NOTE AND WARRANT PURCHASE AGREEMENT Dated as of September 26, 2007 by and among DUSKA THERAPEUTICS, INC. and THE PURCHASERS LISTED ON EXHIBIT A
NOTE
AND WARRANT PURCHASE
AGREEMENT
Dated
as of September 26, 2007
by
and among
and
THE
PURCHASERS LISTED ON EXHIBIT A
TABLE
OF CONTENTS
Page
|
ARTICLE
I
|
Purchase
and Sale of Notes and Warrants
|
1
|
|
Section
1.1
|
Purchase
and Sale of Notes and Warrants.
|
1
|
|
Section
1.2
|
Purchase
Price and Closing
|
2
|
|
Section
1.3
|
Conversion
Shares / Warrant Shares
|
2
|
|
ARTICLE
II
|
Representations
and Warranties
|
3
|
|
Section
2.1
|
Representations
and Warranties of the Company
|
3
|
|
Section
2.2
|
Representations
and Warranties of the Purchasers
|
13
|
|
ARTICLE
III
|
Covenants
|
15
|
|
Section
3.1
|
Securities
Compliance
|
16
|
|
Section
3.2
|
Registration
and Listing
|
15
|
|
Section
3.3
|
Inspection
Rights
|
16
|
|
Section
3.4
|
Compliance
with Laws
|
16
|
|
Section
3.5
|
Keeping
of Records and Books of Account
|
16
|
|
Section
3.6
|
Reporting
Requirements
|
16
|
|
Section
3.7
|
Other
Agreements
|
17
|
|
Section
3.8
|
Use
of Proceeds
|
17
|
|
Section
3.9
|
Reporting
Status
|
17
|
|
Section
3.10
|
Disclosure
of Transaction
|
17
|
|
Section
3.11
|
Disclosure
of Material Information
|
18
|
|
Section
3.12
|
Pledge
of Securities
|
18
|
|
Section
3.13
|
Amendments
|
18
|
|
Section
3.14
|
Distributions
|
18
|
|
Section
3.15
|
Reservation
of Shares
|
18
|
|
Section
3.16
|
Transfer
Agent Instructions
|
18
|
|
Section
3.17
|
Disposition
of Assets
|
19
|
|
Section
3.18
|
Form
SB-2 Eligibility
|
19
|
|
Section
3.19
|
Restrictions
on Certain Issuances of Securities
|
19
|
|
Section
3.20
|
Increase
in Authorized Shares of Common Stock
|
19
|
|
Section
3.21
|
Acquisition
of Assets
|
20
|
|
Section
3.22
|
Subsequent
Financings
|
20
|
|
ARTICLE
IV
|
Conditions
|
22
|
|
Section
4.1
|
Conditions
Precedent to the Obligation of the Company to Close and to Sell the
Securities
|
22
|
|
Section
4.2
|
Conditions
Precedent to the Obligation of the Purchasers to Close and to Purchase
the
Securities
|
23
|
|
ARTICLE
V
|
Certificate
Legend
|
25
|
|
Section
5.1
|
Legend
|
25
|
|
ARTICLE
VI
|
Indemnification
|
26
|
|
Section
6.1
|
General
Indemnity.
|
26
|
|
Section
6.2
|
Indemnification
Procedure
|
26
|
TABLE
OF CONTENTS
(continued)
Page
|
ARTICLE
VII
|
Miscellaneous
|
27
|
|
Section
7.1
|
Fees
and Expenses
|
27
|
|
Section
7.2
|
Specific
Performance; Consent to Jurisdiction; Venue.
|
27
|
|
Section
7.3
|
Entire
Agreement; Amendment
|
28
|
|
Section
7.4
|
Notices
|
28
|
|
Section
7.5
|
Waivers
|
29
|
|
Section
7.6
|
Headings
|
29
|
|
Section
7.7
|
Successors
and Assigns
|
29
|
|
Section
7.8
|
No
Third Party Beneficiaries
|
29
|
|
Section
7.9
|
Governing
Law
|
29
|
|
Section
7.10
|
Survival
|
30
|
|
Section
7.11
|
Counterparts
|
30
|
|
Section
7.12
|
Publicity
|
30
|
|
Section
7.13
|
Severability
|
30
|
|
Section
7.14
|
Further
Assurances
|
30
|
This
NOTE
AND WARRANT PURCHASE AGREEMENT dated as of September 26, 2007 (this
“Agreement”)
by and
among Duska Therapeutics, Inc., a Nevada corporation (the “Company”),
and
each of the purchasers of the senior secured convertible promissory notes of
the
Company whose names are set forth on Exhibit
A
attached
hereto (each a “Purchaser”
and
collectively, the “Purchasers”).
The
parties hereto agree as follows:
ARTICLE
I
PURCHASE
AND SALE OF NOTES AND WARRANTS
Section
1.1 Purchase
and Sale of Notes and Warrants.
(a) Upon
the
following terms and conditions, the Company shall issue and sell to the
Purchasers, and the Purchasers shall purchase from the Company, (i) 10% senior
secured convertible promissory notes in the aggregate principal amount of up
to
$5,750,000, convertible into shares of the Company’s common stock, par value
$0.001 per share (the “Common
Stock”),
in
substantially the form attached hereto as Exhibit
B
(the
“Notes”).
The
Company and the Purchasers are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities registration
afforded by Section 4(2) of the U.S. Securities Act of 1933, as amended, and
the
rules and regulations promulgated thereunder (the “Securities
Act”),
including Regulation D (“Regulation
D”),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
to be made hereunder. All share numbers and per share, exercise and conversion
prices set forth in this Agreement and the Transaction Documents assume the
effectuation, prior to the date hereof, of the reverse split of the Company
as
disclosed in the Company’s Information Statement filed with the Commission on
February 28, 2007; to the extent such reverse split was not effected prior
to
the date hereof, appropriate and proportional adjustment shall be made to all
share numbers and per share, exercise and conversion prices set forth herein
and
in the other Transaction Documents.
(b) Upon
the
following terms and conditions, the Purchasers shall be issued (i) Warrants,
in
substantially the form attached hereto as Exhibit
C
(the
“Long
Term Warrants”),
to
purchase a number of shares of Common Stock equal to one hundred percent (100%)
of the number of Conversion Shares issuable upon conversion of such Purchaser’s
Note at an exercise price per share equal to the Warrant Price (as defined
in
the Long Term Warrants) for a term of five (5) years following the Closing
Date
and (ii) Warrants, in substantially the form attached hereto as Exhibit
D
(the
“Short
Term Warrants”
and,
together with the Long Term Warrants, the “Warrants”),
to
purchase a number of shares of Common Stock equal to one hundred percent (100%)
of the number of Conversion Shares issuable upon conversion of such Purchaser’s
Note at an exercise price per share equal to the Warrant Price (as defined
in
the Short Term Warrants) for a term that expires on the later of (a) one (1)
year following the Closing Date and (b) the date that is the 90th
continuous day of effectiveness of the Registration Statement permitting the
resale of all of the Warrant Shares pursuant to the Registration Statement.
The
number of shares of Common Stock issuable upon exercise of the Warrants issuable
to each Purchaser is set forth opposite such Purchaser’s name on Exhibit
A
attached
hereto.
1
Section
1.2 Purchase
Price and Closing.
Subject
to the terms and conditions hereof, the Company agrees to issue and sell to
the
Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase the Notes and
Warrants for an aggregate purchase price of up to $5,750,000 (the “Purchase
Price”).
The
closing under this Agreement (the “Closing”)
shall
take place on or before September 26, 2007 (the “Closing
Date”).
The
closing of the purchase and sale of the Notes and Warrants to be acquired by
the
Purchasers from the Company under this Agreement shall take place at the offices
of Platinum Long Term Growth VI, LLC (the “Lead
Purchaser”),
▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇
▇▇▇▇▇,
▇▇▇ ▇▇▇▇, 10:00 a.m. New York time; provided,
that
all of the conditions set forth in Article IV hereof and applicable to the
Closing shall have been fulfilled or waived in accordance herewith. Subject
to
the terms and conditions of this Agreement, at the Closing the Company shall
deliver or cause to be delivered to each Purchaser (x) Notes for the principal
amount set forth opposite the name of such Purchaser on Exhibit
A
hereto
and (y) Warrants to purchase such number of shares of Common Stock as is set
forth opposite the name of such Purchaser on Exhibit
A
attached
hereto. At the Closing, each Purchaser shall deliver its Purchase Price by
wire
transfer of immediately available funds to the Company.
Section
1.3 Conversion
Shares / Warrant Shares.
The
Company has authorized and has reserved and covenants to continue to reserve,
free of preemptive rights and other similar contractual rights of stockholders
a
total of 44,700,000 shares of Common Stock to effect the conversion of the
Notes
and any interest accrued and outstanding thereon and exercise of the Warrants.
Within 90 days of the Closing Date, the Company shall amend its Articles to
increase the number of authorized shares of Common Stock (the date of the
effectiveness of such amendment, the “Amendment Date”). On an after the
Amendment Date, the Company shall reserve (and hereby covenants to continue
to
reserve), free of preemptive rights and other similar contractual rights, a
number of its authorized but unissued shares of Common Stock equal to one
hundred twenty percent (120%) of the aggregate number of shares of Common Stock
to effect the conversion of the Notes and any interest accrued and outstanding
thereon and exercise of the Warrants. Any shares of Common Stock issuable upon
conversion of the Notes and any interest accrued and outstanding on the Notes
are herein referred to as the “Conversion
Shares”.
Any
shares of Common Stock issuable upon exercise of the Warrants (and such shares
when issued) are herein referred to as the “Warrant
Shares”.
The
Notes, the Warrants, the Conversion Shares and the Warrant Shares are sometimes
collectively referred to herein as the “Securities”.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES
Section
2.1 Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Purchasers, as of the date hereof
and the Closing Date (except as set forth on the Schedule of Exceptions attached
hereto with each numbered Schedule corresponding to the section number herein),
as follows:
2
(a) Organization,
Good Standing and Power.
The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Nevada and has the requisite corporate
power to own, lease and operate its properties and assets and to conduct its
business as it is now being conducted. The Company does not have any direct
or
indirect Subsidiaries (as defined in Section 2.1(g)) or own securities of any
kind in any other entity except as set forth on Schedule
2.1(g)
hereto.
The Company and each such Subsidiary (as defined in Section 2.1(g)) is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary except for any jurisdiction(s)
(alone or in the aggregate) in which the failure to be so qualified will not
have a Material Adverse Effect. For the purposes of this Agreement,
“Material
Adverse Effect”
means
any material adverse effect on the business, operations, properties, prospects,
or financial condition of the Company and its Subsidiaries and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to perform any of its obligations under this
Agreement or any of the Transaction Documents in any material
respect.
(b) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and
perform this Agreement, the Notes, the Warrants, the Registration Rights
Agreement by and among the Company and the Purchasers, dated as of the date
hereof, substantially in the form of Exhibit
E
attached
hereto (the “Registration
Rights Agreement”),
the
Security Agreement by and among the Company and its wholly owned subsidiaries,
on the one hand, and the Agent (as defined in the Security Agreement), on the
other hand, dated as of the date hereof, substantially in the form of
Exhibit
F
attached
hereto (the “Security
Agreement”),
the
Patent, Trademark and Copyright Security Agreement by and among the Company
and
its wholly owned subsidiaries, on the one hand, and the Agent (as defined in
the
IP Security Agreement), on the other hand, dated as of the date hereof,
substantially in the form of Exhibit
G
attached
hereto (the “IP
Security Agreement”)
the
Guarantee to be delivered by each of the Subsidiaries, dated as of the date
hereof, substantially in the form of Exhibit
H
attached
hereto (the “Guarantee”),
the
Officer’s Certificate to be delivered by Duska Therapeutics, Inc., dated as of
the Closing Date, substantially in the form of Exhibit
I
attached
hereto (the “Officer’s
Certificate”)
and
the Irrevocable Transfer Agent Instructions (as defined in Section 3.16 hereof)
(collectively, the “Transaction
Documents”)
and to
issue and sell the Securities in accordance with the terms hereof. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated thereby have been
duly and validly authorized by all necessary corporate action, and, except
as
set forth on Schedule
2.1(b),
no
further consent or authorization of the Company, its Board of Directors or
stockholders is required. When executed and delivered by the Company, each
of
the Transaction Documents shall constitute a valid and binding obligation of
the
Company enforceable against the Company in accordance with its terms, except
as
such enforceability may be limited by applicable bankruptcy, reorganization,
moratorium, liquidation, conservatorship, receivership or similar laws relating
to, or affecting generally the enforcement of, creditor’s rights and remedies or
by other equitable principles of general application.
3
(c) Capitalization.
The
authorized capital stock and the issued and outstanding shares of capital stock
of the Company as of the Closing Date is set forth on Schedule
2.1(c)
hereto.
All of the outstanding shares of the Common Stock and any other outstanding
security of the Company have been duly and validly authorized. Except as set
forth in this Agreement, the Commission Documents (as defined in Section 2.1(f))
or as set forth on Schedule
2.1(c)
hereto,
no shares of Common Stock or any other security of the Company are entitled
to
preemptive rights or registration rights and there are no outstanding options,
warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares
of
capital stock of the Company. Furthermore, except as set forth in this Agreement
and as set forth on Schedule
2.1(c)
hereto,
there are no contracts, commitments, understandings, or arrangements by which
the Company is or may become bound to issue additional shares of the capital
stock of the Company or options, securities or rights convertible into shares
of
capital stock of the Company. Except for customary transfer restrictions
contained in agreements entered into by the Company in order to sell restricted
securities or as provided on Schedule
2.1(c)
hereto,
the Company is not a party to or bound by any agreement or understanding
granting registration or anti-dilution rights to any person with respect to
any
of its equity or debt securities. Except as set forth on Schedule
2.1(c),
the
Company is not a party to, and it has no knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of the capital
stock of the Company.
(d) Issuance
of Securities.
The
Notes and the Warrants to be issued at the Closing have been duly authorized
by
all necessary corporate action and, when paid for or issued in accordance with
the terms hereof, the Notes shall be validly issued and outstanding, free and
clear of all liens, encumbrances and rights of refusal of any kind. When the
Conversion Shares and Warrant Shares are issued and paid for in accordance
with
the terms of this Agreement and as set forth in the Notes and Warrants, such
shares will be duly authorized by all necessary corporate action and validly
issued and outstanding, fully paid and nonassessable, free and clear of all
liens, encumbrances and rights of refusal of any kind and the holders shall
be
entitled to all rights accorded to a holder of Common Stock.
(e) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Notes and the
consummation by the Company of the transactions contemplated hereby and thereby,
and the issuance of the Securities as contemplated hereby, do not and will
not
(i) violate or conflict with any provision of the Company’s Articles of
Incorporation (the “Articles”)
or
Bylaws (the “Bylaws”),
each
as amended to date, or any Subsidiary’s comparable charter documents, subject to
the filing of an amendment to the Articles to increase the authorized shares,
(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, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries’
respective properties or assets are bound, (iii) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment
or
decree (including federal and state securities laws and regulations) applicable
to the Company or any of its Subsidiaries or by which any property or asset
of
the Company or any of its Subsidiaries are bound or affected, or (iv) create
or
impose a lien, mortgage, security interest, charge or encumbrance of any nature
on any property or asset of the Company or its Subsidiaries under any agreement
or any commitment to which the Company or any of its Subsidiaries is a party
or
by which the Company or any of its Subsidiaries is bound or by which any of
their respective properties or assets are bound, except, in all cases, for
such
conflicts, defaults, terminations, amendments, acceleration, cancellations
and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect (other than violations pursuant to clauses (i) or (iii) (with
respect to federal and state securities laws)). Neither
the Company nor any of its Subsidiaries is required under federal, state,
foreign or local law, rule or regulation to obtain any consent, authorization
or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under the Transaction Documents or issue and sell the Securities in accordance
with the terms hereof (other than any filings, consents and approvals which
may
be required to be made by the Company under applicable state and federal
securities laws, rules or regulations or any registration provisions provided
in
the Registration Rights Agreement). The business of the Company and its
Subsidiaries is not being conducted in violation of any laws, ordinances or
regulations of any governmental entity.
4
(f) Commission
Documents, Financial Statements.
The
Common
Stock of the Company is registered pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
and the Company
has timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Commission pursuant to the reporting
requirements of the Exchange Act (all of the foregoing including filings
incorporated by reference therein being referred to herein as the “Commission
Documents”).
At
the times of their respective filings, the Form 10-QSB for the fiscal quarters
ended June 30, 2007, June 30, 2007 and March 31, 2007 (collectively, the
“Form
10-QSB”)
and
the Form 10-KSB for the fiscal year ended December 31, 2006 (the “Form
10-KSB”)
complied in all material respects with the requirements of the Exchange Act
and
the rules and regulations of the Commission promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to such
documents, and the Form 10-QSB and Form 10-KSB did not contain any untrue
statement of a material fact or omit 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
Commission Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of
the Commission or other applicable rules and regulations with respect thereto.
Such financial statements have been prepared in accordance with generally
accepted accounting principles (“GAAP”)
applied on a consistent basis 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 not include
footnotes or may be condensed or summary statements), and fairly present in
all
material respects the financial position of the Company and its Subsidiaries
as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(g) Subsidiaries.
Schedule
2.1(g)
hereto
sets forth each Subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of each person’s
ownership of the outstanding stock or other interests of such Subsidiary. For
the purposes of this Agreement, “Subsidiary”
shall
mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other Subsidiaries. All of the outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly issued, and
are
fully paid and nonassessable. Except as set forth on Schedule
2.1(g)
hereto,
there are no outstanding preemptive, conversion or other rights, options,
warrants or agreements granted or issued by or binding upon any Subsidiary
for
the purchase or acquisition of any shares of capital stock of any Subsidiary
or
any other securities convertible into, exchangeable for or evidencing the rights
to subscribe for any shares of such capital stock. Neither the Company nor
any
Subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any Subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence except as set forth on Schedule
2.1(g)
hereto.
Neither the Company nor any Subsidiary is party to, nor has any knowledge of,
any agreement restricting the voting or transfer of any shares of the capital
stock of any Subsidiary.
5
(h) No
Material Adverse Change.
Since
December 31, 2006, the Company has not experienced or suffered any Material
Adverse Effect, except as disclosed on Schedule
2.1(h)
hereto.
(i) No
Undisclosed Liabilities.
Except
as disclosed on Schedule
2.1(i)
hereto,
neither the Company nor any of its Subsidiaries has incurred any liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured
or
unsecured, absolute, accrued, contingent or otherwise) other than those incurred
in the ordinary course of the Company’s or its Subsidiaries respective
businesses or which, individually or in the aggregate, are not reasonably likely
to have a Material Adverse Effect.
(j) No
Undisclosed Events or Circumstances.
Since
December 31, 2006, except as disclosed on Schedule
2.1(j)
hereto,
no event or circumstance has occurred or exists with respect to the Company
or
its Subsidiaries or their respective businesses, properties, prospects,
operations or financial condition, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed.
(k) Indebtedness.
Schedule
2.1(k)
hereto
sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or
any
Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness”
shall mean (a) any liabilities for borrowed money or amounts owed in excess
of
$100,000 (other than trade accounts payable incurred in the ordinary course
of
business), (b) all guaranties, endorsements and other contingent obligations
in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection
or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $100,000 due under leases required
to
be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary
is in default with respect to any Indebtedness.
6
(l) Title
to Assets.
Each of
the Company and the Subsidiaries has good and valid title to all of its real
and
personal property reflected in the Commission Documents, free and clear of
any
mortgages, pledges, charges, liens, security interests or other encumbrances,
except for those indicated on Schedule
2.1(l)
hereto
or such that, individually or in the aggregate, do not cause a Material Adverse
Effect. Any leases of the Company and each of its Subsidiaries are valid and
subsisting and in full force and effect.
(m) Actions
Pending.
There
is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or other proceeding pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary which questions the
validity of this Agreement or any of the other Transaction Documents or any
of
the transactions contemplated hereby or thereby or any action taken or to be
taken pursuant hereto or thereto. Except as set forth in the Commission
Documents or on Schedule
2.1(m)
hereto,
there is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or other proceeding pending or, to the knowledge of the
Company, threatened against or involving the Company, any Subsidiary or any
of
their respective properties or assets, which individually or in the aggregate,
would reasonably be expected, if adversely determined, to have a Material
Adverse Effect. There are no outstanding orders, judgments, injunctions, awards
or decrees of any court, arbitrator or governmental or regulatory body against
the Company or any Subsidiary or any officers or directors of the Company or
Subsidiary in their capacities as such, which individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(n) Compliance
with Law.
The
business of the Company and the Subsidiaries has been and is presently being
conducted in accordance with all applicable federal, state and local
governmental laws, rules, regulations and ordinances, except such that,
individually or in the aggregate, the noncompliance therewith could not
reasonably be expected to have a Material Adverse Effect. The Company and each
of its Subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental
or
regulatory authorizations and approvals, individually or in the aggregate,
could
not reasonably be expected to have a Material Adverse Effect.
(o) Taxes.
The Company and each of the Subsidiaries has accurately prepared and filed
all
federal, state and other tax returns required by law to be filed by it, has
paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected
in
the financial statements of the Company and the Subsidiaries for all current
taxes and other charges to which the Company or any Subsidiary is subject and
which are not currently due and payable. Except as disclosed on Schedule
2.1(o)
hereto or in the Commission Documents, to the best of the Company’s knowledge,
none of the federal income tax returns of the Company or any Subsidiary have
been audited by the Internal Revenue Service. The Company has no knowledge
of
any additional assessments, adjustments or contingent tax liability (whether
federal or state) of any nature whatsoever, whether pending or threatened
against the Company or any Subsidiary for any period, nor of any basis for
any
such assessment, adjustment or contingency.
7
(p) Certain
Fees.
Except
as set forth on Schedule
2.1(p)
hereto,
the Company has not employed any broker or finder or incurred any liability
for
any brokerage or investment banking fees, commissions, finders’ structuring
fees, financial advisory fees or other similar fees in connection with the
Transaction Documents. The Company has amended any agreement existing prior
to
the date hereof to provide that fees payable as a result of or in connection
with this transaction shall not exceed (i) 10% of the gross proceeds, plus
(ii)
$35,000 in retainers and expense reimbursement, plus (iii) 10% warrant coverage
(which warrant shall contain a term no longer than 5 years and an exercise
price
not lower than the Long Term Warrant exercise price).
(q) Disclosure.
Except
for the transactions contemplated by this Agreement, the Company confirms that
neither it nor any other person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that constitutes
or
might constitute material, nonpublic information. To the best of the Company’s
knowledge, neither this Agreement or the Schedules hereto nor any other
documents, certificates or instruments furnished to the Purchasers by or on
behalf of the Company or any Subsidiary in connection with the transactions
contemplated by this Agreement contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
made
herein or therein, in the light of the circumstances under which they were
made
herein or therein, not misleading.
(r) Operation
of Business.
Except
as set forth on Schedule
2.1(r)
hereto,
the Company and each of the Subsidiaries owns or possesses the rights to all
patents, trademarks, domain names (whether or not registered) and any patentable
improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations which are necessary for the conduct
of
its business as now conducted without any conflict with the rights of
others.
(s) Environmental
Compliance.
The
Company and each of its Subsidiaries have obtained all material approvals,
authorization, certificates, consents, licenses, orders and permits or other
similar authorizations of all governmental authorities, or from any other
person, that are required under any Environmental Laws. “Environmental Laws”
shall mean all applicable laws relating to the protection of the environment
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. The Company
has
all necessary governmental approvals required under all Environmental Laws
as
necessary for the Company’s business or the business of any of its subsidiaries.
To the best of the Company’s knowledge, the Company and each of its subsidiaries
are also in compliance with all other limitations, restrictions, conditions,
standards, requirements, schedules and timetables required or imposed under
all
Environmental Laws. Except for such instances as would not individually or
in
the aggregate have a Material Adverse Effect, there are no past or present
events, conditions, circumstances, incidents, actions or omissions relating
to
or in any way affecting the Company or its Subsidiaries that violate or may
violate any Environmental Law after the Closing Date or that may give rise
to
any environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
8
(t) Books
and Records; Internal Accounting Controls.
The
records and documents of the Company and its Subsidiaries accurately reflect
in
all material respects the information relating to the business of the Company
and the Subsidiaries, the location and collection of their assets, and the
nature of all transactions giving rise to the obligations or accounts receivable
of the Company or any Subsidiary. The Company is in material compliance with
all
provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 which are applicable to it as
of
the Closing Date. The Company and its subsidiary maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP 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.
The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the Commission’s rules and forms. The Company’s certifying officers
have evaluated the effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by the Company’s most recently
filed periodic report under the Exchange Act (such date, the “Evaluation
Date”).
The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no changes in the
Company’s internal control over financial reporting (as such term is defined in
the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
(u) Material
Agreements.
Except as disclosed in the Commission Documents or as set forth on Schedule
2.1(u)
hereto, or as would not be reasonably likely to have a Material Adverse Effect,
(i) the Company and each of its Subsidiaries have performed all obligations
required to be performed by them to date under any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, filed or
required to be filed with the Commission (the “Material
Agreements”),
(ii) neither the Company nor any of its Subsidiaries has received any notice
of
default under any Material Agreement and, (iii) to the best of the Company’s
knowledge, neither the Company nor any of its Subsidiaries is in default under
any Material Agreement now in effect.
(v) Transactions
with Affiliates.
Except
as set forth on Schedule
2.1(v)
hereto
or in the Commission Documents, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions between (a) the Company, any Subsidiary or any of their
respective customers or suppliers on the one hand, and (b) on the other hand,
any officer, employee, consultant or director of the Company, or any of its
Subsidiaries, or any person owning at least 5% of the outstanding capital stock
of the Company or any Subsidiary or any member of the immediate family of such
officer, employee, consultant, director or stockholder or any corporation or
other entity controlled by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder which, in each case, is required to be
disclosed in the Commission Documents or in the Company’s most recently filed
definitive proxy statement on Schedule 14A, that is not so disclosed in the
Commission Documents or in such proxy statement.
9
(w) Securities
Act of 1933.
The
Company has complied and will comply with all applicable federal and state
securities laws in connection with the offer, issuance and sale of the
Securities hereunder. Neither the Company nor anyone acting on its behalf,
directly or indirectly, has or will sell, offer to sell or solicit offers to
buy
any of the Securities or similar securities to, or solicit offers with respect
thereto from, or enter into any negotiations relating thereto with, any person,
or has taken or will take any action so as to bring the issuance and sale of
any
of the Securities under the registration provisions of the Securities Act and
applicable state securities laws, and 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 Securities Act) in connection with the offer or sale
of
any of the Securities.
(x) Employees.
Neither
the Company nor any Subsidiary has any collective bargaining arrangements or
agreements covering any of its employees, except as set forth on Schedule
2.1(x)
hereto.
Except as set forth on Schedule
2.1(x)
hereto
or in the Commission Documents, neither the Company nor any Subsidiary has
any
employment contract, agreement regarding proprietary information,
non-competition agreement, non-solicitation agreement, confidentiality
agreement, or any other similar contract or restrictive covenant, relating
to
the right of any officer, employee or consultant to be employed or engaged
by
the Company or such Subsidiary required to be disclosed in the Commission
Documents that is not so disclosed. No officer, consultant or key employee
of
the Company or any Subsidiary whose termination, either individually or in
the
aggregate, would be reasonably likely to have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
Subsidiary.
(y) Absence
of Certain Developments.
Except
as set forth in the Commission Documents or provided on Schedule
2.1(y)
hereto,
since December 31, 2006, neither the Company nor any Subsidiary
has:
(i) issued
any stock, bonds or other corporate securities or any right, options or warrants
with respect thereto;
(ii) borrowed
any amount in excess of $100,000 or incurred or become subject to any other
liabilities in excess of $100,000 (absolute or contingent) except current
liabilities incurred in the ordinary course of business which are comparable
in
nature and amount to the current liabilities incurred in the ordinary course
of
business during the comparable portion of its prior fiscal year, as adjusted
to
reflect the current nature and volume of the business of the Company and its
Subsidiaries;
10
(iii) discharged
or satisfied any lien or encumbrance in excess of $100,000 or paid any
obligation or liability (absolute or contingent) in excess of $100,000, other
than current liabilities paid in the ordinary course of business;
(iv) declared
or made any payment or distribution of cash or other property to stockholders
with respect to its stock, or purchased or redeemed, or made any agreements
so
to purchase or redeem, any shares of its capital stock, in each case in excess
of $50,000 individually or $100,000 in the aggregate;
(v) sold,
assigned or transferred any other tangible assets, or canceled any debts or
claims, in each case in excess of $250,000, except in the ordinary course of
business;
(vi) sold,
assigned or transferred any patent rights, trademarks, trade names, copyrights,
trade secrets or other intangible assets or intellectual property rights in
excess of $100,000, or disclosed any proprietary confidential information to
any
person except to customers in the ordinary course of business or to the
Purchasers or their representatives;
(vii) suffered
any material losses or waived any rights of material value, whether or not
in
the ordinary course of business, or suffered the loss of any material amount
of
prospective business;
(viii) made
any
changes in employee compensation except in the ordinary course of business
and
consistent with past practices;
(ix) made
capital expenditures or commitments therefor that aggregate in excess of
$100,000;
(x) entered
into any material transaction, whether or not in the ordinary course of
business;
(xi) made
charitable contributions or pledges in excess of $10,000;
(xii) suffered
any material damage, destruction or casualty loss, whether or not covered by
insurance;
(xiii) experienced
any material problems with labor or management in connection with the terms
and
conditions of their employment; or
(xiv) entered
into an agreement, written or otherwise, to take any of the foregoing
actions.
11
(z) Investment
Company Act Status.
The
Company is not, and as a result of and immediately upon the Closing will not
be,
an “investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
amended.
(aa) [Reserved]
(bb) Independent
Nature of Purchasers.
The
Company acknowledges that the obligations of each Purchaser under the
Transaction Documents are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under the Transaction
Documents. The Company acknowledges that the decision of each Purchaser to
purchase Securities pursuant to this Agreement has been made by such Purchaser
independently of any other purchase and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial
or
otherwise) or prospects of the Company or of its Subsidiaries which may have
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any Purchaser (or any other person) relating to or arising from
any
such information, materials, statements or opinions. The Company acknowledges
that nothing contained herein, or in any Transaction Document, and no action
taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that for reasons of administrative convenience only, the Transaction Documents
have been prepared by counsel for one of the Purchasers and such counsel does
not represent all of the Purchasers but only such Purchaser and the other
Purchasers have retained their own individual counsel with respect to the
transactions contemplated hereby. The Company acknowledges that it has
elected to provide all Purchasers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested
to do so by the Purchasers. The Company acknowledges that such procedure with
respect to the Transaction Documents in no way creates a presumption that the
Purchasers are in any way acting in concert or as a group with respect to the
Transaction Documents or the transactions contemplated hereby or thereby. The
Company acknowledges that each Purchaser shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of this Agreement or out of the other Transaction Documents, and it shall
not be necessary for any other Purchaser to be joined as an additional party
in
any proceeding for such purpose.
(cc) 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 cause
the offering of the Securities pursuant to this Agreement to be integrated
with
prior offerings by the Company for purposes of the Securities Act which would
prevent the Company from selling the Securities pursuant to Regulation D and
Rule 506 thereof under the Securities Act, or any applicable exchange-related
stockholder approval provisions, nor will the Company or any of its affiliates
or subsidiaries take any action or steps that would cause the offering of the
Securities to be integrated with other offerings if to do so would prevent
the
Company from selling Securities pursuant to Regulation D and Rule 506 thereof
under the Securities Act or otherwise prevent a completed offering of Securities
hereunder. The Company does not have any registration statement pending before
the Commission or currently under the Commission’s review and except as set
forth on Schedule
2.1(cc)
hereto,
since January 1, 2007, the Company has not offered or sold any of its equity
securities or debt securities convertible into shares of Common
Stock.
12
(dd) Dilutive
Effect.
The
Company understands and acknowledges that its obligation to issue Conversion
Shares upon conversion of the Notes in accordance with this Agreement and the
Notes and its obligations to issue the Warrant Shares upon the exercise of
the
Warrants in accordance with this Agreement and the Warrants, is, in each case,
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interest of other stockholders of the
Company.
(ee) DTC
Status.
Except as set forth on Schedule
2.1(ff)
hereto, the Company’s transfer agent is a participant in and the Common Stock is
eligible for transfer pursuant to the Depository Trust Company Automated
Securities Transfer Program. The name, address, telephone number, fax number,
contact person and email of the Company transfer agent is set forth on
Schedule
2.1(ee)
hereto.
(ff) Governmental
Approvals.
Except for the filing of any notice prior or subsequent to the Closing that
may
be required under applicable state and/or federal securities laws (which if
required, shall be filed on a timely basis) and the declaration of the
effectiveness of any registration statements filed by the Company pursuant
to
the Transaction Documents, no authorization, consent, approval, license,
exemption of, filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
is or
will be necessary for, or in connection with, the execution or delivery of
the
Preferred Shares and the Warrants, or for the performance by the Company of
its
obligations under the Transaction Documents.
Section
2.2 Representations
and Warranties of the Purchasers.
Each of
the Purchasers hereby represents and warrants to the Company with respect solely
to itself and not with respect to any other Purchaser as follows as of the
date
hereof and as of the Closing Date:
(a) Organization
and Standing of the Purchasers.
If the Purchaser is an entity, such Purchaser is a corporation, limited
liability company or partnership duly incorporated or organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization.
(b) Authorization
and Power.
Each
Purchaser has the requisite power and authority to enter into and perform the
Transaction Documents and to purchase the Securities being sold to it hereunder.
The execution, delivery and performance of the Transaction Documents by each
Purchaser and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate or partnership action,
and
no further consent or authorization of such Purchaser or its Board of Directors,
stockholders, or partners, as the case may be, is required. When executed and
delivered by the Purchasers, the other Transaction Documents shall constitute
valid and binding obligations of each Purchaser enforceable against such
Purchaser in accordance with their terms, except as such enforceability may
be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor’s rights and remedies or by
other equitable principles of general application.
13
(c) Acquisition
for Investment.
Each
Purchaser is purchasing the Securities solely for its own account and not with
a
view to or for sale in connection with distribution. Each Purchaser does not
have a present intention to sell any of the Securities, nor a present
arrangement (whether or not legally binding) or intention to effect any
distribution of any of the Securities to or through any person or entity;
provided,
however,
that by
making the representations herein, such 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 Federal and state
securities laws applicable to such disposition. Each Purchaser acknowledges
that
it (i) has such knowledge and experience in financial and business matters
such
that Purchaser is capable of evaluating the merits and risks of Purchaser’s
investment in the Company, (ii) is able to bear the financial risks associated
with an investment in the Securities and (iii) has been given full access to
such records of the Company and the Subsidiaries and to the officers of the
Company and the Subsidiaries as it has deemed necessary or appropriate to
conduct its due diligence investigation.
(d) Rule
144.
Each
Purchaser understands that the Securities must be held indefinitely unless
such
Securities are registered under the Securities Act or an exemption from
registration is available. Each Purchaser acknowledges that such person is
familiar with Rule 144 of the rules and regulations of the Commission, as
amended, promulgated pursuant to the Securities Act (“Rule
144”),
and
that such Purchaser has been advised that Rule 144 permits resales only under
certain circumstances. Each Purchaser understands that to the extent that Rule
144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(e) General.
Each
Purchaser understands that the Securities are being offered and sold in reliance
on a transactional exemption from the registration requirements of federal
and
state securities laws and the Company is relying upon the truth and accuracy
of
the representations, warranties, agreements, acknowledgments and understandings
of such Purchaser set forth herein in order to determine the applicability
of
such exemptions and the suitability of such Purchaser to acquire the Securities.
Each Purchaser understands that no United States federal or state agency or
any
government or governmental agency has passed upon or made any recommendation
or
endorsement of the Securities. Commencing on the date that the Purchasers were
initially contacted regarding an investment in the Securities, none of the
Purchasers has engaged in any short sale of the Common Stock and will not engage
in any short sale of the Common Stock prior to the consummation of the
transactions contemplated by this Agreement.
(f) No
General Solicitation.
Each
Purchaser acknowledges that the Securities were not offered to such Purchaser
by
means of any form of general or public solicitation or general advertising,
or
publicly disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio,
or
(ii) any seminar or meeting to which such Purchaser was invited by any of the
foregoing means of communications. Each Purchaser, in making the decision to
purchase the Securities, has relied upon independent investigation made by
it
and has not relied on any information or representations made by third
parties.
14
(g) Accredited
Investor.
Each
Purchaser is an “accredited investor” (as defined in Rule 501 of Regulation D),
and such Purchaser has such experience in business and financial matters that
it
is capable of evaluating the merits and risks of an investment in the
Securities. Such Purchaser is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act and such Purchaser is not a broker-dealer.
Each Purchaser acknowledges that an investment in the Securities is speculative
and involves a high degree of risk.
(h) Certain
Fees.
The
Purchasers have not employed any broker or finder or incurred any liability
for
any brokerage or investment banking fees, commissions, finders’ structuring
fees, financial advisory fees or other similar fees in connection with the
Transaction Documents.
(i) Independent
Investment.
No
Purchaser has agreed to act with any other Purchaser for the purpose of
acquiring, holding, voting or disposing of the Securities purchased hereunder
for purposes of Section 13(d) under the Exchange Act, and each Purchaser is
acting independently with respect to its investment in the Securities.
ARTICLE
III
COVENANTS
Unless
otherwise specified in this Section, for so long as any Notes have not been
paid
in full or converted in full, the Company covenants with each Purchaser as
follows, which covenants are for the benefit of each Purchaser and their
respective permitted assignees.
Section
3.1 Securities
Compliance.
The
Company shall notify the Commission in accordance with its rules and
regulations, of the transactions contemplated by any of the Transaction
Documents and shall take all other necessary action and proceedings as may
be
required and permitted by applicable law, rule and regulation, for the legal
and
valid issuance of the Securities to the Purchasers, or their respective
subsequent holders.
Section
3.2 Registration
and Listing.
The
Company shall cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, to comply in all respects with its reporting
and filing obligations under the Exchange Act, to comply with all requirements
related to any registration statement filed pursuant to this Agreement, and
to
not take any action or file any document (whether or not permitted by the
Securities Act or the rules promulgated thereunder) to terminate or suspend
such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted herein. The
Company will take all action necessary to continue the listing or trading of
its
Common Stock on the OTC Bulletin Board or other exchange or market on which
the
Common Stock is trading. If required, the Company will promptly file the
“Listing Application” for, or in connection with, the issuance and delivery of
the Shares and the Warrant Shares. Subject to the terms of the Transaction
Documents, the Company further covenants that it will take such further action
as the Purchasers may reasonably request, all to the extent required from time
to time to enable the Purchasers to sell the Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144 promulgated under the Securities Act. Upon the request of the
Purchasers, the Company shall deliver to the Purchasers a written certification
of a duly authorized officer as to whether it has complied with such
requirements.
15
Section
3.3 Inspection
Rights.
Provided same would not be in violation of Regulation FD, the Company shall
permit, during normal business hours and upon reasonable request and reasonable
notice, each Purchaser or any employees, agents or representatives thereof,
so
long as such Purchaser shall be obligated hereunder to purchase the Notes or
shall beneficially own any Conversion Shares or Warrant Shares, for purposes
reasonably related to such Purchaser’s interests as a stockholder, to examine
the publicly available, non-confidential records and books of account of, and
visit and inspect the properties, assets, operations and business of the Company
and any Subsidiary, and to discuss the publicly available, non-confidential
affairs, finances and accounts of the Company and any Subsidiary with any of
its
officers, consultants, directors, and key employees.
Section
3.4 Compliance
with Laws.
The
Company shall comply, and cause each Subsidiary to comply, with all applicable
laws, rules, regulations and orders, noncompliance with which would be
reasonably likely to have a Material Adverse Effect.
Section
3.5 Keeping
of Records and Books of Account.
The
Company shall keep and cause each Subsidiary to keep adequate records and books
of account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company
and
its Subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section
3.6 Reporting
Requirements.
If the
Company ceases to file its periodic reports with the Commission, or if the
Commission ceases making these periodic reports available via the Internet
without charge, then the Company shall furnish the following to each Purchaser
so long as such Purchaser shall be obligated hereunder to purchase the
Securities or shall beneficially own Notes:
(a) Quarterly
Reports filed with the Commission on Form 10-QSB as soon as practical after
the
document is filed with the Commission, and in any event within five (5) days
after the document is filed with the Commission;
(b) Annual
Reports filed with the Commission on Form 10-KSB as soon as practical after
the
document is filed with the Commission, and in any event within five (5) days
after the document is filed with the Commission; and
(c) Copies
of
all notices, information and proxy statements in connection with any meetings,
that are, in each case, provided to holders of shares of Common Stock,
contemporaneously with the delivery of such notices or information to such
holders of Common Stock.
16
Section
3.7 Other
Agreements.
The
Company shall not enter into any agreement in which the terms of such agreement
would restrict or impair the right or ability to perform of the Company or
any
Subsidiary under any Transaction Document.
Section
3.8 Use
of
Proceeds.
The
proceeds from the sale of the Securities hereunder shall be used by the Company
for: (a) the completion of preparation of and filing with the FDA a New Drug
Application for ATPace; (b) the preparation of the ATPace Phase II data report,
on the basis of which request the approval of the FDA for the commencement
of
Phase III clinical trials with ATPace as a diagnostic tool in the management
of
patients with neurally-mediate syncope or syncope of unknown cause; (c) the
development of in-license additional clinical stage drug candidates; (d) to
hire
▇▇▇▇▇ ▇. ▇▇▇, M.D., MBA as Chief Executive officer as well as additional
clinical and regulatory support personnel; (e) to purchase capital equipment
and
materials to support the development and manufacturing activities; or (f) the
payment of outstanding accounts payable and the expenses of this offering.
In
addition to (a) through (e) above, the Company shall segregate at least $250,000
of the proceeds received on Closing into a separate designated bank account
to
be used only as payment to third-party entities acceptable to the holders of
a
majority in principal amount of the Notes for carrying out investor relations
services (“IR Purposes”). The Company shall use at least $150,000 of such amount
for IR Purposes during the first 12 months after the Closing Date, with the
remainder to be used for IR Purposes by the second anniversary of the Closing
Date. In no event shall the proceeds be used to redeem any Common Stock or
securities convertible, exercisable or exchangeable into Common Stock or to
settle any outstanding litigation.
Section
3.9 Reporting
Status. So
long
as a Purchaser beneficially owns any of the Securities, the Company shall timely
file all reports required to be filed with the Commission 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.
Section
3.10 Disclosure
of Transaction.
The
Company shall issue a press release describing the material terms of the
transactions contemplated hereby (the “Press
Release”)
on the
day of the Closing but in no event later than one hour after the Closing;
provided,
however,
that if
such Closing occurs after 4:00 P.M. Eastern Time on any Trading Day, the Company
shall issue the Press Release no later than 9:00 A.M. Eastern Time on the first
Trading Day following the Closing Date. The Company shall also file with the
Commission a Current Report on Form 8-K (the “Form
8-K”)
describing the material terms of the transactions contemplated hereby (and
attaching as exhibits thereto this Agreement, each form of Note, the
Registration Rights Agreement, the Security Agreement, each series of Warrant
and the Press Release) as soon as practicable following the Closing Date but
in
no event more than two (2) Trading Days following the Closing Date, which Press
Release and Form 8-K shall be subject to prior review and comment by the
Purchasers. “Trading
Day”
means
any day during which the principal exchange on which the Common Stock is traded
shall be open for trading.
Section
3.11 Disclosure
of Material Information.
The
Company covenants and agrees that neither it nor any other person acting on
its
behalf has provided or will provide any Purchaser or its agents or counsel
with
any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The
Company understands and confirms that each Purchaser shall be relying on the
foregoing representations in effecting transactions in securities of the
Company. In the event of a breach of the foregoing covenant by the Company,
or
any of its Subsidiaries, or any of its or their respective officers, directors,
employees and agents, in addition to any other remedy provided herein or in
the
Transaction Documents, the Company shall publicly disclose any material,
non-public information in a Form 8-K within five (5) Business Days of the date
that it discloses such information to any Purchaser. In the event that the
Company discloses any material, non-public information to a Purchaser and fails
to publicly file a Form 8-K in accordance with the above, a Purchaser shall
have
the right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without
the
prior approval by the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Purchaser shall have
any
liability to the Company, its Subsidiaries, or any of its or their respective
officers, directors, employees, stockholders or agents, for any such disclosure.
17
Section
3.12 Pledge
of Securities.
The
Company acknowledges that the Securities may be pledged by a Purchaser in
connection with a bona fide
margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer,
sale
or assignment of the Securities hereunder, and no Purchaser effecting a pledge
of the Securities shall be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement
or any other Transaction Document; provided that a Purchaser and its pledgee
shall be required to comply with the provisions of Article V hereof in order
to
effect a sale, transfer or assignment of Securities to such pledgee. At the
Purchasers’ expense, the Company hereby agrees to execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a
Purchaser.
Section
3.13 Amendments.
The
Company shall not amend or waive any provision of the Articles or Bylaws of
the
Company in any way that would adversely affect exercise rights, voting rights,
conversion rights, prepayment rights or redemption rights of the holder of
the
Notes or the Warrants.
Section
3.14 Distributions.
So long
as any Notes or Warrants remain outstanding, the Company agrees that it shall
not, and shall not permit any Subsidiary to, (i) declare or pay any dividends
or
make any distributions to any holder(s) of Common Stock (or security convertible
into or exercisable for Common Stock) or (ii) purchase or otherwise acquire
for
value, directly or indirectly, any Common Stock or other equity security of
the
Company.
Section
3.15 Reservation
of Shares.
So long
as any of the Notes or Warrants remain outstanding, on and after the Amendment
Date, the Company shall take all action necessary to at all times have
authorized and reserved for the purpose of issuance, one hundred twenty percent
(120%) of the aggregate number of shares of Common Stock needed to provide
for
the issuance of the Conversion Shares and the Warrant Shares.
Section
3.16 Transfer
Agent Instructions.
The
Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates, registered in the name of
each
Purchaser or its respective nominee(s), for the Conversion Shares and the
Warrant Shares in such amounts as specified from time to time by each Purchaser
to the Company upon conversion of the Notes or exercise of the Warrants in
the
form of Exhibit
J
attached
hereto (the “Irrevocable
Transfer Agent Instructions”).
Prior
to registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section 5.1 of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred
to
in this Section 3.16 will be given by the Company to its transfer agent and
that
the Conversion Shares and Warrant Shares 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 3.16
shall affect in any way each Purchaser’s obligations and agreements set forth in
Section 5.1 to comply with all applicable prospectus delivery requirements,
if
any, upon resale of the Conversion Shares and the Warrant Shares. If a Purchaser
provides the Company with an opinion of counsel, in a generally acceptable
form,
to the effect that a public sale, assignment or transfer of the Conversion
Shares or Warrant Shares may be made without registration under the Securities
Act or the Purchaser provides the Company with reasonable assurances that the
Conversion Shares or Warrant Shares can be sold pursuant to 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, in
the
case of the Conversion Shares and the Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Purchaser and without any restrictive legend.
The Company acknowledges that a breach by it of its obligations under this
Section 3.16 will cause irreparable harm to the Purchasers 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 3.16 will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of the provisions of this Section
3.16, that the Purchasers 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.
18
Section
3.17 Form
SB-2 Eligibility; Opinions. The
Company currently meets, and will take all necessary action to continue to
meet,
the “registrant eligibility” and transaction requirements set forth in the
general instructions to Form SB-2 applicable to “resale” registrations on
Form SB-2 during the Effectiveness Period (as defined in the Registration
Rights Agreement) and the Company shall file all reports required to be filed
by
the Company with the Commission in a timely manner so as to maintain such
eligibility for the use of Form SB-2. The Company will provide, at the Company’s
expense, such legal opinions in the future as are reasonably necessary for
the
issuance and resale of the Common Stock issuable upon conversion of the Notes
and exercise of the Warrants pursuant to an effective registration statement,
Rule 144 under the 1933 Act or an exemption from registration. In the event
that
Common Stock is sold in a manner that complies with an exemption from
registration, the Company will promptly instruct its counsel (at its expense)
to
issue to the transfer agent an opinion permitting removal of the legend
(indefinitely, if pursuant to Rule 144(k) of the 1933 Act, or to permit sale
of
the shares if pursuant to the other provisions of Rule 144 of the 1933
Act).
Section
3.18 Acquisition
of Assets.
In the
event the Company or any Subsidiary acquires any assets or other properties,
such assets or properties shall constitute a part of the Collateral (as defined
in the Security Agreement) and the Company shall take all action necessary
to
perfect the Purchasers’ security interest in such assets or properties pursuant
to the Security Agreement.
19
Section
3.19 Subsequent
Financings.
(a)
For so
long as
the Notes remain outstanding,
the Company covenants and agrees to promptly notify (in no event later than
five
(5) days after making or receiving an applicable offer) in writing (a
“Rights
Notice”)
the Purchasers of the terms and conditions of any proposed offer or sale to,
or
exchange with (or other type of distribution to) any third party (a
“Subsequent
Financing”),
of Common Stock or any securities convertible, exercisable or exchangeable
into
Common Stock, including convertible debt securities (collectively, the
“Financing
Securities”).
The
Rights Notice shall describe, in reasonable detail, the proposed Subsequent
Financing, the names and investment amounts of all investors participating
in
the Subsequent Financing, the proposed closing date of the Subsequent Financing,
which shall be within twenty (20) calendar days from the date of the Rights
Notice, and all of the terms and conditions thereof
and proposed definitive documentation to be entered into in connection
therewith.
The
Rights Notice shall provide each Purchaser an option (the “Rights
Option”)
during
the ten (10) Trading Days following delivery of the Rights Notice (the
“Option
Period”)
to
inform the Company whether such Purchaser will purchase securities in such
Subsequent Financing equal to up to 50% of the Purchase Price paid by such
Purchaser hereunder, up
to its pro rata portion of the securities being
offered in such Subsequent Financing on the same, absolute terms and conditions
as contemplated by such Subsequent Financing. If
any Purchaser elects not to participate in such Subsequent Financing, the other
Purchasers may participate on a pro-rata basis so long as such participation
in
the aggregate does not exceed the total Purchase Price hereunder. For
purposes of this Section, all references to “pro rata” means, for any Purchaser
electing to participate in such Subsequent Financing, the percentage obtained
by
dividing (x) the principal amount of the Notes purchased by such Purchaser
at
the Closing by (y) the total principal amount of all of the Notes purchased
by
all of the participating Purchasers at the Closing. Delivery
of any Rights Notice constitutes a representation and warranty by the Company
that there are no other material terms and conditions, arrangements, agreements
or otherwise except for those disclosed in the Rights Notice, to provide
additional compensation to any party participating in any proposed Subsequent
Financing, including, but not limited to, additional compensation based on
changes in the Purchase Price or any type of reset or adjustment of a purchase
or conversion price or to issue additional securities at any time after the
closing date of a Subsequent Financing. If the Company does not receive notice
of exercise of the Rights Option from the Purchasers within the Option Period,
the Company shall have the right to close the Subsequent Financing on the
scheduled closing date with a third party; provided
that all
of the material terms and conditions of the closing are substantially the same
as those provided to the Purchasers in the Rights Notice. If the closing of
the
proposed Subsequent Financing does not occur on that date, any closing of the
contemplated Subsequent Financing or any other Subsequent Financing shall be
subject to all of the provisions of this Section 3.22(a), including, without
limitation, the delivery of a new Rights Notice. The provisions of this Section
3.19(a) shall not apply to issuances of securities in a Permitted Financing
or
with respect to any Purchaser that holds less than 10% of the Notes issued
to it
upon the Closing.
20
(b) For
purposes of this Agreement, a Permitted Financing (as defined hereinafter)
shall
not be considered a Subsequent Financing. A “Permitted
Financing”
shall
mean (1) issuances of shares of Common Stock or options to employees, officers,
directors or consultants of the Company pursuant to any stock or option plan
duly adopted by a majority of the non-employee members of the Board of Directors
of the Company or a majority of the members of a committee of non-employee
directors established for such purpose; (2) issuances of securities upon the
exercise or exchange of or conversion of any securities exercisable or
exchangeable for or convertible into shares of Common Stock issued and
outstanding on the date of this Agreement, provided that such securities have
not been amended since the date of this Agreement to increase the number of
such
securities or to decrease the exercise, exchange or conversion price of any
such
securities (including the Notes and Warrants issued to the Purchasers pursuant
to this Agreement); (3) securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors, but not
including a transaction with an entity whose primary business is investing
in
securities or a transaction, the primary purpose of which is to raise capital;
(4) securities issued in any transaction that is approved in writing by the
holders of more than two-thirds of the principal amount of the Notes; and (5)
up
to _______________ shares of Common Stock (to be equal to 8% of the fully
diluted capitalization of the Company after giving effect to this offering)
issuable pursuant to stock options issued to ▇▇▇▇▇ ▇▇▇ pursuant to the terms
of
the employment agreement entered into, and as in effect, on the date hereof
(and
at the exercise prices and vesting schedule set forth therein), so long as
such
agreement, or options issued pursuant thereto, are not amended or modified
after
the date hereof.
(c) So
long
as the Notes are outstanding, if the Company enters into any Subsequent
Financing on terms more favorable than the terms governing the Notes, then
each
Purchaser in its sole discretion may exchange its Note, valued at their stated
value, together with accrued but unpaid interest (which interest payments shall
be payable, at the sole option of such Purchaser, in cash or in the form of
the
new securities to be issued in the Subsequent Financing), for the securities
issued or to be issued in the Subsequent Financing. The Company covenants and
agrees to promptly notify in writing the Purchasers of the terms and conditions
of any such proposed Subsequent Financing. Neither an exchange pursuant to
this
provision nor any repayment or conversion of the Note shall have any effect
on a
Purchaser’s Warrants. The Warrants constitute a separate, detachable security
from the Notes. Notwithstanding any such exchange, repayment or conversion,
the
Purchasers shall retain all of the outstanding Warrants which they received
upon
Closing, or otherwise, that have not been exercised by the
Purchasers.
.
Section
3.20 Number
of Directors.
For so
long as the Notes remain outstanding, the Company covenants and agrees to
maintain the number of directors comprising the Board of Directors of the
Company at no more seven (7).
Section
3.21 Variable
Rate Securities.
For so
long as any Notes have not been paid in full or converted in full,
notwithstanding whether or not an issuance of securities is an Permitted
Financing, the Company shall not issue or sell, or agree to issue or sell
Variable Equity Securities (as defined below) (the “Variable
Equity Securities Lock-Up”),
without obtaining the prior written approval of each of the Purchasers, with
the
exception of any such agreements or transactions that (x) exist as of the date
hereof and (y) are not amended or modified after the date hereof. For purposes
hereof, the following shall be collectively referred to herein as, the
“Variable
Equity Securities”:
(A)
any debt or equity securities which are convertible into, exercisable or
exchangeable for, or carry the right to receive additional shares of Common
Stock either (1) at any conversion, exercise or exchange rate or other price
that is based upon and/or varies with the trading prices of or quotations for
Common Stock at any time after the initial issuance of such debt or equity
security, or (2) with a fixed conversion, exercise or exchange price that is
subject to being reset at some future date at any time after the initial
issuance of such debt or equity security due to a change in the market price
of
the Company’s Common Stock since date of initial issuance, or (B) any amortizing
convertible security which amortizes prior to its maturity date, where the
Company is required to or has the option to (or the investor in such transaction
has the option to require the Company to) make such amortization payments in
shares of Common Stock (whether or not such payments in stock are subject to
certain equity conditions), or (C) any transaction involving a written agreement
between the Company and an investor or underwriter whereby the Company has
the
right to “put” its securities to the investor or underwriter over an agreed
period of time and at an agreed price or price formula (each, an “Equity Line”
transaction). For purposes of the above, the “Market Price” shall mean the
volume weighted average price, as reported by Bloomberg, for the Company’s
common stock for the 5 trading day period immediately preceding the date in
question. It is expressly agreed and understood that the Variable Equity
Securities Lock-Up shall apply in respect of a Permitted Financing and that
no
issuance of Variable Equity Securities shall be a Permitted Financing.
21
3.22 IP
Assignments.
The
Company will record, or cause to be recorded, in the United States Patent and
Trademark Office the assignment of Patent # 5474890 by the holder thereof to
the
Company’s Subsidiary within 90 days of the Closing Date.
ARTICLE
IV
CONDITIONS
Section
4.1 Conditions
Precedent to the Obligation of the Company to Close and to Sell the
Securities.
The
obligation hereunder of the Company to close and issue and sell the Securities
to the Purchasers at the Closing is subject to the satisfaction or waiver,
at or
before the Closing of the conditions set forth below. These conditions are
for
the Company’s sole benefit and may be waived by the Company at any time in its
sole discretion.
(a) Accuracy
of the Purchasers’ Representations and Warranties.
The
representations and warranties of each Purchaser 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 are
expressly made as of a particular date, which shall be true and correct in
all
material respects as of such date.
(b) Performance
by the Purchasers.
Each
Purchaser shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by the Purchasers at or prior to the
Closing Date.
(c) No
Injunction.
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 which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
22
(d) Delivery
of Purchase Price.
The
Purchase Price for the Securities shall have been delivered to the Company
on
the Closing Date.
(e) Delivery
of Transaction Documents.
The
Transaction Documents shall have been duly executed and delivered by the
Purchasers to the Company.
Section
4.2 Conditions
Precedent to the Obligation of the Purchasers to Close and to Purchase the
Securities.
The
obligation hereunder of the Purchasers to purchase the Securities and consummate
the transactions contemplated by this Agreement is subject to the satisfaction
or waiver, at or before the Closing, of each of the conditions set forth below.
These conditions are for the Purchasers’ sole benefit and may be waived by the
Purchasers at any time in their sole discretion.
(a) Accuracy
of the Company’s Representations and Warranties.
Each of
the representations and warranties of the Company in this Agreement and the
other Transaction Documents shall be true and correct in all material respects
as of the Closing Date, except for representations and warranties that speak
as
of a particular date, which shall be true and correct in all material respects
as of such date.
(b) Performance
by the Company.
The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by the Company at or prior to the Closing
Date.
(c) No
Suspension, Etc.
Trading in the Common Stock shall not have been suspended by the Commission
or
the OTC Bulletin Board, and, at any time prior to the Closing Date, trading
in
securities generally as reported by Bloomberg Financial Markets (“Bloomberg”)
shall not have been suspended or limited, or minimum prices shall not have
been
established on securities whose trades are reported by Bloomberg, or on the
New
York Stock Exchange, nor shall a banking moratorium have been declared either
by
the United States or New York State authorities,
nor
shall there have occurred any material outbreak or escalation of hostilities
or
other national or international calamity or crisis of such magnitude in its
effect on, or any material adverse change in any financial market which, in
each
case, in the judgment of such Purchaser, makes it impracticable or inadvisable
to purchase the Securities.
(d) No
Injunction.
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 which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
(e) No
Proceedings or Litigation.
No
action, suit or proceeding before any arbitrator or any governmental authority
shall have been commenced, and no investigation by any governmental authority
shall have been threatened, against the Company or any Subsidiary, or any of
the
officers, directors or affiliates of the Company or any Subsidiary seeking
to
restrain, prevent or change the transactions contemplated by this Agreement,
or
seeking damages in connection with such transactions.
23
(f) Opinion
of Counsel.
The
Purchasers shall have received an opinion of counsel to the Company, dated
the
date of the Closing, substantially in the form of Exhibit
K
hereto,
with such exceptions and limitations as shall be reasonably acceptable to
counsel to the Purchasers.
(g) Notes
and Warrants.
At or
prior to the Closing, the Company shall have delivered to the Purchasers the
Notes (in such denominations as each Purchaser may request) and the Warrants
(in
such denominations as each Purchaser may request).
(h) Secretary’s
Certificate.
The
Company shall have delivered to the Purchasers a secretary’s certificate, dated
as of the Closing Date, as to (i) the resolutions adopted by the Board of
Directors approving the transactions contemplated hereby, (ii) the Articles,
(iii) the Bylaws, each as in effect at the Closing, and (iv) the authority
and
incumbency of the officers of the Company executing the Transaction Documents
and any other documents required to be executed or delivered in connection
therewith.
(i) Officer’s
Certificate.
On the
Closing Date, the Company shall have delivered to the Purchasers a certificate
signed by an executive officer on behalf of the Company, dated as of the Closing
Date, confirming the accuracy of the Company’s representations, warranties and
covenants as of such Closing Date and confirming the compliance by the Company
with the conditions precedent set forth in paragraphs (a)-(e) and (k) of this
Section 4.2 as of the Closing Date (provided that, with respect to the matters
in paragraphs (d) and (e) of this Section 4.2, such confirmation shall be based
on the knowledge of the executive officer after due inquiry).
(j) Registration
Rights Agreement.
As of
the Closing Date, the Company shall have executed and delivered the Registration
Rights Agreement to each Purchaser.
(k) Material
Adverse Effect.
No
Material Adverse Effect shall have occurred.
(l) Transfer
Agent Instructions.
The
Irrevocable Transfer Agent Instructions, in the form of Exhibit
J
attached
hereto, shall have been delivered to and executed by the Company’s transfer
agent, and delivered to the Lead Purchaser’s counsel to be held in escrow
pending the Closing.
(m) Security
Agreement.
At the
Closing, the Company shall have executed and delivered the Security Agreement
and the IP Security Agreement to each Purchaser.
(n) UCC
Financing Statements.
The
Company shall have authorized the filing of all UCC financing statements in
form
and substance satisfactory to the Purchasers at the appropriate offices to
create a valid and perfected security interest in the Collateral (as defined
in
the Security Agreement), which filings are to be made promptly following
Closing.
(o) Kuo
Employment Agreement.
▇▇▇▇▇ ▇.
▇▇▇ shall have entered into an employment agreement with the Company on terms
and conditions deemed satisfactory to the Purchasers, pursuant to which Kuo
will
serve, on Closing, as Chief Executive Officer of the Company and as Chairman
of
the Board of Directors.
24
ARTICLE
V
CERTIFICATE
LEGEND
Section
5.1 Legend.
Each
certificate representing the Securities shall be stamped or otherwise imprinted
with a legend substantially in the following form (in addition to any legend
required by applicable state securities or “blue sky” laws):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR DUSKA THERAPEUTICS, INC. SHALL HAVE RECEIVED AN OPINION
OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND
UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
The
Company agrees to issue or reissue certificates representing any of the
Conversion Shares and the Warrant Shares, without the legend set forth above
if
at such time, prior to making any transfer of any such Conversion Shares or
Warrant Shares, such holder thereof shall give written notice to the Company
describing the manner and terms of such transfer and removal as the Company
may
reasonably request, and (x) such Conversion Shares and/or Warrant Shares have
been registered for sale under the Securities Act and the holder is selling
such
shares and is complying with its prospectus delivery requirement under the
Securities Act, (y) the holder is selling such Conversion Shares and/or Warrant
Shares in compliance with the provisions of Rule 144 or (z) the provisions
of
paragraph (k) of Rule 144 apply to such Shares.
ARTICLE
VI
INDEMNIFICATION
Section
6.1 General
Indemnity.
The
Company agrees to indemnify and hold harmless the Purchasers (and their
respective directors, officers, affiliates, agents, successors and assigns)
from
and against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorneys’ fees, charges and
disbursements) incurred by the Purchasers as a result of any inaccuracy in
or
breach of the representations, warranties or covenants made by the Company
herein.
25
Section
6.2 Indemnification
Procedure.
Any party entitled to indemnification under this Article VI (an “indemnified
party”) will give written notice to the indemnifying party of any matter giving
rise to a claim for indemnification; provided, that the failure of any party
entitled to indemnification hereunder to give notice as provided herein shall
not relieve the indemnifying party of its obligations under this Article VI
except to the extent that the indemnifying party is actually prejudiced by
such
failure to give notice. In case any such action, proceeding or claim is brought
against an indemnified party in respect of which indemnification is sought
hereunder, the indemnifying party shall be entitled to participate in and,
unless in the reasonable judgment of the indemnifying party a conflict of
interest between it and the indemnified party exists with respect to such
action, proceeding or claim (in which case the indemnifying party shall be
responsible for the reasonable fees and expenses of one separate counsel for
the
indemnified parties), to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. In the event that the indemnifying party
advises an indemnified party that it will contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of
any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle
or
otherwise compromise or pay such action or claim. In any event, unless and
until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the indemnified party’s costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to
such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VI to the contrary, the indemnifying
party shall not, without the indemnified party’s prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does
not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect
of
such claim. The indemnification obligations to defend the indemnified party
required by this Article VI shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred, so long as the
indemnified party shall refund such moneys if it is ultimately determined by
a
court of competent jurisdiction that such party was not entitled to
indemnification. The indemnity agreements contained herein shall be in addition
to (a) any cause of action or similar rights of the indemnified party against
the indemnifying party or others, and (b) any liabilities the indemnifying
party
may be subject to pursuant to the law.
26
ARTICLE
VII
MISCELLANEOUS
Section
7.1 Fees
and Expenses.
Each
party shall pay the fees and expenses of its advisors, counsel, accountants
and
other experts, if any, and all other expenses, incurred by such party incident
to the negotiation, preparation, execution, delivery and performance of this
Agreement; provided,
however,
that
the Company shall pay all actual attorneys’ fees and expenses (including
disbursements and out-of-pocket expenses) incurred by the Lead Purchasers in
connection with (i) the preparation, negotiation, execution and delivery of
the
Transaction Documents and the transactions contemplated thereunder, which
payment shall be made at Closing and shall not exceed $40,000 (plus
disbursements and out-of-pocket expenses) (which payment may be withheld from
the amount delivered to the Company by the Lead Purchaser on Closing), and
(ii)
any amendments, modifications or waivers of this Agreement or any of the other
Transaction Documents. In addition, the Company shall pay all reasonable fees
and expenses incurred by the Purchasers in connection with the enforcement
of
this Agreement or any of the other Transaction Documents, including, without
limitation, all reasonable attorneys’ fees and expenses.
Section
7.2 Specific
Performance; Consent to Jurisdiction; Venue.
(a) The
Company and the Purchasers acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement or the other
Transaction Documents were not performed in accordance with their specific
terms
or were otherwise breached. It is accordingly agreed that the parties shall
be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement or the other Transaction Documents and to enforce
specifically the terms and provisions hereof or thereof, this being in addition
to any other remedy to which any of them may be entitled by law or
equity.
(b) The
parties agree that venue for any dispute arising under this Agreement will
lie
exclusively in the state or federal courts located in New York County, New
York,
and the parties irrevocably waive any right to raise forum
non conveniens
or any
other argument that New York is not the proper venue. The parties irrevocably
consent to personal jurisdiction in the state and federal courts of the state
of
New York. The Company and each Purchaser consent to process being served in
any
such suit, action or proceeding by mailing a copy thereof to such party at
the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 7.2 shall affect or limit any right to serve
process in any other manner permitted by law. The Company and the Purchasers
hereby agree that the prevailing party in any suit, action or proceeding arising
out of or relating to the Securities, this Agreement or the other Transaction
Documents, shall be entitled to reimbursement for reasonable legal fees from
the
non-prevailing party. The parties hereby waive all rights to a trial by jury.
Section
7.3 Entire
Agreement; Amendment.
This
Agreement and the Transaction Documents contain the entire understanding and
agreement of the parties with respect to the matters covered hereby and, except
as specifically set forth herein or in the other Transaction Documents, neither
the Company nor any Purchaser make any representation, warranty, covenant or
undertaking with respect to such matters, and they supersede all prior
understandings and agreements with respect to said subject matter, all of which
are merged herein. No provision of this Agreement may be waived or amended
other
than by a written instrument signed by the Company and the Purchasers holding
at
least a majority of the principal amount of the Notes then held by the
Purchasers. Any amendment or waiver effected in accordance with this Section
7.3
shall be binding upon each Purchaser (and their permitted assigns) and the
Company.
27
Section
7.4 Notices.
Any
notice, demand, request, waiver or other communication required or permitted
to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery by telecopy or facsimile at the address or number designated below
(if
delivered on a business day during normal business hours where such notice
is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice
is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses
for
such communications shall be:
| If to the Company: | Duska Therapeutics, Inc. | ||
|
▇▇▇
▇▇▇▇ ▇▇▇▇▇
|
|||
| ▇▇▇▇▇ ▇▇▇ | |||
| ▇▇▇▇ ▇▇▇▇▇▇, ▇▇ |
|
with
copies (which copies
shall
not constitute notice
to
the Company) to:
|
Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP | ||
| ▇▇ ▇▇▇▇▇▇▇▇ | |||
|
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
|
|||
| Tel: (▇▇▇) ▇▇▇-▇▇▇▇ | |||
| Fax: (▇▇▇) ▇▇▇-▇▇▇▇ | |||
| If to any Purchaser: |
At
the address of such Purchaser set forth on Exhibit
A
to
this Agreement, with copies to Purchaser’s counsel as set forth on
Exhibit
A
or
as specified in writing by such Purchaser with copies
to:
|
||
| ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq. | |||
| ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, PLC | |||
| ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇ | |||
| ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ | |||
|
Tel:
(802) 862-0500Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
|
|||
Any
party
hereto may from time to time change its address for notices by giving written
notice of such changed address to the other party hereto.
28
Section
7.5 Waivers.
No
waiver by either party of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing waiver
in
the future or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder
in
any manner impair the exercise of any such right accruing to it thereafter.
No
consideration shall be offered or paid to any Purchaser to amend or consent
to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration is also offered to all of the parties to the
Transaction Documents. This provision constitutes a separate right granted
to
each Purchaser by the Company and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.
Section
7.6 Headings.
The
article, section and subsection headings in this Agreement are for convenience
only and shall not constitute a part of this Agreement for any other purpose
and
shall not be deemed to limit or affect any of the provisions
hereof.
Section
7.7 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. After the Closing, the assignment by a party
to
this Agreement of any rights hereunder shall not affect the obligations of
such
party under this Agreement. The Purchasers may assign the Securities and its
rights under this Agreement and the other Transaction Documents and any other
rights hereto and thereto without the consent of the Company.
Section
7.8 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.
Section
7.9 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction. This Agreement shall not be interpreted or construed
with
any presumption against the party causing this Agreement to be
drafted.
Section
7.10 Survival.
The representations and warranties of the Company and the Purchasers shall
survive the execution and delivery hereof and the Closing until the third
anniversary of the Closing Date, except the agreements and covenants set forth
in Articles I, III, V, VI and VII of this Agreement shall survive the execution
and delivery hereof and such Closing hereunder.
Section
7.11 Counterparts.
This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and shall become effective
when counterparts have been signed by each party and delivered to the other
parties hereto, it being understood that all parties need not sign the same
counterpart.
Section
7.12 Publicity.
The
Company agrees that it will not disclose, and will not include in any public
announcement, the names of the Purchasers without the consent of the Purchasers,
which consent shall not be unreasonably withheld or delayed, or unless and
until
such disclosure is required by law, rule or applicable regulation, including
without limitation any disclosure pursuant to the Registration Statement, and
then only to the extent of such requirement. Notwithstanding the foregoing,
the
Purchasers consent to being identified in any filings the Company makes with
the
Commission to the extent required by law or the rules and regulations of the
Commission.
29
Section
7.13 Severability.
The
provisions of this Agreement are severable and, in the event that any court
of
competent jurisdiction shall determine that any one or more of the provisions
or
part of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part
of a
provision of this Agreement and this Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible.
Section
7.14 Further
Assurances.
From
and after the date of this Agreement, upon the request of the Purchasers or
the
Company, the Company and each Purchaser shall execute and deliver such
instruments, documents and other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement and the other Transaction Documents
Section
7.15 Collateral
Agent.
(a)
Appointment.
Each
Purchaser hereby appoints the Lead Purchaser as the Collateral Agent under
the
Security Agreement and the IP Security Agreement (collectively, the
“Security
Documents”)
and
each Purchaser authorizes the Collateral Agent to take such action as agent
on
its behalf and to exercise such powers under the Security Documents as are
delegated to the Collateral Agent under such agreements and to exercise such
powers as are reasonably incidental thereto. Without limiting the foregoing,
each Secured Party hereby authorizes the Collateral Agent to execute and
deliver, and to perform its obligations under, each of the documents to which
the Collateral Agent is a party relating to security for the obligations under
the Notes, to exercise all rights, powers and remedies that the Collateral
Agent
may have under such Security Documents and, in the case of the Security
Documents, to act as agent for the Purchasers under such Transaction
Documents.
(b)
Instructions
of Purchasers.
The
Collateral Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions
of
the Purchasers holding at least 51% of the aggregate amount of the Notes then
outstanding, and such instructions shall be binding upon all Purchasers;
provided,
however,
that
the Collateral Agent shall not be required to take any action that (i) the
Collateral Agent in good faith believes exposes it to personal liability unless
the Collateral Agent receives an indemnification satisfactory to it from the
Purchasers with respect to such action or (ii) is contrary to this Agreement
or
applicable law.
(c)
Duties
are Administrative in Nature.
In
performing its functions and duties under the Security Documents and the other
documents required to be executed or delivered in connection therewith, the
Collateral Agent is acting solely on behalf of the Purchasers and its duties
are
entirely administrative in nature. The Collateral Agent does not assume and
shall not be deemed to have assumed any obligation other than as expressly
set
forth herein. The Collateral Agent may perform any of its duties under any
Security Document by or through its agents or employees.
30
(d)
No
Liability.
None of
the Collateral Agent, any of its affiliates or any of their respective
directors, officers, agents or employees shall be liable for any action taken
or
omitted to be taken by it, him, her or them under or in connection with the
Security Documents, except for its, his, her or their own gross negligence
or
willful misconduct.
(e)
Investigation.
Each
Secured Party acknowledges that it shall, independently and without reliance
upon the Collateral Agent or any other Secured Party conduct its own independent
investigation of the financial condition and affairs of the Company and its
Subsidiaries in connection with the issuance of the Securities. Each Secured
Party also acknowledges that it shall, independently and without reliance upon
the Collateral Agent or any other Secured Party and based on such documents
and
information as it shall deem appropriate at the time, continue to make its
own
credit decisions in taking or not taking action under this Agreement and other
Transaction Documents.
(f)
Indemnification.
Each
Purchaser agrees to indemnify the Collateral Agent and each of its affiliates,
and each of their respective directors, officers, employees, agents and advisors
(to the extent not reimbursed by the Company), from any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements (including fees, expenses and disbursements of
financial and legal advisors) of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against, the Collateral Agent or any of
its
affiliates, directors, officers, employees, agents and advisors in any way
relating to or arising out of the Security Documents or any action taken or
omitted by the Collateral Agent under the Security Documents or the document
related thereto; provided,
however,
that no
Purchaser shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Collateral Agent’s or such Affiliate’s gross
negligence or willful misconduct.
(g)
Resignation. The
Collateral Agent may resign at any time by giving written notice thereof to
the
Purchasers and the Company. Upon any such resignation, the Purchasers shall
have
the right to appoint a successor Collateral Agent. If no successor Collateral
Agent shall have been so appointed by the Purchasers, and shall have accepted
such appointment, within 30 days after the retiring Collateral Agent’s giving of
notice of resignation, then the retiring Collateral Agent may, on behalf of
the
Purchasers, appoint a successor Collateral Agent, selected from among the
Purchasers. Upon the acceptance of any appointment as Collateral Agent by a
successor Collateral Agent, such successor Collateral Agent shall succeed to,
and become vested with, all the rights, powers, privileges and duties of the
retiring Collateral Agent, and the retiring Collateral Agent shall be discharged
from its duties and obligations under this Agreement, the Transaction Documents
and any other documents required to be executed or delivered in connection
therewith. Prior to any retiring Collateral Agent’s resignation hereunder as
Collateral Agent, the retiring Collateral Agent shall take such action as may
be
reasonably necessary to assign to the successor Collateral Agent its rights
as
Collateral Agent under the Transaction Documents. After such resignation, the
retiring Collateral Agent shall continue to have the benefit of this Agreement
as to any actions taken or omitted to be taken by it while it was Collateral
Agent under this Agreement, the Security Documents and any other documents
required to be executed or delivered in connection therewith.
31
(h)
Binding.
Each
Purchaser agrees that any action taken by the Collateral Agent in accordance
with the provisions of this Agreement or of the other document relating thereto,
and the exercise by the Collateral Agent or the Purchasers of the powers set
forth herein or therein, together with such other powers as are reasonably
incidental thereto, shall be authorized and binding upon all of the
Purchasers.
(i)
Releases.
Each of
the Purchasers hereby directs, in accordance with the terms hereof, the
Collateral Agent to release (or in the case of clause (ii) below, release or
subordinate) any Lien held by the Collateral Agent for the benefit of the
Purchasers against any of the following: (i) all of the Collateral upon payment
and satisfaction in full of all obligations under the Notes and all other
obligations under the Transaction Documents that the Collateral Agent has been
notified in writing are then due and payable; (ii) any assets that are subject
to a Lien; and (iii) any part of the Collateral sold or disposed of by the
Company or any Subsidiary if such sale or disposition is permitted by this
Agreement and the other Transaction Documents (or permitted pursuant to a waiver
or consent of a transaction otherwise prohibited by this Agreement and the
other
Transaction Documents). Each of the Purchasers hereby directs the Collateral
Agent to execute and deliver or file such termination and partial release
statements and do such other things as are necessary to release Liens to be
released pursuant to this Section 7.15 promptly upon the effectiveness of any
such release.
Section
7.16 Representation
of Lead Purchaser.
It is
acknowledged by each Purchaser that the Lead Purchaser has retained ▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, PLC to act as its counsel in connection with the
transactions contemplated by the Transaction Documents and that ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
& Melloni, PLC has not acted as counsel for any Purchaser, other than the
Lead Purchaser, in connection with the transactions contemplated by the
Transaction Documents and that none of such Purchasers has the status of a
client for conflict of interest or any other purposes as a result
thereof.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
32
IN
WITNESS WHEREOF, the parties hereto have caused this Note and Warrant Purchase
Agreement to be duly executed by their respective authorized officers as of
the
date first above written.
| DUSKA THERAPEUTICS, INC. | |||
| By: | /s/ Amir Pelleg________________________ | ||
| Name: | ▇▇▇▇ ▇▇▇▇▇▇ | ||
| Title: | President | ||
| PLATINUM LONG TERM GROWTH VI, LLC | |||
| By: | /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | ||
| Name: | ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | ||
| Title: |
Managing Member
|
||
| PLATINUM MONTAUR LIFE SCIENCES, LLC | |||
| By: | /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | ||
| Name: | ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | ||
| Title: | Managing Member | ||
| BRIDGEPOINTE MASTER FUND LTD. | |||
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ | ||
| Name: | ▇▇▇▇ ▇. ▇▇▇▇▇▇ | ||
| Title: | Director | ||
| FIREBIRD GLOBAL MASTER FUND LTD. | |||
| By: | /s/ ▇▇▇▇▇ ▇▇▇▇▇▇ | ||
| Name: | ▇▇▇▇▇ ▇▇▇▇▇▇ | ||
| Title: | Director | ||
| FIREBIRD GLOBAL MASTER FUND II LTD. | |||
| By: | /s/ ▇▇▇▇▇ ▇▇▇▇▇▇ | ||
| Name: | ▇▇▇▇▇ ▇▇▇▇▇▇ | ||
| Title: |
Director
|
||
i
EXHIBIT
A
LIST
OF PURCHASERS
|
Names
and Addresses of Purchasers
|
Investment
Amount and Number of
Warrants
Purchased
|
|
|
Platinum
Long Term Growth VI, LLC
▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
$1,326,923.08
Principal Amount of Notes
Long
Term Warrant: 3,317,308 shares
Short
Term Warrant: 3,317,308 shares
|
|
|
Platinum
Montaur Life Sciences, LLC
▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
$1,326,923.08
Principal Amount of Notes
Long
Term Warrant: 3,317,308 shares
Short
Term Warrant: 3,317,308 shares
|
|
|
Bridgepoint
Master Fund Ltd.
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇
, ▇▇▇▇▇▇▇ ▇▇▇▇▇
|
$1,326,923.08
Principal Amount of Notes
Long
Term Warrant: 3,317,308shares
Short
Term Warrant: 3,317,308 shares
|
|
|
Firebird
Global Master Fund Ltd.
c/o
Trident Trust Company (Cayman) Limited
▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
|
$884,615.38
Principal Amount of Notes
Long
Term Warrant: 2,211,539 shares
Short
Term Warrant: 2,211,539 shares
|
|
|
Firebird
Global Master Fund II Ltd.
c/o
Trident Trust Company (Cayman) Limited
▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
|
$884,615.38
Principal Amount of Notes
Long
Term Warrant: 2,211,539 shares
Short
Term Warrant: 2,211,539 shares
|
|
ii
EXHIBIT
B
FORM
OF 10% NOTE
iii
EXHIBIT
C
FORM
OF LONG TERM WARRANT
iv
EXHIBIT
D
FORM
OF SHORT TERM WARRANT
v
EXHIBIT
E
FORM
OF REGISTRATION RIGHTS AGREEMENT
vi
EXHIBIT
F
FORM
OF SECURITY AGREEMENT
vii
EXHIBIT
G
FORM
OF IP SECURITY AGREEMENT
viii
EXHIBIT
H
FORM
OF GUARANTEE
ix
EXHIBIT
I
FORM
OF OFFICER’S CERTIFICATE
x
EXHIBIT
J
FORM
OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
as
of
September __, 2007
[Name
and
address of Transfer Agent]
Attn:
_____________
Ladies
and Gentlemen:
Reference
is made to that certain Note and Warrant Purchase Agreement (the “Purchase
Agreement”),
dated
as of September 26, 2007, by and among Duska Therapeutics, Inc., a Nevada
corporation (the “Company”),
and
the purchasers named therein (collectively, the “Purchasers”)
pursuant to which the Company is issuing to the Purchasers senior secured
convertible promissory notes (the “Notes”)
and
warrants (the “Warrants”)
to
purchase shares of the Company’s common stock, par value $0.001 per share (the
“Common
Stock”).
This
letter shall serve as our irrevocable authorization and direction to you
(provided that you are the transfer agent of the Company at such time) to issue
shares of Common Stock upon conversion of the Notes (the “Conversion
Shares”)
and
exercise of the Warrants (the “Warrant
Shares”)
to or
upon the order of a Purchaser from time to time upon (i) surrender to you of
a
properly completed and duly executed Conversion Notice or Exercise Notice,
as
the case may be, in the form attached hereto as Exhibit I and Exhibit II,
respectively, (ii) in the case of the conversion of Notes, a copy of the Note
(with the original delivered to the Company) representing the Notes being
converted or, in the case of Warrants being exercised, a copy of the Warrants
(with the original Warrants delivered to the Company) being exercised (or,
in
each case, an indemnification undertaking with respect to such Notes or the
Warrants in the case of their loss, theft or destruction), and (iii) delivery
of
a treasury order or other appropriate order duly executed by a duly authorized
officer of the Company. So long as you have previously received (x) written
confirmation from counsel to the Company that a registration statement covering
resales of the Conversion Shares or Warrant Shares, as applicable, has been
declared effective by the Securities and Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended (the “1933
Act”),
and
no subsequent notice by the Company or its counsel of the suspension or
termination of its effectiveness and (y) a copy of such registration statement,
and if the Purchaser represents in writing that the prospectus delivery
requirements have been or will be met, the Conversion Shares or the Warrant
Shares, as the case may be, were sold pursuant to the Registration Statement,
then certificates representing the Conversion Shares and the Warrant Shares,
as
the case may be, shall not bear any legend restricting transfer of the
Conversion Shares and the Warrant Shares, as the case may be, thereby and should
not be subject to any stop-transfer restriction. Provided, however, that if
you
have not previously received (i) written confirmation from counsel to the
Company that a registration statement covering resales of the Conversion Shares
or Warrant Shares, as applicable, has been declared effective by the SEC under
the 1933 Act, and (ii) a copy of such registration statement, then the
certificates for the Conversion Shares and the Warrant Shares shall bear the
following legend:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT”), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS, OR
DUSKA THERAPEUTICS, INC. SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.”
xi
and,
provided further, that the Company may from time to time notify you to place
stop-transfer restrictions on the certificates for the Conversion Shares and
the
Warrant Shares in the event a registration statement covering the Conversion
Shares and the Warrant Shares is subject to amendment for events then
current.
A
form of
written confirmation from counsel to the Company that a registration statement
covering resales of the Conversion Shares and the Warrant Shares has been
declared effective by the SEC under the 1933 Act is attached hereto as Exhibit
III.
Please
be
advised that the Purchasers are relying upon this letter as an inducement to
enter into the Purchase Agreement and, accordingly, each Purchaser is a third
party beneficiary to these instructions.
Notwithstanding
anything to the contrary contained herein, you are not to issue any Warrant
Shares (i) after September 26, 2012 or (ii) upon exercise in full of the
Warrants (as evidenced in written instructions from the Company). Further,
you
are instructed not to issue any Conversion Shares after you are informed in
writing by the Company that the applicable Note has been paid in full and
satisfied or that all of the applicable Note Shares have been issued.
Please
execute this letter in the space indicated to acknowledge your agreement to
act
in accordance with these instructions. Should you have any questions concerning
this matter, please contact me at ___________.
Very
truly yours,
By:
Name:
Title:
ACKNOWLEDGED
AND AGREED:
[TRANSFER
AGENT]
By:
Name:
Title:
Date:
xii
EXHIBIT
K
OPINION
OF COUNSEL TO COMPANY
xiii
EXHIBIT
I
DUSKA
THERAPEUTICS, INC.
CONVERSION
NOTICE
(To
be
Executed by the Registered Holder in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Note No. ___ into shares of Common Stock of DUSKA
THERAPEUTICS, INC. (the “Maker”) according to the conditions hereof, as of the
date written below.
Date
of
Conversion
_________________________________________________________
Applicable
Conversion Price __________________________________________________
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the Date of Conversion: _________________________
Signature___________________________________________________________________
[Name]
Address:__________________________________________________________________
_______________________________________________________________________
xiv
EXHIBIT
II
FORM
OF EXERCISE NOTICE
EXERCISE
FORM
DUSKA
THERAPEUTICS, INC.
The
undersigned _______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase _____ shares of Common Stock of Duska Therapeutics,
Inc. covered by the within Warrant.
| Dated: ________________ | Signature | ___________________________ | |||
| Address | _____________________ | ||||
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the date of Exercise: _________________________
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and
does
irrevocably constitute and appoint _____________, attorney, to transfer the
said
Warrant on the books of the within named corporation.
| Dated:_________________ | Signature | ___________________________ | |||
| Address | _____________________ | ||||
PARTIAL
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named
corporation.
| Dated: ________________ | Signature | ___________________________ | |||
| Address | _____________________ | ||||
FOR
USE
BY THE ISSUER ONLY:
This
Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock
in
the name of _______________.
xv
EXHIBIT
III
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
[Name
and
address of Transfer Agent]
Attn:
_____________
Re: Duska
Therapeutics, Inc.
Ladies
and Gentlemen:
We
are
counsel to Duska Therapeutics, Inc., a Nevada corporation (the “Company”),
and
have represented the Company in connection with that certain Note and Warrant
Purchase Agreement (the “Purchase
Agreement”),
dated
as of September __, 2007, by and among the Company and the purchasers named
therein (collectively, the “Purchasers”)
pursuant to which the Company issued to the Purchasers senior secured
convertible promissory notes (the “Notes”)
and
warrants (the “Warrants”)
to
purchase shares of the Company’s common stock, par value $0.001 per share (the
“Common
Stock”).
Pursuant to the Purchase Agreement, the Company has also entered into a
Registration Rights Agreement with the Purchasers (the “Registration
Rights Agreement”),
dated
as of September __, 2007, pursuant to which the Company agreed, among other
things, to register the Registrable Securities (as defined in the Registration
Rights Agreement), including the shares of Common Stock issuable upon conversion
of the Notes and exercise of the Warrants, under the Securities Act of 1933,
as
amended (the “1933
Act”).
In
connection with the Company’s obligations under the Registration Rights
Agreement, on ________________, 2007, the Company filed a Registration Statement
on Form SB-2 (File No. 333-________) (the “Registration
Statement”)
with
the Securities and Exchange Commission (the “SEC”)
relating to the resale of the Registrable Securities which names each of the
present Purchasers as a selling stockholder thereunder.
In
connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at [ENTER
TIME OF EFFECTIVENESS]
on
[ENTER
DATE OF EFFECTIVENESS]
and we
have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
any stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC
and
accordingly, the Registrable Securities are available for resale under the
1933
Act pursuant to the Registration Statement.
Very
truly yours,
[COMPANY
COUNSEL]
By:
cc: [LIST
NAMES OF PURCHASERS]
xvi
Schedules
2.1(g)
Direct and Indirect Subsidiaries
Duska
Scientific Co.
2.1(b)
Further consent or authorization of the Company, its Board of Directors or
stockholders
None
Schedule
2.1(c) Authorized, Issued and Outstanding Capital Stock, Options, Warrants,
and
other
Securities;
Registration Rights
[see
cap
table and your schedule on reg rights]
2.1
(h)
Material Adverse Changes
None
2.1(i)
Undisclosed Liabilities
None
2.1(j)
Undisclosed Events or Circumstances
None
2.1(k)
Indebtedness
$250,000
Convertible notes issued in September, 2006, which will be converted to common
stock and warrants upon completion of this financing.
2.1
(l)
Title to Assets Clouded
None
2.1
(m)
Claims or Actions Pending
A
claim
has been asserted by ▇▇▇▇ & ▇▇▇▇▇, P.C. for collection action of their
outstanding accounts payable.
2.1
(o)
Returns under Examination
None
2.1(p)
Fees in connection with Transaction
|
Placement
agent fee
|
$575,000
and 10% warrant coverage as set forth in the Purchase
Agreement
|
|
Placement
agent retainer and expenses
|
$35,000
|
|
Legal
fees for Duska Therapeutics
|
$47,500
|
|
Due
diligence fees for Roswell Capital
|
$5,000
|
|
Legal
fees for Platinum Partners
|
$40,000
|
2.1
(r )
Patents not owned
None
xvii
2.1
(u)
Material Agreements
None
2.1
(v)
Transactions with Affiliates
See
schedule attached
2.1
(x)
Collective Bargaining Agreements, Employment agreements
None
2.1
(y)
Subsequent Events
None
xviii