EXHIBIT 10.32
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 3, 1999 (this
"Agreement"), is made by and among ADVANCED VIRAL RESEARCH CORP., a Delaware
corporation, with headquarters located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Company"), FOCUS INVESTORS LLC, a Delaware limited
liability company, with headquarters at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Purchaser").
W I T N E S S E T H:
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of
August 3, 1999, among the Purchaser and the Company (the "Securities Purchase
Agreement"), the Company has agreed to issue and sell to the Purchaser 20 Units
(individually, a "Unit" and collectively, the "Units"), each Unit consisting of
$100,000 aggregate principal amount of the Company's 7% Convertible Debentures
(the "Debentures") and Series W Warrants (the "Warrants") to purchase 50,000
shares of common stock of the Company, par value $.00001per share (the "Common
Stock")
WHEREAS, pursuant to the terms of the Debentures and the Warrants, (i)
upon the conversion of the Debentures and (ii) upon exercise of the Warrants,
the Company will issue shares of Common Stock (the shares of Common Stock
issuable to the Purchaser upon the conversion of the Debentures or upon the
exercise of the Warrants are collectively referred to herein as the "Shares") to
the Purchaser; and
WHEREAS, to induce the Purchaser to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Purchaser hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing one or more Registration Statement
or Statements in compliance with the Securities Act and pursuant to Rule 415
under the Securities Act or any successor rule providing for offering securities
on a continuous basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement by the Securities and Exchange
Commission (the "Commission").
(ii) "Registrable Securities" means the Shares.
(iii) "Registration Statement" means a registration statement
of the Company under the Securities Act.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in the Securities Purchase Agreement, the Debentures
or the Warrants, as the case may be.
2. Registration.
(a) Mandatory Registration. The Company shall utilize best efforts to
(i) amend the Company's existing Registration Statement on Form S-1
(Registration Statement No. 333-70523) or (ii) to file a Registration Statement
on Form S-3, to cover resale of Shares issued to the Purchaser upon conversion
of the Debentures and upon exercise of the Warrants; provided, however, that in
the event that the resale of the Shares is covered by a Registration on Form S-3
rather than on an amended Registration Statement No. 333-70523, such
Registration on Form S-3 shall be declared effective prior to Registration
Statement No. 333-70523. The number of Shares to be included in the Registration
Statement shall be equal to at least two (2) times the sum of: (i) the number of
shares of Common Stock that are issuable upon conversion of the Debentures on
the date of filing, without regard to any limitation on any holder's ability to
convert the Debentures, and (ii) the Shares issuable upon exercise of the
Warrants on the date of filing, without any regard to any limitation on any
holder's ability to exercise the Warrants. If the Company shall not succeed in
obtaining such approval from the Commission, within thirty (30) days of the
Closing Date (the "Required Filing Date"), the Company shall file with the
Commission a Registration Statement on Form S-3 the Shares, as set forth in the
preceding sentence. Such Registration Statement or amended Registration
Statement, as the case may be, shall state that, in accordance with Rule 416
under the Securities Act, it also covers such indeterminate number of additional
Shares as may become issuable upon conversion of such Debentures or exercise of
such Warrants (i) to prevent dilution resulting from stock splits, stock
dividends or similar transactions and (ii) to the extent that is consistent with
the interpretations of the Commission of such rule at such time, resulting from
any adjustment in the applicable Conversion Price of such Debentures or the
Exercise Price of such Warrants. If at any time one and one-half (1 1/2) times
the sum of (i) the number of Shares into which such Debentures may be converted,
and (ii) the maximum number of shares issuable upon exercise of the Warrants,
exceeds the total number of Shares so registered, the Company shall (A) if such
Registration Statement has not been declared effective by the Commission at that
time, amend the Registration Statement filed by the Company pursuant to the
preceding portions of this paragraph, to register such number of Shares as shall
equal two (2) times the sum of (I) the number of Shares into which such
Debentures may be converted and (II) the maximum number of shares issuable upon
exercise of the Warrants, or (B) if such Registration Statement has been
declared effective by the Commission at that time, file with the Commission an
additional Registration Statement on S-3 to register all of such Shares that
have not already been so registered; provided, however, that the determination
as to whether the Company is obligated to register additional Shares resulting
solely from a diminution in the conversion price of the Debentures shall be
determined by using the average of the closing
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prices of the Shares over a ten consecutive trading day period, with the closing
prices determined in accordance with Section 6(b) of the Debentures. The Company
shall use its best efforts to cause any such Registration Statement or amended
Registration Statement, as the case may be, to become effective within (i) if
the Commission elects not to conduct a review of the Registration Statement,
ninety (90) days following the Closing Date; or (ii) if the Registration
Statement is reviewed by the Commission, 120 days following the Closing Date
(such 90th or 120th day, as the case may be, is referred to herein as the
"Required Effective Date"). The failure of the Company to cause such
Registration Statement to become effective during such respective time periods
shall have the effect set forth in Section 2(b) below. Notwithstanding the use
of the terms "Required Filing Date" and "Required Effective Date" that are used
herein, the Company shall use its best efforts to file each required
Registration Statement as soon as possible after the Closing Date and to cause
each such Registration Statement to become effective as soon as possible
thereafter. If the Company shall be required to file an additional Registration
Statement in accordance with this paragraph (rather than amending the
Registration Statement (Registration No. 333-70523) referred to above), no
securities of the Company other than the Registrable Securities shall be
included in such Registration Statement. The Company shall keep each
Registration Statement effective pursuant to Rule 415 at all times until such
date as is the earlier of (i) the date on which all of the Registrable
Securities have been sold and (ii) the date on which the Registrable Securities
(in the opinion of counsel to the Purchaser) may be immediately sold without
restriction (including without limitation as to volume by each holder thereof)
without registration under the Securities Act (the "Registration Period").
(b) Payments by the Company.
(i) (A) If the Registration Statement covering the Registrable
Securities is not filed in proper form with the Commission on or prior to the
Required Filing Date, (B) if the Registration Statement covering the Registrable
Securities is not effective on or prior to the Required Effective Date, (C) if
the number of Shares qualified for trading on the OTC Bulletin Board or reserved
by the Company for issuance shall be insufficient for issuance upon the
conversion of the Debentures and the exercise of the Warrants, or (D) upon the
occurrence of a Blackout Event (as described in Section 3(f) or Section 3(g)
below) (each of the events described in clauses (A) through (D) of this
paragraph are referred to herein as a "Registration Default"), the Company will
make payments to the Purchaser in such amounts and at such times as shall be
determined pursuant to this Section 2(b).
(ii) The amount (the "Periodic Amount") to be paid by the
Company to the Purchaser as of each thirty (30) day period during which a
Registration Default shall be in effect (each such period, a "Default Period")
shall be equal to two percent (2%) of the purchase price paid by the Purchaser
(the "Purchase Price") for all of the Units; provided that, with respect to any
Default Period during which the relevant Registration Defaults shall have been
cured, the Periodic Amount shall be pro rated for the number of days during such
period during which the Registration Defaults were pending; and provided,
however, that the payment of such Periodic Amounts shall not relieve the Company
from its continuing obligations to register the Shares pursuant to Section 2(a).
Notwithstanding anything to the contrary contained herein, (A) the Company's
obligation to pay to
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the Purchaser the Periodic Amount in connection with any Registration Default
described in Section 2(b)(i)(C) or (D) shall not commence until such
Registration Default has continued for an aggregate of five consecutive days at
any time after the Required Effective Date, (B) the Company may elect not to pay
to the Purchaser the Periodic Amount in connection with any Registration Default
described in Section 2(b)(i)(B) or (D) that shall not be under the control of
the Company with respect to any two ten (10) Trading Day (as hereinafter
defined) periods in the aggregate during any 12- month period with at least a
ten (10) Trading Day interval between such periods, and (C) the aggregate
Periodic Amount for Registration Defaults that shall not be under the control of
the Company shall not exceed the amount which would be payable if the Default
Period continued for 365 days in the aggregate. The term "Trading Day" shall
mean any day on which the OTC Bulletin Board, or any other market or exchange
which at the time is the principal trading exchange or market for the Common
Stock, is open for business.
(iii) Each Periodic Amount shall be payable by the Company in
cash or other immediately available funds to the Purchaser monthly, without
demand therefor by the Purchaser; provided that, if the Periodic Amount for any
Default Period shall exceed an aggregate of $100,000, the Company shall only be
obligated to pay an aggregate of $100,000 of the such amount in cash, and the
remainder in Shares of Common Stock. To the extent any portion of the Periodic
Amount shall be paid in Shares, such Shares shall be issued at the Applicable
Conversion Price (as defined in the Debentures). If the Company shall not remit
the Periodic Amounts payable to the Purchaser as set forth in paragraph (ii)
above, the Company will pay to the Purchaser reasonable costs of collection,
including attorneys' fees, in addition to the Periodic Amounts.
(iv) The parties acknowledge that the damages which may be
incurred by the Purchaser if the Registration Statement is not filed by the
Required Filing Date, if the Registration Statement has not been declared
effective by the Required Effective Date, if an insufficient number of Shares of
Common Stock shall be listed or reserved for issuance, or if the provisions of
Section 3(f) or 3(g) become applicable, may be difficult to ascertain. The
parties agree that the Periodic Amount represents a reasonable estimate on the
part of the parties, as of the date of this Agreement, of the amount of such
damages.
(c) Eligibility for Form S-3. The Company represents and warrants that
it meets all of the requirements for the use of Form S-3 for the Registration of
the sale by the Purchaser and any transferees thereof who purchases the
Registrable Securities, and the Company shall file all reports required to be
filed by the Company with the Commission in a timely manner, and shall take such
other actions as may be necessary to maintain such eligibility for the use of
Form S-3.
(d) Priority in filing. The Company covenants that beginning on the
Closing Date and until such time as a Registration Statement pursuant to Section
2(a) of this Agreement has been filed and becomes effective, the Company will
not file any other registration statement without the written consent of the
Purchaser.
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3. Obligations of the Company.
In connection with the registration of the Registrable Securities, the
Company shall do each of the following:
(a) Prepare and file with the Commission the Registration Statements
required by Section 2 of this Agreement and such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectuses used in connection with such Registration Statements, each in such
form as to which the Purchaser and its counsel shall not have objected, as may
be necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all of the
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(b) Furnish to the Purchaser, if the Registrable Securities of the
Purchaser are included in the Registration Statement, and its legal counsel
identified to the Company, promptly after the same is prepared and publicly
distributed, filed with the Commission, or received by the Company, a copy of
the Registration Statement, each preliminary prospectus, each final prospectus,
and all amendments and supplements thereto and such other documents, as the
Purchaser may reasonably request in order to facilitate the disposition of its
Registrable Securities;
(c) Furnish to the Purchaser and its counsel copies of any
correspondence between the Company and the Commission with respect to any
Registration Statement or amendment or supplement thereto filed pursuant to this
Agreement;
(d) Use all reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions as the Purchaser may
reasonably request (not to exceed five such jurisdictions in the aggregate),
(ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times during the Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period and (iv) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions, provided that in connection therewith, the Company shall not be
required to qualify as a foreign corporation or to file a general consent to the
service of process in any jurisdiction;
(e) Qualify such securities for trading on the OTC Bulletin Board and
list such securities on all the other national securities exchanges on which any
securities of the Company are then listed, and file any filings required by the
OTC Bulletin Board and/or such other exchanges;
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(f) As promptly as practicable after becoming aware of such event,
notify the Purchaser of the occurrence of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and to use its best efforts to promptly prepare a
supplement or amendment to the Registration Statement or other appropriate
filing with the Commission to correct such untrue statement of omission, and to
deliver a number of copies of such supplement or amendment to the Purchaser as
the Purchaser may reasonably request;
(g) As promptly as practicable after becoming aware of such event,
notify the Purchaser (or, in the event of an underwritten offering, the managing
underwriters) of the issuance by the Commission or any stop order or other
suspension of the effectiveness of the Registration Statement at the earliest
possible time, and to use its best efforts to promptly obtain the withdrawal of
such stop order or other suspension of effectiveness (the occurrence of any of
the events described in paragraphs (f) and (g) of this Section 3 is referred to
herein as a "Blackout Event");
(h) During the period commencing upon (i) the third day following the
Purchaser's receipt of a notification pursuant to Section 3(f) above or (ii) the
third day following the entry of a stop order or other suspension of the
effectiveness of the Registration Statement described in Section 3(g) above, and
ending at such time as (y) the Company shall have completed the applicable
filings (and if applicable, such filings shall have been declared effective) and
shall have delivered to the Purchaser the documents required pursuant to Section
3(e) above or (z) such stop order or other suspension of the effectiveness of
the Registration Statement shall have been removed, the Company shall be liable
to remit the payments required to be paid to the Purchaser pursuant to Section
2(b) above;
(i) Suspend the use of any prospectus used in connection with the
Registration Statement only in the event, and for such period of time as, such a
suspension is required by the rules and regulations of the Commission;
(j) Enter into such customary agreements for secondary offerings
(including a customary underwriting agreement with the underwriter or
underwriters, if any) and take all such other actions reasonably requested by
the Purchaser in connection therewith in order to expedite or facilitate the
disposition of such Registrable Securities. Whether or not an underwriting
agreement is entered into and whether or not the Registrable Securities are to
be sold in an underwritten offering the Company shall:
(i) make such representations and warranties to the Purchaser
and the underwriter or underwriters, if any, in form, substance and
scope as are customarily made by issuers to underwriters in secondary
offerings;
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(ii) cause to be delivered to the sellers of Registrable
Securities and the underwriter or underwriters, if any, opinions of
independent counsel to the Company (which counsel and opinions shall be
reasonably satisfactory in form, scope and substance to the Purchaser
and the underwriter(s), if any, and their counsel), (A) on and dated as
of the effective day (or in the case of an underwritten offering, dated
the date of delivery of any Registrable Securities sold pursuant
thereto) of the Registration Statement stating that (x) the
Registration Statement complies in all material respects with the
requirements of the Securities Act and the rules and regulations of the
Commission thereunder, (y) to the best of such counsel's knowledge, the
Registration Statement does not contain an 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 not misleading, and
(z) to the best of such counsel's knowledge, the documents incorporated
by reference in the prospectus accompanying the Registration Statement,
at the time they were filed with the Commission or as amended, complied
in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules and
regulations thereunder and, when read together with the other
information in such prospectus, do not include an 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 not misleading, and
(B) within ninety (90) days following the end of each fiscal year
thereafter, an opinion of independent counsel to the Company, updating
the opinion referred to in clause (A) of this paragraph;
(iii) if an underwriting agreement is entered into, the same
shall include customary indemnification and contribution provisions to
and from the underwriters and procedures for secondary underwritten
offerings;
(iv) deliver such documents and certificates as may be
reasonably requested by Purchaser of the Registrable Securities being
sold or the managing underwriter or underwriters, if any, to evidence
compliance with clause (i) above and with any customary conditions
contained in the underwriting agreement, if any; and
(v) deliver to the Purchaser on the effective day (or in the
case of an underwritten offering, dated the date of delivery of any
Registrable Securities sold pursuant thereto) of the Registration
Statement, and at the beginning of each fiscal quarter thereafter, a
certificate in form and substance as shall be reasonably satisfactory
to the Purchaser, executed by an executive officer of the Company and
to the effect that all the representations and warranties of the
Company contained in the Securities Purchase Agreement are still true
and correct except as disclosed in such certificate; the Company shall,
as to each such certificate delivered at the beginning of each fiscal
quarter, update or cause to be updated each such certificate during
such quarter so that it shall remain current, complete and correct
throughout such quarter; and such updates received by the Purchaser
during such quarter, if any, shall have been reasonably satisfactory to
the Purchaser.
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(k) Make available for inspection by the Purchaser, its
representative(s), any underwriter participating in any disposition pursuant to
a Registration Statement, and any attorney or accountant retained by the
Purchaser or any underwriter, all financial and other records customary for
purposes of the Purchaser's due diligence examination of the Company and review
of any Registration Statement, all filings made with the Commission subsequent
to the Closing, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all information
reasonably requested by any such representative, underwriter, attorney or
accountant in connection with such Registration Statement, provided that such
parties agree to keep such information confidential;
(l) Cooperate with the Purchaser to facilitate the timely preparation
and delivery of certificates for the Registrable Securities to be offered
pursuant to the Registration Statement and to enable such certificates for the
Registrable Securities to be in such denominations or amounts, as the case may
be, as the Purchaser may reasonably request, and registered in such names as the
Purchaser may request; and, within three (3) business days after a Registration
Statement which includes Registrable Securities is ordered effective by the
Commission, the Company shall deliver, and shall cause legal counsel selected by
the Company to deliver, to the transfer agent for the Registrable Securities
(with copies to the Purchaser) an appropriate instruction and opinion of such
counsel; and
(m) Permit counsel to the Purchaser to review the Registration
Statement and all amendments and supplements thereto within a reasonable period
of time (but not less than one full business day) prior to each filing, and to
incorporate those changes, if provided to the Company or its counsel within such
one full business day period mentioned above, suggested by such counsel.
4. Obligations of the Purchaser.
In connection with the registration of the Registrable Securities, the
Purchaser shall have the following obligations:
(a) Take all other reasonable actions necessary to expedite and
facilitate the disposition by the Purchaser of the Registrable Securities
pursuant to the Registration Statement;
(b) Furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of the
Registrable Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities. The intended method or methods of
disposition and/or sale (Plan of Distribution) of the Registrable Securities as
so provided by the Purchaser shall be included without alteration in the
Registration Statement covering the Registrable Securities and shall not be
changed without written consent of the Purchaser. At least five (5) business
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify the Purchaser of the information the Company requires
from the Purchaser if the Purchaser elects to have any of its Registrable
Securities included in the Registration Statement.
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In order to participate in an underwritten offering under Section 2, the
Purchaser shall be required to provide such documents as the underwriter may
reasonably require;
(c) The Purchaser, by its acceptance of the Registrable Securities,
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of any Registration Statement
hereunder, unless the Purchaser has notified the Company in writing of its
election to exclude all of the Purchaser's Registrable Securities from such
Registration Statement; and
(d) The Purchaser agrees that, upon receipt of any notice from the
Company of the happening of any Blackout Event of the kind described in Section
3(f) or 3(g) above, it will immediately discontinue disposition of its
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such copies of the supplemented or amended
prospectus contemplated by Section 3(f) or 3(g) shall be furnished to the
Purchaser.
5. Expenses of Registration.
All expenses, other than underwriting discounts and commissions and
other fees and expenses of investment bankers and other than brokerage
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualification fees, printing and accounting fees, and
the fees and disbursements of counsel for the Company, and the fees of one
counsel to the Purchaser with respect to each Registration Statement filed
pursuant hereto shall be borne by the Company; provided that the Company shall
not be obligated to pay an amount in excess of $5,000 in the aggregate with
respect to the fees of such counsel to the Purchaser.
6. Indemnification.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
(a) The Company will indemnify and hold harmless the Purchaser, each of
its officers, directors and partners, and each person, if any, who controls the
Purchaser within the meaning of the Securities Act or the Exchange Act (each, an
"Indemnified Person"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission to state therein a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
(ii) any untrue statement of a material fact contained in any preliminary
prospectus if used prior to the effective date of such Registration Statement,
or contained in the final prospectus (as amended or supplemented, if the Company
files
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any amendment thereof or supplement thereto with the Commission) or the omission
to state therein any material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading, or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state or foreign securities law or any
rule or regulation under the Securities Act, the Exchange Act or any state or
foreign securities law (the matters in foregoing clauses (i) through (iii)
being, collectively, "Violations"). The Company shall, subject to the provisions
of Section 6(b) below, reimburse the Purchaser, promptly as such expenses are
incurred and are due and payable, for any legal and other costs, expenses and
disbursements in giving testimony or furnishing documents in response to a
subpoena or otherwise, including without limitation, the costs, expenses and
disbursements, as and when incurred, of investigating, preparing or defending
any such action, suit, proceeding or investigation (whether or not in connection
with litigation in which the Purchaser is a party), incurred by it in connection
with the investigation or defense of any such Claim. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(a) shall not (i) apply to any Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof supplement thereto; (ii) with respect to
any preliminary prospectus, inure to the benefit of any such person from whom
the person asserting any such Claim purchased the Registrable Securities that
are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the final prospectus, as then amended or
supplemented, if such final prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (iii) be available to the extent that such
Claim is based upon a failure of the Purchaser to deliver or to cause to be
delivered the prospectus made available by the Company, if such prospectus was
timely made available by the Company pursuant to Section 3(b) hereof; or (iv)
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Purchaser
pursuant to Section 9. The Purchaser will indemnify the Company and its officers
and directors against any Claims arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished in writing
to the Company, by or on behalf of the Purchaser, expressly for use in
connection with the preparation of the Registration Statement, subject to such
limitations and conditions as are applicable to the Indemnification provided by
the Company in this Section 6.
(b) Promptly after receipt by an Indemnified Person under this Section
6 of notice of the commencement of any action (including any governmental
action), such Indemnified Person shall, if a Claim in respect thereof is to be
made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and to the extent
that the indemnifying party so desires, jointly with any other indemnifying
party similarly notified, to assume control of the
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defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person; provided, however, that an Indemnified Person shall have
the right to retain its own counsel with the reasonable fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person and any
other party represented by such counsel in such proceeding. In such event, the
Company shall pay for only one separate legal counsel for the Purchaser, and
such legal counsel shall be selected by the Purchaser. The failure to deliver
written notice to an indemnifying party within a reasonable time after the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person under this Section 6, except to the extent
that the indemnifying party is materially prejudiced in its ability to defend
such action. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
(c) No indemnifying party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Person of an unconditional and irrevocable release from all
liability in respect of such claim or litigation.
(d) Notwithstanding the foregoing, to the extent that any provisions
relating to indemnification or contribution contained in the underwriting
agreements entered into among the Company, the underwriters and the Purchaser in
connection with an underwritten public offering are in conflict with the
foregoing provisions, the provisions in such underwriting agreements shall be
controlling as to the Registrable Securities included in the public offering;
provided, however, that if, as a result of this Section 6(d), the Purchaser, its
officers, directors, partners or any person controlling the Purchaser is or are
held liable with respect to any Claim for which they would be entitled to
indemnification hereunder but for this Section 6(d) in an amount which exceeds
the aggregate proceeds received by the Purchaser from the sale of Registrable
Securities included in a registration pursuant to such underwriting agreement
(the "Excess Liability"), the Company shall reimburse the Purchaser for such
Excess Liability.
7. Contribution.
To the extent any indemnification by an indemnifying party is
prohibited or limited under applicable law, the indemnifying party agrees to
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage, liability or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the Indemnified Person on the other hand in connection with the
statements or omissions which resulted in such Claim, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and the Indemnified Person shall be determined by reference to, among other
things, whether the untrue statement of a material fact or the omission to state
a material fact on
11
which such Claim is based relates to information supplied by the indemnifying
party or by the Indemnified Person, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. Notwithstanding the forgoing, (a) no seller of Registrable Securities
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent misrepresentation
and (b) contribution by any seller of Registrable Securities shall be limited in
amount to the net proceeds received by such seller from the sale of such
Registrable Securities. The Company and the Purchaser agree that it would not be
just and equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the Purchaser and any other party were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in this Section.
8. Reports Under Exchange Act.
With a view to making available to the Purchaser the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the Commission that may at any time permit the Purchaser to sell securities
of the Company to the public without registration ("Rule 144"), the Company
agrees to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144;
(ii) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act; and
(iii) furnish to the Purchaser, so long as the Purchaser owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of the Securities
Act and the Exchange Act, (ii) a copy of the most recent annual or periodic
report of the Company and such other reports and documents so filed by the
Company and (iii) such other information as may be reasonably requested to
permit the Purchaser to sell such securities pursuant to Rule 144 without
registration.
9. Assignment of the Registration Rights.
The rights to have the Company register Registrable Securities pursuant
to this Agreement shall be automatically assigned by the Purchaser to any
transferee of all or any portion of the Debentures or the Warrants held by the
Purchaser if: (a) the Purchaser agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment; (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or assignee and
(ii) the Securities with respect to which such registration rights are being
transferred or assigned; (c) at or before the time the Company receives the
written notice
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contemplated by clause (b) of this sentence, the transferee or assignee agrees
in writing with the Company to be bound by all of the provisions contained
herein; and (d) the transferee of the relevant Securities complies with the
restrictions on the Purchaser set forth in Section 4 of the Securities Purchase
Agreement.
10. Amendment of Registration Rights.
Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), from time to time, only with the written
consent of the Company and holders of 75% of the then outstanding principal
amount of the Debentures. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon the Purchaser and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of the
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be effective upon personal
delivery, via facsimile (upon receipt of confirmation of error-free
transmission) or two business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid and addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by five days advance written
notice to each of the other parties hereto.
Company: ADVANCED VIRAL RESEARCH
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Att.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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and to:
ADVANCED VIRAL RESEARCH CORP.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Att.: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Wolf, Block, ▇▇▇▇▇▇ and ▇▇▇▇▇-▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Att: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Purchaser: FOCUS INVESTORS LLC
c/o West End Asset Management LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Att.: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
KRONISH ▇▇▇▇ ▇▇▇▇▇▇ &HELLMAN LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Att: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
14
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York, except for provisions with respect to
internal corporate matters of the Company which shall be governed by the
corporate laws of the State of Delaware. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. This Agreement has been entered into
freely by each of the parties, following consultation with their respective
counsel, and shall be interpreted fairly in accordance with its terms, without
any construction in favor of or against either party. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such validity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth, or referred to
herein and in the other Primary Documents. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
15
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed.
ADVANCED VIRAL RESEARCH CORP.
By: ___________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
FOCUS INVESTORS LLC
By: WEC Asset Management LLC, Manager
By: ________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Managing Director
16