SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of May 17,
2000 (the "Closing Date"), is entered into by and among Generex Biotechnology
Corporation, a Delaware corporation, with headquarters located at ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ (the "Company"), and the investors
listed on Schedule 1 attached hereto (individually, a "Buyer" and collectively,
the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by
Regulation S ("Regulation S") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
B. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, that number of shares of the Company's Common Stock, par value
$.001 per share (the "Company Common Stock") as set forth in Section 1 below
(the "Common Shares") and warrants, in substantially the same form attached
hereto as Exhibit D (the "Warrants") to acquire that number of shares of Company
Common Stock as set forth in Section 1 below (as exercised, collectively, the
"Warrant Shares"); and
C. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit A (the "Registration Rights
Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.
a. Purchase of Common Shares and Warrants. In connection with the offering
by the Company of its Common Shares and Warrants to certain purchasers,
including without limitation, the Buyers, and subject to the satisfaction (or
waiver) of the conditions set forth in this Section 1 and Sections 6 and 7
below, the Company shall issue and sell to each Buyer and each Buyer severally
agrees to purchase from the Company that number of Common Shares (as applicable
to each Buyer, the "Buyer Common Share Amount") determined by dividing (i) such
Buyer's portion of the Purchase Price (defined below), as set forth on Schedule
1, by the lesser of (A) $8.10 or (B) ninety percent (90%) of the closing bid
price for the Company Common Stock (as quoted on the Principal Market (defined
below) or the market or exchange where the Company's common stock is then
traded) on the trading day immediately preceding the Closing Date (the "Market
Price") (the lesser
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of (A) or (B) is referred to herein as the "Buyer Offering Per Share Purchase
Price") along with one (1) Warrant to acquire that number of Warrant Shares
equal to such Buyer's Buyer Common Share Amount at an initial exercise price
equal to 110% of the Market Price (such transactions are referred to herein as
the "Closing"). (The Company shall not issue fractional Common Shares or any
Warrant exercisable into fractional Warrant Shares. In such an event, the
Company shall round any such fractional share amount up to the next whole
number.) The aggregate purchase price (the "Purchase Price") of the Common
Shares and Warrants at the Closing shall be $3,600,000. Notwithstanding anything
to the contrary contained in this Agreement, including without limitation
Section 11(l) below, in the event that the Market Price for the Company common
stock (as quoted on the Principal Market or the market or exchange where the
Company's common stock is then traded) on the Closing Date is less than $6.00
per common share, then the Company may unilaterally terminate this Agreement by
providing written notice to the Escrow Agent (defined below), and all of the
obligations of the Buyers and the Company as contemplated in this Agreement
shall be automatically terminated. The Buyers and the Company acknowledge that
the Company is selling additional shares of Company Common Stock and warrants to
purchase Company Common Stock to other purchasers (the "Other Purchasers") in
reliance on Regulation S of the 1933 Act and/or Rule 506 of Regulation D
("Regulation D") promulgated under the 1933 Act. Buyers consent to such sales to
Other Purchasers provided that (i) any such sales shall only be made to one or
more qualified institutional buyers as that term is defined by Rule 144A
promulgated under the 1933 Act or accredited investors as that term is defined
by Rule 501(a) promulgated under the 1933 Act or pursuant to Regulation S, on
substantially similar terms as those contemplated by this Agreement, (ii) such
sales are made no later than ten (10) business days after the Closing Date, and
(iii) the gross proceeds from the sale of the Common Shares and Warrants to the
Buyers and additional shares of Company Common Stock and Warrants to purchase
Company Common Stock to the Other Purchasers (together, the "Offering") shall
not exceed $25,000,000.
b. Form of Payment. On the Closing Date, (i) subject to the satisfaction
(or waiver) of the conditions contained in Sections 1, 6 and Section 7, the
Buyers shall pay the Purchase Price to the Company, for the Common Shares and
Warrants to be issued and sold to such Buyers at the Closing, by wire transfer
of immediately available funds in accordance with the Company's written wire
instructions, and (ii) the Company shall deliver to Strategic Investment
Counsel, LLC, c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as the escrow agent (the "Escrow Agent"), on behalf
of each Buyer, stock certificates (in the denominations as such Buyer shall
request) (the "Common Share Certificates") representing such number of the
Common Shares which such Buyer is then purchasing along with the Warrants such
Buyer is purchasing hereunder, duly executed on behalf of the Company and
registered in the name of such Buyer or its designee. Upon the completion of the
conditions contained in Sections 1, 6 and 7 of this Agreement, the Escrow Agent
shall deliver the certificates representing the Common Shares and the Warrants
to the Buyers via overnight courier after the Buyers have wired the Purchase
Price to the Company.
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2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
a. Investment Purpose. Such Buyer is acquiring the Common Shares and
Warrants (the Common Shares, Warrants and Warrant Shares may also be referred to
herein as the "Securities"), for its own account for investment only and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered under the 1933 Act or
exempted under Regulation S or the 1933 Act; provided, however, that by making
the representations herein, such Buyer does not agree to hold any of 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 Regulation S or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited investor" as
that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the Securities
are being offered and sold to it in reliance on Regulation S and that the
Company is relying in part upon the truth and accuracy of, and such Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the
applicability of Regulation S and the eligibility of such Buyer to acquire such
Securities.
d. Information. Such Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities which
have been requested by such Buyer. Such Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. Such Buyer understands that its investment in the Securities
involves a high degree of risk. Such Buyer has sought such accounting, legal and
tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that except as provided in
the Registration Rights Agreement: (i) the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company an
opinion of counsel, in a form reasonably acceptable to Company counsel, to the
effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant
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to Regulation S or an exemption from such registration, or (C) if such Buyer
wishes to sell Securities in reliance upon the exemption from registration set
forth in Section 4(1) of the 1933 Act ("Section 4(1)"), such Buyer provides the
Company with reasonable assurance that such Securities have been or are to be
sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act, as amended, (or a successor rule thereto) ("Rule 144"). If Seller intends
to utilize Rule 144 but Rule 144 is not applicable to such resale, any resale of
the Securities under circumstances in which the Seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the ▇▇▇▇ ▇▇▇) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder. Such Buyer
further understands and agrees not to engage in hedging transactions with regard
to the Securities unless in compliance with the 1933 Act.
g. Securities. Such Buyer understands that the certificates or other
instruments representing the Securities, except as set forth below, shall bear a
restrictive legend in substantially the following form (and the Company shall be
required to issue a stop-transfer order against transfer of such stock
certificates if the Securities are not transferred in accordance with the
following legend):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
PURSUANT TO REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "1933 ACT"), AND HAVE NOT BEEN REGISTERED UNDER THE
1933 ACT OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (1) IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, OR
APPLICABLE STATE SECURITIES LAWS, OR (2) IN THE ABSENCE OF AN OPINION
OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO ISSUER COUNSEL, THAT
REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR BECAUSE THE
SECURITIES HAVE BEEN SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO
REGULATION S OR RULE 144 UNDER THE 1933 ACT. FURTHERMORE, THE HOLDER
HEREOF SHALL NOT ENGAGE IN ANY HEDGING TRANSACTIONS INVOLVING THESE
SECURITIES, UNLESS IN COMPLIANCE WITH THE 1933 ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for sale under the 1933 Act and the Buyer has sold the
Securities and has fulfilled the applicable prospectus delivery requirements,
(ii) in connection with a sale transaction, such holder provides the Company
with an opinion of counsel, in a form reasonably acceptable to Company counsel,
to the effect that a public sale, assignment or transfer of the Securities may
be made in accordance with Regulation S or otherwise without registration under
the 1933 Act, or (iii) such holder, in the case of a sale in reliance upon
Section 4(1), shall provide the Company with reasonable assurances that the
Securities have been or are to be sold
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pursuant to Rule 144 without any restriction as to the number of Securities that
can then be immediately sold.
h. Validity; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and is a valid and
binding agreement of such Buyer enforceable against such Buyer in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
i. Residency. Such Buyer certifies that such Buyer is outside the United
States (as defined in Regulation S), such Buyer is not a U. S. person (as
defined in Regulation S), such Buyer is not acquiring the Securities for the
account or benefit of any U.S. person, and such Buyer is a resident of that
country specified in its address on Schedule 1.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its "Subsidiaries"
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns a controlling position of capital stock or holds a
controlling position of an equity or similar interest) are corporations duly
organized and validly existing in good standing under the laws of the
jurisdiction in which they are incorporated, and have the requisite corporate
power and authorization to own their properties and to carry on their business
as now being conducted. Each of the Company and its Subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect"
means any material adverse effect on the business, properties, assets,
operations, results or operations, financial condition or prospects of the
Company and its Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements and instruments to be entered into in
connection herewith, or on the authority or ability of the Company to perform
its obligations under the Transaction Documents (as defined below).
b. Authorization; Enforcement; Validity. (i) The Company has the
requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement, the Transfer Agent Instructions
(as defined in Section 5), the Warrants and each of the other agreements entered
into by the parties hereto in connection with the transactions contemplated by
this Agreement (collectively, the "Transaction Documents"), and to issue the
Securities in accordance with the terms hereof and thereof, (ii) the execution
and delivery of the Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby, including without
limitation the issuance of the Common Shares and the Warrants and the
reservation for issuance and the issuance of the Warrant Shares issuable upon
exercise thereof,
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have been duly authorized by the Company's Board of Directors and no further
consent or authorization is required by the Company, its Board of Directors or
its stockholders, (iii) the Transaction Documents have been duly executed and
delivered by the Company, and (iv) the Transaction Documents constitute the
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
c. Issuance of Securities. The Common Shares are duly authorized and,
upon issuance in accordance with the terms hereof, shall be (i) validly issued,
fully paid and non-assessable and (ii) free from all taxes, liens and charges
with respect to the issue thereof. The shares of Common Stock issued pursuant to
this Agreement (subject to adjustment pursuant to the Company's covenant set
forth in Section 4(g) below) have been duly authorized and reserved for issuance
upon exercise of the Warrants. Upon exercise in accordance with the Warrants,
the Warrant Shares will be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of common stock. The
issuance by the Company of the Securities is exempt from registration under the
1933 Act.
d. No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
Company's issuance of the Common Shares and the reservation for issuance and
issuance of the Warrant Shares) will not (i) result in a violation of the
Company's Certificate of Incorporation, as amended and as in effect on the date
hereof (the "Certificate of Incorporation") or the Company's By-laws, as amended
and as in effect on the date hereof (the "By-laws") or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the Principal Market (as defined below)) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected. Neither the Company nor
its Subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation, or By-laws or their organizational charter or
by-laws, respectively. Neither the Company or any of its Subsidiaries is in
violation or any term of or in default under any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries, except for
possible conflicts, defaults, terminations, amendments which would not have a
Material Adverse Effect. The business of the Company and its Subsidiaries is not
being conducted, and shall not be conducted, in violation of any law, ordinance,
regulation of any governmental entity, except for possible violations the
sanctions for which either individually or in the aggregate would not have a
Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the 1933 Act, the Company is not required to obtain any
consent, authorization or
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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 or contemplated by the
Transaction Documents in accordance with the terms hereof or thereof. All
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company and its Subsidiaries are
unaware of any facts or circumstances which might give rise to any of the
foregoing. The Company is not in violation of the listing requirements of the
Principal Market (as defined below).
e. SEC Documents; Financial Statements. As of the Closing, the Company
has 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
Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents"). As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 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
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading. Neither the Company nor any of its
Subsidiaries or any of their officers, directors, employees or agents have
provided the Buyers with any material, nonpublic information.
f. Absence of Certain Changes. Since the most recent filing by the
Company with the SEC, 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 or its
Subsidiaries. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor does
the Company or any of its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy proceedings.
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g. Absence of Litigation. Except as set forth in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, the Company's common stock, the
Common Shares or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such
that would have a Material Adverse Effect.
h. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company to third parties other than the
Buyers for purposes of the 1933 Act so as to render invalid the exemption from
registration provided under Regulation S or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the
Company are listed or designated, nor will the Company or any of its
Subsidiaries take any action or steps that would require registration of any of
the Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings so as to render invalid the exemption from
registration provided under Regulation S.
i. No Undisclosed Events, Liabilities, Developments or Circumstances. No
event, liability, development or circumstance has occurred or exists, or is
contemplated to occur, with respect to the Company or its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement filed with the SEC relating to an
issuance and sale by the Company of its common stock and which has not been
publicly announced.
j. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer or sale of the
Securities.
k. Regulation S Related Matters. Assuming the accuracy of Buyer's
representations and warranties contained in Section 2 hereof, the Offering meets
the requirements of Regulation S, including without limitation Rule 903(a) and
903(b)(3) under the 1933 Act.
l. Employee Relations. Neither the Company nor any of its Subsidiaries
is involved in any union labor dispute nor, to the knowledge of the Company or
any of its Subsidiaries, is any such dispute threatened.
m. Intellectual Property Rights. The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service ▇▇▇▇ registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals,
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governmental authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted. None of the Company's trademarks, trade
names, service marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government authorizations,
trade secrets or other intellectual property rights have expired or terminated,
or are expected to expire or terminate within two years from the date of this
Agreement. The Company and its Subsidiaries do not have any knowledge of any
infringement by the Company or its Subsidiaries of trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service ▇▇▇▇ registrations, trade secret or other similar rights of
others, or of any such development of similar or identical trade secrets or
technical information by others and the Company and its Subsidiaries are unaware
of any facts or circumstances which might give rise to any of the foregoing. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties.
n. Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
o. Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in the SEC Documents or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and any of its
Subsidiaries. Any real property and facilities held under lease by the Company
and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
p. Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged and the Company does not have any reason to believe it will not be able
to renew its existing insurance coverage under substantially similar terms for
the next two (2) years.
q. Regulatory Permits. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as presently conducted, and neither the
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Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
r. Tax Status. The Company and each of its Subsidiaries has made or
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
s. Transactions With Affiliates. Except as set forth in the SEC
Documents filed at least ten days prior to the date hereof, none of the
officers, control parties, control entities, 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.
t. Eligibility. The Company is currently eligible to register the resale
of the Common hares and Warrant Shares on a registration statement on Form S-3
under the 1933 Act.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely to satisfy
each of the conditions to be satisfied by it as provided in Sections 6 and 7 of
this Agreement.
b. Regulation S Matters. The Company shall meet the requirements of
Regulation S with respect to the Offering during the Distribution Compliance
Period (defined in Regulation S), including without limitation, Rule 903(a) and
903(b)(3) under the 1933 Act.
c. Reporting Status. Until the earlier of (i) the date which is one year
after the date as of which the Investors (as that term is defined in the
Registration Rights Agreement) may sell all of the Common Shares or Warrant
Shares without restriction pursuant to Rule 144(k) promulgated under the 1933
Act (or successor thereto), or (ii) the date on which the Investors shall have
sold all the Common Shares and Warrant Shares (the "Registration Period"), the
Company shall file all reports required to be filed with the SEC pursuant to the
1934 Act, and the Company
10
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
d. Rule 903(c)(3)(iii)(B)(4) Covenant. The Buyers and the Company agree
that the Company shall refuse to register any transfer on the Company's books
and records of Securities not made in accordance with Regulation S.
e. Right of First Refusal. Subject to the rights of Ladenburg ▇▇▇▇▇▇▇▇ &
Co. ("LT&C") as set forth in that certain investment banking agreement with the
Company, dated April 11, 2000 (the "Investment Banking Agreement") and subject
to the exceptions described below, the Company and its Subsidiaries shall not
negotiate or contract with any party for any equity financing (including any
debt financing with an equity component) or issue any equity securities of the
Company or any Subsidiary or securities convertible or exchangeable into or for
equity securities of the Company or any Subsidiary (including debt securities
with an equity component) in any form ("Future Offerings") during the period
beginning on the date hereof and ending on, and including, the date which is 180
days after the Closing Date, unless it shall have first delivered to Strategic
Investment Counsel c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ which each Buyer has authorized to act
on its behalf with respect to this Section 4(e) ("Buyers' Designee") written
notice (the "Future Offering Notice") describing the proposed Future Offering,
including the terms and conditions thereof, and providing each Buyer an option
to purchase up to its Aggregate Percentage (as defined below) of the securities
to be issued in such Future Offering, as of the date of delivery of the Future
Offering Notice, in the Future Offering (the limitations referred to in this
sentence is referred to as the "Capital Raising Limitations"). For purposes of
this Section 4(e), "Aggregate Percentage" at any time with respect to any Buyer
shall mean the percentage obtained by dividing (i) the aggregate number of the
Common Shares initially issued to such Buyer by (ii) the aggregate number of the
Common Shares sold to all Buyers plus the shares of Company Common Stock sold to
Other Purchasers by the Company in the Offering. A Buyer can exercise its option
to participate in a Future Offering by delivering to the Company directly or
through the Buyers' Designee written notice thereof to participate to the
Company within five (5) business days after receipt of a Future Offering Notice
by Buyers' Designee, which notice shall state the quantity of securities being
offered in the Future Offering that such Buyer will purchase, up to its
Aggregate Percentage, and that number of securities it is willing to purchase in
excess of its Aggregate Percentage. In the event that one or more Buyers fail to
elect to purchase up to each such Buyer's Aggregate Percentage, then each Buyer
which has indicated that it is willing to purchase a number of securities in
such Future Offering in excess of its Aggregate Percentage shall be entitled to
purchase its pro rata portion (determined in the same manner as described in the
preceding sentence) of the securities in the Future Offering which one or more
of the Buyers have not elected to purchase. In the event the Buyers fail to
elect to fully participate in the Future Offering within the periods described
in this Section 4(e), the Company shall have 45 days thereafter to sell the
securities of the Future Offering that the Buyers did not elect to purchase,
upon terms and conditions, no more favorable to the purchasers thereof than
specified in the Future Offering Notice. In the event the Company has not sold
such securities of the Future Offering within such 45 day period, the Company
shall not thereafter issue or sell such securities without first offering such
securities to the Buyers in the manner provided in this Section 4(e). In the
event a Buyer exercises its option to participate
11
in a Future Offering and such Buyer fails to purchase its Aggregate Percentage
of the securities offered by the Company through such Future Offering (other
than as a result of the Company's breach of its obligations concerning such
Future Offering) then notwithstanding anything to the contrary contained in this
Section 4(e), such Buyer shall then forfeit its right to first refusal with
respect to such Future Offering and any later Future Offering. The Capital
Raising Limitations shall not apply to (i) a loan from a commercial bank or any
other institutional lender which does not have any equity feature, (ii) any
transaction involving the Company's issuances of securities (A) as consideration
in a merger or consolidation, or (B) as consideration for the acquisition of a
business, product, license or other assets by the Company, (iii) the issuance of
securities in a firm commitment, underwritten public offering, (iv) the issuance
of securities upon exercise or conversion of the Company's options, warrants or
other convertible securities outstanding as of the date hereof or other
contractual commitments in effect prior to the Closing Date, (v) the grant of
additional options or warrants, or the issuance of additional securities, under
any Company stock option plan, restricted stock plan or stock purchase plan for
the benefit of the Company's employees, directors, consultants or advisors; or
(vi) the Company's issuance of equity securities pursuant to any significant
investment made by any entity or business engaged in the same industry or
business of the Company in connection with a research, development, marketing,
supply or similar arrangement. The Buyers shall not be required to participate
or exercise their right of first refusal with respect to a particular Future
Offering in order to exercise their right of first refusal with respect to later
Future Offerings.
f. Listing. The Company shall promptly secure the listing of all of the
Registrable Securities (as that term is defined in the Registration Rights
Agreement) upon each national securities exchange, automated quotation system or
bulletin board system, if any, upon which shares of the Company's common stock
are then listed (subject to official notice of issuance) and shall maintain, so
long as any other shares of common stock shall be so listed, such listing of all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents. The Company shall maintain the Common Stock's
authorization for quotation on the Nasdaq Small-Cap Market, Nasdaq National
Market, The New York Stock Exchange, Inc. or The American Stock Exchange, Inc.,
as applicable (the "Principal Market"). Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of Company common stock on the Principal Market.
The Company shall promptly, and in no event later than the following business
day, provide to each Buyer copies of any notices it receives from the Principal
Market regarding the continued eligibility of Company common stock for listing
on such automated quotation system or securities exchange. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 4(f).
g. Reservation of Shares. The Company shall take all action necessary to
at all times have authorized; and reserved for the purpose of issuance, no less
than 100% of the number of shares of common stock needed to provide for the
issuance of the shares of Common Stock upon exercise of all outstanding
Warrants.
h. [Reserved.]
12
i. Limitation on Filing Registration Statements. Except to comply with
the rights of LT&C as set forth in the Investment Banking Agreement and the
investor or investors contemplated by the Investment Banking Agreement, the
Company shall not file a registration statement other than (A) the Registration
Statement (as defined in the Registration Rights Agreement) or (B) a
registration statement covering the sale or resale of shares of Company common
stock issued or issuable upon the exercise of options or rights granted under an
employee benefit plan, as defined in Rule 405 under the 1933 Act with the SEC
during the period beginning on the date hereof and ending on the date which is
90 days after the Registration Statement has been declared effective by the SEC.
j. Independent Auditors. The Company shall, until at least three (3)
years after the Closing Date, maintain as its independent auditors an accounting
firm authorized to practice before the SEC.
k. Corporate Existence and Taxes. The Company shall, until at least the
later of (i) the date that is three (3) years after the Closing Date or (ii) the
sale of all of the Common Shares purchased pursuant to this Agreement, maintain
its corporate existence in good standing (provided, however, that the foregoing
covenant shall not prevent the Company from entering into any merger or
corporate reorganization as long as the surviving entity in such transaction, if
not the Company, has common stock listed for trading on the Principal Market and
shall pay all its taxes when due except for taxes which the Company disputes).
13
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to StockTrans, Inc., as
transfer agent (the "Transfer Agent"), and any subsequent transfer agent,
substantially in the form of Exhibit B hereto (the "Transfer Agent
Instructions"). Prior to registration of the Common Shares and Warrant Shares
under the 1933 Act, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Transfer Agent Instructions referred to in this
Section 5, and stop transfer instructions to give effect to Section 2(f) hereof
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 as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section 5 shall affect in any way each Buyer's obligations and
agreements set forth in Section 2(g) to comply with all applicable prospectus
delivery requirements, if any, upon resale of the Securities. If a Buyer
provides the Company with an opinion of counsel, in a form reasonably acceptable
to Company counsel, to the effect that a public sale, assignment or transfer of
the Securities may be made without registration under the 1933 Act or the Buyer
provides the Company with reasonable assurances that the Securities have been or
are to be sold pursuant to Regulation S or Rule 144 without any restriction as
to the number of securities acquired as of a particular date that can then be
immediately sold, the Company shall permit the transfer, and, promptly instruct
its Transfer Agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer and without any restrictive legend. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an order and/or 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.
[Intentionally Left Blank]
14
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Common Shares
and Warrants to each Buyer at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion by providing each Buyer with prior
written notice thereof:
a. Such Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Escrow Agent for the
transactions contemplated by this Agreement.
b. The representations and warranties of such Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and such Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to the Closing Date.
c. Such Buyer shall have delivered to the Escrow Agent such other
documents relating to the transactions contemplated by this Agreement as the
Escrow Agent or its counsel may reasonable request.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Common Shares and
Warrants at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for each Buyer's sole benefit and may be waived by such Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:
a. The Company shall have executed each of the Transaction Documents and
delivered the same to the Escrow Agent.
b. The Company's common stock shall be authorized for quotation on the
Principal Market and trading in Company common stock shall not have been
suspended by the SEC or the Principal Market.
c. The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date) and the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date.
15
d. The Company shall have delivered to the Escrow Agent the opinion of
the Company's counsel dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to such Buyer and in substantially the form of Exhibit C
attached hereto.
e. The Company shall have executed and delivered to the Escrow Agent the
Warrants and the certificates representing Common Shares (in such denominations
as such Buyer shall request) for the Common Shares being purchased by such Buyer
at the Closing.
f. The Transfer Agent Instructions, in the form of Exhibit B attached
hereto, shall have been delivered to and acknowledged in writing by the
Company's transfer agent and a copy of the executed Transfer Agent Instructions
shall have been delivered to the Escrow Agent.
g. The Company shall have made all filings, other than those
contemplated by the Registration Rights Agreement, under all applicable federal
and state securities laws necessary to consummate the issuance of the Securities
pursuant to this Agreement in compliance with such laws.
h. The Company shall have delivered to the Escrow Agent such other
documents relating to the transactions contemplated by this Agreement as the
Escrow Agent or its counsel may reasonably request.
i. [Reserved.]
j. Subject to Section 11(l) below, at Closing, the Company shall
reimburse the Buyers for the Buyers' attorneys' fees and expenses (in an amount
not to exceed $20,000) incurred by the Buyers concerning the due diligence
review of the contemplated transactions and the Company, and the negotiation and
preparation of the Transaction Documents and the consummation of the
transactions contemplated thereby.
8. INDEMNIFICATION.
In consideration of each Buyer's execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company's other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless each Buyer and each
other holder of the Securities and all of their stockholders, officers,
directors, employees and direct or indirect investors and any of the foregoing
person's agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation
16
or warranty made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (c) any cause of action, suit or claim brought
or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(d) any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (e) the
status of such Buyer or holder of the Securities as an investor in the Company.
To the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.
9. ANTI-DILUTION ADJUSTMENTS.
a. Dividend, Subdivision, Combination or Reclassification of Company
Common Stock. If the Corporation shall, at any time or from time to time, (a)
declare a dividend on the Company common stock payable in shares of its capital
stock (including Company common stock) or, (b) subdivide the outstanding Company
common stock or, (c) combine the outstanding Company common stock into a smaller
number of shares, or (d) issue any shares of its capital stock in a
reclassification of the Company common stock (excluding any such
reclassification in connection with a consolidation or merger in which the
Corporation is the continuing corporation), then in each such case, the number
of shares of Company common stock constituting the Common Shares at the time of
the record date for such dividend or of the effective date of such subdivision,
combination or reclassification and the number and kind of Common Shares on such
date shall be proportionately adjusted by virtue of such dividend, subdivision,
combination or reclassification. Any such adjustment to the Common Shares shall
become effective immediately after the record date of such dividend or the
effective date of such subdivision, combination or reclassification. Such
adjustment to the Common Shares shall be made successively whenever any event
listed above shall occur.
b. Issuance of Common Stock or Rights to Purchase Company Common Stock
Below Offering Price. Prior to the registration of the Common Shares pursuant to
an effective Registration Statement (as described in the Registration Rights
Agreement), if the Company shall, at any time or from time to time, issue
Company common stock or instruments convertible or exercisable into Company
common stock (other than Company common stock issued or issuable pursuant to an
employee stock option incentive plan or Company common stock issued or issuable
pursuant to options, warrants, convertible securities outstanding as of the
Closing Date or other contractual commitments in effect prior to the Closing
Date or in connection with a merger or other business combination or
reorganization of the Company) at a price per common stock share, a conversion
price per common stock share or an exercise price per common stock share less
than the Buyer Offering Per Share Purchase Price per common stock share (such
lesser price shall be deemed the "Differential Price"), then the Company shall
issue additional shares of Company common stock to the Buyers equal to the Share
Differential Amount. The Share Differential Amount shall
17
equal the sum of (i) the amount determined by dividing the Differential Price
into the Buyers' aggregate Purchase Price, less (ii) the number of Common Shares
purchased by the Buyer at the Closing. Any such additional shares of common
stock after issuance shall be deemed to be Common Shares for purposes of this
Agreement and shall have the registration rights set forth in the Registration
Rights Agreement.
10. LIQUIDATED DAMAGES.
The Company agrees that a Buyer will suffer damages if the Company
violates any provision of or fails to fulfill any of its obligations or duties
pursuant to the Transaction Documents (other than the Registration Rights
Agreement) and such violation or failure directly or indirectly restricts such
Buyer from selling, transferring or disposing of its Common Shares (a "Company
Violation"), and that it would not be possible to ascertain the extent of such
damages. Accordingly, in the event of such Company Violation, the Company hereby
agrees to pay liquidated damages ("Liquidated Damages") to such Buyer following
the occurrence of such Company Violation in an amount determined by multiplying
(i) two percent (2%) of the Buyer Offering Per Share Purchase Price per Common
Share then held by such Buyer by (ii) the percentage derived by dividing (A) the
actual number of days elapsed from the first day of the date that an uncured
Company Violation occurred or the end of the prior 30-day period, as applicable,
to the day all Company Violations have been completely cured, by (B) 30.
Liquidated Damages shall be paid in cash, or at the Buyer's option, in the
number of shares of Company common stock equal to the quotient of (v) the dollar
amount of the Liquidated Damages due on the Payment Date (as defined below)
divided by (w) the closing bid price of the Company's common stock (as quoted in
the Principal Market or the market or exchange where the Company's common stock
is then traded) as of the first day that an uncured Company Violation occurred.
The Liquidated Damages payable pursuant hereto shall be payable within five (5)
business days from the end of the 30-day period commencing on the first 30-day
period in which the Company Violation occurs (each, a "Payment Date"). In the
event the Liquidated Damages are paid in shares of Company common stock, such
shares shall also be considered Common Shares and shall have the registration
rights set forth in the Registration Rights Agreement. Notwithstanding anything
to the contrary herein, (a) no Liquidated Damages shall be payable under this
paragraph in respect of any Company Violation which also constitutes a
Registration Default under the Registration Rights Agreement entered into by
Buyers and the Company as of the date of this Agreement, (b) in no event shall
the Company issue shares of common stock pursuant to this Section 10 which, when
added to other Securities purchased by Buyers pursuant to this Agreement, would
(i) result in a change of control of the Company, or (ii) represent 20% or more
of the total number of shares of common stock or voting power of the Company
outstanding immediately prior to the Closing Date, and (c) the Company shall
have the right to pay Liquidated Damages in cash irrespective of any Buyer's
election to receive shares of Company common stock in settlement thereof if the
closing bid price for the Company's common stock as determined in accordance
with clause (w) above is less than the Buyer Offering Per Share Purchase Price
per share.
18
11. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. This Agreement shall be
governed by and construed in all respects by the internal laws of the State of
Illinois (except for the proper application of the United States federal
securities laws), without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the Buyers, and no provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought.
f. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be as set forth below, or at such other address
19
and/or facsimile number and/or to the attention of such other person as the
recipient party has specified by written notice given to each other party five
days prior to the effectiveness of such change:
If to the Company:
Generex Biotechnology Corporation
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: E. ▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ Chicco, Esq.
If to the Transfer Agent:
StockTrans, Inc.
▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
If to a Buyer, to it at the address and facsimile number set forth on Schedule 1
with copies to such Buyer's representatives as set forth on Schedule 1.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Common Shares. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Buyers. A Buyer may assign some or all of its rights hereunder
without the consent of the Company, provided, however, that any such assignment
shall not release such Buyer from its obligations hereunder unless such
obligations are assumed by such assignee and the Company has consented to such
assignment and assumption.
20
h. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section 11(l),
the agreements and covenants set forth in Sections 4, 5 and 11, the
indemnification provisions set forth in Section 8, the anti-dilution adjustments
and provisions set forth in Section 9 and the liquidated damages provisions set
forth in Section 10 shall survive the Closing. Each Buyer shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.
j. [Reserved.]
k. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have occurred
with respect to a Buyer on or before three (3) business days from the date
hereof due to the Company's or such Buyer's failure to satisfy the conditions
set forth in Sections 6 and 7 above (and the nonbreaching party's failure to
waive such unsatisfied condition(s)), the nonbreaching party shall have the
option to terminate this Agreement with respect to such breaching party at the
close of business on such date without liability of any party to any other
party; provided, however, that if this Agreement is terminated pursuant to this
Section 11(l), the Company shall remain obligated to reimburse the nonbreaching
Buyers for the expenses described in Section 7(j) above.
m. Placement Agent. The Company has agreed to compensate Pali Capital,
LLC ("Pali") as placement agent in connection with the sale of the Common Shares
and Warrants, which placement agent may have formally or informally engaged
other agents on its behalf, in accordance with a written agency agreement
entered into between Pali and the Company prior to the date hereof (the "Agent's
Agreement"). The Company shall be responsible for the payment of any placement
agent's fees or broker's commissions pursuant to the Agent's Agreement as well
as any other fees or commissions relating to or arising out of the transactions
contemplated hereby which are founded upon an agreement or undertaking made by
the Company. The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, attorneys' fees and
out of pocket expenses) arising in connection with any such claim.
n. No Strict Construction. The language used in this Agreement will be
deemed to be the anguage chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
o. Remedies. Each Buyer and each holder of the Securities shall have
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders
21
have been granted at any time under any other agreement or contract and all of
the rights which such holders have under any law. Any Person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a payment or
payments to the Buyers hereunder or pursuant to the Transaction Documents or the
Buyers enforce or exercise their rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
[Signature Page Follows]
22
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY: BUYERS:
GENEREX BIOTECHNOLOGY PROTIUS OVERSEAS LIMITED
CORPORATION
By: By:
----------------------------------- ---------------------------------
Name: Name:
--------------------------------- ---------------------------
Title: Title:
-------------------------------- --------------------------
PHOTON FUND LTD.
By:
---------------------------------
Name:
--------------------------
Title:
--------------------------
23
SCHEDULE 1: LIST OF INVESTORS
Investor's
Representatives'
Investor Address Purchase Number of Number of Address and
Investor's Name and Facsimile Number Price Common Shares Warrant Shares Facsimile Number
--------------- -------------------- -------- ------------- -------------- -----------------
--------------- -------------------- -------- ------------- -------------- -----------------
TOTAL
EXHIBITS
Exhibit A Form of Registration Rights Agreement
Exhibit B Form of Transfer Agent Instructions
Exhibit C Form of Company Counsel Opinion
Exhibit D Form of Warrant
[Exhibits Omitted]