EXHIBIT 10.2
SETTLEMENT AGREEMENT
This Settlement Agreement (the "Agreement") is entered into as of October 26,
2004, between IR BioSciences Holdings, Inc. ("IR") and
__________________________ ("Creditor"), (also referred to collectively as the
"Parties"), and reflects full and complete settlement of the claims Creditor may
have against IR, as described below.
WHEREAS, IR has retained Joseph Stevens & Company, Inc. to effectuate a private
offering of its securities with a minimum Initial Closing of $1.0 million (the
"Initial Closing").
The Parties hereby agree as follows:
1. EFFECTIVELY. This Agreement shall be effective upon execution by the
Parties of this Agreement and those referenced in Section 3 herein, and
the Initial Closing.
2. SETTLEMENT. Creditor, on behalf of itself, its subsidiaries,
affiliates, officers, directors, shareholders, successors, and/or
assigns, hereby agrees to settle, discharge and release IR and each of
its affiliates, subsidiaries, successors, officers, directors,
shareholders, employees and agents (collectively, the "Released
Parties") from any and all claims, losses, debts, charges, damages,
obligations, causes of action, liabilities, penalties, costs, and
expenses, of whatever nature, type, kind, description or character,
whether known or unknown, and which Creditor holds or held as of the
date of this Agreement against the Released Parties (collectively,
"Claims"), and which relate to the sum of $_______ owing by IR to
Creditor as of the date hereby, which is known as the "Outstanding
Amount".
3. IR PAYMENT. Upon the execution of this Agreement by the Parties, IR
shall issue shares of its common stock (the "Shares") to the Creditor
as full and complete satisfaction of the Claims. The number of Shares
to be issued by IR shall be the product of the Outstanding Amount
divided by the per share price of the common stock sold further to the
Initial Closing (the "Per Share Price"). In addition, IR shall issue to
the Creditor five year warrants in the form attached hereto as EXHIBIT
A (the "Warrants") excercisable for 50% of the Shares issuable
hereunder at a per share exercise price equal to $.50 (fifty cents).
The Shares, the Warrants and the shares of Common Stock issuable upon
exercise of the Warrants (the "Warrant Shares") are the "Securities"
and shall be registered concurrently with the securities sold further
to the Initial Closing.
4. WARRANTIES AND REPRESENTATIONS.
a) The Creditor represents and warrants to IR as follows:
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1). PURCHASE FOR OWN ACCOUNT. The Creditor is purchasing the
Securities for the Creditor's own account and not with a present view
towards the distribution thereof. The Creditor understands that the
Creditor must bear the economic risk of this investment indefinitely,
unless the Securities are registered pursuant to the Securities Act and
any applicable state securities or blue sky laws or an exemption from
such registration is available. Notwithstanding anything in this
Section 4(a)(1) to the contrary, by making the foregoing
representation, the Creditor 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 and any applicable state securities laws; PROVIDED, that
in the case of any transfer of the Securities pursuant to an exemption,
such transfer is made in accordance with the provisions of Section
4(a)(5).
2) INFORMATION. The Creditor has been furnished all materials
(excluding any material nonpublic information) relating to the
business, finances and operations of IR and its subsidiaries and
materials relating to the offer and sale of the Securities that have
been requested by the Creditor. The Creditor has been afforded the
opportunity to ask questions of IR and has received what the Creditor
believes to be satisfactory answers to any such inquiries. The Creditor
understands that its investment in the Securities involves a high
degree of substantial risk, including but not limited to, the risk
factors described in IR's annual report on Form 10-K for the year ended
December 31, 2003 and its quarterly report on Form 10-Q for the three
months ended March 31, 2004 and June 30, 2004, which were filed with
the U.S. Securities and Exchange Commission.
3) GOVERNMENTAL REVIEW. The Creditor understands that no
United States federal or state agency or any other government or
governmental agency has passed upon or made any recommendation or
endorsement of the Securities.
4) AUTHORIZATION; ENFORCEMENT. The Creditor has the requisite
power and authority to enter into and perform its obligations under
this Agreement and to purchase the Securities in accordance with the
terms hereof. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Creditor and is a valid and
binding agreement of the Creditor enforceable against the Creditor in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other
laws affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
5) TRANSFER OR RESALE. The Creditor understands that (i) 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 (a) subsequently registered thereunder or sold pursuant to Rule
144(k) under the Securities Act, or (b) the Creditor shall have
delivered to IR an opinion of counsel reasonably acceptable to IR
(which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that the
Securities to be sold or transferred may be sold or transferred under
an exemption from such registration.
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6) LEGENDS. The Creditor understands that the Securities may
bear a restrictive legend (the "Legend") in substantially the following
form:
THESE SECURITIES HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. THE SECURITIES REPRESENTED
HEREBY MAY NOT BE OFFERED OR SOLD IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER
APPLICABLE SECURITIES LAWS UNLESS OFFERED,
SOLD OR TRANSFERRED UNDER AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THOSE LAWS. NOTWITHSTANDING THE
FOREGOING, THESE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY SUCH SECURITIES.
Certificates evidencing the Securities shall not be required
to contain the Legend or any other legend (i) while any registration
statement covering the resale of the Shares is effective under the
Securities Act provided the Creditor (or a broker acting on the
Creditor's behalf), upon requesting a removal of the Legend on any
certificate evidencing all or any portion of any of the Securities or
requesting to transfer any of the same, provides to IR (or to the
transfer agent on IR's behalf) reasonable written assurances to the
effect that any of the Securities, sold or to be sold by the Creditor
have been, or will be, sold in accordance with the plan of distribution
set forth in the prospectus that forms a part o the registration
statement and in compliance with the prospectus delivery requirements
under the Securities Act, or (ii) following any sale of such Shares
pursuant to Rule 144, or (iii) if such Securities are eligible for sale
under Rule 144(k), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the SEC). IR
shall cause its counsel to issue the legal opinion included in the
transfer agent instructions to the transfer agent on the effective date
of such registration statement. Following such effective date or at
such earlier time as a legend is no longer required for the Shares, IR
will no later than three business days following the delivery by the
Creditor to IR or the transfer agent of a legended certificate
representing the Securities, deliver or cause to be delivered to the
Creditor a certificate representing the Securities that is free from
all restrictive and other legends. IR may not make any notation on its
records or give instructions to its transfer agent that enlarge the
restrictions on transfer set forth in this Section.
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7) INVESTOR STATUS. The Creditor is an "accredited investor"
within the meaning of Rule 501 Regulation D under the Securities Act.
It has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of purchasing the
Securities. The Creditor is not a registered broker dealer or an
affiliate of any broker or dealer registered under Section 15(a) of the
Exchange Act, or a member of the National Association of Securities
Dealers, Inc. or a person engaged in the business of being a broker
dealer.
8) NO SHORT POSITIONS OR STOCK OWNERSHIP. The Creditor has
not, prior to the 30 business days prior to the date of this Agreement,
entered into any Short Sales. For purposes of this SECTION 4(C)(8), a
"Short Sale" by the Creditor means a sale of IR's common stock that is
marked as a short sale and that is executed at a time when the Creditor
has no equivalent offsetting long position in IR's common stock. For
purposes of determining whether the Creditor has an equivalent
offsetting long position in IR's common stock, all common stock and all
common stock that would be issuable upon conversion or exercise in full
of all options then held by the Creditor (assuming that such options
were then fully convertible or exercisable, notwithstanding any
provisions to the contrary, and giving effect to any conversion or
exercise price adjustments scheduled to take effect in the future)
shall be deemed to be held long by the Creditor.
b) IR represents and warrants the Creditor as follows:
1) AUTHORIZATION; ENFORCEMENT. (i) IR has the requisite
corporate power and authority to enter into and perform its obligations
under this Agreement, the Warrants, and the Registration Rights
Agreements, to issue and sell the Shares and the Warrants in accordance
with the terms hereof and to issue the Warrant Shares in accordance
with the terms of the Warrants; (ii) the execution, delivery and
performance of this Agreement and the Warrants by IR and the
consummation by it of the transactions contemplated hereby and thereby
(including, without limitation, the reservation for issuance and
issuance of the Shares and the Warrants and the reservation for
issuance and issuance of the Warrant Shares) have been duly authorized
by IR's Board of Directors and no further consent or authorization of
IR, its Board of Directors or its shareholders is required; (iii) this
Agreement and the Warrants have been duly executed and delivered by IR;
and (iv) this Agreement and the Warrants constitute, and, upon
execution and delivery by IR and the other parties thereto to the
extent required of the Warrants, such agreements will constitute, valid
and binding obligations of IR enforceable against IR in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other laws
affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
2) ISSUANCE OF SHARES. The Shares are duly authorized and when
issued and paid for in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable, and free from all taxes
and liens (other than those imposed through acts or omissions of the
Creditor and will not be subject to preemptive rights or
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other similar rights of shareholders of IR. The Warrant Shares are duly
authorized and reserved for issuance, and, upon exercise of the
Warrants,, in accordance with the terms thereof, will be validly
issued, fully paid and non-assessable and free from all taxes and liens
(other than those imposed through acts or omissions of the Creditor and
will not be subject to preemptive rights or other similar rights of
shareholders of IR.
3) NO CONFLICTS. The execution, delivery and performance of
this Agreement and the Warrants by IR, and the consummation by IR of
the transactions contemplated hereby and thereby (including, without
limitation, the reservation for issuance and issuance of the Shares and
the Warrant Shares, and the issuance of the Warrants, will not (i)
conflict with or result in a violation of the Certificate of
Incorporation or By-laws or (ii) conflict with, or constitute a default
(or an event which, with notice or lapse of time or both, would become
a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument to which IR or any of its subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including (assuming the accuracy of the representations and warranties
of the Creditor) the United States federal and state securities laws
and regulations) applicable to IR or any of its subsidiaries or by
which any property or asset of IR or any of its subsidiaries is bound
or affected (except, with respect to clause (ii), for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a
material adverse effect or IR). Except as specifically contemplated by
this Agreement and as required under the Securities Act and any
applicable state securities laws and assuming the accuracy of the
representations and warranties of the Creditor, IR is not required to
obtain any consent, approval, 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
(including without limitation the issuance and sale of the Shares and
Warrants as provided hereby), the Warrants (including without
limitation the issuance of the Warrant Shares) or the Registration
Rights Agreements, in each case in accordance with the terms hereof or
thereof.
5. ENTIRE AGREEMENT. This Agreement is a fully integrated
agreement constituting the entire agreement and understanding
of the Parties hereto, and supersedes and replaces all
negotiations, and all proposed agreements, whether oral or
written, between IR and Creditor regarding the release of the
Claims. Each party acknowledges that it has read this
Agreement and has signed it freely and voluntarily without
reliance on any representations made by the other party
hereto, its attorneys or its representatives except as
expressly set forth in this Agreement.
6. SEVERANCE. If any covenant, condition, or other provision
herein contained is held to be invalid, void, or illegal by
any court of competent jurisdiction, such covenant, condition
or provision will be deemed severed from the remainder of this
Agreement. Such severance will in no way affect, impair, or
invalidate any other covenant, condition or other provision
herein. If such condition, covenant,
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or other provision is deemed invalid due to its scope or
breadth, such covenant, condition, or other provision will be
deemed valid to the extent of the scope or breadth permitted
by law.
7. NO ORAL MODIFICATIONS. This Agreement may only be amended or
modified by a written agreement executed by or on behalf of
each of the Parties hereto.
8. GOVERNING LAW AND VENUE. This Agreement is to be construed
simply and fairly and not strictly for or against any of the
Parties hereto, and shall be interpreted, enforced and
governed by and under the laws of the State of California.
9. NOTICE. All notices required to be given hereunder shall be in
writing and shall be deemed to have been given upon deposit in
first class mail, sent through a nationally recognized courier
service, or transmission by confirmed facsimile as follows:
IR BioSciences Holdings, Inc.
4021 N. 75th Street, Suite 201
Scottsdale, AZ 85251
Attn: Michael K. Wilhelm
Facsimile: (480) 222-3295
With a copy to:
Kirkpatrick & Lockhart LLP
10100 Santa Monica Blvd., Seventh Floor
Los Angeles, CA 90067
Attn: Thomas J. Poletti, Esq.
Facsimile: (310) 552-5001
Creditor:
--------------------------
--------------------------
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Attn:
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Facsimile:
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10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and
the same Agreement.
11. INDEPENDENT ADVICE. Each Party acknowledges that it has
received independent legal advice with respect to the
advisability of making this Agreement, and that it has
received independent legal advice.
12. SUCCESSORS AND ASSIGNS. This Agreement shall apply to, bind
and inure to the benefit of the Parties, and their
successors-in-interest and assigns.
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In Witness Whereof, the Parties have duly executed and delivered this
Agreement as of the date first set forth above.
IR BIOSCIENCES HOLDINGS, INC. [CREDITOR]
- ------------------------------------ ----------------------------------
Name: Name:
----------------------------- -----------------------------
Its: Its:
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Schedule of Creditors in Second Closing
Janet Thompson $312
Carol Benwell $487
Michael Caridi $10,000
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