EQUITY PURCHASE AGREEMENT BY AND BETWEEN AMERICAN SCIENTIFIC RESOURCES, INCORPORATED AND SOUTHRIDGE PARTNERS II, LP Dated February 3, 2011
BY
AND BETWEEN
AMERICAN
SCIENTIFIC RESOURCES, INCORPORATED
AND
SOUTHRIDGE
PARTNERS II, LP
Dated
February
3, 2011
THIS EQUITY PURCHASE AGREEMENT entered
into as of the 3rd day of February, 2011 (this "AGREEMENT"), by and between
SOUTHRIDGE PARTNERS II,
LP, Delaware limited partnership ("INVESTOR"), and AMERICAN SCIENTIFIC RESOURCES,
INCORPORATED, a Nevada corporation (the "COMPANY").
WHEREAS, the parties desire that, upon
the terms and subject to the conditions contained herein, the Company shall
issue and sell to Investor, from time to time as provided herein, and Investor
shall purchase, up to Ten Million Dollars ($10,000,000) of its Common Stock (as
defined below); and
NOW, THEREFORE, the parties hereto
agree as follows:
ARTICLE
I
CERTAIN
DEFINITIONS
Section
1.1 DEFINED TERMS as used in this Agreement,
the following terms shall have the following meanings specified or indicated
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined)
"AGREEMENT" shall have the meaning
specified in the preamble hereof.
"BLACKOUT NOTICE" shall mean a written
notice from the Company to the Investor with respect to the existence of a
Potential Blackout Event.
“BLACKOUT PERIOD" shall have the
meaning specified in Section 2.6
“BLACKOUT SHARES" shall have the
meaning specified in Section 2.6
"BY-LAWS" shall have the meaning
specified in Section 4.8.
"CERTIFICATE" shall have the meaning
specified in Section 4.8.
"CLAIM NOTICE" shall have the meaning
specified in Section 9.3(a).
"CLOSING" shall mean one of the
closings of a purchase and sale of shares of Common Stock pursuant to Section
2.3.
"CLOSING CERTIFICATE" shall mean the
closing certificate of the Company in the form of Exhibit C hereto.
"CLOSING DATE" shall mean, with respect
to a Closing, the sixth (6th) Trading Day following the Put Date related to such
Closing, or such earlier date as the Company and Investor shall agree, provided
all conditions to such Closing have been satisfied on or before such Trading
Day.
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“CLOSING PRICE” shall mean the closing
bid price for the Company’s common stock on the Principal Market on a Trading
Day as reported by Bloomberg Finance L.P.
"COMMITMENT PERIOD" shall mean the
period commencing on the Effective Date, and ending on the earlier of (i) the
date on which Investor shall have purchased Put Shares pursuant to this
Agreement for an aggregate Purchase Price of the Maximum Commitment Amount, or
(ii) the date occurring twenty four (24) months from the date of commencement of
the Commitment Period.
"COMMON STOCK" shall mean the Company's
common stock, no par value per share, and any shares of any other class of
common stock whether now or hereafter authorized, having the right to
participate in the distribution of dividends (as and when declared) and assets
(upon liquidation of the Company).
"COMMON STOCK EQUIVALENTS" shall mean
any securities that are convertible into or exchangeable for Common Stock or any
options or other rights to subscribe for or purchase Common Stock or any such
convertible or exchangeable securities.
"COMPANY" shall have the meaning
specified in the preamble to this Agreement.
"CONDITION SATISFACTION DATE" shall
have the meaning specified in Section 7.2.
"DAMAGES" shall mean any loss, claim,
damage, liability, cost and expense (including, without limitation, reasonable
attorneys' fees and disbursements and costs and expenses of expert witnesses and
investigation).
"DISPUTE PERIOD" shall have the meaning
specified in Section 9.3(a).
“DOLLAR VOLUME” shall mean the product
of (a) the Closing Price multiplied by (b) the trading volume on the Principal
Market on a Trading Day.
"DTC" shall have the meaning specified
in Section 2.3.
"DWAC" shall have the meaning specified
in Section 2.3.
"EFFECTIVE DATE" shall mean the date on
which the SEC first declares effective a Registration Statement, or any
amendment thereof, registering the Registrable Securities as set forth in
Section 7.2(a).
"EXCHANGE ACT" shall mean the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder.
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"FAST" shall have the meaning specified
in Section 2.3.
"FINRA" shall mean the Financial
Industry Regulatory Authority, Inc.
"INDEMNIFIED PARTY" shall have the
meaning specified in Section 9.3(a).
"INDEMNIFYING PARTY" shall have the
meaning specified in Section 9.3(a).
"INDEMNITY NOTICE" shall have the
meaning specified in Section 9.3(b).
"INVESTMENT AMOUNT" shall mean the
dollar amount to be invested by Investor to purchase Put Shares with respect to
any Put as notified by the Company to Investor in accordance with Section
2.2.
"INVESTOR" shall have the meaning
specified in the preamble to this Agreement.
"LEGEND" shall have the meaning
specified in Section 8.1.
"MARKET PRICE" shall mean the average
of the lowest two (2) daily Closing Prices during the Valuation
Period.
"MATERIAL ADVERSE EFFECT" shall mean
any effect on the business, operations, properties, or financial condition of
the Company that is material and adverse to the Company and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to enter into and perform its obligations under
any of (a) this Agreement and (b) the Registration Rights
Agreement.
"MAXIMUM COMMITMENT AMOUNT" shall mean
Ten Million Dollars ($10,000,000).
“MAXIMUM PUT AMOUNT” shall mean the
lesser of (b) Five Hundred Thousand Dollars ($500,000), or (b) Two Hundred Fifty
(250%) percent of the average of the Dollar Volume for the twenty (20) Trading
Days immediately preceding the Put Date.
"NEW PRICE" shall have the meaning
specified in Section 2.6.
"OLD PRICE" shall have the meaning
specified in Section 2.6.
"PERSON" shall mean an individual, a
corporation, a partnership, an association, a trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
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"POTENTIAL BLACKOUT EVENT" shall mean
any of the following: (a) the possession by the Company of material information
ripe for disclosure in a Registration Statement, which shall be evidenced by
determinations in good faith by the Board of Directors of the Company that
disclosure of such information in the Registration Statement is required,, (b)
receipt by the Company of any request by the SEC or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the Registration Statement or related
prospectus; (c) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
(d) receipt by the Company of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; or (e) the happening of any event that, in the good
faith determination of the Board of Directors of the Company, makes any
statement made in such Registration Statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any amendment or
supplement in the Registration Statement, related prospectus or documents so
that, in the case of a Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
"PRINCIPAL MARKET" shall mean any of
the national exchanges (i.e. NYSE, AMEX, Nasdaq), the OTC Bulletin Board, OTC
Markets (or Pink Sheets), or other principal exchange which is at the time the
principal trading exchange or market for the Common Stock.
"PURCHASE PRICE" shall mean 92% of the
Market Price on such date on which the Purchase Price is calculated in
accordance with the terms and conditions of this Agreement.
"PUT" shall mean the right of the
Company to require the Investor to purchase shares of Common Stock, subject to
the terms and conditions of this Agreement.
"PUT DATE" shall mean any Trading Day
during the Commitment Period that a Put Notice is deemed delivered pursuant to
Section 2.2(b).
"PUT NOTICE" shall mean a written
notice, substantially in the form of Exhibit B hereto, to Investor setting forth
the Investment Amount with respect to which the Company intends to require
Investor to purchase shares of Common Stock pursuant to the terms of this
Agreement.
"PUT SHARES" shall mean all shares of
Common Stock issued or issuable pursuant to a Put that has been exercised or may
be exercised in accordance with the terms and conditions of this
Agreement.
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"REGISTRABLE SECURITIES" shall mean the
(a) Put Shares, (b) the Blackout Shares, and (c) any securities issued or
issuable with respect to any of the foregoing by way of exchange, stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (i) a Registration Statement has been declared
effective by the SEC and such Registrable Securities have been disposed of
pursuant to a Registration Statement, (ii) such Registrable Securities may be or
have been sold under circumstances under which all of the applicable conditions
of Rule 144 are met, (iii) such time as such Registrable Securities have been
otherwise transferred to holders who may trade such shares without restriction
under the Securities Act or (iv) in the opinion of counsel to the Company, which
counsel shall be reasonably acceptable to Investor, such Registrable Securities
may be sold pursuant to Rule 144(b)(i) (or any similar provision then in effect)
under the Securities Act.
"REGISTRATION RIGHTS AGREEMENT" shall
mean the registration rights agreement in the form of Exhibit A
hereto.
"REGISTRATION STATEMENT" shall mean a
registration statement on such form promulgated by the SEC for which the Company
then qualifies and which counsel for the Company shall deem appropriate and
which form shall be available for the resale of the Registrable Securities to be
registered thereunder in accordance with the provisions of this Agreement and
the Registration Rights Agreement and in accordance with the intended method of
distribution of such securities, for the registration of the resale by Investor
of the Registrable Securities under the Securities Act.
"REGULATION D" shall mean Regulation D
promulgated under the Securities Act.
"REMAINING PUT SHARES" shall have the
meaning specified in Section 2.6.
"RULE 144" shall mean Rule 144 under
the Securities Act or any similar provision then in force under the Securities
Act.
"SEC" shall mean the Securities and
Exchange Commission.
"SECURITIES ACT" shall have the meaning
specified in the recitals of this Agreement.
"SEC DOCUMENTS" shall mean, as of a
particular date, all reports and other documents filed by the Company with the
SEC or pursuant to Section 13(a) or 15(d) of the Exchange Act.
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“SHORT SALES” shall mean all “short
sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but
shall not be deemed to include the location and/or reservation of borrowable
shares of Common Stock).
"SUBSCRIPTION DATE" shall mean the date
on which this Agreement is executed and delivered by the Company and
Investor.
"THIRD PARTY CLAIM" shall have the
meaning specified in Section 9.3(a).
“TRADING DAY” shall mean a day on which
the Principal Market shall be open for business.
“TRANSACTION DOCUMENTS” shall mean this
Equity Purchase Agreement and the Registration Rights Agreement.
"TRANSFER AGENT" shall mean the
transfer agent for the Common Stock (and to any substitute or replacement
transfer agent for the Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent).
"UNDERWRITER" shall mean any
underwriter participating in any disposition of the Registrable Securities on
behalf of Investor pursuant to a Registration Statement.
"VALUATION EVENT" shall mean an event
in which the Company at any time during a Valuation Period takes any of the
following actions:
(a) subdivides
or combines the Common Stock;
(b) pays
a dividend in shares of Common Stock or makes any other distribution of shares
of Common Stock, except for dividends paid with respect to any series of
preferred stock authorized by the Company, whether existing now or in the
future;
(c) issues
any options or other rights to subscribe for or purchase shares of Common Stock
other than pursuant to this Agreement and the price per share for which shares
of Common Stock may at any time thereafter be issuable pursuant to such options
or other rights shall be less than the Closing Price in effect immediately prior
to such issuance;
(d) issues
any securities convertible into or exchangeable for shares of Common Stock and
the consideration per share for which shares of Common Stock may at any time
thereafter be issuable pursuant to the terms of such convertible or exchangeable
securities shall be less than the Closing Price in effect immediately
prior to such issuance;
(e) issues
shares of Common Stock otherwise than as provided in the foregoing subsections
(a) through (d), at a price per share less, or for other consideration lower,
than the Closing Price in effect immediately prior to such issuance, or without
consideration; or
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(f) makes
a distribution of its assets or evidences of indebtedness to the holders of
Common Stock as a dividend in liquidation or by way of return of capital or
other than as a dividend payable out of earnings or surplus legally available
for dividends under applicable law or any distribution to such holders made in
respect of the sale of all or substantially all of the Company's assets (other
than under the circumstances provided for in the foregoing subsections (a)
through (e).
Notwithstanding anything to the
contrary herein, a Valuation Event shall not include the issuance
of (a) shares of Common Stock or options to employees, officers or
directors of the Company pursuant to any stock or option plan duly adopted for
such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise or exchange of or
conversion of any securities issued hereunder and/or other securities
exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the date of this Agreement or issued
or issuable pursuant to agreements outstanding as of the date of this Agreement,
provided that such securities or agreements have not been amended since the date
of this Agreement to increase the number of such securities or to decrease the
exercise, exchange or conversion price of such securities, and (c) securities
issued pursuant to acquisitions or strategic transactions approved by a majority
of the disinterested directors of the Company.
"VALUATION PERIOD" shall mean the
period of five (5) Trading Days immediately following the date on which the
applicable Put Notice is deemed to be delivered and during which the Purchase
Price of the Common Stock is valued; provided, however, that if a Valuation
Event occurs during any Valuation Period, a new Valuation Period shall begin on
the Trading Day immediately after the occurrence of such Valuation Event and end
on the fifth (5th)
Trading Day thereafter.
ARTICLE
II
PURCHASE
AND SALE OF COMMON STOCK
Section
2.1
INVESTMENTS.
(a) PUTS. Upon
the terms and conditions set forth herein (including, without limitation, the
provisions of Article VII), on any Put Date the Company may exercise a Put by
the delivery of a Put Notice. The number of Put Shares that Investor shall
purchase pursuant to such Put shall be determined by dividing the Investment
Amount specified in the Put Notice by the Purchase Price with respect to such
Put Notice.
(b) WARRANT. Upon
the execution of this Agreement, the Company shall issue to the Investor a
transferable, divisible Warrant to purchase 25,000,000 shares of Common Stock,
at an exercise price equal to $0.00615, with a five year term, and cashless
exercise rights in the form annexed hereto as Exhibit D. The Warrant
shall be delivered to the Investor upon the execution of the
Agreement.
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Section
2.2
MECHANICS.
(a) PUT
NOTICE. At any time and from time to time during the Commitment Period, the
Company may deliver a Put Notice to Investor, subject to the conditions set
forth in Section 7.2; provided, however, that the Investment Amount identified
in the applicable Put Notice shall not be greater than the Maximum Put Amount
and, when taken together with any prior Put Notices, shall not exceed the
Maximum Commitment.
(b) DATE
OF DELIVERY OF PUT NOTICE. A Put Notice shall be deemed delivered on (i) the
Trading Day it is received by facsimile or otherwise by Investor if such notice
is received on or prior to 12:00 noon New York time, or (ii) the immediately
succeeding Trading Day if it is received by facsimile or otherwise after 12:00
noon New York time on a Trading Day or at anytime on a day which is not a
Trading Day.
Section
2.3
CLOSINGS. On or prior to each Closing Date for any
Put, (a) the Company shall deliver to the Investor one or more certificates, at
Investor's option, representing the Put Shares purchased by Investor pursuant to
Section 2.1 herein, registered in the name of Investor and (b) Investor shall
deliver the Investment Amount specified in the Put Notice by wire transfer of
immediately available funds to an account designated by the Company
within forty eight (48) hours of receipt of the Put Shares. In lieu
of delivering physical certificates representing the Common Stock issuable in
accordance with clause (a) of this Section 2.3, and provided that the Transfer
Agent then is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer ("FAST") program, upon request of Investor, but
subject to the applicable provisions of Article VIII hereof, the Company shall
use its commercially reasonable efforts to cause the Transfer Agent to
electronically transmit, prior to the applicable Closing Date, the applicable
Put Shares by crediting the account of the Investor's prime broker with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system, and provide
proof satisfactory to the Investor of such delivery. In addition, on
or prior to such Closing Date, each of the Company and Investor shall deliver to
each other all documents, instruments and writings required to be delivered or
reasonably requested by either of them pursuant to this Agreement in order to
implement and effect the transactions contemplated herein.
Section
2.4
COVER. If the Company fails for any reason to
take or cause to be taken all steps necessary on the part of the Company to
deliver the Put Shares on such Closing Date and the Investor purchases, in an
open market transaction or otherwise, shares of Common Stock (the "Covering
Shares") in order to make delivery in satisfaction of a sale of Common Stock by
the Investor (the "Sold Shares"), which delivery the Investor anticipated to
make using the Put Shares (a "Buy-In"), then the Company shall pay to such
Investor, in addition to all other amounts contemplated in other provisions of
the Transaction Documents, and not in lieu thereof, the Buy-In Adjustment Amount
(as defined below). The "Buy-In Adjustment Amount" is the amount equal to the
excess, if any, of (x) such Investor’s total purchase price (including brokerage
commissions, if any) for the Covering Shares over (y) the net proceeds (after
brokerage commissions, if any) received by such Investor from the sale of the
Sold Shares. The Company shall pay the Buy-In Adjustment Amount to such Investor
in immediately available funds immediately upon demand by such Investor. By way
of illustration and not in limitation of the foregoing, if such Investor
purchases Covering Shares having a total purchase price (including brokerage
commissions) of $11,000 to cover a Buy-In with respect to shares of Common Stock
that it sold for net proceeds of $10,000, the Buy-In Adjustment Amount that the
Company will be required to pay to such Investor will be
$1,000.
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Section
2.5
[INTENTIONALLY OMITTED]
Section
2.6 BLACKOUT
SHARES.
(a) If
at any time or from time to time after the date of effectiveness of the
Registration Statement, the Company delivers a Blackout Notice to the Investor,
the Investor shall not offer or sell any Put Shares, or Blackout Shares (as
defined below), or engage in any other transaction involving or relating to such
shares, from the time of the Blackout Notice until Investor receives written
notice from the Company that such Potential Blackout Event either has been
disclosed to the public or no longer constitutes a Potential Blackout Event
(such period, a "Blackout Period").
(b) In
the event that, (i) within fifteen (15) Trading Days following any Closing Date,
the Company delivers a Blackout Notice to Investor, and (ii) the Closing Price
on the Trading Day immediately preceding the applicable Blackout Period ("OLD
PRICE") is greater than the Closing Price on the first Trading Day following
such Blackout Period that Investor may sell its Registrable Securities pursuant
to an effective Registration Statement ("NEW PRICE"), then the Company shall
issue to Investor the number of additional shares of Registrable Securities (the
"BLACKOUT SHARES") equal to the excess of (x) the product of the number of Put
Shares held by Investor immediately prior to the Blackout Period that were
issued on the most recent Closing Date (the "REMAINING PUT SHARES") multiplied
by the Old Price, divided by the New Price, over (y) the Remaining Put
Shares.
Section
2.7
[INTENTIONALLY OMITTED]
Section
2.8
LIQUIDATED DAMAGES. Each of the Company and Investor
acknowledge and agree that the requirement to issue Blackout Shares under
Section 2.6 shall give rise to liquidated damages and not penalties. Each of the
Company and Investor further acknowledge that (a) the amount of loss or damages
likely to be incurred is incapable or is difficult to precisely estimate, (b)
the amount specified in such Section bears a reasonable proportion and is not
plainly or grossly disproportionate to the probable loss likely to be incurred
by Investor in connection with a Blackout Period, and (c) each of the Company
and Investor are sophisticated business parties and have been represented by
sophisticated and able legal and financial counsel and negotiated this Agreement
at arm's length.
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ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF INVESTOR
Investor represents and warrants to the
Company that:
Section
3.1 INTENT.
Investor is entering into this Agreement for its own account and Investor has no
present arrangement (whether or not legally binding) at any time to sell the
Registrable Securities to or through any person or entity; provided, however,
that Investor reserves the right to dispose of the Registrable Securities at any
time in accordance with federal and state securities laws applicable to such
disposition.
Section
3.2 NO LEGAL
ADVICE FROM THE COMPANY. The Investor acknowledges that it has had
the opportunity to review this Agreement and the transactions contemplated by
this Agreement with its own legal counsel and investment and tax
advisors. The Investor is relying solely on such counsel and advisors
and not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
Section
3.3
SOPHISTICATED INVESTOR. Investor is a sophisticated investor (as
described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor (as
defined in Rule 501 of Regulation D), and Investor has such experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Registrable Securities. Investor acknowledges that
an investment in the Registrable Securities is speculative and involves a high
degree of risk.
Section
3.4 AUTHORITY.
(a) Investor has the requisite power and authority to enter into and perform its
obligations under this Agreement and the transactions contemplated hereby in
accordance with its terms; (b) the execution and delivery of this Agreement and
the Registration Rights Agreement, and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action and no further consent or authorization of Investor or its
partners is required; and (c) each of this Agreement and the Registration Rights
Agreement has been duly authorized and validly executed and delivered by
Investor and constitutes a valid and binding obligation of Investor enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
Section
3.5 NOT AN
AFFILIATE. Investor is not an officer, director or "affiliate" (as that term is
defined in Rule 405 of the Securities Act) of the Company.
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Section
3.6 ORGANIZATION
AND STANDING. Investor is a limited partnership duly organized, validly existing
and in good standing under the laws of the Delaware and has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Investor is duly qualified and in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a material adverse effect on
Investor.
Section
3.7 ABSENCE OF
CONFLICTS. The execution and delivery of this Agreement and any other document
or instrument contemplated hereby, and the consummation of the transactions
contemplated hereby and thereby, and compliance with the requirements hereof and
thereof, will not (a) violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on Investor, (b) violate any provision of
any indenture, instrument or agreement to which Investor is a party or is
subject, or by which Investor or any of its assets is bound, or conflict with or
constitute a material default thereunder, (c) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by Investor to
any third party, or (d) require the approval of any third-party (that has not
been obtained) pursuant to any material contract, instrument, agreement,
relationship or legal obligation to which Investor is subject or to which any of
its assets, operations or management may be subject.
Section
3.8
DISCLOSURE; ACCESS TO INFORMATION. Investor had an
opportunity to review copies of the SEC Documents filed on behalf of the Company
and has had access to all publicly available information with respect to the
Company.
Section
3.9 MANNER OF
SALE. At no time was Investor presented with or solicited by or through any
leaflet, public promotional meeting, television advertisement or any other form
of general solicitation or advertising.
Section 3.10 FINANCIAL CAPABILITY.
Investor presently has the financial capacity and the necessary capital to
perform its obligations hereunder.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The Company represents and warrants to
Investor that, except as disclosed in the SEC Documents:
Section
4.1
ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Nevada and has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being
conducted. The Company is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify would not have a
Material Adverse Effect.
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Section
4.2 AUTHORITY.
(a) The Company has the requisite corporate power and authority to enter into
and perform its obligations under this Agreement and the Registration Rights
Agreement and to issue the Put Shares and Blackout Shares, if any; (b) the
execution and delivery of this Agreement and the Registration Rights Agreement
by the Company and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
and no further consent or authorization of the Company or its Board of Directors
or stockholders is required; and (c) each of this Agreement and the Registration
Rights Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section
4.3
CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of 2,500,000,000 shares of
Common Stock, no par value per share, of which 2,176,343,609 shares
are outstanding as of the date hereof.
Except as otherwise disclosed in the
SEC Documents, there are no outstanding securities which are convertible into
shares of Common Stock, whether such conversion is currently exercisable or
exercisable only upon some future date or the occurrence of some event in the
future.
All of the outstanding shares of Common
Stock of the Company have been duly and validly authorized and issued and are
fully paid and non-assessable.
Section
4.4 COMMON
STOCK. The Company is in full compliance with all reporting requirements of the
Exchange Act, and the Company has maintained all requirements for the continued
listing or quotation of the Common Stock, and such Common Stock is currently
listed or quoted on the Principal Market.
Section
4.5 SEC
DOCUMENTS. The Company may make available to Investor true and complete copies
of the SEC Documents (including, without limitation, proxy information and
solicitation materials). To the Company’s knowledge, the Company has not
provided to Investor any information that, according to applicable law, rule or
regulation, should have been disclosed publicly prior to the date hereof by the
Company, but which has not been so disclosed. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act, and other federal laws, rules and regulations applicable to such
SEC Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form and
substance in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except (a) as may be otherwise
indicated in such financial statements or the notes thereto or (b) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit
adjustments).
12
Section
4.6 VALID
ISSUANCES. When issued and paid for as herein provided, the Put Shares and the
Blackout Shares, if any, shall be duly and validly issued, fully paid, and
non-assessable. Neither the sales of the Put Shares or the Blackout Shares, if
any, pursuant to this Agreement or the Registration Rights Agreement, nor the
Company's performance of its obligations thereunder, shall (a) result
in the creation or imposition of any liens, charges, claims or other
encumbrances upon the Put Shares or Blackout Shares, if any, or any of the
assets of the Company, or (b) entitle the holders of outstanding shares of
Common Stock to preemptive or other rights to subscribe to or acquire the Common
Stock or other securities of the Company. The Put Shares and Blackout Shares, if
any, shall not subject Investor to personal liability, in excess of the
subscription price by reason of the ownership thereof.
Section
4.7
[INTENTIONALLY OMITTED]
Section
4.8
[INTENTIONALLY OMITTED]
Section
4.9 NO
CONFLICTS. The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby, including without limitation the issuance of the Put Shares and the
Blackout Shares, if any, do not and will not (a) result in a violation of the
Certificate or By-Laws or (b) conflict with or constitute a material default (or
an event that with notice or lapse of time or both would become a material
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture, instrument
or any "lock-up" or similar provision of any underwriting or similar agreement
to which the Company is a party, or (c) result in a violation of any federal,
state or local law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations) applicable to the Company or
by which any property or asset of the Company is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect) nor is the Company otherwise in violation of, conflict with or
in default under any of the foregoing. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate do
not and will not have a Material Adverse Effect. The Company is not required
under federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Common Stock in
accordance with the terms hereof (other than any SEC, FINRA or state securities
filings that may be required to be made by the Company subsequent to any
Closing, any registration statement that may be filed pursuant hereto); provided
that, for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of Investor herein.
13
Section
4.10 NO MATERIAL ADVERSE
CHANGE. Since January 14, 2011 no event has occurred that would have a Material
Adverse Effect on the Company.
Section
4.11 [INTENTIONALLY
OMITTED]
Section
4.12 [INTENTIONALLY
OMITTED]
Section
4.13 [INTENTIONALLY
OMITTED]
Section
4.14 LITIGATION AND OTHER
PROCEEDINGS. There are no lawsuits or proceedings pending or to the knowledge of
the Company threatened, against the Company, nor has the Company received any
written or oral notice of any such action, suit, proceeding or investigation,
which would have a Material Adverse Effect other than those already publicly
disclosed on the Financial statements and the S-1 Registration Statement that
was declared effective January 14, 2011. No judgment, order, writ, injunction or
decree or award has been issued by or, so far as is known by the Company,
requested of any court, arbitrator or governmental agency which would have a
Material Adverse Effect other than those already publicly disclosed on the
Financial statements and the S-1 Registration Statement that was declared
effective January 14, 2011.
Section
4.15
DILUTION. The number of shares of Common Stock issuable
as Put Shares may increase substantially in certain circumstances, including,
but not necessarily limited to, the circumstance wherein the trading price of
the Common Stock declines during the period between the Effective Date and the
end of the Commitment Period. The Company’s executive officers and
directors have studied and fully understand the nature of the transactions
contemplated by this Agreement and recognize that they have a potential dilutive
effect. The board of directors of the Company has concluded in its
good faith business judgment that such issuance is in the best interests of the
Company. The Company specifically acknowledges that, subject to
Section 2.2(c), its obligation to issue the Put Shares is binding upon the
Company and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company.
Section
4.16 [INTENTIONALLY
OMITTED]
Section
4.17 [INTENTIONALLY
OMITTED]
14
ARTICLE
V
COVENANTS
OF INVESTOR
Section
5.1 COMPLIANCE
WITH LAW; TRADING IN SECURITIES. Investor's trading activities with respect to
shares of the Common Stock will be in compliance with all applicable state and
federal securities laws, rules and regulations and the rules and regulations of
FINRA and the Principal Market on which the Common Stock is listed or
quoted.
Section
5.2 SHORT
SALES AND CONFIDENTIALITY. Neither Investor nor any affiliate of the Investor
acting on its behalf or pursuant to any understanding with it will execute any
Short Sales during the period from the date hereof to the end of the Commitment
Period. For the purposes hereof, and in accordance with Regulation
SHO, the sale after delivery of a Put Notice of such number of shares of Common
Stock reasonably expected to be purchased under a Put Notice shall not be deemed
a Short Sale.
Other than to other Persons party to
this Agreement, Investor has maintained the confidentiality of all disclosures
made to it in connection with this transaction (including the existence and
terms of this transaction).
ARTICLE
VI
COVENANTS
OF THE COMPANY
Section
6.1
REGISTRATION RIGHTS. The Company shall use
its best efforts to cause the Registration Statement to remain in full force and
effect and the Company shall comply in all respects with the terms
thereof.
Section
6.2
RESERVATION OF COMMON STOCK. The Company will, from time
to time as needed in advance of a Closing Date, reserve and keep available until
the consummation of such Closing, free of preemptive rights sufficient shares of
Common Stock for the purpose of enabling the Company to satisfy its obligation
to issue the Put Shares to be issued in connection therewith. The number of
shares so reserved from time to time, as theretofore increased or reduced as
hereinafter provided, may be reduced by the number of shares actually delivered
hereunder.
Section
6.3 LISTING OF
COMMON STOCK. If the Company applies to have the Common Stock traded
on any other Principal Market, it shall include in such application the Put
Shares and the Blackout Shares, if any, and shall take such other action as is
necessary or desirable in the reasonable opinion of Investor to cause the Common
Stock to be listed on such other Principal Market as promptly as possible. The
Company shall use its commercially reasonable efforts to continue the listing
and trading of the Common Stock on the Principal Market (including, without
limitation, maintaining sufficient net tangible assets) and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the FINRA and the Principal Market.
15
Section
6.4 NOTICE OF
CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A PUT. The
Company shall promptly notify Investor upon the occurrence of any Potential
Blackout Event. The Company shall not deliver to Investor any Put Notice during
the continuation of any Blackout Period.
Section
6.5 The
Company shall issue to its management and directors a series of preferred stock
with voting rights sufficient to grant such holders the ability to vote in favor
of an increase the Company’s authorized common stock and/or a reverse split of
the outstanding shares of common stock.
Section
6.6 CERTAIN
AGREEMENTS. The Company covenants and agrees that it shall not, without the
prior written consent of the Investor, enter into any other equity line of
credit agreement with a third party during the Commitment Period having terms
and conditions substantially comparable to this Agreement. For the
avoidance of doubt, nothing contained in the Transaction Documents shall
restrict, or require the Investor's consent for, any agreement providing for the
issuance or distribution of (or the issuance or distribution of) any equity
securities pursuant to any agreement or arrangement that is not commonly
understood to be an "equity line of credit."
ARTICLE
VII
CONDITIONS
TO DELIVERY OF
PUT
NOTICES AND CONDITIONS TO CLOSING
Section
7.1 CONDITIONS
PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE AND SELL COMMON STOCK. The
obligation hereunder of the Company to issue and sell the Put Shares to Investor
incident to each Closing is subject to the satisfaction, at or before each such
Closing, of each of the conditions set forth below.
(a) ACCURACY
OF INVESTOR'S REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Investor shall be true and correct in all material respects as of the date of
this Agreement and as of the date of each such Closing as though made at each
such time.
(b) PERFORMANCE
BY INVESTOR. Investor shall have performed, satisfied and complied in all
respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by Investor at or prior to
such Closing.
(c) Principal Market
Regulation. The Company shall not issue any Put Shares or Blackout
Shares, if any, and the Investor shall not have the right to receive any Put
Shares or Blackout Shares, if the issuance of such shares would exceed the
aggregate number of shares of Common Stock which the Company may issue without
breaching the Company’s obligations under the rules or regulations of the
Principal Market if any (the “EXCHANGE CAP”), except that such limitation shall
not apply in the event that the Company obtains the approval of its stockholders
as required by the applicable rules of the Principal Market for issuances of
Common Stock in excess of such amount, which such approval the Company will use
its best efforts to obtain. Until such approval is obtained, Investor shall not
be issued under the Transaction Documents, shares of Common Stock in an amount
greater than the Exchange Cap.
16
Section
7.2 CONDITIONS
PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A PUT NOTICE AND THE OBLIGATION
OF INVESTOR TO PURCHASE PUT SHARES. The right of the Company to deliver a Put
Notice and the obligation of Investor hereunder to acquire and pay for the Put
Shares incident to a Closing is subject to the satisfaction, on (i) the date of
delivery of such Put Notice and (ii) the applicable Closing Date (each a
"CONDITION SATISFACTION DATE"), of each of the following
conditions:
(a) EFFECTIVE
REGISTRATION STATEMENT. As set forth in the Registration Rights Agreement, a
Registration Statement, and any amendment or supplement thereto, shall have
previously become effective for the resale by Investor of the Registrable
Securities subject to such Put Notice, and such Registration Statement shall
remain effective on each Condition Satisfaction Date and (i) neither the Company
nor Investor shall have received notice that the SEC has issued or intends to
issue a stop order with respect to such Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of such Registration
Statement, either temporarily or permanently, or intends or has threatened to do
so (unless the SEC's concerns have been addressed and Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such action),
and (ii) no other suspension of the use or withdrawal of the effectiveness of
such Registration Statement or related prospectus shall exist.
(b) ACCURACY
OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company shall be true and correct in all material respects as
of each Condition Satisfaction Date as though made at each such time (except for
representations and warranties specifically made as of a particular date) with
respect to all periods, and as to all events and circumstances occurring or
existing to and including each Condition Satisfaction Date, except for any
conditions which have temporarily caused any representations or warranties
herein to be incorrect and which have been corrected with no continuing
impairment to the Company or Investor.
(c) PERFORMANCE
BY THE COMPANY. The Company shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by this
Agreement and the Registration Rights Agreement to be performed, satisfied or
complied with by the Company at or prior to each Condition Satisfaction
Date.
(d) NO
INJUNCTION. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or adopted by any court
or governmental authority of competent jurisdiction that prohibits or directly
and materially adversely affects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced that may have the effect
of prohibiting or materially adversely affecting any of the transactions
contemplated by this Agreement.
17
(e) ADVERSE
CHANGES. Since the date of filing of the Company's most recent SEC Document, no
event that had or is reasonably likely to have a Material Adverse Effect has
occurred.
(f) NO
SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of the Common
Stock shall not have been suspended by the SEC, the Principal Market or the
FINRA and the Common Stock shall have been approved for listing or quotation on
and shall not have been delisted from the Principal Market.
(g) [INTENTIONALLY
OMITTED]
(h) TEN
PERCENT LIMITATION. On each Closing Date, the number of Put Shares then to be
purchased by Investor shall not exceed the number of such shares that, when
aggregated with all other shares of Registrable Securities then owned by
Investor beneficially or deemed beneficially owned by Investor, would result in
Investor owning more than 9.99% of all of such Common Stock as would be
outstanding on such Closing Date, as determined in accordance with Section 16 of
the Exchange Act and the regulations promulgated thereunder. For purposes of
this Section, in the event that the amount of Common Stock outstanding as
determined in accordance with Section 16 of the Exchange Act and the regulations
promulgated thereunder is greater on a Closing Date than on the date upon which
the Put Notice associated with such Closing Date is given, the amount of Common
Stock outstanding on such Closing Date shall govern for purposes of determining
whether Investor, when aggregating all purchases of Common Stock made pursuant
to this Agreement and Blackout Shares, if any, would own more than 9.99% of the
Common Stock following such Closing Date.
(i) Principal Market
Regulation. The Company shall not issue any Put Shares or Blackout
Shares, if any, and the Investor shall not have the right to receive any Put
Shares or Blackout Shares, if the issuance of such shares would exceed the
Exchange Cap if any, except that such limitation shall not apply in the event
that the Company obtains the approval of its stockholders as required by the
applicable rules of the Principal Market for issuances of Common Stock in excess
of such amount, which such approval the Company will use its best efforts to
obtain. Until such approval is obtained, Investor shall not be issued under the
Transaction Documents, shares of Common Stock in an amount greater than the
Exchange Cap.
(j) NO
KNOWLEDGE. The Company shall have no knowledge of any event more likely than not
to have the effect of causing such Registration Statement to be suspended or
otherwise ineffective (which event is more likely than not to occur within the
fifteen (15) Trading Days following the Trading Day on which such Put Notice is
deemed delivered).
(k) SHAREHOLDER
VOTE. The issuance of shares of Common Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval requirements of the
Principal Market.
18
(l)
NO VALUATION EVENT. No Valuation Event shall have
occurred since the Put Date.
(m)
OTHER. On each Condition Satisfaction Date, Investor
shall have received a certificate in substantially the form and substance of
Exhibit C hereto, executed by an executive officer of the Company and to the
effect that all the conditions to such Closing shall have been satisfied as at
the date of each such certificate.
ARTICLE
VIII
LEGENDS
Section
8.1 LEGENDS.
Until such time as the Registrable
Securities have been registered under the Securities Act, as contemplated
by the Registration Rights Agreement, and sold in accordance with an effective
Registration Statement or otherwise in accordance with another effective
registration statement, or until such Registrable
Securities can otherwise be sold without restriction, whichever is
earlier, each certificate representing Registrable Securities will bear the
following legend (the "LEGEND"):
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
The Company warrants that it will give
its Transfer Agent no instructions inconsistent with the provisions hereof. It
is the intent and purpose of such instructions, as provided therein, to require
its Transfer Agent to issue to Investor certificates evidencing shares of Common
Stock incident to a Closing, free of the Legend; provided that (a) a
Registration Statement shall then be effective, (b) Investor confirms to the
Transfer Agent and the Company that it has sold or intends to sell such Common
Stock to a third party which is not an affiliate of Investor or the Company and
Investor agrees to redeliver the certificate representing such shares of Common
Stock to the Transfer Agent to add the Legend in the event the Common Stock is
not sold, and (c) Investor confirms to the transfer agent and the Company that
Investor has complied, or will comply with the prospectus delivery
requirement under the Securities Act.
Section
8.2 NO OTHER
LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend other than the one specified in
Section 8.1 has been or shall be placed on the share certificates representing
the Registrable Securities.
Section
8.3
[INTENTIONALLY OMITTED]
19
Section
8.4 INVESTOR'S
COMPLIANCE. Nothing in this Article VIII shall affect in any way Investor's
obligations under any agreement to comply with all applicable securities laws
upon resale of the Common Stock.
ARTICLE
IX
NOTICES;
INDEMNIFICATION
Section
9.1 NOTICES.
All notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (a) personally served, (b) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (c)
delivered by reputable air courier service with charges prepaid, or (d)
transmitted by hand delivery, telegram, facsimile, or email as a PDF, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, or email as a PDF,
at the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (ii) on the
second business day following the date of mailing by express courier service or
on the fifth business day after deposited in the mail, in each case, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur.
The
addresses for such communications shall be:
If to the
Company:
American
Scientific Resources, Incorporated
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Tel: (▇▇▇)
▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
With
copies (which shall not constitute notice) to:
▇▇▇▇▇▇▇
Law, PLLC
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇▇▇
Sichenzia
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇
▇▇▇▇▇▇▇▇
▇▇
▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
If to
Investor:
Southridge
Partners II, LP
▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel:
▇▇▇-▇▇▇-▇▇▇▇
Fax:
▇▇▇-▇▇▇-▇▇▇▇
Email:
▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Either
party hereto may from time to time change its address or facsimile number for
notices under this Section 9.1 by giving at least ten (10) days' prior written
notice of such changed address or facsimile number to the other party
hereto.
Section
9.2
INDEMNIFICATION. Each party (an
“Indemnifying Party”) agrees to indemnify and hold harmless the other
party along with its officers, directors, employees, and authorized
agents, and each Person or entity, if any, who controls such party within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
together with the Controlling Persons (as defined in the Registration Rights
Agreement) (an “Indemnified Party”) from and against any Damages, joint or
several, and any action in respect thereof to which the Indemnified Party
becomes subject to, resulting from, arising out of or relating to any
misrepresentation, breach of warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of Indemnifying Party contained in this
Agreement, as such Damages are incurred, except to the extent such Damages
result primarily from Indemnified Party's failure to perform any covenant or
agreement contained in this Agreement or Indemnified Party's negligence,
recklessness or bad faith in performing its obligations under this
Agreement.
Section
9.3 METHOD OF
ASSERTING INDEMNIFICATION CLAIMS. All claims for indemnification by any
Indemnified Party (as defined below) under Section 9.2 shall be asserted and
resolved as follows:
(a) In
the event any claim or demand in respect of which an Indemnified
Party might seek indemnity under Section 9.2 is asserted against or
sought to be collected from such Indemnified Party by a person other than a
party hereto or an affiliate thereof (a "THIRD PARTY CLAIM"), the Indemnified
Party shall deliver a written notification, enclosing a copy of all papers
served, if any, and specifying the nature of and basis for such Third Party
Claim and for the Indemnified Party's claim for indemnification that is being
asserted under any provision of Section 9.2 against an Indemnifying Party,
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such Third Party Claim (a "CLAIM NOTICE")
with reasonable promptness to the Indemnifying Party. If the Indemnified Party
fails to provide the Claim Notice with reasonable promptness after the
Indemnified Party receives notice of such Third Party Claim, the Indemnifying
Party shall not be obligated to indemnify the Indemnified Party with respect to
such Third Party Claim to the extent that the Indemnifying Party's ability to
defend has been prejudiced by such failure of the Indemnified Party. The
Indemnifying Party shall notify the Indemnified Party as soon as practicable
within the period ending thirty (30) calendar days following receipt by the
Indemnifying Party of either a Claim Notice or an Indemnity Notice (as defined
below) (the "DISPUTE PERIOD") whether the Indemnifying Party disputes its
liability or the amount of its liability to the Indemnified Party under Section
9.2 and whether the Indemnifying Party desires, at its sole cost and expense, to
defend the Indemnified Party against such Third Party Claim.
21
(i) If
the Indemnifying Party notifies the Indemnified Party within the Dispute Period
that the Indemnifying Party desires to defend the Indemnified Party with respect
to the Third Party Claim pursuant to this Section 9.3(a), then the Indemnifying
Party shall have the right to defend, with counsel reasonably satisfactory to
the Indemnified Party, at the sole cost and expense of the Indemnifying Party,
such Third Party Claim by all appropriate proceedings, which proceedings shall
be vigorously and diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the Indemnifying Party (but
only with the consent of the Indemnified Party in the case of any settlement
that provides for any relief other than the payment of monetary damages or that
provides for the payment of monetary damages as to which the Indemnified Party
shall not be indemnified in full pursuant to Section 9.2). The Indemnifying
Party shall have full control of such defense and proceedings, including any
compromise or settlement thereof; provided, however, that the Indemnified Party
may, at the sole cost and expense of the Indemnified Party, at any time prior to
the Indemnifying Party's delivery of the notice referred to in the first
sentence of this clause (i), file any motion, answer or other pleadings or take
any other action that the Indemnified Party reasonably believes to be necessary
or appropriate to protect its interests; and provided further, that if requested
by the Indemnifying Party, the Indemnified Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to the
Indemnifying Party in contesting any Third Party Claim that the Indemnifying
Party elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this clause (i), and except as provided in the
preceding sentence, the Indemnified Party shall bear its own costs and expenses
with respect to such participation. Notwithstanding the foregoing, the
Indemnified Party may takeover the control of the defense or settlement of a
Third Party Claim at any time if it irrevocably waives its right to indemnity
under Section 9.2 with respect to such Third Party Claim.
22
(ii) If
the Indemnifying Party fails to notify the Indemnified Party within the Dispute
Period that the Indemnifying Party desires to defend the Third Party Claim
pursuant to Section 9.3(a), or if the Indemnifying Party gives such notice but
fails to prosecute vigorously and diligently or settle the Third Party Claim, or
if the Indemnifying Party fails to give any notice whatsoever within the Dispute
Period, then the Indemnified Party shall have the right to defend, at the sole
cost and expense of the Indemnifying Party, the Third Party Claim by all
appropriate proceedings, which proceedings shall be prosecuted by the
Indemnified Party in a reasonable manner and in good faith or will be settled at
the discretion of the Indemnified Party(with the consent of the Indemnifying
Party, which consent will not be unreasonably withheld). The Indemnified Party
will have full control of such defense and proceedings, including any compromise
or settlement thereof; provided, however, that if requested by the Indemnified
Party, the Indemnifying Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the Indemnified Party and
its counsel in contesting any Third Party Claim which the Indemnified Party is
contesting. Notwithstanding the foregoing provisions of this clause (ii), if the
Indemnifying Party has notified the Indemnified Party within the Dispute Period
that the Indemnifying Party disputes its liability or the amount of its
liability hereunder to the Indemnified Party with respect to such Third Party
Claim and if such dispute is resolved in favor of the Indemnifying Party in the
manner provided in clause (iii) below, the Indemnifying Party will not be
required to bear the costs and expenses of the Indemnified Party's defense
pursuant to this clause (ii) or of the Indemnifying Party's participation
therein at the Indemnified Party's request, and the Indemnified Party shall
reimburse the Indemnifying Party in full for all reasonable costs and expenses
incurred by the Indemnifying Party in connection with such litigation. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this clause (ii), and
the Indemnifying Party shall bear its own costs and expenses with respect to
such participation.
(iii) If
the Indemnifying Party notifies the Indemnified Party that it does not dispute
its liability or the amount of its liability to the Indemnified Party with
respect to the Third Party Claim under Section 9.2 or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes its liability or the amount of its liability to the Indemnified Party
with respect to such Third Party Claim, the amount of Damages specified in the
Claim Notice shall be conclusively deemed a liability of the Indemnifying Party
under Section 9.2 and the Indemnifying Party shall pay the amount of such
Damages to the Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to such
claim, the Indemnifying Party and the Indemnified Party shall proceed in good
faith to negotiate a resolution of such dispute; provided, however, that if the
dispute is not resolved within thirty (30) days after the Claim Notice, the
Indemnifying Party shall be entitled to institute such legal action as it deems
appropriate.
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(b) In
the event any Indemnified Party should have a claim under Section 9.2 against
the Indemnifying Party that does not involve a Third Party Claim, the
Indemnified Party shall deliver a written notification of a claim for indemnity
under Section 9.2 specifying the nature of and basis for such claim, together
with the amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim (an "INDEMNITY NOTICE") with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that the Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the claim
described in such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes the claim or
the amount of the claim described in such Indemnity Notice, the amount of
Damages specified in the Indemnity Notice will be conclusively deemed a
liability of the Indemnifying Party under Section 9.2 and the Indemnifying Party
shall pay the amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.
(c) The
indemnity provisions contained herein shall be in addition to (i) any cause of
action or similar rights of the Indemnified Party against the Indemnifying Party
or others, and (ii) any liabilities the Indemnifying Party may be subject
to.
ARTICLE
X
MISCELLANEOUS
Section
10.1 GOVERNING LAW;
JURISDICTION. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York without regard to the principles of
conflicts of law. Each of the Company and Investor hereby submit to the
exclusive jurisdiction of the United States Federal and state courts located in
New York with respect to any dispute arising under this Agreement, the
agreements entered into in connection herewith or the transactions contemplated
hereby or thereby.
Section
10.2 JURY TRIAL
WAIVER. The Company and the Investor hereby waive a trial by jury in
any action, proceeding or counterclaim brought by either of the parties hereto
against the other in respect of any matter arising out of or in connection with
the Transaction Documents.
Section 10.3
ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Company and Investor and their respective
successors. Neither this Agreement nor any rights of Investor or the Company
hereunder may be assigned by either party to any other person.
Section
10.4 THIRD PARTY
BENEFICIARIES. This Agreement is intended for the benefit of the Company and
Investor and their respective successors, and is not for the benefit of, nor may
any provision hereof be enforced by, any other person.
Section
10.5 TERMINATION. The
Company may terminate this Agreement at any time by written notice to the
Investor. Additionally, this Agreement shall terminate at the end of Commitment
Period or as otherwise provided herein (unless extended by the agreement of the
Company and Investor); provided, however, that the provisions of Articles V, VI,
VIII, and Sections 9.2, 9.3 10.1, 10.2 and 10.4 shall survive the termination of
this Agreement for a period of eighteen (18) months.
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Section
10.6 ENTIRE AGREEMENT,
AMENDMENT; NO WAIVER. This Agreement and the instruments referenced herein
contain the entire understanding of the Company and Investor with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor Investor makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
Section
10.7 FEES AND EXPENSES.
The Company agrees to pay the Investor a fee of $10,000, payable upon the
execution of this Agreement, to cover expenses in connection with the
preparation of this Agreement and performance of its obligations hereunder. The
Company shall pay all stamp or other similar taxes and duties levied in
connection with issuance of the Put Shares pursuant hereto.
Section
10.8 [INTENTIONALLY
OMITTED]
Section
10.9 COUNTERPARTS. This
Agreement may be executed in multiple counterparts, each of which may be
executed by less than all of the parties and shall be deemed to be an original
instrument which shall be enforceable against the parties actually executing
such counterparts and all of which together shall constitute one and the same
instrument. This Agreement may be delivered to the other parties hereto by
facsimile transmission or email of a copy of this Agreement bearing the
signature of the parties so delivering this Agreement.
Section
10.10 SEVERABILITY. In the event that
any provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that such severability
shall be ineffective if it materially changes the economic benefit of this
Agreement to any party.
Section
10.11 FURTHER ASSURANCES. Each party
shall do and perform, or cause to be done and performed, all such further acts
and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
Section 10.12
NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
25
Section 10.13
EQUITABLE RELIEF. The Company recognizes that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under this Agreement, any remedy at law may prove to be inadequate
relief to Investor. The Company therefore agrees that Investor shall be entitled
to temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages.
Section 10.14
TITLE AND SUBTITLES. The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.
Section 10.15
REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity
relied upon for the determination of the Closing Price for the Common Stock on
any given Trading Day for the purposes of this Agreement shall be Bloomberg
Finance L.P. or any successor thereto. The written mutual consent of Investor
and the Company shall be required to employ any other reporting
entity.
Section 10.16
PUBLICITY. The Company and Investor
shall consult with each other in issuing any press releases or otherwise making
public statements with respect to the transactions contemplated hereby and no
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other parties, which consent
shall not be unreasonably withheld or delayed, except that no prior consent
shall be required if such disclosure is required by law, in which such case the
disclosing party shall provide the other parties with prior notice of such
public statement. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of Investor without the prior written consent of such
Investor, except to the extent required by law. Investor agrees that it may be
identified in documents filed by the Company with the SEC and acknowledges that
this Agreement and all or part of the Transaction Documents may be deemed to be
"material contracts" as that term is defined by Item 601(b)(10) of Regulation
S-K, and that the Company may therefore be required to file such documents as
exhibits to reports or registration statements filed under the Securities Act or
the Exchange Act. Investor further agrees that the status of such documents and
materials as material contracts shall be determined solely by the Company, in
consultation with its counsel.
[SIGNATURES
ON FOLLOWING PAGE]
26
[SIGNATURE
PAGE]
IN WITNESS WHEREOF, the
parties hereto have caused this Equity Purchase Agreement to be executed by the
undersigned, thereunto duly authorized, as of the date first set forth
above.
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SOUTHRIDGE
PARTNERS II, LP
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By: Southridge
Advisors LLC
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By:
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇
▇▇▇▇▇
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Title:
Manager
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AMERICAN
SCIENTIFIC RESOURCES, INCORPORATED
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By:
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/s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name:
▇▇▇▇▇▇▇▇▇▇▇ Tirorra
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Title:
CEO
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EXHIBITS
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EXHIBIT
A
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Registration
Rights Agreement
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EXHIBIT
B
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Put
Notice
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EXHIBIT
C
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Closing
Certificate
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EXHIBIT
D
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Warrant
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