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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), dated September __,
1998, by and between Cryomedical Sciences, Inc., a Delaware corporation with an
office at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Company"), and ValorInvest, Ltd., a corporation formed pursuant to the laws of
Ireland with an address at ▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ (the
"ValorInvest").
W I T N E S S E T H :
WHEREAS, the Company is desirous of obtaining capital through a bridge
financing of $600,000 (the "Bridge Financing") and a public offering of
$4,000,000 to $10,000,000 (the "Public Offering") to further its business
development and purposes; and
WHEREAS, the Company has a current capitalization consisting of (a)
50,000,000 shares of common stock, par value $.001 per share ("Common Stock"),
of which 33,454,302 shares are issued and outstanding and (b) 9,378,800 shares
of preferred stock, par value $.001 per share ("Preferred Stock"), of which no
shares are issued and outstanding; and
WHEREAS, ValorInvest is a merchant banking organization that is willing to
provide the Company with the Bridge Financing and, subject to the adoption by
the Company and its shareholders of a Plan of Recapitalization and Financing,
use its best efforts to arrange for the Public Offering through an underwriter
to be designated or approved by ValorInvest (the "Underwriter");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants contained herein, the parties agree as follows:
1. Plan of Recapitalization and Financing.
(a) On or as of the date hereof, the Company's Board of Directors
shall adopt or shall have adopted the following Plan of Recapitalization and
Financing(the "Plan"), pursuant to which:
(i) the Company's certificate of incorporation shall be
amended to (A) reduce the authorized number of shares of (1) Common
Stock from 50,000,000 shares to 25,000,000 shares, and (2) Preferred
Stock from 9,378,800 shares to 1,000,000 shares, and (B) effectuate
a reverse stock split of either (1) one for five, (2) one for six,
(3) one for seven, (4) one for eight, (5) one for nine, (6) one for
ten, (7) one for eleven, (8) one for twelve, (9) one for thirteen,
(10) one for fourteen, (11) one for fifteen, or (12) one for
sixteen, each of such alternatives to be approved by the
shareholders of the Company and one of such approved alternatives to
be chosen by the Board of Directors of the Company;
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(ii) to appropriately incentivize and compensate management,
the Board of Directors and others who have performed services for
the Company, the Company shall (A) adopt a 1998 Stock Option Plan
containing 20,000,000 shares (on a pre-reverse stock split basis) of
Common Stock, options for which may be issued at an exercise price
of not less than the fair market value, and (B) grant 10 year stock
options/warrants (on a pre-reverse stock split basis), exercisable
at $.25 per share (on a pre-reverse stock split basis), the vesting
of which shall be subject to the approval of the Plan by the
Company's shareholders, in the following amounts to the following
persons or entities: each director - 720,000 shares of Common Stock;
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ - 6,480,000 shares of Common Stock; ▇▇▇▇ ▇▇▇▇▇
- 2,160,000 shares of Common Stock; ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP -
2,880,000 shares of Common Stock; BWM Investments - 3,600,000 shares
of Common Stock; and to other employees of the Company up to an
aggregate of 2,500,000 shares of Common Stock; and
(iii) the Company will prepare and file a registration
statement (the "Registration Statement") with the Securities and
Exchange Commission ("SEC") for the sale of securities of the
Company on such terms and conditions as may be mutually agreed to
between the Company and the Underwriter.
(b) Within 60 days from the date hereof, the Company shall call a
shareholders meeting to approve the Plan.
2. Bridge Financing.
(a) Concurrently with the execution and delivery of this Agreement,
the Company is selling to ValorInvest or its designee, and ValorInvest or its
designee is purchasing from the Company, 128 Units ("Series E Units") at a price
of $1,562.50 per Unit (an aggregate of $200,000), each Unit to consist of (1)
one share of Series E Convertible Preferred Stock ("Series E Preferred Stock")
each share of which Series E Preferred Stock (A) is convertible into 10,000
shares (pre-reverse stock split) of Common Stock, (B) has one vote for each
share of Common Stock into which it is convertible, and (C) automatically
converts into Common Stock upon the effectuation of the reverse stock split
pursuant to the Plan, and (2) a warrant to purchase 5,000 shares (pre-reverse
stock split) of Common Stock at $.25 per share (pre-reverse stock split).
(b) On or before December 28, 1998, the Company shall sell to
ValorInvest or its designee, and ValorInvest or its designee will purchase from
the Company, an additional 256 Series E Units at a price of $1,562.50 per Unit
(an aggregate of $400,000).
(c) The Company covenants and agrees to (i) include the shares of
Common
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Stock issuable upon conversion of the Series E Preferred Stock sold hereunder in
the Registration Statement at the Company's cost and expense, and to keep such
Registration Statement effective until such time as such shares of Common Stock
may be sold pursuant to an exemption from registration pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), and (ii), at the
request of ValorInvest, redeem the Series E Units at a price, as to each Unit,
equal to the price paid under this Agreement plus an additional amount
determined by multiplying the price paid under this Agreement by a fraction, the
denominator of which is the number "120" and the numerator of which is the
number of months (rounded to a higher whole number) elapsed between the date on
which such Units were purchased and the redemption date, in the event the Plan
is not approved by the Company's shareholders within 120 days from the date
hereof.
3. Representations and Warranties by the Company. The Company represents
and warrants to ValorInvest as follows:
(a) Organization and Qualification. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has the full corporate power and authority to own, lease, and
operate its properties as it now does and to carry on its business as it
presently is being conducted. The Company is duly qualified and in good standing
as a foreign corporation in each jurisdiction in which the property owned or
leased by it or the nature of the activities conducted by it requires
qualification, except where the failure to be so qualified would not have a
material adverse effect on the Company's business, operations, financial
condition, properties, or assets (a "Material Adverse Effect").
(b) Authorization.
(i) This Agreement constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except as may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights in general and subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The Company has the power and authority to
execute, deliver, and perform this Agreement and to consummate the transactions
contemplated herein. The execution and delivery of this Agreement and the
performance by the Company of its obligations hereunder has been duly authorized
by the Company's Board of Directors. No approval by the shareholders of the
Company is required.
(ii) The Series E Units have been duly authorized and, when issued
in accordance with this Agreement, shall be validly issued, fully paid, and
nonassessable. The issuance, sale, and delivery of the Series E Units is not
subject to any preemptive right of any shareholder of the Company or to any
right of first refusal or other right in favor of any person.
(c) Required Filings and Consents; No Conflict. Except for applicable
requirements of the Securities and Exchange Act of 1934, as amended, (the
"Exchange Act") and the Securities Act, the Company is not required to submit
any notice, report or other filing with any governmental authority in connection
with the execution, delivery or performance of this
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Agreement. The execution and delivery of this Agreement and consummation of the
transactions contemplated herein do not and will not (i) conflict with or
violate any law, regulation, judgment, order or decree binding upon the Company
or the provision of its Certificate of Incorporation or By-laws, or (ii)
conflict with or result in a breach of any condition or provision of, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or result in the creation of imposition of any
lien or charge upon any of the properties or assets of the Company pursuant to,
any contract, agreement, permit, license, franchise or other instrument to which
the Company is a party or which is or purports to be binding upon the Company or
any of its property; nor will the same result in the loss of any license, legal
privilege or legal right enjoyed or possessed by the Company.
(d) Capitalization. The authorized capital stock of the Company
consists of (a) 50,000,000 shares of common stock, par value $.001 per share, of
which 33,454,302 shares are issued and outstanding, and (b) 9,378,800 shares of
preferred stock, par value $.001 per share, none of which are issued and
outstanding. Except as disclosed in the documents referred to in Section 3(e)
hereof and as contemplated by this Agreement, there are no outstanding
subscriptions, options, warrants, calls, commitments, agreements or rights of
any kind or nature in respect of the authorized but unissued shares of capital
stock of the Company and none of such shares are reserved for issuance for any
purpose.
(e) Securities and Exchange Commission Filings; Financial Statements.
(i) The Company has filed all forms, reports and documents required
to be filed with the Securities and Exchange Commission ("SEC") since January 1,
1996 and has heretofore delivered to ValorInvest true and complete copies of the
Company's (i) Form 10-KSB for the fiscal year ended December 28, 1997, and (ii)
Quarterly Report on Form 10-QSB for each of the quarters ended March 29, 1998
and June 28, 1998 (collectively, "the SEC Reports"). The SEC Reports (x) were
prepared in accordance with the requirements of the Exchange Act, and (y) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(ii) The financial statements contained in the SEC Reports have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and fairly present the financial position of the
Company as at the respective dates thereof and the results of operations of the
Company for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount. Since the date of
the Form 10-QSB for the quarter ended June 28, 1998, there has not been any
material adverse change in the financial condition of the Company.
(f) Litigation; Claims; Investigations. There are no suits, actions, or
claims,
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or any investigations or inquiries, by any administrative agency or governmental
body, or legal, administrative agency or governmental body, or legal
administrative or arbitration proceedings pending or, to the best knowledge of
the Company, threatened against the Company or to which the Company is or, in
the case of threatened proceedings, might become a party and which if decided
adversely to the Company would have a Material Adverse Effect, and the Company
does not know or have any grounds to know of any basis or grounds for any such
suit, action, claim, investigation, inquiry or proceeding. There is no
outstanding order, writ, judgment, injunction or decree of any court,
administrative agency or governmental body or arbitration tribunal against or
affecting the Company or any of the properties, rights, assets or business of
the Company.
(g) No Series E Units Offered in U.S. or to any U.S. Person. The
Company has not offered the Series E Units to ValorInvest in the United States
or to any other person in the United States or to any U.S. person ("U.S.
Person") as that term is defined in Regulation S ("Regulation S") promulgated
under the Securities Act of 1933, as amended (the "Act"), unless such U.S.
Person is a professional fiduciary of a non-U.S. Person (as described in
Regulation S).
(h) No Directed Selling Efforts in Regard to this Transaction. Neither
the Company, nor any person acting for the Company, has conducted any "directed
selling efforts" in the United States (as such term is defined in Regulation S)
with respect to the offering of the Series E Units.
(i) Taxes.
(i) The Company has filed all tax reports and returns required to
be filed by it, including all federal, state, local, and foreign tax returns and
reports (the "Tax Returns"), and has paid all taxes shown to be due by such Tax
Returns as well as all other taxes, assessments, and governmental charges which
have become due or payable, including all taxes which the Company has been
required to withhold from amounts owing to employees, creditors, and third
parties.
(ii) The Tax Returns have not been examined by the Internal Revenue
Service for any period during the past five years. No audits, inquiries,
investigations, or examinations relating to the Tax Returns are pending or, to
the Company's knowledge, threatened by any Governmental Authority and no claims
have been asserted relating to any of the Tax Returns filed for any year which,
if determined adversely, would result in the assertion by any Governmental
Authority of any tax deficiency against the Company.
(j) Personal Property; Inventory; Other Assets. The Company has valid
title, free and clear of any Liens, to all personal property used in its
business or presently located on its premises, including, but not limited to,
all items of personal property reflected in its financials. The assets owned by
the Company, together with those leased or licensed from unrelated third parties
on an arm's-length basis, constitute all of the assets, tangible and
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intangible, used in or needed to conduct the Company's business in the manner in
which it is presently conducted by the Company.
(k) Real Property. The company owns no real property. The Company
enjoys peaceful and undisturbed possession under all real property leases under
which it is operating and all such real property leases are valid and subsisting
and in full force and effect. The transactions contemplated by this Agreement
will not materially adversely affect the Company's right to use those properties
for the same purpose and to the same extent as they were being used by the
Company prior to the date of this Agreement.
(l) Contracts and Commitments. Each material contract, lease,
commitment, and other agreement to which the Company is a party (the
"Contracts") is set forth in the SEC Reports and other filings with the SEC and
is in full force and effect in accordance with its terms. Neither the Company
nor, to Company's knowledge, any other party is in default in any material
respect under any of the provisions of any of the Contracts, and no condition
exists that, with notice or lapse of time or both, would constitute a default by
the Company or, to Company's knowledge, any other party to any Contract. No
party to any Contract has made, asserted, or, to Company's knowledge, has any
defense, set off, or counterclaim under any Contract or has exercised any option
granted to it to cancel or terminate its Contract, to shorten the term of its
Contract, or to renew or extend the term of its Contract, and the Company has
not received any notice to that effect.
(m) Employee Matters.
(i) Except as disclosed in the SEC Reports and other filings with
the SEC, the Company (A) is not a party to or bound by any pension, annuity,
retirement, stock option, stock purchase, savings, profit sharing, or deferred
compensation plan or agreement, or any retainer, consultant, bonus, group
insurance, or other incentive or benefit contract, plan, or arrangement
applicable to employees of the Company an (B) does not have any severance policy
and no employee or former employee of the company is entitled to any severance
payment (or similar payment), either by law or by agreement, upon the
termination of his or her employment. No employee of the Company is represented
by any union or other collective bargaining agent, there are no collective
bargaining or other labor agreements with respect to such employees, and to the
best of the knowledge of the Company, no union is attempting to organize any
such employees. The transactions contemplated by this Agreement will not trigger
any payments of any kind to any employee of the Company.
(ii) Neither the Company nor any predecessor has ever contributed
to, contributes to, has ever been required to contribute to, or otherwise
participated in or participates in or in any way, directly or indirectly, has
any liability with respect to any "multi-employer plan" (within the meaning of
Sections 3(37) or 4001(a)(3) of the Employment Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 414(f) of the Internal Revenue Code of
1986, as amended (the "Code")) or any single employer pension plan (within the
meaning of
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Section 4001(a)(15) or ERISA) which is subject to Title IV of ERISA or Section
412 of the Code.
(iii) No third party has claimed that any employee of or consultant
to the Company has (A) violated or may be in violating the terms and conditions
of an agreement between such employee or consultant and the third party, (B)
disclosed any trade secret of the third party during the course of their
employment by the Company, or (C) interfered with the employment relationship
between the employee or consultant and the third party.
(n) Permits and Licenses. The Company has all material permits,
licenses, franchises, and other authorizations (collectively, "Licenses")
necessary for the conduct of its business as currently conducted, and all such
Licenses are valid and in full force and effect.
(o) Insurance. The Company maintains such insurance policies as is
customary for a Company engaged in the business in which the Company is engaged.
(p) Intellectual Property. The Company owns or possesses adequate
licenses or other rights to use all material trademarks, trade names, service
marks, service names, domain names, copyrights, logos, slogans, patents,
licenses (including software licenses), and other intellectual property
(collectively, "Intellectual Property") necessary for the conduct of its
business as currently conducted. Except as disclosed on the Company's filings
with the SEC, no claim is pending or, to the Company's knowledge, threatened to
the effect that the operations of the Company infringe upon or conflict with the
asserted rights of any other person under any Intellectual Property, and, to the
knowledge of the Company, there is no basis for any such claim.
(q) Illegal Payments. Neither the Company, nor any officer, director,
or employee of the Company, directly or indirectly, has paid or delivered any
fee, commission, or other sum of money or item or property, however
characterized, to any finder, agent, government official, or other party, in the
United States or any other country, which is in any manner related to the
business or operations of the Company, which the Company or such person knows or
has reason to believe to have been illegal under any federal, state, or local
laws of the United States or any other country having jurisdiction, and the
Company has not participated, directly or indirectly, in any boycotts or other
similar practices affecting any of its actual or potential customers.
(r) Material Misstatements or Omissions. No representation, warranty,
or statement made by the Company in this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary to be stated in order to make such representation, warranty, or
statement not misleading. All documents delivered on behalf of the Company in
connection with this Agreement and the transaction contemplated herein are true,
complete, and correct.
4. Representations and Warranties by ValorInvest. ValorInvest represents
and
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warrants to the Company as follows:
(a) Organization. ValorInvest is a corporation duly organized, validly
existing, and in good standing under the laws of Ireland.
(b) Authorization of Agreement. The execution, delivery, and
performance of this Agreement by ValorInvest has been duly authorized by all
necessary action of ValorInvest and this Agreement constitutes a valid and
binding obligation of ValorInvest enforceable against ValorInvest in accordance
with its terms, except as may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights in general and
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) Consents of Third Parties.
(i) The execution, delivery and performance of this Agreement by
ValorInvest will not (A) conflict with or result in the breach or termination
of, or constitute a default (or an event which, with notice or lapse of time or
both, would become a default) under, any lease, agreement, commitment or other
instrument, or any order, judgment or decree, to which ValorInvest is a party or
by which it or any of its properties is bound; or (B) constitute a violation by
ValorInvest of any law, regulation, order, writ, judgment, injunction or decree
applicable to it.
(ii) No consent, approval or authorization of, or designation,
declaration or filing with, any court, governmental authority, or any other
person or entity is required on the part of ValorInvest in connection with the
execution, delivery, and performance of this Agreement.
(d) Offshore Transaction. (a) ValorInvest is not a U.S. Person; (b) the
Series E Units were not offered to ValorInvest in the United States; (c) at the
time of execution of this Agreement and the time of any offer to ValorInvest to
purchase the Series E Units hereunder, ValorInvest was physically outside the
United States; (d) ValorInvest is purchasing the Series E Units for its own
account and not on behalf of or for the benefit of any U.S. Person, and the sale
and resale of the Series E Units have not been prearranged with any U.S. Person
or buyer in the United States; and (e) ValorInvest is not an underwriter,
dealer, distributor, or other person who is participating, pursuant to a
contractual arrangement, in the distribution of the Series E Units offered or
sold in reliance on Regulation S.
(e) ValorInvest's Investment Decision. In making its investment
decision to purchase the Series E Units, ValorInvest is not relying on any oral
or written representations or assurances from the Company or any other person
other than as set forth in this Agreement and SEC Reports. ValorInvest has such
experience in business and financial matters that it is capable of evaluating
the risk of its investment and determining the suitability of its investment.
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ValorInvest is an accredited investor as defined in Rule 501 of Regulation D
promulgated under the Act.
(f) ValorInvest's Economic Risk. ValorInvest understands and
acknowledges that an investment in the Series E Units and Common Stock issuable
upon conversion/exercise thereof involves a high degree of risk. ValorInvest
understands and acknowledges that there are
limitations on the liquidity of the Series E Units and the Common Stock issuable
upon conversion/exercise thereof. ValorInvest represents that ValorInvest is
able to bear the economic risk of an investment in the Series E Units and the
Common Stock issuable upon conversion/exercise thereof, including a possible
total loss of investment. In making this statement ValorInvest hereby represents
and warrants to the Company that ValorInvest has adequate means of providing for
its current needs and contingencies; and that ValorInvest is able to afford to
hold the Series E Units and the Common Stock issuable upon conversion/exercise
thereof for an indefinite period. Further, ValorInvest represents, as of the
date of signing this Agreement, that ValorInvest has no present need for
liquidity in the Series E Units or the Common Stock issuable upon
conversion/exercise thereof and ValorInvest is willing to accept such investment
risks.
(g) No Government Recommendation or Approval. ValorInvest understands
that no United States federal or state agency, or similar agency of any other
country, has reviewed, approved, passed upon, or made any recommendation or
endorsement of the Company or the purchase of the Series E Units.
(h) No Directed Selling Efforts in Regard to This Transaction. To the
actual knowledge of ValorInvest, without any independent investigation, neither
the Company, nor any person acting for the Company, has conducted any "directed
selling efforts" in the United States as such term is defined in Regulation S,
which in general, means any activity undertaken for the purpose of, or that
could reasonably be expected to have the effect of, conditioning the market in
the United States for any of the Series E Units being offered in reliance on
Regulation S. Such activity includes, without limitation, the mailing of printed
material to investors residing in the United States, the holding of promotional
seminars in the United States, and the placement of advertisements with radio or
television stations broadcasting in the United States or in publications with a
general circulation in the United States, that refers to the offering of the
Series E Units in reliance on Regulation S.
(i) Company's Reliance on Representations of ValorInvest. ValorInvest
understands that the Series E Units is being offered and sold to it in reliance
on specific exemptions from the registration requirements of U.S. securities
laws and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments, and understandings of
ValorInvest set forth herein in order to determine the applicability of such
exemptions and the suitability of ValorInvest to acquire the Series E Units.
(j) Series E Units Not Registered Under the Act or Any State Act.
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ValorInvest understands that the offer and sale of the Series E Units have not
been registered under the Securities Act or any state securities laws ("State
Acts") and is being offered and sold pursuant to Regulation S based in part upon
the representations of ValorInvest contained herein.
(k) No Public Solicitation. ValorInvest knows of no public solicitation
or advertisement of an offer in connection with the issuance and sale of the
Series E Units.
(l) Investment Intent. ValorInvest is acquiring the Series E Units and
the Common Stock issuable upon conversion/exercise thereof for its own account
for investment and not as a nominee and not with a view to the distribution
thereof. ValorInvest understands that ValorInvest must bear the economic risk of
this investment indefinitely unless the Series E Units or the Common Stock
issuable upon conversion/exercise thereof is registered pursuant to the Act and
any applicable State Acts, or an exemption from such registration is available,
and that the Company has no present intention of registering any such sale of
the Series E Units, except as provided in Section 2(c) with respect to the
Common Stock issuable upon conversion of the Series E Units. ValorInvest
represents and warrants to the Company, as of the date of this Agreement, that
ValorInvest has no present plan or intention to sell the Series E Units or the
Common Stock issuable upon conversion/exercise thereof in the United States at
any predetermined time, and has made no predetermined arrangements to sell the
Series E Units or the Common Stock issuable upon conversion/exercise thereof.
(m) No Tax Advice From Company or Its Agents. ValorInvest has had an
opportunity to review with its own tax advisors the foreign, U.S. federal, state
and local tax consequences of this investment, and the transactions contemplated
by this Agreement. ValorInvest is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents and
understands that ValorInvest (and not the Company) shall be responsible for
ValorInvest's own tax liability that may arise as a result of this investment or
the transactions contemplated by this Agreement.
(n) No Legal Advice from Company or Its Agents. ValorInvest
acknowledges that it has had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with its own legal counsel.
ValorInvest is relying solely on such counsel and not on any statements or
representations of the Company or any of its agents for legal advice with
respect to this investment or the transactions contemplated by this Agreement,
except for representations, warranties and covenants set forth herein.
(o) No Scheme to Evade Registration. ValorInvest's acquisition of the
Series E Units is not a transaction (or any element of a series of transactions)
that is part of a plan or scheme to evade the registration provisions of the
Act.
5. Resales; Stock Legends.
(a) Resales of Series E Units. ValorInvest cannot resell the Series E
Units, or
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the Common Stock issuable upon conversion/exercise thereof, in the U.S. or to a
U.S. Person unless such sales are made (a) pursuant to an exemption from
registration under the Act and applicable State Acts after the Distribution
Compliance Period (as defined below); or (b) pursuant to an effective and
current registration statement under the Act. A transferee of the Series E
Units, or the Common Stock issuable upon conversion/exercise thereof, during the
Distribution Compliance Period shall execute an agreement containing provisions
substantially similar to this Section 5. For purposes hereof, the term
Distribution Compliance Period shall be, with respect to the Series E Units
purchased pursuant to Section 2(a) hereof, the period commencing on the date
hereof (the "Closing Date") and ending one year after the Closing Date, and,
with respect to the transaction contemplated by Sections 2(b) and 2(c) hereof,
the period commencing on the date of such transaction and ending one year after
the date thereof.
(b) Legend. To insure compliance with the provisions of the Act and
State Acts, the certificate(s) evidencing the Series E Units, and the Common
Stock issuable upon conversion/exercise thereof, shall bear a legend (the
"Regulation S Restrictive Legend") substantially as follows:
"THE ISSUANCE OF THE SECURITIES EVIDENCED HEREBY HAS NOT BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES LAW. THE
SECURITIES WERE ISSUED PURSUANT TO A SAFE HARBOR FROM REGISTRATION
UNDER REGULATION S ("REGULATION S") PROMULGATED UNDER THE ACT. THE
SECURITIES MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION
S) UNLESS SUCH OFFERS, SALES, AND TRANSFERS ARE REGISTERED UNDER THE
ACT AND APPLICABLE STATE SECURITIES LAWS OR ARE MADE PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS."
(c) Removal of Legend.
(i) The Regulation S Restrictive Legend may be removed (and the
restrictions on the transferability of the Series E Units and the Common Stock,
issuable upon conversion/exercise thereof shall terminate) when (i) such
securities have been registered under the Act and sold by the holder thereof in
accordance with such registration, (ii) a written opinion to the effect that
such restrictions are no longer required or necessary under any federal or state
securities law or regulation has been received from counsel for the holder
thereof (provided that such counsel, and the form and substance of such opinion,
are reasonably satisfactory to the Company) or counsel for the Company, (iii)
the Series E Units or the Common Stock issuable upon conversion/exercise thereof
has been sold without registration under the Act in compliance
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with Rule 144 or Rule 144A promulgated under the Act, (iv) the Company is
reasonably satisfied that the holder of the Series E Units or the Common Stock
issuable upon conversion/exercise thereof, in accordance with the terms of
Subsection (k) of Rule 144 or of Rule 144A promulgated under the Act, shall be
entitled to sell the Series E Units or the Common Stock issuable upon
conversion/exercise thereof pursuant to such Subsection, or (v) a letter or an
order has been issued to the holder thereof by the staff of the Securities and
Exchange Commission (the "Commission") stating that no enforcement action shall
be recommended by such staff or taken by the Commission, as the case may be, if
the Series E Units or the Common Stock issuable upon conversion/exercise thereof
are transferred in the United States or to a U.S. Person without registration
under the Act in accordance with the conditions set forth in such letter or
order and such letter or order specifies that no subsequent restrictions on
transfer are required.
(vi) Whenever the restrictions imposed by this Section 5 shall
terminate as hereinabove provided, the holder of a certificate representing any
of the Series E Units or the Common Stock issuable upon conversion/exercise
thereof then outstanding as to which such restrictions shall have terminated
shall be entitled to receive from the Company, without expense to such holder,
one or more new certificates for Series E Units or the Common Stock issuable
upon conversion/exercise thereof not bearing the restrictive legend set forth in
Section 5(b).
6. Covenants of the Company.
(a) Until March 31, 1999, ValorInvest shall have a right of first
refusal with respect to bona fide third party financing offer received by the
Company. If the Company receives such an offer of financing, then the Company
will promptly give ValorInvest written notice of such offer, and will offer
ValorInvest the opportunity to provide financing to the Company on the same
terms and conditions. If ValorInvest fails to exercise its right of first
refusal with respect to such offer within ten business days after notice
thereof, then ValorInvest shall have no further claim or right with respect
thereto provided that such offer is accepted within ninety (90) days after
notice shall have been given to ValorInvest. If the offer is not accepted within
such 90-day period or is modified, the Company shall adopt the same procedure as
with respect to the original offer. An offer to purchase securities of the
Company by an entity with whom the Company is entering into a partnering
arrangement for manufacturing, distribution, etc., shall not be deemed to be a
third party financing offer.
(b) Except with the prior agreement of ValorInvest, through March 31,
1999 the Company agrees not to issue additional shares of any type, or right
thereto, except as contemplated by this Agreement (including the last sentence
of Section 6(a) hereof), and each of the persons listed in Section 1(a)(ii)
hereof agrees not to sell, transfer or otherwise dispose of their shares or any
interest therein (and the Company agrees to cause such persons listed or
otherwise referred to in Section 1(a)(ii) to deliver a letter to such effect to
ValorInvest within 30 days from the date hereof).
(c) Prior to March 31, 1999, the Company will: (i) conduct business
only in
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the normal and ordinary course and in substantially the same manner as conducted
previously; (ii) use best efforts to preserve intact its business organization
and goodwill; (iii) keep ValorInvest advised of significant business
developments and of any significant decisions concerning business operation;
(iv) not make any dividend or other unusual distributions of any kind to
stockholders; (v) use its best efforts to retain the services of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Ph.D. as its Chief Executive Officer; and (vi) not make any material
change to any material agreements or incur any material liabilities without
ValorInvest's prior written consent.
(d) In consideration for the expenditures of time, effort and expense
to be undertaken by ValorInvest in connection with the financings contemplated
by this Agreement, the Company agrees that so long as ValorInvest is providing
financing and complying with its covenants as provided herein, the Company will
not, between the date of the execution of this Agreement and March 31, 1999,
solicit, entertain or enter into any agreement or understanding with, or furnish
any nonpublic information to, any person or entity other than ValorInvest or its
representative with respect to the acquisition (by purchase, merger or
otherwise) of any or all of the capital stock of the Company or the sale of any
material portion of its assets. The Company will promptly notify ValorInvest if
it receives an unsolicited offer for such a transaction, or obtain information
that such an offer is likely to me made, which notice will include the identity
of the prospective offeror and the price and terms of the proposed offer.
(e) For such period of time that ValorInvest or its designee owns
Series E Preferred Stock or shares of Common Stock issuable upon conversion
thereof, and provided that ValorInvest is not in breach of its representations,
warranties, covenants and agreements contained herein, the Company agrees, at
the request of ValorInvest, to nominate and use its best efforts to elect a
designee of ValorInvest as a director of the Company.
7. Covenants of ValorInvest. ValorInvest hereby covenants and agrees that:
(a) ValorInvest will not knowingly make any sale, transfer, or other
disposition of the Series E Units or the Common Stock issuable upon
conversion/exercise thereof, or engage in hedging transactions with respect to
the Series E Units or the Common Stock issuable upon conversion/exercise
thereof, in violation of the Act (including Regulation S), the Securities
Exchange Act of 1934, as amended, any applicable State Acts, or the rules and
regulations of the Commission or of any state securities commissions or similar
state authorities promulgated under any of the foregoing; and
(b) ValorInvest will use its best efforts to arrange for the
Underwriting through the Underwriter on the following terms and conditions: (i)
in the event the Company's Common Stock is trading at a price of $.50 or more
(pre-reverse stock split), 16,000,000 shares (pre-reverse stock split) of Common
Stock at not less than $.50 per share (pre-reverse stock split), or (ii), in the
event the Company's Common Stock is trading at a price of less than $.50 per
share (pre-reverse stock split), 16,000 Units ("Series F Units") at $500 per
Unit, each Series F Unit to consist of (1) one share of Series F Convertible
Preferred Stock ("Series F Preferred
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Stock"), each share of which Series F Preferred Stock shall be (x) convertible
into 1,000 shares (pre-reverse stock split) of Common Stock and automatically
converted into Common Stock if the closing and bid price of the Common Stock on
any day is $.50 or more (pre-reverse stock split), and (y) entitled to one vote
for each share of Common Stock into which it is convertible, and (2) a warrant
to purchase 250 shares (pre-reverse stock split) of Common Stock at $.75 per
share (pre-reverse stock split). The parties acknowledge that the final terms of
the Underwriting will be as negotiated between the Company and the Underwriter
and that there is no assurance that the terms of the Underwriting will be as set
forth herein. The exercise of the warrants included in the Series E Units shall
be conditioned upon the Underwriting being completed in accordance with (b)(i)
or (ii) hereunder.
8. Indemnification.
(a) Company's Indemnity. The Company agrees to indemnify and hold
harmless ValorInvest and its officers, directors, shareholders, agents, and
employees, from and against, for and in respect of, and promptly shall reimburse
them for, any and all claims, losses, costs, and expenses (including the cost of
any investigation and reasonable attorneys' fees), damages, lawsuits,
obligations, deficiencies, and liabilities (collectively "Losses") which arise
or result from or are related to (b) the inaccuracy or breach of any
representation or warranty made by the Company herein, (c) any breach or failure
of the Company to perform any of its covenants or agreements set forth herein,
or (d) any claim against ValorInvest arising out of or relating to events
occurring prior to the date hereof.
(b) ValorInvest's Indemnity. ValorInvest agrees to indemnify and hold
harmless the Company and its officer, directors, shareholders, agents, and
employees, from and against, for and in respect of, and shall promptly reimburse
them for, any and all Losses which arise or result from or are related to (a)
the inaccuracy or breach of any representation or warranty made by ValorInvest
herein, or (b) any breach or failure of ValorInvest to perform any of its
covenants or agreements set forth herein.
(c) Indemnification Procedure. An indemnifying party shall not be
liable under this Section 7 with respect to any claim made against an
indemnified party unless such indemnifying party shall be notified in writing of
the nature of the claim within a reasonable time after the assertion thereof,
but failure so to notify such indemnifying party shall not relieve it from any
liability which it may have otherwise than on account of this Section 8. If a
claim is made against an indemnified party and it notifies the indemnifying
party as herein provided, then the indemnifying party, subject to the provisions
set forth herein, shall be entitled to participate at its own expense in the
defense thereof or, if it so elects within a reasonable time after receipt of
such notice, to assume the defense thereof, which defense shall be conducted by
counsel chosen by it and reasonably satisfactory to the indemnified party
defendant or defendants in any suit so brought. The indemnified party will have
the right to employ its own counsel in any such action, but the fees, expenses,
and other charges of such counsel will be at the expense of such indemnified
party unless (a) the employment of counsel by the indemnified party has been
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authorized in writing by the indemnifying party, (b) the indemnified party has
reasonably concluded (based on advice of counsel) that there may be legal
defenses available to it or other indemnified parties that are different from or
in addition to those available to the indemnifying party, (c) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party), or (d) the indemnifying party has not
employed counsel to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action, in each of which cases
the reasonable fees, disbursements, and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party shall not, in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for the indemnified
parties.
(d) Cumulative Remedies. All remedies provided herein shall be
cumulative and shall not preclude the assertion by any party hereto of any other
rights or the seeking of any other remedies against the other parties hereto.
(e) Survival of Representations and Warranties. The representations,
warranties, covenants, and agreements made by the parties in this Agreement, or
in any certificate, agreement, or document furnished pursuant hereto, and the
obligation to indemnify hereunder shall survive the date hereof and the
consummation of the transactions contemplated hereby, notwithstanding any
investigation made by or on behalf of any party; provided, however, (i) except
as set forth in (ii) hereof, no action (other than an action for fraud) shall be
brought by any party hereto against any other party hereto more than three (3)
years after the date hereof, and (ii) with respect to an action for breach of
the representations and warranties of Section 3(i) hereof (Taxes), no action
shall be brought against the Company after the end of the statute of limitations
for such actions.
9. Miscellaneous.
(a) Notices. Any notice or other communication under this Agreement
shall be in writing and shall be considered given when delivered personally, two
days after being sent by a major overnight courier, or five days after being
mailed by registered air mail, to the parties at their respective addresses set
forth above (or at such other address as a party may specify by notice to the
other), with copies as follows:
If to the Company, to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to ValorInvest, to:
Powell, Goldstein, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(b) Expenses. Each party shall bear its own expenses in connection with
this Agreement and in connection with all obligations required to be performed
by it under this Agreement.
(c) Finders. ValorInvest and the Company each represent and warrant to
the other that it has not retained or dealt with any broker or finder in
connection with the transactions contemplated by this Agreement, except that the
Company acknowledges that the transaction was brought about by BWM Investments.
(d) Entire Agreement. This Agreement contains a complete statement of
all the arrangements between the parties with respect to its subject matter and
supersedes any previous agreements between them relating to that subject matter.
(e) Headings. The section headings of this Agreement are for reference
purposes only and are to be given no effect in the construction or
interpretation of this Agreement.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of Delaware.
(g) Separability. If any provision of this Agreement is invalid or
unenforceable, the balance of this Agreement shall remain in effect.
(h) Amendment; Waiver. This Agreement cannot be altered, amended,
changed, waived, terminated, or modified in any respect unless the same shall be
in writing and signed by the party to be charged therewith. No waiver of any
provision shall be construed as a waiver of any other provision.
(i) No Third Party Beneficiaries; Assignments. Nothing in this
Agreement shall create or be deemed to create any third party beneficiary rights
in any person or entity (including, without limitation, any employees of the
Company) not a party to this Agreement. The Company may not assign any of its
rights or delegate any of its duties under this Agreement without the consent of
ValorInvest and any attempted assignment or delegation in violation of this
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provision shall be void. ValorInvest may not assign any of its rights or
delegate any of its duties under this Agreement without the consent of the
Company, except that ValorInvest may assign any of its rights and delegate any
of its duties under this Agreement to any affiliate of ValorInvest, provided
that no assignment shall relieve ValorInvest of any of its obligations under
this Agreement. As used herein, the term "affiliate" means any person or entity
directly or indirectly controlled by, controlling, or under common control with,
any other person or entity.
(j) Counterparts. This Agreement may be executed in counterparts, which
together shall constitute the same instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
respective parties as of the day and year first above written.
CRYOMEDICAL SCIENCES, INC.
By: /s/
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Ph.D.
VALORINVEST, LTD.
By: /s/
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Authorized Signature
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