Exhibit (10.1)
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT ("Agreement") is entered into as of
December 12, 1997, by and between Biospherics Incorporated, a Delaware
corporation (the "Company"), with headquarters located at 12051 Indian Creek
Court, Beltsville, Maryland, and the Purchaser (the "Purchaser") set forth on
the execution pages hereof, with regard to the following:
RECITALS
A. The Company and Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Regulation D ("Regulation D"), as promulgated
by the United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act").
B. Purchaser desires to purchase, upon the terms and conditions stated
in this Agreement, (i) shares of the Company's Common Stock, par value $.005
per share (the "Common Stock") and (ii) warrants to purchase shares of Common
Stock in the forms attached hereto as Exhibits A-1 and A-2. The shares of
Common Stock being purchased hereunder are referred to herein as the "Common
Shares". The warrants being purchased hereunder are referred to herein as the
"Warrants". The shares of Common Stock issuable upon the exercise of or
otherwise pursuant to the Warrants are referred to herein as the "Warrant
Shares". The Common Shares, Warrants and Warrant Shares are collectively
referred to herein as the "Securities."
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights
Agreement in the form attached hereto as Exhibit B (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act, the rules and regulations
promulgated thereunder and applicable state securities laws.
AGREEMENTS
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and Purchaser hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES
1.1 Purchase of Common Stock and Warrants. Subject to the terms and
conditions of this Agreement, the Company shall issue and sell, and Purchaser
shall purchase, Common Stock and Warrants as further contemplated hereby.
The purchase price for a unit consisting of two (2) shares of Common Stock
and two (2) Warrants, each Warrant to purchase one (1) share of
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Common Stock (subject to adjustment as provided in the Warrant) shall be
$8.00. Purchaser shall purchase the number of shares of Common Stock set
forth on the signature page executed by Purchaser. In addition, Purchaser
shall purchase Warrants to purchase the number of shares of Common Stock
(subject to adjustment as provided in the Warrants) set forth on the
signature page executed by Purchaser.
1.2 Form of Payment. Purchaser shall pay the aggregate Purchase Price
for the Common Shares and Warrants being purchased by Purchaser by wire
transfer to the Company, in accordance with the Company's written wiring
instructions, against delivery of duly executed Warrants and stock
certificates for the Common Shares, and the Company shall deliver such Common
Shares and Warrants against delivery of such aggregate Purchase Price.
1.3 Closing Date. Subject to the satisfaction (or waiver) of the
conditions set forth in Articles VI and VII below, the closing (the
"Closing") of the issuance, sale and purchase of the Securities pursuant to
this Agreement shall occur at 10:00 a.m. on December 12, 1997 (the "Closing
Date"), at the offices of Ballard, Spahr, Andrews & Ingersoll, 1735 Market
Street, 51st Floor, Philadelphia, PA 19103-7599.
ARTICLE II
PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser represents and warrants, solely with respect to itself and its
purchase hereunder. No Purchaser makes any other representations or
warranties, express or implied, to the Company in connection with the
transactions contemplated hereby and any and all prior representations and
warranties, if any, which may have been made by Purchaser to the Company in
connection with the transactions contemplated hereby shall be deemed to have
been merged in this Agreement and any such prior representations and
warranties, if any, shall not survive the execution and delivery of this
Agreement.
2.1 Investment Purpose. Purchaser is purchasing the Common Shares and
Warrants (collectively, the "Purchased Securities") for Purchaser's own
account for investment only and not with a present view toward or in
connection with the public sale or distribution thereof. Purchaser will not
resell the Purchased Securities or any securities which may be issued upon
exercise of the Warrants except pursuant to an effective registration
statement filed under the Securities Act or sales that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act. Purchaser understands that Purchaser must bear the
economic risk of this investment indefinitely, unless the Securities are
registered pursuant to the Securities Act and any applicable state securities
laws or an exemption from such Securities Act other than as contemplated by
the Registration Rights Agreement. By making the representations in this
Section 2.1, the Purchaser does not agree to hold the Securities for any
minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption from registration under the Securities Act or
applicable state securities laws.
2.2 Accredited Investor Status. Purchaser is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D.
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2.3. Reliance on Exemptions. Purchaser understands that the Purchased
Securities are being offered and sold to the Purchaser in reliance upon
specific exemptions from the registration requirements of the United States
federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understanding of Purchaser set
forth herein in order to determine the availability of such exemptions and
the eligibility of Purchaser to acquire the Purchased Securities.
2.4 Information. Purchaser and its counsel have been furnished all
materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Purchased Securities
which have been specifically requested by Purchaser. Purchaser has been
afforded the opportunity to ask questions of the Company and has received
what Purchaser believes to be complete and satisfactory answers to any such
inquiries. Neither such inquiries nor any other due diligence investigation
conducted by Purchaser or any of its representations shall modify, amend or
affect Purchaser's right to rely on the Company's representations and
warranties contained in Article III or the Officer's Certificate delivered
pursuant to Section 3.3. Purchaser understands that Purchaser's investment
in the Securities involves a high degree of risk.
2.5 Governmental Review. Purchaser understands that no United States
federal or state agency or any other government agency has passed upon or
made any recommendation or endorsement of the Securities or an investment
therein.
2.6 Transfer or Resale. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been
and are not being registered under the Securities Act or any state securities
laws, and may not be transferred unless subsequently registered thereunder,
an exemption from such registration is available (which exemption the Company
expressly agrees may be established as contemplated in clauses (b) and (c) of
Section 5.1 hereof) or such Securities are sold or transferred to an
"affiliate" (as defined in Rule 144 under the Securities Act (or a successor
rule) ("Rule 144")); (ii) any sale of such Securities made in reliance on Rule
144 may be made only in accordance with the terms of said Rule and further,
if said Rule is not applicable, any resale of such Securities without
registration under the Securities Act under circumstances in which the seller
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such
Securities under the Securities Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder (in each case,
other than pursuant to this Agreement or the Registration Rights Agreement).
2.7 Legends. Purchaser understands that, subject to Article V hereof,
the certificates for the Common Shares and Warrant Shares, and until such
time as the Common Shares and Warrant Shares have been registered under the
Securities Act as contemplated by the Registration Rights Agreement or
otherwise may be sold by Purchaser pursuant to Rule 144, the certificates for
the Common Shares and Warrant Shares will be a restrictive legend (the
"Legend") in the following form:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIRMETNS OF THOSE LAWS.
2.8 Authorization: Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and
delivered on behalf of Purchaser and are valid and binding agreements of
Purchaser enforceable against Purchaser in accordance with their terms.
2.9 Residency. Purchaser is a resident of the jurisdiction set forth
under Purchaser's name on the signature page hereto executed by Purchaser.
2.10 Organization. Purchaser is duly organized, validity existing and in
good standing under the laws of the jurisdiction in which it is formed, and has
the requisite power and authority to own its properties and to carry on its
business as now being conducted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that:
3.1 Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized, validity existing and in good
standing under the laws of the jurisdiction in which it is incorporated, and
has the requisite corporate power and authority to own its properties and to
carry on its business as now being conducted. The Company and each of its
subsidiaries is duly qualified as a foreign corporation to do business and is
in good standing in every jurisdiction where the failure to so qualify would
have a Material Adverse Effect. "Material Adverse Effect" means any
material adverse effect on either (i) the business, operations, properties,
financial condition, operating results or prospects of the Company and its
subsidiaries, taken as a whole on a consolidated basis or (ii) the
transactions contemplated hereby.
3.2 Authorization: Enforcement. (a) The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Warrants and the Registration Rights Agreement, and to issue and sell,
perform its obligations with respect to, the Purchased Securities in
accordance with the terms hereof and to issue the Warrant Shares in
accordance with the terms and conditions of the Warrants; (b) the execution,
delivery and performance of this Agreement, the Warrants and the Registration
Rights Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation
the issuance of the Purchased Securities and the reservation for issuance and
issuance of the Warrant Shares)
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have been duly authorized by all necessary corporate action and, except as
set forth on Schedule 3.2 hereof, no further consent or authorization of the
Company, its board of directors, or its stockholders or any other person,
body or agency is required with respect to any of the transactions
contemplated hereby or thereby (whether under rules of NASDAQ National Market
System ("NASDAQ"), the National Association of Securities Dealers or
otherwise); (c) this Agreement, the Registration Rights Agreement and the
Purchased Securities have been duly executed and delivered by the Company;
and (d) this Agreement, the Registration Rights Agreement and the Purchased
Securities constitute legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms.
3.3 Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued
and outstanding, the number of shares reserved for issuance pursuant to the
Company's stock option plans, the number of shares reserved for issuance
pursuant to securities (other than the Warrants) exercisable for, or
convertible into or exchangeable for any shares of Common Stock and the
number of shares to be initially reserved for issuance upon exercise of the
Warrants is set forth on Schedule 3.3. All of such outstanding shares of
capital stock have been, or upon issuance will be, validly issued, fully paid
and nonassessable. No shares of capital stock of the Company (including the
Common Shares and the Warrant Shares) are subject to preemptive rights or any
other similar rights of the stockholders of the Company or any liens or
encumbrances. Except as disclosed in Schedule 3.3, as of the date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exercisable or exchangeable for,
any shares of capital stock of the Company or any of its subsidiaries or
contracts, commitments, understandings or arrangements by which the Company
or any of its subsidiaries is or may become bound to issue additional shares
of capital stock of the Company or any of its subsidiaries, (ii) there are no
agreements or arrangements under which the Company or any of its subsidiaries
is obligated to register the sale of any of its or their securities under the
Securities Act (except the Registration Rights Agreement), and (iii) there
are no anti-dilutive or price adjustment provisions contained in any security
issued by the Company (or any agreement providing rights to security holders)
that will be triggered by the issuance of the Purchased Securities or Warrant
Shares. The Company has furnished to Purchaser true and correct copies of
the Company's Certificate of Incorporation as currently in effect
("Certificate of Incorporation"), and the Company's By-laws as currently in
effect (the "By-laws"). The Company has set forth on Schedule 3.3 all
instruments and agreements (other than the Certificate of Incorporation and
By-laws) governing securities convertible into or exercisable for Common
Stock of the Company (and the Company shall provide to Purchaser copies
thereof upon the request of Purchaser). The Company shall provide Purchaser
with a written update of this representation signed by the Company's Chief
Executive Officer on behalf of the Company as of the date of the Closing.
3.4 Issuance of Shares. The Common Shares and Warrant Shares are duly
authorized and reserved for issuance, and, upon consummation of the purchase
contemplated hereby (with respect to the Common Shares) and exercise of the
Warrants in accordance with the terms thereof (with respect to the Warrant
Shares), will be validly issued, fully paid and non-assessable, and
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free from all taxes, liens, claims and encumbrances and will not be subject
to the preemptive rights or other similar rights of stockholders of the
Company. The Common Shares are duly authorized and reserved for issuance, and
are validly issued, fully paid and nonassessable, and free from all taxes,
liens claims and encumbrances and are not and will not be subject to
preemptive rights or other similar rights of stockholders of the Company.
Accordingly, no further corporate authorization or approval is required under
the rules of the NASDAQ with respect to the transaction contemplated by this
Agreement, including, without limitation, the issuance of the Warrant Shares
and the inclusion thereof on the NASDAQ. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Common Shares and, upon exercise of the Warrants, the Warrant
Shares. The Company further acknowledges that its obligation to issue the
Common Shares and the Warrant Shares upon the exercise of the Warrants in
accordance with this Agreement and the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the
ownership interests of other stockholders of the Company.
3.5 No Conflicts. The execution, delivery and performance of this
Agreement, the Warrants and the Registration Rights Agreement by the Company,
and the consummation by the Company of transactions contemplated hereby and
thereby (including, without limitation, the issuance and reservation for
issuance, as applicable, of the Common Shares and Warrant Shares) will not
(a) result in a violation of the Certificate of Incorporation or By-laws, (b)
violate or conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration, or cancellation
of, any agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party (except for such conflicts, defaults, terminations,
amendments, accelerations, and cancellations as would not, individually or in
the aggregate, have a Material Adverse Effect), or (c) result in a violation
of any law, rule, regulation, order, judgment or decree to the Company or any
of its subsidiaries, or by which any property or asset of the Company or any
of its subsidiaries, is bound or affected. Neither the Company nor any of
its subsidiaries is in violation of its Certificate of Incorporation, By-laws
or other organizational documents, and neither the Company nor any of its
subsidiaries is in default (and no event has occurred which, with notice or
lapse of time or both, would put the Company or any of its subsidiaries in
default) under, nor has there occurred any event giving others (with notice
or lapse of time or both) any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or instrument to which the
Company or any of its subsidiaries is a party, except for possible defaults
or rights as would not, individually or in the aggregate, have a Material
Adverse Effect. The business of the Company and its subsidiaries are not
being conducted, and shall not be conducted so long as Purchaser owns any of
the Securities, in violation of any law, ordinance, rule, regulation, order,
judgment or decree of any governmental entity, court or arbitration tribunal
except for possible violations the sanctions for which either singly or in
the aggregate would not have a Material Adverse Effect. Except as set forth
on Schedule 3.5, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or governmental agency or any regulatory or self-regulatory agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement, the Warrants or the Registration Rights Agreement or to perform
its obligations in accordance with the terms hereof or thereof. The Company
is not in violation of the listing requirements of NASDAQ and does not
reasonably anticipate that the Common Stock will be delisted by NASDAQ for
the foreseeable future. The Company and its subsidiaries are unaware of any
facts which might give rise to any of the foregoing.
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3.6 Registration and SEC Documents. The Common Stock is registered
under Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and has been so registered since 1969. Except as disclosed
in Schedule 3.6, since January 1, 1995, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act (all of the foregoing filed after December 31, 1993 and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein, being referred to herein as the
"SEC Documents"). The Company has delivered to Purchaser true and complete
copies of the SEC Documents, except for exhibits, schedules and incorporated
documents (the SEC documents filed prior to the date hereof being the "Filed
SEC Documents"). As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with
the SEC, contained any untrue statements of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. None of the statements made in any such SEC
Documents is required to be updated or amended under applicable law. The
financial statements of the Company included in the SEC Documents have been
prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, and the rules and regulations of the SEC during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they do not include footnotes or are condensed or
summary statements) and present accurately and completely the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal, immaterial year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the Filed SEC Documents, the
Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred subsequent to the date of such financial statements in
the ordinary course of business consistent with the past practice and (ii)
obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles
to be reflected in such financial statements, in each case of clause (i) and
(ii) next above which, individually and in the aggregate, are not material to
the financial condition, business, operations, properties, operating results
or prospects of the Company and its subsidiaries taken on a whole. The Filed
SEC Documents contain a complete and accurate list of all material
undischarged written or oral contracts, agreements, leases or other
instruments to which the Company or any subsidiary is a party or by which the
Company or any subsidiary is bound or to which any of the properties or
assets of the Company or any subsidiary is subject (each a "Contract"). None
of the Company, its subsidiaries or, to the best knowledge of the Company,
any of the other parties thereto, is in breach or violation of any Contract,
which breach or violation would have a Material Adverse Effect. No event,
occurrence or condition exists which, with the lapse of time, the giving of
notice, or both, or the happening of any further event or condition, would
become a breach or default by the Company or its subsidiaries or, to the
Company's knowledge, by any other party under any Contract which breach or
default would have a Material Adverse Effect.
3.7 Absence of Certain Changes. Since December 31, 1996, there has been
no material adverse change and no material adverse development in the
business, properties,
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operations, financial condition, results of operations or prospects of the
Company, except as disclosed in Schedule 3.7.
3.8 Absence of Litigation. Except as disclosed in Schedule 3.8, there
is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, governmental agency or authority, or self-regulatory
organization or body pending or, to the knowledge of the Company or any of
its subsidiaries, threatened against or affecting the Company, any of its
subsidiaries, or any of their respective directors or officers in their
capacities as such, wherein an unfavorable decision, ruling or finding would
have a Material Adverse Effect or would adversely affect the transactions
contemplated by this Agreement or any of the documents contemplated hereby or
which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, this
Agreement or any of such other documents. There are no facts which, if known
by a potential claimant or governmental agency or authority, could give rise
to a claim or proceeding which, if asserted or conducted with results
unfavorable to the Company or any of its subsidiaries, could have a Material
Adverse Effect.
3.9 Disclosure. No information relating to or concerning the Company
set forth in this Agreement or provided to Purchaser in connection with the
transactions contemplated hereby contains an untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading. Except for the execution and performance of
this Agreement, no material fact (within the meaning of the federal
securities laws of the United States) exists with respect to the Company or
any of its subsidiaries which has not been publicly disclosed.
3.10 Acknowledgment Regarding Purchaser's Purchase of the Securities.
The Company acknowledges and agrees that Purchaser is not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement or the transactions contemplated hereby, that
this Agreement and the transaction contemplated hereby, and the relationship
between Purchaser and the Company, are "arms-length", and that any statement
made by Purchaser, or any of its representatives or agents, in connection
with the Agreement or the transactions contemplated hereby is not advice or a
recommendation, is merely incidental to Purchaser's purchase of the
Securities and has not been relied upon in any way by the Company, its
officers, directors or other representatives. The Company further represents
to Purchaser that the Company's decision to enter into this Agreement and the
transactions contemplated hereby has been based solely on an independent
evaluation by the Company and its representatives.
3.11 Current Public Information. The Company currently meets the
"Registrant eligibility requirements" set forth in the general instructions to
Form S-3 under the Securities Act.
3.12 No General Solicitation. Neither the Company nor any person acting
on behalf of the Company has conducted any "general solicitation," as
described in Rule 502(c) under Regulation D, with respect to any of the
Securities being offered hereby.
3.13 No Integrated Offering. Neither the Company, nor any if its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers
to buy any security under circumstances that would prevent the parties hereto
from consummating the transactions contemplated hereby pursuant to an
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exemption from registration under the Securities Act pursuant to the
provisions of Regulation D. The transactions contemplated hereby are exempt
from the registration requirements of the Securities Act, assuming the
accuracy of the representations and warranties herein contained of Purchaser
to the extend relevant for such determination. The issuance of the
Securities to the Purchaser will not be integrated with any other issuance of
the Company's Securities (past, present, or future) which requires
stockholder approval under the rules of the NASDAQ stock market.
3.14 No Brokers. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or
similar payments to Purchaser relating to this Agreement or the transactions
contemplated hereby, except for dealings with Wharton Capital and Coppers &
Lybrand Securities LLP (the fees of which shall be paid in full by the
Company). The Company will indemnify Purchaser from and against any fees and
expenses sought or other claims made by Wharton Capital and Coppers & Lybrand
Securities LLP.
3.15 Acknowledgment of Terms and Nature of Securities. The Company's
executive officers and directors have studied and fully understand the terms
and nature of the securities being sold hereunder. The board of directors of
the Company has concluded in its good faith business judgment that such
issuance is in the best interests of the Company.
3.16 Intellectual Property. Each of the Company and its subsidiaries
owns or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") used or necessary for the conduct of
its business as now being conducted and as previously described in the
Company's Annual Report on Form 10-KSB for its most recently ended fiscal
year. Neither the Company nor any subsidiary of the Company infringes on or
is in conflict with any right or any other person with respect to any
Intangibles nor is there any claim or infringement made by a third party
against or involving the Company or any of its subsidiaries, which
infringement, conflict or claim, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect.
3.17 Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any subsidiary has, in the course of his
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect unlawful payment
to any foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee. Without limiting the generality of
the foregoing, the Company and its subsidiaries have not directly or
indirectly made or agreed to make (whether or not said payment is lawful) any
payment to obtain, or with respect to, sales other than usual and regular
compensation to its or their employees and sales representatives with respect
to such sales.
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3.18 Key Employees. Each Key Employee (as defined below) is currently
serving the Company in the capacity disclosed in Schedule 3.18. No Key
Employee, to the best of the knowledge of the Company and its subsidiaries,
is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or
any restrictive covenant, and the continued employment of each Key Employee
does not subject the Company or any of its subsidiaries to any liability with
respect to any of the foregoing matters. No Key Employee has, to the best of
the knowledge of the Company and its subsidiaries, any intention to terminate
or limit his employment with, or services to, the Company or any of its
subsidiaries, nor is any such Key Employee subject to any constraints (e.g.,
limitation) which would cause such employee to be unable to devote his full
time and attention to such employment or services. "Key Employee" means each
of individuals listed on Schedule 3.18.
3.19 Certain Transactions. Except as set forth on Schedule 3.19 and
except for arm's length transactions pursuant to which the Company or any of
its Subsidiaries makes payments in the ordinary course of business upon terms
no less favorable than the Company or any of its Subsidiaries could obtain
from third parties and other than the grant of stock options disclosed on
Schedule 3.3, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
3.20 Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
ARTICLE IV
COVENANTS
4.1 Best Efforts. The Company shall use its best efforts timely to
satisfy each of the conditions described in Articles VI and VII of this
Agreement.
4.2 Securities Laws. The Company agrees to file a Form D with respect
to the Securities with the SEC as required under Regulation D and to provide
a copy thereof to Purchaser within five (5) business days following the Date
of Closing. The Company agrees to file a Form 8-K disclosing this Agreement
and the transactions contemplated hereby with the SEC within five business
(5) days following the date of Closing. Such Form 8-K shall include
10
this Agreement and the related transaction documents as exhibits thereto.
The Company shall, on or prior to the date of Closing, take such action as is
necessary to sell the Securities to Purchaser in accordance with applicable
securities laws of states of the United States, and shall provide evidence of
any such action so taken to Purchaser on or prior to the date of Closing.
Without limiting any of the Company's obligations under this Agreement, the
Registration Rights Agreement or the Warrants, from and after the date of
Closing, neither the Company nor any person acting on its behalf shall take
any action which would adversely affect any exemptions from registration
under the Securities Act with respect to the transactions contemplated hereby.
4.3 Reporting Status. For so long as the Purchaser owns any of the
Securities or three (3) years from the Closing Date, whichever is sooner, the
Company shall timely file all reports required to be filed with the SEC
pursuant to the Exchange Act, and the Company shall not terminate its status
as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination. The Company will take all action necessary to continue to meet
the registrant eligibility requirements set forth in the general instruction
to Form S-3.
4.4 Use of Proceeds. The Company shall use the proceeds from the sale
of the Common Shares and Warrants for general working capital needs, capital
expenditures including software development for future contracts and expenses
associated with new health care call center ventures.
4.5 Restriction on Below Market Issuance of Securities. (a) For a
period of one hundred and eighty (180) days following the date of Closing
(the "Restricted Period"), the Company shall not issue or agree to issue
(except (i) to Purchaser pursuant to this Agreement, (ii) pursuant to any
employee stock option, stock purchase or restricted stock plan of the Company
in effect on the date hereof up to the aggregate amounts set forth on
Schedule 4.5 hereto, (iii) pursuant to any existing security, option,
warrant, scrip, call or commitment or right in each case or disclosed on
Schedule 3.3 hereof or (iv) pursuant to a strategic joint venture or
partnership entered into by the Company, undertaken at the reasonable
discretion of the Board of Directors of the Company, the primary purpose of
which is not to raise equity capital) any equity securities (including debt
securities with an equity component) of the Company (or any security
convertible into or exercisable or exchangeable, directly or indirectly, or
equity securities of the Company) if such securities are issued at a price
(or in the case of securities convertible into or exercisable or
exchangeable, directly or indirectly, for Common Stock such securities
provide for a conversion, exercise or exchange price) which may be less than
the then current market price for Common Stock on the date of issuance (in
the case of Common Stock) or the date of conversion, exercise or exchange (in
the case of securities convertible into or exercisable or exchangeable,
directly or indirectly, for Common Stock).
4.6 Right of First Offer. For a period of one year after the expiration
of the Restricted Period, the Company shall not issue or sell, or agree to
issue or sell any equity or debt securities of the Company (or any security
convertible into or exercisable or exchangeable, directly or indirectly, for
equity or debt securities of the Company) ("Future Offerings") unless the
Company shall have first delivered to Purchaser at least fifteen (15)
business days prior to the closing of such Future Offering, written notice
describing the proposed Future Offering,
11
including the terms and conditions thereof, and providing Purchaser and its
affiliates an option during the ten (10) business days period following
delivery of such notice to purchase up to the full amount of the securities
being offered in the Future Offering on the same terms as contemplated by
such Future Offering (the limitations referred to in this sentence are
collectively referred to as the "Capital Raising Limitations"). The Capital
Raising Limitations shall not apply to any transaction involving issuances of
securities in connection with a bona fide merger or consolidation or exercise
of options of employees, consultants or directors. In addition, the Capital
Raising Limitations also shall not apply to (a) the issuance of securities
upon exercise of conversion of the Company's options, warrants or other
convertible securities outstanding as of the date hereof or (b) the grant of
additional options or warrants, or the issuance of additional securities,
under any employee stock option, stock purchase or restricted stock plan of
the Company up to the aggregate amounts set forth on Schedule 4.5 hereto.
This Section 4.6 shall not limit the Company's obligations under Section 4.5
above. The Company shall prohibit any Common Stock or other security issued
subject to the Capital Raising Limitations but not purchased by Purchaser
from being converted, exercised or resold until the day following the first
anniversary of the date of the Closing and shall take all actions necessary
(including, without limitation, the issuance of a stop transfer order) to
effect such prohibition. Notwithstanding anything to the contrary contained
herein, and without limiting any of the Company's other obligations in this
Agreement, the Registration Rights Agreement or the Warrants, any securities
issued in a Future Offering (whether or not to Purchaser) (and any security
issued upon conversion, exercise or exchange of any of such security) shall
be ineligible for conversion, exercise, exchange, resale and/or registration
under Federal or state securities laws for a period of six (6) months
following the closing of such Future Offering.
4.7 Expenses. The Company shall pay to Purchaser, or at its direction,
at the Closing reimbursement for the expenses reasonably incurred by it and
its affiliates and advisors in connection with the negotiation, preparation,
execution, and delivery of this Agreement and the other agreements to be
executed in connection herewith, including, without limitation, Purchaser's
and its affiliates' and advisors' due diligence and attorneys' fees and
expenses (the "Expenses"); provided, however, that the Company shall not be
obliged under this Section 4.7 to reimburse more than an aggregate of
$10,000.00 of such attorneys' fees and expenses. From time to time
thereafter, upon Purchaser's written request, the Company shall pay to
Purchaser such Expenses, if any, not so paid at Closing and/or covered by
such payment, in each case to the extent reasonably incurred by Purchaser up
to the $10,000.00 maximum amount.
4.8 Information. For so long as the Purchaser owns any of the
Securities or three (3) years from the Closing Date, whichever is sooner, the
Company agrees to send the following reports to Purchaser until Purchaser
transfers, assigns or sells all of its Securities: (a) within three (3) days
after the filing with SEC, a copy of its Annual Report on Form 10-KSB, its
Quarterly Reports on Form 10-QSB, any proxy statements and any Current
Reports on Form 8-KSB; and (b) within one (1) day after release, copies of
all press releases issued by the Company or any if its subsidiaries. The
Company further agrees to promptly provide to Purchaser or assignee thereof
(a "Holder") any information with respect to the Company, its properties, or
its business or Holder's investment as such Holder may reasonably request;
provided, however, that the Company shall not be required to give any Holder
any material nonpublic information. If any information requested by a Holder
from the Company contains material nonpublic information, the Company shall
inform the Holder in writing that the information requested contains material
12
nonpublic information and shall in no event provide such information to
Holder without the express prior written consent of such Holder after being
so informed.
4.9 Reservation of Shares. The Company shall at times have authorized
and reserved for the purpose of issuance of a sufficient number of shares to
provide for the full exercise of the outstanding Warrants and issuance of the
Warrant Shares in connection therewith and as otherwise required by the
Warrants. The Company shall not reduce the number of shares reserved for
issuance upon exercise of the Warrants without the consent of Purchaser
holding a majority in interest of the Warrants then held by Purchaser (said
majority in interest to be determined based on the number of Warrant Shares
issuable upon exercise of said Warrants).
4.10 Listing. The Company shall promptly secure and maintain listing and
trading of the Common Shares and Warrant Shares on the NASDAQ and any other
national securities exchange or quotation system on which the Common Stock is
then listed and for so long as Purchaser owns any of the Securities or three
(3) years from the Closing Date, whichever is sooner, and comply in all
respects with the Company's reporting, filing and other obligations under the
by-laws or rules of the NASDAQ and any other national securities exchange or
quotation system on which the Common Stock is then listed.
4.11 Prospectus Delivery Requirement. Purchaser understands that the
Securities Act may require delivery of a prospectus relating to the Common
Stock in connection with any sale thereof pursuant to a registration
statement under the Securities Act covering the resale by Purchaser of the
Common Stock being sold, and Purchaser shall use its reasonable efforts to
comply with the applicable prospectus delivery requirements of the Securities
Act, if any, in connection with any such sale.
4.12 Intentional Acts or Omissions. The Company shall not intentionally
perform any act which if performed, or intentionally omit to perform any act
which, if omitted to be performed, would prevent or excuse the performance of
this Agreement or any of the transactions contemplated hereby.
4.13 Corporate Existence. So long as Purchaser beneficially owns any
Securities or for three (3) years from the Closing Date, whichever is sooner,
the Company shall maintain its corporate existence and shall not sell all or
substantially all of the Company's assets, except in the event of a merger or
consolidation or sale of all or substantially all of the Company's assets,
where the surviving or successor entity in such transaction (i) assumes the
Company's obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded corporation
whose Common Stock is listed for trading on NASDAQ, NASDAQ SmallCap, NYSE, or
AMEX.
4.14 Hedging Transactions. The Company hereby expressly agrees that
Purchaser shall not in any way be prohibited or restricted from any purchases
or sales of any securities or other instruments of, or related to, the
Company or any of its securities, including, without limitation, puts, call,
futures contracts, short sales and hedging and arbitrage transactions as long
as Purchaser complies with applicable law.
13
ARTICLE V
LEGEND REMOVAL, TRANSFER, AND CERTAIN SALES
5.1 Removal of Legend. The Legend shall be removed and the Company
shall issue a certificate without any legend to the holder of any Security
upon which such Legend is stamped, and a certificate for a security shall be
originally issued without any legend, if, unless otherwise required by
applicable state securities laws, (a) the sale of such Security is registered
under the Securities Act, (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions (the reasonable cost of which shall be
borne by the Company), to the effect that a public sale or transfer of such
Security may be made without registration under the Securities Act or (c)
such Security can be sold pursuant to Rule 144. Purchaser agrees to sell all
Securities, including those represented by a certificate(s) from which the
Legend has been removed, or which were originally issued without the Legend,
pursuant to an effective registration statement and, if required, to deliver
a prospectus in connection with such sale or in compliance with an exemption
from the registration requirements of the Securities Act. In the event the
Legend is removed from any Security or any Security is issued without the
Legend and thereafter the effectiveness of a registration statement covering
the resale of such Security is suspended or the Company determines that a
supplement or amendment thereto is required by applicable securities laws,
then upon reasonable advance notice to Purchaser holding such Security, the
Company may require that the Legend be placed on any such Security that
cannot then be sold pursuant to an effective registration statement or Rule
144 or with respect to which the opinion referred to in clause (b) next above
has not been rendered, which Legend shall be removed when such Security may
be sold pursuant to an effective registration statement or Rule 144 or such
holder provides the opinion with respect thereto described in clause (b) next
above.
5.2 Transfer Agent Instructions. The Company shall irrevocably instruct
its transfer agent to issue certificates, registered in the name of Purchaser
or its nominee, for the Common Shares and Warrant Shares in such amounts as
specified from time to time by Purchaser to the Company. Such certificates
shall bear a legend only in the form of the Legend and only to the extend
permitted by Section 5.1 above. The Company warrants that no instruction
other than such instructions referred to in this Article V, and no stop
transfer instructions other than stop transfer instructions to give effect to
Section 2.6 hereof in the case of the Common Shares and Warrant Shares prior
to registration thereof under the Securities Act, will be given by the
Company to its transfer agent and that the Securities shall otherwise be
freely transferable on the books and records of the Company to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section shall affect in any way Purchaser's obligations and agreement
set forth in Section 5.1 hereof to resell the Securities pursuant to an
effective registration statement and to deliver a prospectus in connection
with such sale or in compliance with an exemption from the registration
requirements of applicable securities laws. Without limiting the foregoing,
if (a) Purchaser provides the Company with an opinion of counsel, which
opinion of counsel shall be in form, substance and scope customary for
opinions of counsel in comparable transactions (the reasonable cost of which
shall be borne by the Company), to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from
registration or (b) Purchaser transfers Securities to an affiliate or
pursuant to Rule 144, the Company shall permit the transfer, and, in the case
of the Common Shares and Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates in such name
14
and in such denomination as specified by Purchaser in order to effect such a
transfer or sale. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to Purchaser by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly,
the Company acknowledges that the remedy at law for a breach of its
obligations under this Article V will be inadequate and agrees, in the event
of a breach of threatened breach by the Company of the provisions of this
Article V, that Purchaser shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic
loss and without any bond or other security being required.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
6.1 Conditions to the Company's Obligation to Sell. The obligation of
the Company hereunder to issue and sell the Common Shares and Warrants to
Purchaser at the Closing is subject to the satisfaction, as of the date of
the Closing and with respect to Purchaser, of each of the following
conditions thereto, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion:
(a) Purchaser shall have executed the signature page to this Agreement
and the Registration Rights Agreement and delivered the same to the
Company.
(b) Purchaser shall deliver the applicable Purchase Price for the Common
Shares and Warrants purchased at the Closing.
(c) The representations and warranties of Purchaser shall be true and
correct as of the date when made and as of the Closing as though made
at the that time, and Purchaser shall have performed, satisfied and
complied in all material respects with the covenants and agreements
required by this Agreement to be performed or complied with by
Purchaser at or prior to the Closing.
(d) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated, or endorsed
by any court or governmental authority of competent jurisdiction or
any self-regulatory organization having authority over the matters
contemplated hereby which restricts or prohibits the consummation of
any of the transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE
The obligation of Purchaser hereunder to purchase the Common Shares and
Warrants to be purchased by it on the date of the Closing is subject to the
satisfaction of each of the following conditions, provided that these
conditions are for Purchaser's sole benefit and may be waived by Purchaser
(with respect to it) at any time in Purchaser's sole discretion:
(a) The Company shall have executed the signature page to this Agreement
and the Registration Rights Agreement and delivered the same to
Purchaser.
15
(b) The Company shall have delivered duly executed Warrants and
certificates for the Common Shares (in each case in such denominations
as Purchaser shall request) being so purchased by Purchaser at the
Closing.
(c) The Common Stock shall be listed on the NASDAQ and trading in the
Common Stock shall not have been suspended and no delisting or
suspension shall be reasonably likely for the foreseeable future.
(d) The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing as though made
at that time and the Company shall have performed, satisfied and
complied with the covenants and agreements required by this Agreement
to be performed or complied with by the Company at or prior to the
Closing. Purchaser shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Closing to the
foregoing effect and as to such other matters as may be reasonably
requested by Purchaser.
(e) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction or
any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
(f) Purchaser shall have received the officer's certificate described in
Section 3.3 as of the Closing.
(g) Purchaser shall have received opinions of the Company's counsel, dated
as of the Closing, in the form attached hereto as Exhibit C.
(h) The Company's transfer agent has agreed to act in accordance with
irrevocable instructions in the form attached hereto as Exhibit D.
(i) The Company shall have entered into agreements with each of Gilbert V.
Levin and M. Karen Levin restricting dispositions of Common Stock
beneficially owned by such persons and in the form attached hereto as
Exhibit E.
ARTICLE VIII
GOVERNING LAW: MISCELLANEOUS
8.1 Governing Law: Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware applicable
to contracts made and to be performed in the State of Delaware. The parties
hereto irrevocably consent to the jurisdiction of the United States federal
courts located in the State of Delaware and the state courts located in the
County of New Castle in the State of Delaware in any suit or proceeding based
on or arising under this Agreement or the transactions contemplated hereby
and irrevocably agree that all claims in respect of such suit or proceeding
may be determined in such courts. The Company irrevocably waives the defense
of an inconvenient forum to the maintenance of such suit or proceeding. The
Company further agrees that service of process upon the Company mailed by the
first class mail shall be deemed in every respect effective service of
process upon the Company in any suite or proceeding arising hereunder.
Nothing
16
herein shall affect Purchaser's right to serve process in any other manner
permitted by law. The parties hereto agree that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
8.2 Counterparts. This Agreement may be executed in two or more
counterparts, including, without limitation, by facsimile transmission, all
of which counterparts shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event any signature page is delivered
by facsimile transmission, the party using such means of delivery shall cause
additional original executed signature pages to be delivered to the other
parties.
8.3 Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
8.4 Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement or the validity or enforceability of this Agreement in any other
jurisdiction.
8.5 Entire Agreement: Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with
respect to the matters covered herein and therein and, except as specifically
set forth herein or therein, neither the Company nor Purchaser makes any
representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived other than by an
instrument in writing signed by the party to be charged with enforcement and
no provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and Purchaser.
8.6 Notice. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier or by
facsimile-machine confirmed telecopy, and shall be deemed delivered at the
time and date of receipt (which shall include telephone line facsimile
transmission). The addresses for such communications shall be:
If to the Company:
Biospherics Incorporated
12051 Indian Creek Court
Beltsville, MD 20705
Telecopy: 301-210-4908/09
Attention: Dr. Gilbert V. Levin
with a copy to:
Smith, Somerville & Case, L.L.C.
Attorneys At Law
100 Light Street
Baltimore, MD 21202
17
Telecopy: 410-385-8060
Attention: James Baker, Esq.
If to RGC International Investors, LDC:
c/o Rose Glen Capital Management, L.P.
251 St. Asaphs Road
Suite 200
3 Bala Plaza East
Bala Cynwyd, PA 19004
Telecopy: 610-617-0570
Attention: Wayne D. Bloch
with a copy to:
Ballard, Spahr, Andrews & Ingersoll
1735 Market Street
51st Floor
Philadelphia, PA 19103
Telecopy: 215-864-8999
Attention: Gerald J. Guarcini, Esq.
If to any other Purchaser, to such address set forth under Purchaser's name
on the signature page hereto executed by Purchaser. Each party shall provide
notice to the other parties of any change in address.
8.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns.
Neither the Company nor Purchaser shall assign this Agreement or any rights
or obligations hereunder without any prior written consent of the other.
Notwithstanding the foregoing, Purchaser may assign its rights and
obligations hereunder to any of its "affiliates," as that term is defined
under the Exchange Act, without the consent of the Company so long as such
affiliate is an accredited investor. This provision shall not limit
Purchaser's right to transfer the Securities pursuant to the terms of this
Agreement or to assign Purchasers' rights hereunder to any such transferee
(and all such rights may in fact be so assigned to any such transferee).
Notwithstanding anything to the contrary contained in this Agreement,
Purchaser may pledge the Securities in connection with a bona fide margin
arrangement.
8.8 Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
8.9 Survival. The representations and warranties of the Company and the
agreements and covenants set forth in Articles III, IV, V and VIII shall
survive the closing hereunder notwithstanding any due diligence investigation
conducted by or on behalf of Purchaser. The Company agrees to indemnify and
hold harmless Purchaser and each of Purchaser's officers, directors,
employees, partners, agents and affiliates for loss or damage arising as a
result of or
18
related to any breach by the Company of any of its representations or
covenants set forth herein, including advancement of expenses as they are
incurred.
8.10 Public Filings: Publicity. Immediately following execution on this
Agreement, the Company shall issue a press release with respect to the
transactions contemplated hereby. The Company and Purchaser shall have the
right to approve before issuance any press releases (including the foregoing
press release), SEC or other filings, or any other public statements, with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of Purchaser, to make
any press release or SEC, NASDAQ, NASD or exchange filings with respect to
such transactions as is required by applicable law and regulations (although
Purchaser shall (to the extent time permits) be consulted by the Company in
connection with any such press release prior to its release and shall be
provided with a copy thereof.
8.11 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
8.12 Remedies. No provision of this Agreement providing for any remedy
to Purchaser shall limit any remedy which would otherwise be available to
Purchaser at law or in equity. Nothing in this Agreement shall limit any
rights Purchaser may have with any applicable federal or state securities
laws with respect to the investment contemplated hereby.
8.13 Termination. In the event that the Closing shall not have occurred
on or before December 12, 1997, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date.
8.14 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
* * * * *
19
IN WITNESS WHEREOF, the undersigned Purchasers and the Company have
caused this Agreement to be duly executed as of the date first above written.
PURCHASER:
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp., as General Partner
By: _____________________________
Its: _____________________________
RESIDENCE: Cayman Islands
ADDRESS:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Facsimile: (610) 617-0570
Telephone: (610) 617-5900
AGGREGATE NUMBER OF COMMON SHARES: 750,000
WARRANTS FOR AGGREGATE NUMBER OF WARRANT SHARES: 750,000
COMPANY:
BIOSPHERICS INCORPORATED
By: _____________________________
Its: _____________________________
20
Exhibit (10.1)
SCHEDULES TO SECURITIES
PURCHASE AGREEMENT
These Schedules are being provided in connection with the Securities
Purchase Agreement dated as of December 12, 1997. All undefined
capitalized terms contained herein shall have the same meaning as set forth
in the Securities Purchase Agreement. It is understood and agreed that
disclosure of any item on any one of the following Schedules shall
constitute appropriate disclosure on all appropriate Schedules.
1
Schedule 3.2
Authorization, Enforcement
There are no further consents or authorizations of the Company, its board
of directors, or its stockholders or any other person, body or agency required
with respect to any of the transactions contemplated by the Securities Purchase
Agreement.
2
Schedule 3.3
Capitalization
This schedule includes the authorized capital stock, the number of shares
issued and outstanding, the number of shares reserved for issuance pursuant to
the Company's stock option plans, the number of shares reserved for issuance
pursuant to securities (other than the Warrants) exercisable for, or convertible
into or exchangeable for any shares of Common Stock and the number of shares to
be initially reserved for issuance upon exercise of the Warrants:
At September 30, 1997
-------------------------
Shares
----------
Common Stock, $0.005 par value,
18,000,000 shares authorized
Issued, non-redeemable 6,518,837
Issued, redeemable 1,577,253
---------
8,096,090
Treasury Stock, at cost (69,006)
---------
8,027,084
---------
---------
Nonqualified Stock Option Plan
Under the Company's Nonqualified Stock Option Plan dated May 15, 1997
(the 1987 plan), options may be granted to officers and other key employees
to purchase up to 4,400,000 shares of common stock in amounts determined by
the Board of Directors at a price not less than 50% of the fair market value
of the stock on the date the options are granted, and for a term not to
exceed five years and one month from the date of grant.
To date, all options granted, except for those part of an anti-hostile
takeover plan explained below, have been at the then-publicly quoted price of
the stock. The 1987 plan expired on May 14, 1997. On November 17, 1997, the
Company's Board of Directors approved the 1997 Stock Option Plan subject to
stockholders' approval. The 1997 plan provides 400,000 options for granting
to officers, directors, and other key employees and contains terms similar to
the 1987 plan.
3
Schedule 3.3
Capitalization (Continued)
Outstanding Options Granted Under the 1987 Nonqualified Stock Option Plan
Options as of September 30, 1997 2,731,250(1)
Price Range of Options Outstanding: $1.4375 to $7.25
Options Exercisable as of September 30, 1997: 554,750
(1) See attached summary of outstanding stock options.
Stock Redemption Agreement
The Company has agreements with two officers-stockholders who
beneficially own 39.7% of the outstanding common stock. Upon their deaths,
the Company may be required to redeem from their estates, the number of
shares of the Company's stock necessary to pay estate taxes and
administrative expenses of the estate, if any, up to $5,000,000. Shares
would be redeemed at the then current market price. The Company is the
beneficiary to an insurance policy on the lives of the two
officers-stockholders, which the Company maintains to provide benefits of
$5,000,000 for this agreement.
4
Schedule 3.5
No Conflicts
None.
5
Schedule 3.6
Registration and SEC Documents
Since January 1, 1995, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it
with the SEC pursuant to the reporting requirements of the Exchange Act.
6
Schedule 3.7
Absence of Certain Changes
Since December 31, 1996, there has been no material adverse change and no
material adverse development in the business, properties, operations,
financial condition, results of operations or prospects of the Company. The
Company has filed its quarterly report on Form 10-QSB for the three-month and
nine-month periods ended September 30, 1997 on November 13, 1997 with the
Securities and Exchange Commission. In such filing, the Company reclassified
deferred revenue of $1,000,000, which represents a non-refundable advance
against future royalties from the D-tagatose licensing agreement with MD
Foods Ingredients amba of Denmark from current to non-current. The advance
will be recoverable at 50% of such annual royalties. As commercialization of
D-tagatose is not anticipated prior to the summer of 1999, the deferred
revenue has accordingly been reclassified as non-current.
The Company's government contracts typically have a term of three to five
years. Several contracts were rebid in 1997, which represented over 25% of
consolidated revenues. The Company was successful in securing new contracts
for two of three contracts which were rebid. Both of these contract awards
are being protested by the unsuccessful bidder(s). The Company is
aggressively protesting the award of a contract that it had performed for the
last two years and was unsuccessful in securing award during the rebid
process. The Company believes that it will continue to provide services
under this contract through at least September 30, 1998, as the protest is
being resolved.
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Schedule 3.8
Litigation
Summarized below is a listing of all actions, suits, proceedings,
inquiries or investigations before or by any court, public board,
governmental agency or authority, or self-regulatory organization or body
pending or threatened against or affecting the Company, any of its
subsidiaries, or any of their respective directors or officers in their
capacities as such:
In the fourth quarter of 1997, the Company collected the outstanding
amount owed to it by Tetra Technologies, Inc. ($100,000) and the Pennsylvania
Merchant Group. See Note 7 to the Company's Annual Report on 10-KSB for
further discussion on this Tetra matter. The Company has filed a lawsuit
against Forbes for an article printed about the Company. There have been
motions for dismissal of the suit and counter motions against dismissal; a
decision is pending from the judge on these motions.
The Company received a notice of potential liability from the U.S. EPA.
See Note 7 of the Company's Annual Report on Form 10-KSB for background on
this matter. There has been no correspondence between the Company and EPA
regarding this claim during 1997.
The Company is awaiting a final determination by the Department of Labor
on the wage rates paid to employees at the Company's Cumberland, Maryland
facility. The Government Accounting Office must rule/decide if the wage rates
are applicable to the Company. A decision is still pending. If there is an
unfavorable ruling to the Company, the Company has recourse through an
equitable adjustment claim under its contract with the GSA/Federal
Information Center.
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Schedule 3.18
Key Employees
Summarized below is a listing of Key Employees of Biospherics
Incorporated and the capacity in which they currently serve.
Dr. Gilbert Levin President & CEO; Chairman of the Board
Karen Levin VP, Communications & Corporate Secretary
Jeffrey W. Church Executive VP & Chief Financial Officer
Richard Levin VP, Planning
Raul Vera VP, Technology
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Schedule 3.19
Certain Transactions
Consulting Agreements: Each of Gilbert V. Levin and M. Karen Levin have
entered into Consulting Agreements with the Company pursuant to which such
individuals will provide post-employment consulting services to the Company.
Retirement Agreements: Each of Gilbert V. Levin and M. Karen Levin have
entered into Supplemental Executive Retirement Plan Agreements with the
Company pursuant to which such individuals would be entitled to certain
post-employment payments.
Copies of the above described Agreements have been furnished to Purchaser.
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Schedule 4.5
Restriction on Below Market
Issuance of Securities
The Company has an Employees' Nonqualified Stock Option Plan, whereby
options are granted to officers and key employees. See Schedule 3.3
Capitalization for further details regarding this plan.
The Company has an informal plan with its outside Board directors whereby
options are granted on an annual basis. Historically these grants have
averaged 4,000 options per outside directors. There are currently six (6)
outside directors on Biospherics' Board of Directors.
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