENT. At the time of the Closing, the purchase of
the Securities to be purchased by the Purchaser hereunder shall be legally
permitted by all laws and regulations to which the Purchaser and the Company are
subject.
5.6. DUE DILIGENCE INVESTIGATION. The Purchaser shall not have
discovered any fact, whether or not reflected in the Schedule of Exceptions,
which in the Purchaser's determination would make the consummation of the
transactions contemplated by this Agreement not in the Purchaser's best
interests.
5.7. PROCEEDINGS AND OTHER DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
shall have been taken and the Purchaser shall have received such other
documents, in form and substance reasonably satisfactory to the Purchaser and
the Purchaser's counsel, as to such other matters incident to the transaction
contemplated hereby as the Purchaser may reasonably request.
ARTICLE VI
CONDITIONS TO CLOSING OF THE COMPANY
The Company's obligation to sell the Securities at the Closing is
subject to the fulfillment to its satisfaction on or prior to the Closing Date
of each of the following conditions:
6.1. REPRESENTATIONS. The representations made by the Purchaser in
Article III hereof shall be true and correct when made and shall be true and
correct on the Closing Date.
6.2. LEGAL INVESTMENT. At the time of the Closing, the offer, sale
and purchase of the Securities shall be legally permitted by all laws and
regulations to which the Purchaser and the Company are subject.
6.3. PAYMENT OF PURCHASE PRICE. The Company shall have received
payment in full of the Net Proceeds.
ARTICLE VII
OPTIONAL PREPAYMENTS
7.1. OPTIONAL PREPAYMENTS. The Company may, at its option, at any
time prior to maturity, prepay the Debenture, in whole or in part without
premium or penalty at a price equal to the principal amount thereof plus accrued
interest thereon to the date fixed for prepayment. Any prepayments made pursuant
to this Section 7.1 shall be applied first to the payment of interest on and
then to principal of the Debenture at the time outstanding.
7.2. NOTICE OF PREPAYMENT. The right of the Company to prepay the
Debenture pursuant to Section 7.1 shall be conditioned upon its giving notice of
prepayment, signed by its President and by its Treasurer or an Assistant
Treasurer, to the holder of the Debenture not less than thirty (30) days prior
to the date upon which the prepayment is to be made (the "Prepayment Notice"),
specifying the aggregate principal amount of the Debenture to be prepaid, the
date of such prepayment, and the accrued and unpaid interest (to and including
the date upon which the prepayment is to be made). The Prepayment Notice having
been so given, the aggregate principal amount of the Debenture so specified in
such Prepayment Notice, and all accrued and unpaid interest thereon, shall
become due and payable on the specified prepayment date.
7.3. EXERCISE OF CONVERSION PRIVILEGE UPON RECEIPT OF PREPAYMENT
NOTICE. Upon receipt of a Prepayment Notice, the holder of the Debenture may at
any time up to the third day preceding the specified prepayment date elect to
convert all or a portion of the outstanding principal amount of the Debenture in
accordance with the terms of the Debenture.
ARTICLE VIII
AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees, so long as any Securities
remain outstanding, as follows:
8.1. MAINTENANCE OF CORPORATE EXISTENCE, PROPERTIES AND LEASES;
TAXES; INSURANCE.
(a) The Company shall and shall cause each of its subsidiaries
to, maintain in full force and effect its corporate existence, rights and
franchises and all material terms of licenses and other rights to use licenses,
trademarks, trade names, service marks, copyrights, patents or processes owned
or possessed by it and necessary to the conduct of its business.
(b) The Company shall and shall cause each of its subsidiaries
to keep each of its properties necessary to the conduct of its business in good
repair, working order and condition, reasonable wear and tear excepted, and from
time to time make all needful and proper repairs, renewals, replacements,
additions and improvements thereto; and the Company shall and shall cause its
subsidiaries to at all times comply with each material provision of all leases
to which it is a party or under which it occupies property.
(c) The Company shall and shall cause each of its subsidiaries
to promptly pay and discharge, or cause to be paid and discharged when due and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, assets, property or business of the Company
and its subsidiaries, and all claims or indebtedness (including, without
limitation, claims or demands of workmen, materialmen, vendors, suppliers,
mechanics, carriers, warehousemen and landlords) which, if unpaid might become a
lien upon the assets or property of the Company or subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall be contested timely and in good faith by appropriate
proceedings, if the Company or subsidiary shall have set aside on its books
adequate reserves with respect thereto, and the failure to pay shall not be
prejudicial in any material respect to the holders of the Securities, and
provided, further, that the Company or subsidiary will pay or cause to be paid
any such tax, assessment, charge or levy forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security therefor.
The Company shall and shall cause its subsidiaries to pay or cause to be paid
all other indebtedness incident to the operations of the Company or
subsidiaries.
(d) The Company shall and shall cause each of its subsidiaries
to keep its assets which are of an insurable character insured by financially
sound and reputable insurers against loss or damage by theft, fire, explosion
and other risks customarily insured against by companies in the line of business
of the Company or its subsidiaries, in amounts sufficient to prevent the Company
or its subsidiaries from becoming a co-insurer of the property insured; and the
Company shall and shall cause its subsidiaries to maintain, with financially
sound and reputable insurers, insurance against other hazards and risks and
liability to persons and property to the extent and in the manner customary for
companies in similar businesses similarly situated or as may be required by law,
including, without limitation, general liability, fire and product liability
insurance as may be required pursuant to any license agreement to which the
Company or its subsidiaries is a party or by which it is bound.
8.2. BASIC FINANCIAL INFORMATION. The Company shall furnish the
following reports to the Purchaser (or any transferee of any Securities), so
long as the Purchaser is a holder of any Securities:
(a) within forty-five (45) days after the end of each of the
quarterly accounting periods in each fiscal year, unaudited consolidated
statements of income and retained earnings and cash flows of the Company and its
subsidiaries for such quarterly period and for the period from the beginning of
such fiscal year to the end of such quarterly period, together with consolidated
balance sheets of the Company and its subsidiaries as at the end of each
quarterly period, setting forth in each case comparisons to corresponding
periods in the preceding fiscal year, which statements will be prepared in
accordance with generally accepted accounting principles, consistently applied;
(b) within ninety (90) days after the end of each fiscal year,
consolidated statements of income and retained earnings and cash flows of the
Company and its subsidiaries for the period from the beginning of each fiscal
year to the end of such fiscal year, and consolidated balance sheets as at the
end of such fiscal year, setting forth in each case in comparative form
corresponding figures for the preceding fiscal year, which statements will be
prepared in accordance with generally accepted accounting principles,
consistently applied (except as approved by the accounting firm examining such
statements and disclosed by the Company), and will be accompanied by a report
thereon of certified public accountants.
(c) promptly as legally permitted, any additional reports or
other detailed information concerning significant aspects of the operations and
condition, financial or otherwise, of the Company and its subsidiaries, given to
the Company by its independent accountants;
(d) within ten (10) days after transmission or receipt thereof,
copies of all financial statements, proxy statements and reports which the
Company sends to its stockholders or directors, and copies of all registration
statements and all regular, special or periodic reports which it or any of its
officers or directors files with the Commission or with any securities exchange
on which any of the securities of the Company are then listed or proposed to be
listed, copies of all press releases and other statements made generally
available by the Company to the public concerning material developments in the
business of the Company and its subsidiaries and copies of material
communications sent to or received from stockholders, directors or committees of
the Board of Directors of the Company or any of its subsidiaries and copies of
all material communications sent to and received from any lender to the Company;
and
(e) with reasonable promptness such other information and
financial data concerning the Company as any person entitled to receive
materials under this Section 8.2 may reasonably request.
8.3. NOTICE OF ADVERSE CHANGE. The Company shall promptly give notice
to all holders of any Securities (but in any event within seven (7) days) after
becoming aware of the existence of any condition or event which constitutes, or
the occurrence of, any of the following:
(a) any Event of Default;
(b) the institution of an action, suit or proceeding against the
Company before any court, administrative agency or arbitrator, including,
without limitation, any action of a foreign
government or instrumentality, which, if adversely decided, could materially
adversely affect the business, prospects, properties, financial condition or
results of operations of the Company, whether or not arising in the ordinary
course of business; or
(c) any information relating to the Company which could
reasonably be expected to materially and adversely affect the assets, property,
business or condition (financial or otherwise) of the Company or its ability to
perform the terms of this Agreement. Any notice given under this Section 8.3
shall specify the nature and period of existence of the condition, event,
information, development or circumstance, the anticipated effect thereof and
what actions the Company has taken and/or proposes to take with respect thereto.
8.4. COMPLIANCE WITH AGREEMENTS; COMPLIANCE WITH LAWS. The Company
and its subsidiaries shall comply with the material terms and conditions of all
material agreements, commitments or instruments to which the Company or any of
its subsidiaries is a party or by which it or they may be bound. The Company
shall and shall cause each of its subsidiaries to duly comply in all material
respects with any material laws, ordinances, rules and regulations of any
foreign, federal, state or local government or any agency thereof, or any writ,
order or decree, and conform to all valid requirements of governmental
authorities relating to the conduct of their respective businesses, properties
or assets, including, but not limited to, the requirements of ERISA, the
Environmental Protection Act, the Occupational Safety and Health Act, the
Foreign Corrupt Practices Act and the rules and regulations of each of the
agencies administering such acts.
8.5. PROTECTION OF LICENSES, ETC. The Company shall maintain, defend
and protect to the best of its ability licenses and sublicenses (and to the
extent the Company is a licensee or sublicensee under any license or sublicense,
as permitted by the license or sublicense agreement), trademarks, trade names,
service marks, patents and applications therefor and other proprietary
information owned or used by it and shall keep duplicate copies of any licenses,
trademarks, service marks or patents owned or used by it, if any, at a secure
place selected by the Company.
8.6. ACCOUNTS AND RECORDS; INSPECTIONS.
(a) The Company shall keep true records and books of account in
which full, true and correct entries will be made of all dealings or
transactions in relation to the business and affairs of the Company and its
subsidiaries in accordance with generally accepted accounting principles applied
on a consistent basis.
(b) The Company shall permit each holder of any Securities or
any of such holder's officers, employees or representatives during regular
business hours of the Company, upon reasonable notice and as often as such
holder may reasonably request, to visit and inspect the offices and properties
of the Company and its subsidiaries and (i) to make extracts or copies of the
books, accounts and records of the Company or its subsidiaries, and (ii) to
discuss the affairs, finances and accounts of the Company and its subsidiaries,
with the Company's (or subsidiary's) directors and officers, its independent
public accountants, consultants and attorneys.
(c) Nothing contained in this Section 8.6 shall be construed to
limit any rights which a holder of any Securities (a "Holder") may have with
respect to the books and records of the Company and its subsidiaries, to inspect
its properties or to discuss its affairs, finances and accounts.
8.7. FURTHER ASSURANCES. From time to time the Company shall execute
and deliver to the Purchaser and the Purchaser shall execute and deliver to the
Company such other instruments, certificates, agreements and documents and take
such other action and do all other things as may be reasonably requested by the
other party in order to implement or effectuate the terms and provisions of this
Agreement and any of the Securities.
8.8. REGISTRATION RIGHTS.
(a) The Company shall file a registration statement (the
"Registration Statement") with the Securities and Exchange Commission, on such
form as the Company deems to be appropriate, to register the Shares under the
Securities Act. The Registration Statement shall be filed on or prior to the
60th day after the Closing Date (the "Filing Deadline"). The Company shall use
its best efforts to cause the Registration Statement to be declared effective by
the Securities and Exchange Commission on or prior to the 90th day after the
date the Registration Statement is filed (the "Effective Deadline").
Notwithstanding any other provision contained herein, neither the failure of the
Company to file the Registration Statement on or prior to the Filing Deadline
nor the failure of the Company to cause the Registration Statement to be
declared effective by the Securities and Exchange Commission on or prior to the
Effective Deadline shall be deemed an event of default under this Agreement.
(b) In the event the Company fails to file the Registration
Statement on or prior to the Filing Deadline, the Company shall pay the
Purchaser a penalty equal to the sum of (i) 2% of the Aggregate Purchase Price
and (ii) 0.1% of the Aggregate Purchase Price for each day lapsed after the
Filing Deadline, until the Registration Statement is filed. In the event the
Registration Statement is not declared effective by the Securities and Exchange
Commission on or before the Effective Deadline, the Company shall, in addition
to the penalty contemplated above, pay the Purchaser a penalty equal to the sum
of (x) 2% of the Aggregate Purchase Price and (y) 0.1% of the Aggregate Purchase
Price for each day lapsed after the Effective Deadline, until the Registration
Statement is declared effective by the Securities and Exchange Commission;
provided, however, that the total penalties under this Section 8.8(b) shall not
exceed $100,000 in the aggregate.
ARTICLE IX
EVENTS OF DEFAULTS
9.1. EVENTS OF DEFAULT. If any of the following events (herein called
an "Event of Default") shall occur and be continuing:
(a) if the Company shall default in the payment of (i) any part
of the principal of any Debenture, when the same shall become due and payable,
whether at maturity or at a date fixed for prepayment or by acceleration or
otherwise; or (ii) the interest on any Debenture; when the
same shall become due and payable, and such default in the payment of interest
shall have continued for ten (10) days; and in each case such default shall have
continued without cure for ten (10) days after written notice (a "Default
Notice") is given to the Company of such default; or
(b) If the Company shall default in the performance of any of
the covenants contained in Article VIII and such default shall have continued
without cure (i) for twenty (20) days after a Default Notice is given to the
Company with respect to a covenant relating to any payment of monies under an
agreement providing for payments of at least $50,000 in the aggregate or (ii)
twenty (20) days after a Default Notice is given to the Company with respect to
default in the case of a covenant not related to the payment of monies, by any
holder or holders of the Securities (the Company to give forthwith to all other
holders of the Securities at the time outstanding written notice of the receipt
of such Default Notice, specifying the default referred to therein).
Notwithstanding the foregoing, if any such non-monetary default
shall, by its nature, be reasonably incapable of being cured within 20 days, the
period within which the Company shall have the right to cure such default shall
be extended for such period of time as shall enable it to cure such default upon
the exercise of due diligence.
(c) If the Company shall default in the performance of any other
material agreement or covenant contained in this Agreement and such default
shall not have been remedied to the satisfaction of the holder or holders of at
least a majority in aggregate principal amount of the Debentures then
outstanding, within thirty (30) days after a Default Notice shall have been
given to the Company (the Company to give forthwith to all other holders of
Debentures and Shares at the time outstanding written notice of the receipt of
such Default Notice, specifying the default referred to therein); or
Notwithstanding the foregoing, if any such non-monetary default
shall, by its nature, be reasonably incapable of being cured within 20 days, the
period within which the Company shall have the right to cure such default shall
be extended for such period of time as shall enable it to cure such default upon
the exercise of due diligence.
(d) If any representation or warranty made in this Agreement or
in or any certificate delivered pursuant hereto shall prove to have been
incorrect in any material respect when made; or
(e) If any default shall occur under any indenture, mortgage,
agreement, instrument or commitment evidencing or under which there is at the
time outstanding any indebtedness of the Company (or a Material Subsidiary, as
hereinafter defined), in excess of $50,000, or which results in such
indebtedness, in an aggregate amount (with other defaulted indebtedness) in
excess of $50,000 becoming due and payable prior to its due date and if such
indenture or instrument so requires, the holder or holders thereof (or a trustee
on their behalf) shall have declared such indebtedness due and payable; or
(f) If any of the Company or its subsidiaries shall default in
the observance or performance of any material term or provision of a material
agreement to which it is a party or by which it is bound, and such default is
not waived or cured within the applicable grace period; or
(g) If a final judgment which, either alone or together with
other outstanding final judgments against the Company and its subsidiaries,
exceeds an aggregate of $50,000 shall be rendered against the Company (or any
Material Subsidiary) and such judgment shall have continued undischarged or
unstayed for thirty (30) days after entry thereof; or
(h) If the Company (or any Material Subsidiary) shall make an
assignment for the benefit of creditors, or shall admit in writing its inability
to pay its debts; or if the Company (or any Material Subsidiary) shall suffer a
receiver or trustee for it or substantially all of its assets to be appointed,
and, if appointed without its consent, not to be discharged or stayed within
ninety (90) days; or if the Company (or any Material Subsidiary) shall suffer
proceedings under any law relating to bankruptcy, insolvency or the
reorganization or relief of debtors to be instituted by or against it, and, if
contested by it, not to be dismissed or stayed within ninety (90) days; or if
the Company (or any Material Subsidiary) shall suffer any writ of attachment or
execution or any similar process to be issued or levied against it or any
significant part of its property which is not released, stayed, bonded or
vacated within ninety (90) days after its issue or levy; or if the Company (or
any Material Subsidiary) takes corporate action in furtherance of any of the
aforesaid purposes or conditions.
For purposes of this Section 9.1, "Material Subsidiary" means
any subsidiary with respect to which the Company has directly or indirectly
invested, loaned, advanced or guaranteed the obligations of, an aggregate amount
exceeding fifteen percent (15%) of the Company's gross assets, or the Company's
proportionate share of the assets or net income of which (based on the
subsidiary's most recent financial statements) exceed fifteen percent (15%) of
the Company's gross assets or net income, respectively, or the gross revenues of
which exceed fifteen percent (15%) of the gross revenues of the Company based
upon the most recent financial statements of such subsidiary and the Company.
9.2. REMEDIES.
(a) Upon the occurrence of an Event of Default, any holder or
holders of a majority in aggregate principal amount of the Debentures at the
time outstanding may at any time (unless all defaults shall theretofore have
been remedied) at its or their option, by written notice or notices to the
Company (i) declare all the Debentures to be due and payable, whereupon the same
shall forthwith mature and become due and payable, together with interest
accrued thereon, without presentment, demand, protest or notice, all of which
are hereby waived; and (ii) declare any other amounts payable to the Purchaser
under this Agreement or as contemplated hereby due and payable.
(b) Notwithstanding anything contained in Section 9.2(a), in the
event that at any time after the principal of the Debentures shall so become due
and payable and prior to the
date of maturity stated in the Debentures all arrears of principal of and
interest on the Debentures (with interest at the rate specified in the
Debentures on any overdue principal and, to the extent legally enforceable, on
any interest overdue) shall be paid by or for the account of the Company, then
the holder or holders of at least a majority in aggregate principal amount of
the Debentures then outstanding, by written notice or notices to the Company,
may (but shall not be obligated to) waive such Event of Default and its
consequences and rescind or annul such declaration, but no such waiver shall
extend to or affect any subsequent Event of Default or impair any right
resulting therefrom. If any holder of a Debenture shall give any notice or take
any other action with respect to a claimed default, the Company, forthwith upon
receipt of such notice or obtaining knowledge of such other action will give
written notice thereof to all other holders of the Debentures then outstanding,
describing such notice or other action and the nature of the claimed default.
9.3. ENFORCEMENT. In case any one or more Events of Default shall
occur and be continuing, the holder of a Debenture then outstanding may proceed
to protect and enforce the rights of such holder by an action at law, suit in
equity or other appropriate proceeding, whether for the specific performance of
any agreement contained herein or in such Debenture or for an injunction against
a violation of any of the terms hereof or thereof, or in aid of the exercise of
any power granted hereby or thereby or by law. Each holder agrees that it will
give written notice to the other holders prior to instituting any such action.
In case of a default in the payment of any principal of or interest on any
Debenture, the Company will pay to the holder thereof such further amount as
shall be sufficient to cover the cost and the expenses of collection, including,
without limitation, reasonable attorney's fees, expenses and disbursements. No
course of dealing and no delay on the part of any holder of any Debenture in
exercising any rights shall operate as a waiver thereof or otherwise prejudice
such holder's rights. No right conferred hereby or by any Debenture upon any
holder thereof shall be exclusive of any other right referred to herein or
therein or now available at law in equity, by statute or otherwise.
ARTICLE X
AMENDMENT AND WAIVER
This Agreement may not be amended, discharged or terminated (or any
provision hereof waived) without the written consent of the Company and the
Purchaser. Provided that such written consent of the Company and the Purchaser
is given:
(a) Holders of at least a majority in aggregate principal amount
of the Debentures then outstanding may by written instrument amend or waive any
term or condition of this Agreement relating to the rights or obligations of
holders of Debentures, which amendment or waiver operates for the benefit of
such holders, except that no such amendment or waiver shall (i) change the fixed
maturity of any Debenture, the rate or the time of mandatory prepayment of
principal thereof or payment of interest thereon, the principal amount thereof,
or the terms of subordination, if any, without the consent of the holder of the
Debenture so affected, (ii) change the aforesaid percentage of Debentures, the
holders of which are required to consent to any such amendment or waiver,
without the consent of the holders of all the Debentures then outstanding
or (iii) change the percentage of the amount of the Debentures, the holders of
which may declare the Debentures to be due and payable under Article IX.
(b) The Company and each holder of a Debenture then or
thereafter outstanding shall be bound by any amendment or waiver effected in
accordance with the provisions of this Article X, whether or not such Debenture
shall have been marked to indicate such modification, but any Debenture issued
thereafter shall bear a notation as to any such modification. Promptly after
obtaining the written consent of the holders herein provided, the Company shall
transmit a copy of such modification to all of the holders of the Debentures
then outstanding.
ARTICLE XI
EXCHANGE AND REPLACEMENT OF DEBENTURES
11.1. Subject to Section 12.2, at any time at the request of any holder
of one or more of the Debentures to the Company at its office, the Company at
its expense (except for any transfer tax or any other tax arising out of the
exchange) will issue in exchange therefor new Debentures, in such denomination
or denominations ($100,000 or any larger multiple of $100,000, plus one
Debenture in a lesser denomination, if required) as such holder may request, in
aggregate principal amount equal to the unpaid principal amount of the Debenture
or Debentures surrendered and substantially in the form thereof, dated as of the
date to which interest has been paid on the Debenture or Debentures surrendered
(or, if no interest has yet been so paid thereon, then dated the date of the
Debenture or Debentures so surrendered) and payable to such person or persons or
order as may be designated by such holder.
11.2. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Debenture and, in the case of any such
loss, theft, or destruction, upon delivery of a bond of indemnity satisfactory
to the Company (provided that if the holder is a Purchaser or a financial
institution, its own agreement will be satisfactory), or in the case of any such
mutilation, upon surrender and cancellation of such Debenture, the Company will
issue a new Debenture of like tenor as if the lost, stolen, destroyed or
mutilated Debenture were then surrendered for exchange in lieu of such lost,
stolen, destroyed or mutilated Debenture.
ARTICLE XII
TRANSFER OF AND PAYMENT OF DEBENTURES
12.1. NOTIFICATION OF PROPOSED SALE.
(a) Subject to Section 12.1(b), each holder of a Debenture by
acceptance thereof agrees that it will give the Company ten (10) days written
notice prior to selling or otherwise disposing of such Debenture during which
time the Company may prepay the Debenture in full. No such sale or other
disposition shall be made unless (i) the holder shall have supplied to the
Company an opinion of counsel for the holder reasonably acceptable to the
Company to the effect that no registration under the Securities Act is required
with respect to such sale or other
disposition, or (ii) an appropriate registration statement with respect to such
sale or other disposition shall have been filed by the Company and declared
effective by the Commission.
(b) If the holder of Debentures has obtained an opinion of
counsel reasonably acceptable to the Company to the effect that the sale of its
Debentures may be made without registration under the Securities Act pursuant to
compliance with Rule 144 (or any successor rule under the Securities Act), the
holder need not provide the Company with the notice required in Section 12.1(a).
(c) The Company may endorse on all Debentures an appropriate
legend restricting their transfer except upon compliance with this Section 12.1;
provided, however, that no such legend shall be endorsed on any Debenture which,
when issued, is no longer subject to the restrictions of this Section 12.1, and
provided, further, that if an opinion of counsel satisfactory to the Company
concludes that the legend is no longer necessary, the Company will deliver upon
transfer Debentures without such legends.
12.2 PAYMENT. So long as the Purchaser shall be the holder of any
Debenture, the Company will make payments of principal and interest to the
Purchaser no later than 11 a.m. Eastern Time on the date when such payment is
due. Payments shall be made by delivery to the Purchaser at the Purchaser's
address furnished to the Company in accordance with this Agreement of a
certified or official bank check drawn upon or issued by a bank which is a
member of the New York Clearinghouse for banks or by wire transfer to such
Purchaser's (or such Purchaser's nominee's) account at any bank or trust company
in the United States of America. The Purchaser further agrees that, before the
Debenture is assigned or transferred, the Purchaser will make or cause to be
made a notation thereon of principal payments previously made thereof and of the
date to which interest thereon has been paid and will notify the Company of the
name and address of the transferee of such Debenture if such name and address
are known to the Purchaser.
ARTICLE XIII
MISCELLANEOUS
13.1. GOVERNING LAW. This Agreement and the rights of the parties
hereunder shall be governed in all respects by the laws of the State of New
York.
13.2. SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive (a) any investigation made by the Purchaser
and (b) the Closing.
13.3. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding upon
and enforceable by and against, the successors, assigns, heirs, executors and
administrators of the parties hereto; provided, however, that the Company may
not assign its rights hereunder.
13.4. ENTIRE AGREEMENT. This Agreement (including the Exhibits hereto)
and the other documents delivered pursuant hereto and simultaneously herewith
constitute the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and thereof.
13.5. NOTICES, ETC. All notices, demands or other communications given
hereunder shall be in writing and shall be sufficiently given if delivered
either personally or by a nationally recognized courier service marked for next
business day delivery or sent in a sealed envelope by first class mail, postage
prepaid and either registered or certified, addressed as follows:
(a) if to the Company:
Advanced Viral Research Corp.
200 Corporate Boulevard South
Yonkers, New York 10701
Attention: Shalom Z. Hirschman, M.D.
President and Chief Executive Officer
(b) if to the Purchaser, to the address set forth on the
first page of this Agreement.
or to such other address with respect to any party hereto as such party may from
time to time notify (as provided above) the other parties hereto. Any such
notice, demand or communication shall be deemed to have been given (i) on the
date of delivery, if delivered personally, (ii) one business day after delivery
to a nationally recognized overnight courier service, if marked for next day
delivery or (iii) five business days after the date of mailing, if mailed.
Copies of any notice, demand or communication given to the
Company, shall be delivered to Wolf, Block, Schorr and Solis-Cohen LLP, 250 Park
Avenue, New York, New York, 10177, Attn.: Robert E. Fischer, Esq., or such other
address as may be directed.
13.6. DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Securities upon any breach or
default of the Company under this Agreement shall impair any such right, power
or remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence, therein, or of or in any similar breach
or default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement must be, made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either
under this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
13.7. RIGHTS; SEVERABILITY. Unless otherwise expressly provided
herein, each Purchaser's rights hereunder are several rights, not rights jointly
held with any other person. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
13.8. PLACEMENT FEE.
(a) In connection with the consummation of the transactions
contemplated herein, the Company will pay RBB Bank Aktiengesellschaft a fee
equal to 7% of the Aggregate Purchase Price, which fee will be deducted from the
Aggregate Purchase Price to be paid to the Company at the Closing Date.
(b) Except the fee described in Section 13.8(a), the Company
hereby (i) represents and warrants that the Company has not retained a finder or
broker in connection with the transactions contemplated by this Agreement and
(ii) agrees to indemnify and to hold the Purchaser harmless of and from any
liability for commission or compensation in the nature of an agent's fee to any
broker, person or firm, and the costs and expenses of defending against such
liability or asserted liability, including, without limitation, reasonable
attorney's fees, arising from any act by the Company or any of the Company's
employees or representatives; provided, however, that the Company will have the
right to defend against such liability by representative(s) of its own choosing,
and provided, further, that the Company will not settle or compromise any claim
or lawsuit without prior written notice to the Purchaser of the terms and
provisions thereof. In the event that the Company shall fail to undertake the
defense within ten (10) days of any notice of such claim, the Purchaser shall
have the right to undertake the defense, compromise or settlement of such claim
upon written notice to the Company by holders of a majority in principal amount
of the Debentures and the Company will be responsible for and shall pay all
costs and expenses of defending such liability or asserted liability and any
amounts paid in settlement.
(c) The Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby severally agrees to indemnify and to hold the
Company harmless from any liability for any commission or compensation in the
nature of an agent's or finder's fee to any broker or other person or firm (and
the costs, including reasonable legal fees, and expenses of defending against
such liability or asserted liability) for which such Purchaser, or any of its
employees or representatives, are responsible.
13.9. EXPENSES. Each of the parties shall bear its own expenses and
legal fees incurred on its behalf with respect to the negotiation, execution and
consummation of the transactions contemplated by this Agreement.
13.10. LITIGATION. The parties each hereby waive trial by jury in any
action or proceeding of any kind or nature in any court in which an action may
be commenced arising out of this Agreement or by reason of any other cause or
dispute whatsoever between them. The parties hereto agree that the State and
Federal Courts which sit in the State of New York and the County of New York
shall have exclusive jurisdiction to hear and determine any claims or disputes
between the Company and such holders, pertaining directly or indirectly to this
Agreement or to any matter arising therefrom. The parties each expressly submit
and consent in advance to such jurisdiction in any action or proceeding
commenced in such courts provided that such consent shall
not be deemed to be a waiver of personal service of the summons and complaint,
or other process or papers issued therein. The choice of forum set forth in this
Section 13.10 shall not be deemed to preclude the enforcement of any judgment
obtained in such forum or the taking of any action under this Agreement to
enforce same in any appropriate jurisdiction. The parties each waive any
objection based upon forum non conveniens and any objection to venue of any
action instituted hereunder.
13.11. TITLES AND SUBTITLES. The titles of the articles, sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
13.12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the Purchaser is in agreement with the foregoing the Purchaser shall
sign where indicated below and thereupon this letter shall become a binding
agreement between the Purchaser and the Company.
Very truly yours,
ADVANCED VIRAL RESEARCH CORP.
By: \s\ Shalom Hirschman
---------------------------------------------
Name: Shalom Z. Hirschman, M.D.
Title: President and Chief Executive Officer
AGREED:
RBB BANK AKTIENGESELLSCHAFT (as agent for its clients whose
names can not be disclosed due
to Austrian bancsecrecylaws. RBB
By: \s\ Herbert Strauss Bank does not buy any of the
Name: Herbert Strauss debenture itself and has no
Title: voting power or power of
disposition over the securities
owned by the clients)
EXHIBIT A
THIS DEBENTURE AND THE SHARES OF COMMON STOCK ISSUABLE UPON
THE CONVERSION OF THIS DEBENTURE (COLLECTIVELY, THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED
OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT) UNLESS IN ACCORDANCE
WITH REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT. IN ADDITION,
HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
FORM OF 7% CONVERTIBLE DEBENTURE DUE OCTOBER 31, 2008
$1,500,000 November , 1998
New York, New York
FOR VALUE RECEIVED, ADVANCED VIRAL RESEARCH CORP., a Delaware
corporation (the "undersigned" or the "Company"), hereby promises to pay to the
order of , at its offices located at or at
such other place as the holder hereof shall designate to the undersigned in
writing, in lawful money of the United States of America or in New York Clearing
House Funds, the principal amount of One Million Five Hundred Thousand Dollars,
and to pay interest (computed on the basis of a 360-day year and the actual
number of days elapsed) on the unpaid principal amount hereof at the rate of
seven (7%) percent per annum. The undersigned promises to pay the said principal
sum and interest as follows:
Until this Debenture is completely retired the undersigned shall make
payments of accrued interest on this Debenture on the first day of January and
July in each year (commencing with January 1, 1999), computed at the rate of 7%
per annum on the unpaid principal balance of this Debenture for the period from
the date of this Debenture until the date of such interest payment. On October
31, 2008 the undersigned shall pay the holder all unpaid principal and interest
on this Debenture.
Interest on the indebtedness evidenced by this Debenture after default
or maturity accelerated or otherwise shall be due and payable at the rate of ten
(10%) percent per annum, subject to the limitations of applicable law.
If this Debenture or any installment hereof becomes due and payable on
a Saturday, Sunday or public holiday under the laws of the State of New York,
the due date hereof shall be extended to the next succeeding business day and
interest shall be payable at the rate of seven (7%)
percent per annum during such extension. All payments received by the holder
shall be applied first to the payment of all accrued interest payable hereunder.
Subject to and in compliance with the provisions hereof, the holder
shall have the right to convert all or a portion of the outstanding principal
amount of this Debenture into such number of shares of Common Stock, par value
$.00001 per share, of the Company ("Common Stock") (the shares of Common Stock
issuable upon conversion of this Debenture are hereinafter referred to as the
"Conversion Shares") as shall equal the quotient obtained by dividing (x) the
principal amount of this Debenture to be converted by (y) the Applicable
Conversion Price (as hereinafter defined) and by surrender of this Debenture,
such surrender to be made in the manner provided herein; provided, however, that
the right to convert outstanding principal of this Debenture shall terminate at
the close of business on the third calendar day preceding the date fixed for
prepayment unless the Company shall default in making such prepayment.
For purposes hereof the term "Applicable Conversion Price" shall mean
the lesser of (q) $0.20 and (r) the product obtained by multiplying (i) the
Average Closing Price (as hereinafter defined) by (iii) .72.
For purposes hereof the "Average Closing Price" with respect to any
conversion elected to be made by the holder shall be the average of the daily
closing prices for the three consecutive trading days, as selected by the
holder, out of the ten trading days immediately preceding the date on which the
holder gives the Company a written notice of the holder's election to convert
outstanding principal of this Debenture. The closing price on any trading day
shall be (a) if the Common Stock is then listed or quoted on either the NASD
Bulletin Board, the NASDAQ SmallCap Market or the NASDAQ National Market, the
reported closing bid price for the Common Stock on such day or (b) if the Common
Stock is listed on either the American Stock Exchange or New York Stock
Exchange, the last reported sales price for the Common Stock on such exchange on
such day.
On the date notice is delivered in order to exercise its conversion
right, the holder shall surrender this Debenture to the Company at its office,
accompanied by written notice to the Company that the holder hereof elects to
convert all or a specified portion of the outstanding principal of this
Debenture (the "Conversion Notice"). Within five (5) business days after receipt
of this Debenture and the Conversion Notice, the Company will pay to the holder
all interest accrued on the principal amount of this Debenture to be converted
to the effective date of conversion or, at the sole option of the Company, issue
to the holder in lieu thereof such additional number of shares of Common Stock
as shall equal the quotient obtained by dividing the total amount of accrued
interest on the principal amount of this Debenture to be converted by the
Applicable Conversion Price. Within five (5) business days after the surrender
of this Debenture, as aforesaid, the Company shall cause its transfer agent to
issue and deliver to such holder, or on its written order, a certificate or
certificates without any restrictive legend thereon for the number of shares of
Common Stock issuable upon the conversion hereof in accordance with the
provisions of this Debenture, and any fractional interest in respect of a share
of Common Stock arising upon such conversion shall be settled as hereinafter
provided. If the Company fails to deliver to the holder a certificate or
certificates for shares of Common Stock as aforesaid prior to the expiration
of five (5) business days after receipt of the Conversion Notice and surrender
to the Company of the Debenture, the Company shall pay to the holder a penalty.
The penalty shall be $1,000 if the certificate or certificates are not delivered
until the sixth business day after the delivery of the Conversion Notice and the
penalty shall double every business day until the certificate or certificates
are so delivered, but in no event shall such penalty exceed $100,000. For
example, if the certificates are delivered on the eighth business day after
delivery of the Conversion Notice and surrender of the Debenture the penalty
shall be $4,000.
If the entire outstanding principal amount of this Debenture is not
converted, the Company shall also issue and deliver to such holder a new
Debenture of like tenor in the principal amount equal to the principal which was
not converted and dated the effective date of conversion. Each conversion shall
be deemed to have been effected immediately prior to the close of business on
the date on which this Debenture shall have been surrendered and such notice
received by the Company as aforesaid, and the person or persons in whose name or
names any certificate of certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such time on such date.
All shares of Common Stock delivered upon conversion of this Debenture will,
upon delivery, be duly authorized, validly issued and fully paid and
nonassessable. No fractional shares of Common Stock shall be issued upon
conversion of this Debenture. Instead of any fractional share of Common Stock
which would otherwise be deliverable upon the conversion of a principal of this
Debenture the Company shall pay to the holder an amount in cash (computed to the
nearest cent) equal to the Average Closing Price multiplied by the fraction of a
share of Common Stock represented by such fractional interest.
The issuance of certificates for shares of Common Stock upon any
conversion of this Debenture shall be made without charge to the payee hereof
for any tax or other expense in respect to the issuance of such certificates,
all of which taxes and expenses shall be paid by the Company, and such
certificates shall be issued only in the name of the registered holder of this
Debenture.
This Debenture has been issued pursuant to and shall be subject to all
of the provisions of the Purchase Agreement. The payee is entitled to the
benefits of the Purchase Agreement, and this Debenture may be prepaid as
provided in the Purchase Agreement. Reference is made to Sections 7.2 and 7.3 of
the Purchase Agreement with respect to certain rights of the holder to convert
this Debenture into Common Stock upon receipt of a notice of prepayment.
Upon the occurrence of any one or more of the events of default
specified or referred to in the Purchase Agreement or in the other documents or
instruments executed in connection therewith, all amounts then remaining unpaid
on this Debenture may be declared to be immediately due and payable as provided
in the Purchase Agreement.
In the event that this Debenture shall be placed in the hands of an
attorney for collection by reason of any event of default hereunder, the
undersigned agrees to pay reasonable
attorney's fees and disbursements and other reasonable expenses incurred by the
payee in connection with the collection of this Debenture.
The rights, powers and remedies given to the payee under this
Debenture shall be in addition to all rights, powers and remedies given to it by
virtue of the Purchase Agreement, any document or instrument executed in
connection therewith, or any statute or rule of law.
Any forbearance, failure or delay by the payee in exercising any
right, power or remedy under this Debenture, the Purchase Agreement, any
documents or instruments executed in connection therewith or otherwise available
to the payee shall not be deemed to be a waiver of such right, power or remedy,
nor shall any single or partial exercise of any right, power or remedy preclude
the further exercise thereof.
No modification or waiver of any provision of this Debenture, the
Purchase Agreement or any documents or instruments executed in connection
therewith shall be effective unless it shall be in writing and signed by the
payee, and any such modification or waiver shall apply only in the specific
instance for which given.
This Debenture and the rights and obligations of the parties hereto,
shall be governed, construed and interpreted according to the laws of the State
of New York, and the undersigned consents and agrees that the State and Federal
Courts which sit in the State of New York, County of New York shall have
exclusive jurisdiction of all controversies and disputes arising hereunder.
The term "payee" as used herein shall be deemed to include the payee
and its successors, endorsees and assigns.
The undersigned hereby waives presentment, demand for payment,
protest, notice of protest and notice of non-payment hereof.
By:
------------------------------------
Shalom Z. Hirschman, M.D., President
and Chief Executive Officer
EXHIBIT B
Name and Address of Purchaser Security Purchased Purchase Price
- ----------------------------- ------------------ --------------
$1,500,000 principal amount of 7%
Convertible Debenture due October
31, 2008 $
------------
Warrant to purchase 375,000 shares
of Common Stock, par value $.00001
per share in the form of Exhibit D-1 $
------------
Warrant to purchase 375,000 shares
of Common Stock, par value $.00001
per share in the form of Exhibit D-2 $
------------
EXHIBIT C
TO
SECURITIES PURCHASE AGREEMENT
DATED NOVEMBER 16, 1998
BETWEEN ADVANCED VIRAL RESEARCH CORP.
AND RBB BANK AG
Schedule of Exceptions
SUBSIDIARY
Exception 4.2 The Company caused to be incorporated in the Commonwealth of
the Bahamas, Grand Bahama, Freeport, a corporation under the
name Advance Viral Research Limited. One thousand shares are
issued, of which 996 are held by Bernard Friedland and William
Bregman under a Declaration of Trust for the benefit of the
Company. The remaining four shares are held by a domestic
nominee. The Company has been advised by local counsel that
this is the normal manner to reduce costs and foreign corporate
entanglements for a United State company to organize and
maintain a subsidiary in that jurisdiction. A copy of the
Declaration of Trust, dated November 16, 1987, is attached to
this item.
OPTIONS
Exception 4.3 There is attached hereto a schedule listing the names of
optionees, together with the respective option prices, number
of options, aggregate cost and expiration date of the options.
In each case the options were created for services rendered or
to be rendered.
LITIGATION AND PROCEEDINGS
Exception 4.8 A. During 1988 and 1989, the U.S. Securities and Exchange
Commission ("SEC") conducted an informal inquiry into certain
of the Company's prior disclosure documents, including its
original prospectus, press releases and annual reports. On
December 14, 1989, the SEC, as plaintiff, filed a civil
complaint for permanent injunction and other equitable relief
(the "Complaint") in the United States District Court, Southern
District of Florida, Miami Division, against the Company, its
President, Bernard Friedland, and its Secretary-Treasurer,
William Bregman. The Complaint alleged violations of Sections
5(b)(2) and 17(a) of the Securities Act of 1933, as amended,
Sections 10(b) and 15(d) of the Securities Exchange Act of
1934, as amended, and Rules 10b-5, 12b-20, 15d-1 and 15d-13
adopted thereunder.
The Company, Bernard Friedland and William Bregman each,
without admitting or denying the allegations of the Complaint,
consented to the entry of an injunction. A permanent injunction
was entered, which required the Company, in accordance with its
undertaking, to make a rescission offer described by the
Company in previous disclosure. There is attached hereto a copy
of the Final Judgment of Permanent Injunction and Other
Equitable Relief.
B. The Company has been made a party to litigation in the
Superior Court of the State of California, County of Los
Angeles, West District, initiated by Susan L. Liebman, as
plaintiff, against Donaldson, Lufkin & Jenrette Securities
Corporation and a number of other defendants, including the
Company. The Company retained Saltzburg, Ray & Bergman, LLP, as
counsel to represent its interests. Counsel has moved to
dismiss the proceeding on jurisdictional grounds (see
Attachment to this item) to quash the service of summon for
lack of personal jurisdiction and the motion has been granted.
As such, the Company is no longer a party to the litigation.
PERMITS
Exception 4.10 The Company does not currently possess approvals from the
United States Food and Drug Administration or similar authority
of any foreign jurisdiction to test or to market its products,
except that the Company now has the permission to test its
products in Mexico and Argentina. Applications will be filed in
other appropriate jurisdictions as promptly as the Company
deems practical.
INTANGIBLE RIGHTS
Exception 4.15 There is attached hereto a copy of a letter dated November 4,
1998 from Cohen, Pontani, Lieberman & Pavane, patent counsel to
the Company, addressed to Robert E. Fischer captioned "Status
Report of U.S. Patent Position of Advanced Viral Research".
This document sets forth the current status of all patent
applications filed, prepared and in preparation on behalf of
the Company.
There further is attached hereto a copy of a letter dated
February 12, 1997 from patent counsel to the Company making
reference to trademark "Reticulose". This letter refers to the
status of the registration of that Mark as of the date of this
letter.
OTHER MATERIAL CONTRACTS
Exception 4.17 Set forth below are the contracts or excerpts of contracts
deemed by the Company to be material but not otherwise referred
to in this schedule of exceptions.
A. Amended and Restated Employment Agreement of Shalom Z.
Hirschman. Exhibit 99.1 to the Form 8-K filed on July 20, 1998
by the Company with the
Securities and Exchange Commission is incorporated herein by
reference for the terms of the Agreement.
B. Lease for executive office and research space in Yonkers,
New York executed by the Company on February 4, 1997.
References shall be made to Securities and Exchange Commission
filings of the Company for terms of the Lease.
C. Summary of Distribution Agreements by the Company and the
following named distributees for the territories indicated.
1. Advanced Viral Research Corporation (Party A), Beijing
Unistone Pharmaceutical Co., Ltd. (Party B) and AVIX
International Pharmaceutical Corporation (Party C) - China
2. Advanced Viral Research Corp. and DCT S.R.L. - Argentina,
Bolivia, Paraguay, Uruguay, Brazil and Chile
3. Advanced Viral Research Corp. and Dormer Laboratories Inc.
- Canada
4. Advanced Viral Research Corporation and Commonwealth
Pharmaceuticals of the Channel Islands - Channel Islands,
Isle of Man, British West Indies, Jamaica, Haiti, Bermuda
and Belize
5. Advanced Viral Research Corporation and Commonwealth
Pharmaceuticals - Saudi Arabia
Copies of the foregoing agreements referred to in Subparts B
and C will be provided upon request.
REFERENCES BY INCORPORATION.
All disclosures made in reports, schedules, forms and other documents, which the
Company has filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended, and the securities Exchange Act of 1934, as
amended, to the extent that such disclosures are pertinent to the provisions of
Article IV of the Agreement, are hereby incorporated by reference.
EXHIBIT D-1
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE OF THIS WARRANT (COLLECTIVELY, THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS DEFINED IN REGULATION S UNDER
THE SECURITIES ACT) UNLESS IN ACCORDANCE WITH REGULATION S,
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER THE SECURITIES ACT. IN ADDITION, HEDGING TRANSACTIONS
INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT.
WARRANT TO PURCHASE
COMMON STOCK, PAR VALUE $.00001 PER SHARE
OF
ADVANCED VIRAL RESEARCH CORP.
-----------------------------
This certifies that, for value received, , or
registered assigns ("Warrantholder"), is entitled to purchase from ADVANCED
VIRAL RESEARCH CORP. (the "Company"), subject to the provisions of this Warrant,
at any time and from time to time until 5:00 p.m. Eastern Standard Time on
October 31, 2008, 375,000 shares of the Company's Common Stock, par value
$.00001 per share ("Warrant Shares"). The purchase price payable upon the
exercise of this Warrant shall be $0.20 per Warrant Share. The Warrant Price and
the number of Warrant Shares which the Warrantholder is entitled to purchase is
subject to adjustment upon the occurrence of the contingencies set forth in
Section 3 of this Warrant, and as adjusted from time to time, such purchase
price is hereinafter referred to as the "Warrant Price."
This Warrant is subject to the following terms and conditions:
I EXERCISE OF WARRANT.
(a) This Warrant may be exercised in whole or in part but not for a
fractional share. Upon delivery of this Warrant at the offices of the Company or
at such other address as the Company may designate by notice in writing to the
registered holder hereof with the Subscription Form annexed hereto duly
executed, accompanied by payment of the Warrant Price for the number of Warrant
Shares purchased (in cash, by certified, cashier's or other check acceptable to
the Company, by Common Stock of the Company having a Market
Value (as hereinafter defined) equal to the aggregate Warrant Price for the
Warrant Shares to be purchased, or any combination of the foregoing), the
registered holder of this Warrant shall be entitled to receive a certificate or
certificates for the Warrant Shares so purchased. Such certificate or
certificates shall be promptly delivered to the Warrantholder. Upon any partial
exercise of this Warrant, the Company shall execute and deliver a new Warrant of
like tenor for the balance of the Warrant Shares purchasable hereunder.
(b) In lieu of exercising this Warrant pursuant to Section 1(a), the
holder may elect to receive shares of Common Stock equal to the value of this
Warrant determined in the manner described below (or any portion thereof
remaining unexercised) upon delivery of this Warrant at the offices of the
Company or at such other address as the Company may designate by notice in
writing to the registered holder hereof with the Notice of Cashless Exercise
Form annexed hereto duly executed. In such event the Company shall issue to the
holder a number of shares of the Company's Common Stock computed using the
following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the holder.
Y = the number of shares of Common Stock purchasable under this Warrant
(at the date of such calculation).
A = the Market Value of the Company's Common Stock on the business day
immediately preceding the day on which the Notice of Cashless
Exercise is received by the Company.
B = Warrant Price (as adjusted to the date of such calculation).
(c) The Warrant Shares deliverable hereunder shall, upon issuance, be
fully paid and non-assessable and the Company agrees that at all times during
the term of this Warrant it shall cause to be reserved for issuance such number
of shares of its Common Stock as shall be required for issuance and delivery
upon exercise of this Warrant.
(d) For purposes of this Warrant, the Market Value of a share of Common
Stock on any date shall be equal to (i) the closing sale price per share as
published by a national securities exchange on which shares of Common Stock (or
other units of the security) are traded (an "Exchange") on such date or, if
there is no sale of Common Stock on such date, the average of the bid and asked
prices on such exchange at the close of trading on such date or, (ii) if shares
of Common Stock are not listed on a national securities exchange on such date,
the closing price per share as published on the National Association of
Securities Dealers Automatic Quotation System ("NASDAQ") National Market System
if the shares are quoted on such system on such date, or (iii) the average of
the bid and asked prices in the over-the-counter market at the close of trading
on such date if the shares are not traded on an exchange or listed on the NASDAQ
National Market System, or (iv) if the Common Stock is not traded on a national
securities exchange or in the over-the-counter market, the fair market value of
a share of Common Stock on such date as determined in good faith by the Board of
Directors. If the holder disagrees with the determination of the Market Value of
any securities of the Company determined by the Board of Directors under Section
1(d)(iv) the Market Value of such securities shall be determined by an
2
independent appraiser acceptable to the Company and the holder (or, if they
cannot agree on such an appraiser, by an independent appraiser selected by each
of them, and Market Value shall be the median of the appraisals made by such
appraisers). If there is one appraiser, the cost of the appraisal shall be
shared equally between the Company and the holder. If there are two appraisers,
each of the Company and the holder shall pay for its own appraisal.
II TRANSFER OR ASSIGNMENT OF WARRANT.
(a) Any assignment or transfer of this Warrant shall be made by
surrender of this Warrant at the offices of the Company or at such other address
as the Company may designate in writing to the registered holder hereof with the
Assignment Form annexed hereto duly executed and accompanied by payment of any
requisite transfer taxes, and the Company shall, without charge, execute and
deliver a new Warrant of like tenor in the name of the assignee for the portion
so assigned in case of only a partial assignment, with a new Warrant of like
tenor to the assignor for the balance of the Warrant Shares purchasable.
(b) Prior to any assignment or transfer of this Warrant, the holder
thereof shall deliver an opinion of counsel to the Company to the effect that
the proposed transfer may be effected without registration under the Act.
III ADJUSTMENT OF WARRANT PRICE AND WARRANT SHARES -- ANTI-DILUTION
PROVISIONS.
A. (1) Except as hereinafter provided, in case the Company shall
at any time after the date hereof issue any shares of Common Stock
(including shares held in the Company's treasury) without
consideration, then, and thereafter successively upon each issuance,
the Warrant Price in effect immediately prior to each such issuance
shall forthwith be reduced to a price determined by multiplying the
Warrant Price in effect immediately prior to such issuance by a
fraction:
(a) the numerator of which shall be the total number of
shares of Common Stock outstanding immediately prior to
such issuance, and
(b) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after
such issuance.
For the purposes of any computation to be made in accordance with the
provisions of this clause (1), the following provisions shall be applicable:
(i) Shares of Common Stock issuable by way of dividend
or other distribution on any stock of the Company
shall be deemed to have been issued and to be
outstanding at the close of business on the record
date fixed for the determination of stockholders
entitled to receive such dividend or other
distribution and shall be
3
deemed to have been issued without consideration.
Shares of Common Stock issued otherwise than as a
dividend, shall be deemed to have been issued and
to be outstanding at the close of business on the
date of issue.
(ii) The number of shares of Common Stock at any time
outstanding shall not include any shares then
owned or held by or for the account of the
Company.
(2) In case the Company shall at any time subdivide or combine
the outstanding shares of Common Stock, the Warrant Price shall
forthwith be proportionately decreased in the case of the
subdivision or proportionately increased in the case of combination
to the nearest one cent. Any such adjustment shall become effective
at the close of business on the date that such subdivision or
combination shall become effective.
B. In the event that the number of outstanding shares of Common
Stock is increased by a stock dividend payable in shares of Common
Stock or by a subdivision of the outstanding shares of Common Stock,
which may include a stock split, then from and after the time at which
the adjusted Warrant Price becomes effective pursuant to the foregoing
Subsection A of this Section by reason of such dividend or
subdivision, the number of shares issuable upon the exercise of this
Warrant shall be increased in proportion to such increase in
outstanding shares. In the event that the number of outstanding shares
of Common Stock is decreased by a combination of the outstanding
shares of Common Stock, then, from and after the time at which the
adjusted Warrant Price becomes effective pursuant to such Subsection A
of this Section by reason of such combination, the number of shares
issuable upon the exercise of this Warrant shall be decreased in
proportion to such decrease in outstanding shares.
C. In the event of an adjustment of the Warrant Price, the
number of shares of Common Stock (or reclassified stock) issuable upon
exercise of this Warrant after such adjustment shall be equal to the
number determined by dividing:
(1) an amount equal to the product of (i) the number of
shares of Common Stock issuable upon exercise of this
Warrant immediately prior to such adjustment, and (ii)
the Warrant Price immediately prior to such adjustment,
by
(2) the Warrant Price immediately after such adjustment.
4
D. In the case of any reorganization or reclassification of the
outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value,
or as a result of a subdivision or combination) or in the case of any
consolidation of the Company with, or merger of the Company with,
another corporation, or in the case of any sale, lease or conveyance
of all, or substantially all, of the property, assets, business and
goodwill of the Company as an entity, the holder of this Warrant shall
thereafter have the right upon exercise to purchase the kind and
amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification, consolidation, merger or
sale by a holder of the number of shares of Common Stock which the
holder of this Warrant would have received had all Warrant Shares
issuable upon exercise of this Warrant been issued immediately prior
to such reorganization, reclassification, consolidation, merger or
sale, at a price equal to the Warrant Price then in effect pertaining
to this Warrant (the kind, amount and price of such stock and other
securities to be subject to adjustment as herein provided).
E. In case the Company shall, at any time prior to the expiration
of this Warrant and prior to the exercise thereof, dissolve, liquidate
or wind up its affairs, the Warrantholder shall be entitled, upon the
exercise thereof, to receive, in lieu of the Warrant Shares of the
Company which it would have been entitled to receive, the same kind
and amount of assets as would have been issued, distributed or paid to
it upon such Warrant Shares of the Company, had it been the holder of
record of shares of Common Stock receivable upon the exercise of this
Warrant on the record date for the determination of those entitled to
receive any such liquidating distribution. After any such dissolution,
liquidation or winding up which shall result in any distribution in
excess of the Warrant Price provided for by this Warrant, the
Warrantholder may at its option exercise the same without making
payment of the aggregate Warrant Price and in such case the Company
shall upon the distribution to said Warrantholder consider that the
aggregate Warrant Price has been paid in full to it and in making
settlement to said Warrantholder, shall deduct from the amount payable
to such Warrantholder an amount equal to the aggregate Warrant Price.
F. In case the Company shall, at any time prior to the expiration
of this Warrant and prior to the exercise thereof make a distribution
of assets (other than cash) or securities of the Company to its
stockholders (the "Distribution") the Warrantholder shall be entitled,
upon the exercise thereof, to receive, in addition to the Warrant
Shares it is entitled to receive, the same kind and amount of assets
or securities as would have been distributed to it in the Distribution
had it been the holder of record of shares of Common Stock receivable
upon exercise of this Warrant on the record date for determination of
those entitled to receive the Distribution.
5
G. Irrespective of any adjustments in the number of Warrant
Shares and the Warrant Price or the number or kind of shares
purchasable upon exercise of this Warrant, this Warrant may continue
to express the same price and number and kind of shares as originally
issued.
IV OFFICER'S CERTIFICATE. Whenever the number of Warrant Shares and the
Warrant Price shall be adjusted pursuant to the provisions hereof, the Company
shall forthwith file, at its principal executive office a statement, signed by
the Chairman of the Board, President, or one of the Vice Presidents of the
Company and by its Chief Financial Officer or one of its Treasurers or Assistant
Treasurers, stating the adjusted number of Warrant Shares and the new Warrant
Price calculated to the nearest one hundredth and setting forth in reasonable
detail the method of calculation and the facts requiring such adjustment and
upon which such calculation is based. Each adjustment shall remain in effect
until a subsequent adjustment hereunder is required. A copy of such statement
shall be mailed to the Warrantholder.
V CHARGES, TAXES AND EXPENSES. The issuance of certificates for Warrant
Shares upon any exercise of this Warrant shall be made without charge to the
Warrantholder for any tax or other expense in respect to the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued only in the name of the Warrantholder.
VI MISCELLANEOUS.
(a) The terms of this Warrant shall be binding upon and shall inure to
the benefit of any successors or assigns of the Company and of the holder or
holders hereof and of the shares of Common Stock issued or issuable upon the
exercise hereof.
(b) No holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be deemed to be a stockholder of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder of this Warrant, as such, any rights of a stockholder of the
Company or any right to vote, give or withhold consent to any corporate action,
receive notice of meetings, receive dividends or subscription rights, or
otherwise.
(c) Receipt of this Warrant by the holder hereof shall constitute
acceptance of an agreement to the foregoing terms and conditions.
(d) The Warrant and the performance of the parties hereunder shall be
construed and interpreted in accordance with the laws of the State of New York
and the parties hereunder consent and agree that the State and Federal Courts
which sit in the State of New York and the County of New York shall have
exclusive jurisdiction with respect to all controversies and disputes arising
hereunder.
6
(e) Shares issued upon exercise of this Warrant shall be legended
substantially as follows:
"The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, and
must be held indefinitely unless they are transferred pursuant
to an effective registration statement under that Act or after
receipt of an opinion of counsel satisfactory to the Company
that registration is not required."
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer and its corporate seal to be affixed hereto.
Dated: November _____, 1998
ADVANCED VIRAL RESEARCH CORP.
BY:
--------------------------------
Shalom Hirschman, M.D.
President
7
SUBSCRIPTION FORM
(TO BE EXECUTED BY THE REGISTERED HOLDER
IF HE DESIRES TO EXERCISE THE WARRANT)
To: ADVANCED VIRAL RESEARCH CORP.
The undersigned hereby exercises the right to purchase
_________ shares of Common Stock, par value $.00001 per share, covered by the
attached Warrant in accordance with the terms and conditions thereof, and
herewith makes payment of the Warrant Price for such shares in full.
-------------------------------------------
SIGNATURE
--------------------------------------------
ADDRESS
--------------------------------------------
DATED:
--------------------
NOTICE OF EXERCISE OF COMMON STOCK WARRANT
PURSUANT TO NET ISSUE ("CASHLESS") EXERCISE PROVISIONS
, 199
------------ ---
Advanced Viral Research Corp. Aggregate Price of $
a Delaware corporation of Warrant --------------
200 Corporate Boulevard South
Yonkers, New York 10701 Aggregate Price Being
Exercised: $
Attention: --------------
-------------------- Warrant Price
(per share): $
Number of Shares of --------------
Common Stock to be
Issued Under this
Notice:
CASHLESS EXERCISE
Gentlemen:
The undersigned, registered holder of the Warrant to Purchase
Common Stock delivered herewith ("Warrant") hereby irrevocably exercises such
Warrant for, and purchases thereunder, shares of the Common Stock of ADVANCED
VIRAL RESEARCH CORP., a Delaware corporation, as provided below. Capitalized
terms used herein, unless otherwise defined herein, shall have the meanings
given in the Warrant. The portion of the Aggregate Price (as hereinafter
defined) to be applied toward the purchase of Common Stock pursuant to this
Notice of Exercise is $ , thereby leaving a remainder Aggregate Price (if any)
equal to $
. Such exercise shall be pursuant to the net issue exercise provisions
of Section 1(b) of the Warrant; therefore, the holder makes no payment with this
Notice of Exercise. The number of shares to be issued pursuant to this exercise
shall be determined by reference to the formula in Section 1(b) of the Warrant
which requires the use of the Market Value (as defined in Section 1(d) of the
Warrant) of the Company's Common Stock on the business day immediately preceding
the day on which this Notice is received by the Company. To the extent the
foregoing exercise is for less than the full Aggregate Price of the Warrant, the
remainder of the Warrant representing a number of Shares equal to the quotient
obtained by dividing the remainder of the Aggregate Price by the Warrant Price
(and otherwise of like form, tenor and effect) may be exercised under Section
1(a) of the Warrant. For purposes of this Notice the term "Aggregate Price"
means the product obtained by multiplying the number of shares of Common Stock
for which the Warrant is exercisable times the Warrant Price.
-------------------------------------------
SIGNATURE
DATE:
-------------------- --------------------------------------------
ADDRESS
2
ASSIGNMENT
(To be Executed by the Registered Holder
if he Desires to Transfer the Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto the right to purchase shares of Common
Stock of ADVANCED VIRAL RESEARCH CORP., evidenced by the within Warrant, and
does hereby irrevocably constitute and appoint Attorney
to transfer the said Warrant on the books of the Company, with full power of
substitution.
-------------------------------------------
SIGNATURE
--------------------------------------------
ADDRESS
DATED:
---------------------
IN THE PRESENCE OF:
- ---------------------------
EXHIBIT D-2
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE OF THIS WARRANT (COLLECTIVELY, THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS DEFINED IN REGULATION S UNDER
THE SECURITIES ACT) UNLESS IN ACCORDANCE WITH REGULATION S,
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER THE SECURITIES ACT. IN ADDITION, HEDGING TRANSACTIONS
INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT.
WARRANT TO PURCHASE
COMMON STOCK, PAR VALUE $.00001 PER SHARE
OF
ADVANCED VIRAL RESEARCH CORP.
-----------------------------------------------------------------------
This certifies that, for value received, ,
--------------------
or registered assigns ("Warrantholder"), is entitled to purchase from ADVANCED
VIRAL RESEARCH CORP. (the "Company"), subject to the provisions of this Warrant,
at any time and from time to time until 5:00 p.m. Eastern Standard Time on
October 31, 2008, 375,000 shares of the Company's Common Stock, par value
$.00001 per share ("Warrant Shares"). The purchase price payable upon the
exercise of this Warrant shall be $0.24 per Warrant Share. The Warrant Price and
the number of Warrant Shares which the Warrantholder is entitled to purchase is
subject to adjustment upon the occurrence of the contingencies set forth in
Section 3 of this Warrant, and as adjusted from time to time, such purchase
price is hereinafter referred to as the "Warrant Price."
This Warrant is subject to the following terms and conditions:
1. EXERCISE OF WARRANT.
(1) This Warrant may be exercised in whole or in part but not
for a fractional share. Upon delivery of this Warrant at the offices of the
Company or at such other address as the Company may designate by notice in
writing to the registered holder hereof with the Subscription Form annexed
hereto duly executed, accompanied by payment of the Warrant Price for the number
of Warrant Shares purchased (in cash, by certified, cashier's or other check
acceptable to the Company, by Common Stock of the Company having a Market Value
(as hereinafter defined) equal to the aggregate Warrant Price for the Warrant
Shares to be purchased, or any combination of the foregoing), the registered
holder of this Warrant shall be entitled to receive a certificate or
certificates for the Warrant Shares so purchased. Such certificate or
certificates shall be promptly delivered to the Warrantholder. Upon any partial
exercise of this Warrant, the Company shall execute and deliver a new Warrant of
like tenor for the balance of the Warrant Shares purchasable hereunder.
(2) In lieu of exercising this Warrant pursuant to Section 1(a),
the holder may elect to receive shares of Common Stock equal to the value of
this Warrant determined in the manner described below (or any portion thereof
remaining unexercised) upon delivery of this Warrant at the offices of the
Company or at such other address as the Company may designate by notice in
writing to the registered holder hereof with the Notice of Cashless Exercise
Form annexed hereto duly executed. In such event the Company shall issue to the
holder a number of shares of the Company's Common Stock computed using the
following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the holder.
Y = the number of shares of Common Stock purchasable under this Warrant
(at the date of such calculation).
A = the Market Value of the Company's Common Stock on the business day
immediately preceding the day on which the Notice of Cashless
Exercise is received by the Company.
B = Warrant Price (as adjusted to the date of such calculation).
(3) The Warrant Shares deliverable hereunder shall, upon
issuance, be fully paid and non-assessable and the Company agrees that at all
times during the term of this Warrant it shall cause to be reserved for issuance
such number of shares of its Common Stock as shall be required for issuance and
delivery upon exercise of this Warrant.
(4) For purposes of this Warrant, the Market Value of a share of
Common Stock on any date shall be equal to (i) the closing sale price per share
as published by a national securities exchange on which shares of Common Stock
(or other units of the security) are traded (an "Exchange") on such date or, if
there is no sale of Common Stock on such date, the average of the bid and asked
prices on such exchange at the close of trading on such date or, (ii) if shares
of Common Stock are not listed on a national securities exchange on such date,
the closing price per share as published on the National Association of
Securities Dealers Automatic Quotation System ("NASDAQ") National Market System
if the shares are quoted on such system on such date, or (iii) the average of
the bid and asked prices in the over-the-counter market at the close of trading
on such date if the shares are not traded on an exchange or listed on the NASDAQ
National Market System, or (iv) if the Common Stock is not traded on a national
securities exchange or in the over-the-counter market, the fair market value of
a share of Common Stock on such date as determined in good faith by the Board of
Directors. If the holder disagrees with the determination of the Market Value of
any securities of the Company determined by the Board of
2
Directors under Section 1(d)(iv) the Market Value of such securities shall be
determined by an independent appraiser acceptable to the Company and the holder
(or, if they cannot agree on such an appraiser, by an independent appraiser
selected by each of them, and Market Value shall be the median of the appraisals
made by such appraisers). If there is one appraiser, the cost of the appraisal
shall be shared equally between the Company and the holder. If there are two
appraisers, each of the Company and the holder shall pay for its own appraisal.
2. TRANSFER OR ASSIGNMENT OF WARRANT.
(1) Any assignment or transfer of this Warrant shall be made by
surrender of this Warrant at the offices of the Company or at such other address
as the Company may designate in writing to the registered holder hereof with the
Assignment Form annexed hereto duly executed and accompanied by payment of any
requisite transfer taxes, and the Company shall, without charge, execute and
deliver a new Warrant of like tenor in the name of the assignee for the portion
so assigned in case of only a partial assignment, with a new Warrant of like
tenor to the assignor for the balance of the Warrant Shares purchasable.
(2) Prior to any assignment or transfer of this Warrant, the
holder thereof shall deliver an opinion of counsel to the Company to the effect
that the proposed transfer may be effected without registration under the Act.
3. ADJUSTMENT OF WARRANT PRICE AND WARRANT SHARES -- ANTI-DILUTION
PROVISIONS.
A. (1) Except as hereinafter provided, in case the Company
shall at any time after the date hereof issue any shares of
Common Stock (including shares held in the Company's treasury)
without consideration, then, and thereafter successively upon
each issuance, the Warrant Price in effect immediately prior to
each such issuance shall forthwith be reduced to a price
determined by multiplying the Warrant Price in effect immediately
prior to such issuance by a fraction:
(a) the numerator of which shall be the total number of
shares of Common Stock outstanding immediately prior to
such issuance, and
(b) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after
such issuance.
For the purposes of any computation to be made in accordance with the
provisions of this clause (1), the following provisions shall be applicable:
(i) Shares of Common Stock issuable by way
of dividend or other distribution on any
stock of the Company shall be deemed to
have been issued and to be outstanding
at the close of business on the record
date fixed for the determination of
stockholders entitled to receive
3
such dividend or other distribution and
shall be deemed to have been issued
without consideration. Shares of Common
Stock issued otherwise than as a
dividend, shall be deemed to have been
issued and to be outstanding at the
close of business on the date of issue.
(ii) The number of shares of Common Stock at
any time outstanding shall not include
any shares then owned or held by or for
the account of the Company.
(2) In case the Company shall at any time subdivide
or combine the outstanding shares of Common Stock, the Warrant
Price shall forthwith be proportionately decreased in the case of
the subdivision or proportionately increased in the case of
combination to the nearest one cent. Any such adjustment shall
become effective at the close of business on the date that such
subdivision or combination shall become effective.
B. In the event that the number of outstanding shares of
Common Stock is increased by a stock dividend payable in shares
of Common Stock or by a subdivision of the outstanding shares of
Common Stock, which may include a stock split, then from and
after the time at which the adjusted Warrant Price becomes
effective pursuant to the foregoing Subsection A of this Section
by reason of such dividend or subdivision, the number of shares
issuable upon the exercise of this Warrant shall be increased in
proportion to such increase in outstanding shares. In the event
that the number of outstanding shares of Common Stock is
decreased by a combination of the outstanding shares of Common
Stock, then, from and after the time at which the adjusted
Warrant Price becomes effective pursuant to such Subsection A of
this Section by reason of such combination, the number of shares
issuable upon the exercise of this Warrant shall be decreased in
proportion to such decrease in outstanding shares.
C. In the event of an adjustment of the Warrant Price, the
number of shares of Common Stock (or reclassified stock) issuable
upon exercise of this Warrant after such adjustment shall be
equal to the number determined by dividing:
(1) an amount equal to the product of (i) the number of
shares of Common Stock issuable upon exercise of this
Warrant immediately prior to such adjustment, and (ii)
the Warrant Price immediately prior to such adjustment,
by
(2) the Warrant Price immediately after such adjustment.
4
D. In the case of any reorganization or reclassification of
the outstanding shares of Common Stock (other than a change in
par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or
combination) or in the case of any consolidation of the Company
with, or merger of the Company with, another corporation, or in
the case of any sale, lease or conveyance of all, or
substantially all, of the property, assets, business and goodwill
of the Company as an entity, the holder of this Warrant shall
thereafter have the right upon exercise to purchase the kind and
amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification,
consolidation, merger or sale by a holder of the number of shares
of Common Stock which the holder of this Warrant would have
received had all Warrant Shares issuable upon exercise of this
Warrant been issued immediately prior to such reorganization,
reclassification, consolidation, merger or sale, at a price equal
to the Warrant Price then in effect pertaining to this Warrant
(the kind, amount and price of such stock and other securities to
be subject to adjustment as herein provided).
E. In case the Company shall, at any time prior to the
expiration of this Warrant and prior to the exercise thereof,
dissolve, liquidate or wind up its affairs, the Warrantholder
shall be entitled, upon the exercise thereof, to receive, in lieu
of the Warrant Shares of the Company which it would have been
entitled to receive, the same kind and amount of assets as would
have been issued, distributed or paid to it upon such Warrant
Shares of the Company, had it been the holder of record of shares
of Common Stock receivable upon the exercise of this Warrant on
the record date for the determination of those entitled to
receive any such liquidating distribution. After any such
dissolution, liquidation or winding up which shall result in any
distribution in excess of the Warrant Price provided for by this
Warrant, the Warrantholder may at its option exercise the same
without making payment of the aggregate Warrant Price and in such
case the Company shall upon the distribution to said
Warrantholder consider that the aggregate Warrant Price has been
paid in full to it and in making settlement to said
Warrantholder, shall deduct from the amount payable to such
Warrantholder an amount equal to the aggregate Warrant Price.
F. In case the Company shall, at any time prior to the
expiration of this Warrant and prior to the exercise thereof make
a distribution of assets (other than cash) or securities of the
Company to its stockholders (the "Distribution") the
Warrantholder shall be entitled, upon the exercise thereof, to
receive, in addition to the Warrant Shares it is entitled to
receive, the same kind and amount of assets or securities as
would have been distributed to it in the Distribution had it been
the holder of record of shares of Common Stock receivable upon
exercise of this Warrant on the record date for determination of
those entitled to receive the Distribution.
5
G. Irrespective of any adjustments in the number of Warrant
Shares and the Warrant Price or the number or kind of shares
purchasable upon exercise of this Warrant, this Warrant may
continue to express the same price and number and kind of shares
as originally issued.
4. OFFICER'S CERTIFICATE. Whenever the number of Warrant Shares and
the Warrant Price shall be adjusted pursuant to the provisions hereof, the
Company shall forthwith file, at its principal executive office a statement,
signed by the Chairman of the Board, President, or one of the Vice Presidents of
the Company and by its Chief Financial Officer or one of its Treasurers or
Assistant Treasurers, stating the adjusted number of Warrant Shares and the new
Warrant Price calculated to the nearest one hundredth and setting forth in
reasonable detail the method of calculation and the facts requiring such
adjustment and upon which such calculation is based. Each adjustment shall
remain in effect until a subsequent adjustment hereunder is required. A copy of
such statement shall be mailed to the Warrantholder.
5. CHARGES, TAXES AND EXPENSES. The issuance of certificates for
Warrant Shares upon any exercise of this Warrant shall be made without charge to
the Warrantholder for any tax or other expense in respect to the issuance of
such certificates, all of which taxes and expenses shall be paid by the Company,
and such certificates shall be issued only in the name of the Warrantholder.
6. MISCELLANEOUS.
(1) The terms of this Warrant shall be binding upon and shall
inure to the benefit of any successors or assigns of the Company and of the
holder or holders hereof and of the shares of Common Stock issued or issuable
upon the exercise hereof.
(2) No holder of this Warrant, as such, shall be entitled to vote
or receive dividends or be deemed to be a stockholder of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder of this Warrant, as such, any rights of a stockholder of the
Company or any right to vote, give or withhold consent to any corporate action,
receive notice of meetings, receive dividends or subscription rights, or
otherwise.
(3) Receipt of this Warrant by the holder hereof shall constitute
acceptance of an agreement to the foregoing terms and conditions.
(4) The Warrant and the performance of the parties hereunder
shall be construed and interpreted in accordance with the laws of the State of
New York and the parties hereunder consent and agree that the State and Federal
Courts which sit in the State of New York and the County of New York shall have
exclusive jurisdiction with respect to all controversies and disputes arising
hereunder.
6
(5) Shares issued upon exercise of this Warrant shall be legended
substantially as follows:
"The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, and
must be held indefinitely unless they are transferred pursuant
to an effective registration statement under that Act or after
receipt of an opinion of counsel satisfactory to the Company
that registration is not required."
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer and its corporate seal to be affixed
hereto.
Dated: November ___, 1998
ADVANCED VIRAL RESEARCH CORP.
BY:
------------------------
Shalom Hirschman, M.D.
President
7
EXHIBIT E
CERTIFICATE
The undersigned desires to purchase certain securities (the
"Securities") to be issued by Advanced Viral Research Corp. (the "Company")
pursuant a Securities Purchase Agreement (the "Agreement"), dated November 16,
1998.
The undersigned, in connection with the transactions contemplated in
the Agreement, hereby certifies that:
(a) OFFSHORE TRANSACTION.
(i) The undersigned is not a U.S. Person as that term
is defined under Regulation S under the Securities Act of
1933, as amended (the "Securities Act"), at the time the offer
and sale of the Securities are made to the undersigned;
(ii) The undersigned is purchasing the Securities for
its own account and not for the account or on behalf of any U.
S. Person, and no sale has been prearranged with any U.S.
Person in the United States or its territories;
(iii) The undersigned has not engaged in, and will
not during the Restricted Period (as defined below) engage in,
any short selling, hedging or other similar transaction which
would have the effect of either transferring the benefits
and/or burdens of ownership of the Securities back to the
United States market during the Restricted Period;
(iv) The undersigned is not and will not act as a
distributor as defined in Rule 902 of Regulation S.
(v) The undersigned hereby agrees that the Securities
acquired by the undersigned pursuant to the Agreement shall
not be voluntarily sold, transferred or otherwise disposed of
for a minimum period of one year from the date of Closing of
the sale of the Securities to the undersigned (the "Restricted
Period"); unless such disposition is made pursuant to
Regulation S, an effective registration statement under the
Securities Act, or pursuant to an exemption from the
registration requirements of the Securities Act.
(vi) The undersigned understands that the Securities
are being offered and sold to it in reliance on Regulation S
under the Securities Act, and that the Company is relying upon
the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the
undersigned set forth herein and in the Agreement in order to
determine the applicability of Regulation S and the
suitability of the undersigned to acquire the Securities;
8
(b) NO GOVERNMENT RECOMMENDATION OR APPROVAL. The undersigned
understands that no federal or state agency has passed on or made any
recommendation or endorsement of the Securities.
---------------------------------
, Participant
Date: November , 1998
---
Place of Execution:
--------------------------
2
- --------------------------------------------------------------------------------
ADVANCED VIRAL RESEARCH CORP.
$1,500,000
7% CONVERTIBLE DEBENTURE
DUE OCTOBER 31, 2008
WARRANTS TO PURCHASE
750,000 SHARES OF COMMON STOCK, PAR VALUE $.00001 PER SHARE
PURCHASE AGREEMENT
DATED NOVEMBER 16, 1998
SECURITIES PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I
AUTHORIZATION OF THE SECURITIES.............................................. 1
ARTICLE II
SALE AND PURCHASE OF THE SECURITIES; CLOSING................................. 1
2.1. Sale and Purchase of the Securities.................... 1
2.2. Closing................................................ 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.............................. 2
3.1. Regulation S Offering.................................. 2
3.2. The Purchase and Purchaser............................. 2
3.3. Offshore Transaction................................... 3
3.4. Offering Restrictions.................................. 3
3.5. Beneficial Owner....................................... 3
3.6. Directed Selling Effort................................ 3
3.7. Short Position......................................... 4
3.8. Certificate of Participant............................. 4
3.9. Independent Investigation.............................. 4
3.10. No Government Recommendation or Approval............... 4
3.11. Further Limitations on Disposition..................... 4
3.12. Legal Representation................................... 4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................ 5
4.1. Organization and Existence, etc........................ 5
4.2. Subsidiaries and Affiliates............................ 5
4.3. Capitalization......................................... 6
4.4. Authorization.......................................... 6
4.5. Binding Obligations; No Material Adverse
Contracts, etc...................................... 6
4.6. Financial Information.................................. 6
4.7. Compliance with Instruments, etc....................... 6
4.8. Litigation............................................. 7
4.9. Offering............................................... 7
4.10. Permits; Governmental and Other Approvals.............. 7
4.11. Reporting Company Status............................... 7
4.12. Offshore Transaction................................... 7
4.13. Prearranged Sale....................................... 7
4.14. No Directed Selling Efforts............................ 7
4.15. Copyrights, Trademarks and Patents..................... 8
4.16. No Relationship Between Parties........................ 8
4.17. Other Material Contracts............................... 8
4.18 Registration of Transfer of Securities..................8
4.19. Disclosure............................................. 8
ARTICLE V
CONDITIONS TO CLOSING OF THE PURCHASER....................................... 8
5.1. Representations and Warranties Correct................. 8
5.2. Performance............................................ 9
5.3. No Impediments......................................... 9
5.4. Other Agreements....................................... 9
5.5. Legal Investment....................................... 9
5.6. Due Diligence Investigation............................ 9
5.7. Proceedings and Other Documents........................ 9
ARTICLE VI
CONDITIONS TO CLOSING OF THE COMPANY......................................... 9
6.1. Representations........................................ 9
6.2. Legal Investment....................................... 9
6.3. Payment of Purchase Price............................. 10
ARTICLE VII
OPTIONAL PREPAYMENTS........................................................ 10
7.1. Optional Prepayments.................................. 10
7.2. Notice of Prepayment.................................. 10
7.3. Exercise of Conversion Privilege Upon
Receipt of Prepayment Notice.......................... 10
ARTICLE VIII
AFFIRMATIVE COVENANTS....................................................... 10
8.1. Maintenance of Corporate Existence,
Properties and Leases; Taxes; Insurance............... 10
8.2. Basic Financial Information........................... 11
8.3. Notice of Adverse Change.............................. 12
8.4. Compliance With Agreements; Compliance With Laws...... 13
8.5. Protection of Licenses, etc........................... 13
8.6. Accounts and Records; Inspections..................... 13
8.7. Further Assurances.................................... 14
8.8. Registration Rights................................... 14
ARTICLE IX
EVENTS OF DEFAULTS.......................................................... 15
9.1. Events of Default..................................... 15
9.2. Remedies.............................................. 17
9.3. Enforcement........................................... 17
ARTICLE X
AMENDMENT AND WAIVER........................................................ 18
ARTICLE XI
EXCHANGE AND REPLACEMENT OF DEBENTURES...................................... 18
ARTICLE XII
TRANSFER OF AND PAYMENT OF DEBENTURES....................................... 19
12.1. Notification of Proposed Sale......................... 19
12.2. Payment............................................... 19
ARTICLE XIII
MISCELLANEOUS............................................................... 20
13.1. Governing Law......................................... 20
13.2. Survival.............................................. 20
13.3. Successors and Assigns................................ 20
13.4. Entire Agreement...................................... 20
13.5. Notices, etc.......................................... 21
13.6. Delays or Omissions................................... 21
13.7. Rights; Severability.................................. 21
13.8. Placement Fee......................................... 21
13.9. Expenses.............................................. 22
13.10. Litigation............................................ 22
13.11. Titles and Subtitles.................................. 23
13.12. Counterparts.......................................... 23
Exhibit A - Form of 7% Convertible Debenture
Exhibit B - Name and Address of Purchaser; Purchase Prices for Securities
Exhibit C - Schedule of Exceptions
Exhibit D-1 - Form of Warrant
Exhibit D-2 - Form of Warrant
Exhibit E - Form of Certificate of Participant