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PURCHASE AGREEMENT
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dated as of September 8, 2003
by and between
BIOGENTECH CORP.
and
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GRYPHON MASTER FUND, L.P.
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8% CONVERTIBLE NOTE DUE 2006
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and
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COMMON STOCK PURCHASE WARRANT
BIOGENTECH CORP.
PURCHASE AGREEMENT
8% CONVERTIBLE NOTE DUE 2006
and
COMMON STOCK PURCHASE WARRANT
TABLE OF CONTENTS
Page
1. Definitions............................................................1
2. Purchases and Sales of the Note and Warrant............................5
2.1 Purchase and Sale.............................................5
2.2 Form of Payment...............................................5
2.3 Closing.......................................................6
3. Representations and Warranties of the Company..........................6
3.1 Organization, Good Standing and Qualification.................6
3.2 Authorization.................................................6
3.3 Capitalization................................................6
3.4 Valid Issuance................................................7
3.5 Consents......................................................7
3.6 Delivery of SEC Filings; Business; Non-Public Information.....7
3.7 Use of Proceeds...............................................8
3.8 No Material Adverse Change....................................8
3.9 Registration Statements.......................................9
3.10 Form S-3 Eligibility..........................................9
3.11 No Conflict, Breach, Violation or Default.....................9
3.12 Tax Matters..................................................10
3.13 Title to Properties..........................................10
3.14 Certificates, Licenses, Authorizations and Permits...........10
3.15 No Labor Disputes............................................10
3.16 Intellectual Property........................................10
3.17 Environmental Matters........................................11
3.18 Litigation...................................................11
3.19 Financial Statements.........................................12
3.20 Insurance Coverage...........................................12
3.21 ▇▇▇▇▇▇▇▇-▇▇▇▇▇...............Error! Bookmark not defined.
3.22 Acknowledgement of Potential Dilution........................12
3.23 Brokers and Finders..........................................12
3.24 No Directed Selling Efforts or General Solicitation..........12
3.25 No Integrated Offering.......................................13
3.26 Disclosures..................................................13
3.27 Absence of Rights Agreement..................................13
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4. Representations and Warranties of the Purchaser.......................13
4.1 Organization and Existence...................................13
4.2 Purchase Entirely for Own Account............................13
4.3 Investment Experience........................................13
4.4 Disclosure of Information....................................13
4.5 Restricted Securities........................................14
4.6 Accredited Investor..........................................14
4.7 No General Solicitation......................................14
4.8 Residency of Purchaser.......................................14
4.9 Brokers and Finders..........................................14
4.10 Authorization................................................14
4.11 Risk Factors.................................................14
4.12 Reliance.....................................................14
4.13 No Representations...........................................14
4.14 Survival.....................................................15
5. Registration Rights Agreement.........................................15
5.1 Registration Rights Agreement................................15
6. Certain Covenants of the Company and the Purchaser....................15
6.1 19.99% Cap; Rule 144..........................................15
6.2 Limitation on Certain Transactions............................16
6.3 Right of the Purchasers to Participate in Future Transactions.16
6.4 Reports and Information.......................................17
(a) Quarterly Financial Information...............................18
(b) Annual Financial Information..................................18
(c) Stockholder and Analyst Reports and Information...............18
(d) Other Information.............................................18
(e) Rule 144......................................................18
6.5 Press Releases................................................19
6.6 No Conflicting Agreements.....................................19
6.7 Insurance.....................................................19
6.8 Compliance with Laws..........................................19
6.9 Listing of Underlying Shares and Warrant Shares
and Related Matters...........................................19
6.10 Corporate Existence...........................................20
6.11 Form 8-K......................................................20
6.12 Legends.......................................................20
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7. Conditions to the Company's Obligations to Issue and Sell............21
8. Conditions to the Purchaser's Obligations to Purchase................22
9. Miscellaneous........................................................23
9.1 Successors and Assigns......................................23
9.2 Counterparts................................................23
9.3 Titles and Subtitles........................................23
9.4 Notices.....................................................23
9.5 Expenses....................................................24
9.6 Amendments and Waivers......................................24
9.7 Severability................................................24
9.8 Entire Agreement............................................25
9.9 Survival....................................................25
9.10 Further Assurances..........................................25
9.11 Applicable Law..............................................25
9.12 Remedies....................................................25
9.13 Jurisdiction................................................25
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Warrant
Exhibit C - Form of Registration Rights Agreement
Exhibit D - Form of Opinion of Legal Counsel to the Company
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PURCHASE AGREEMENT
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THIS PURCHASE AGREEMENT dated as of September 8, 2003 (this
"Agreement"), by and between BIOGENTECH CORP., a Nevada corporation (the
"Company"), and GRYPHON MASTER FUND, L.P., a Burmuda limited partnership (the
"Purchaser").
W I T N E S S E T H:
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WHEREAS, the Purchaser wishes to purchase from the Company,
and the Company wishes to sell and issue to the Purchaser, upon the terms and
subject to the conditions of this Agreement, (i) a Note (such capitalized term
and all other capitalized terms used herein having the respective meanings
provided herein) in principal amount of $600,000 (if converted, represent over
5% ownership--13d? 10% or over--Form 3, etc.--also add in warrants) and (ii) a
Warrant initially entitling the holder to purchase an aggregate of 90,000 shares
of Common Stock for the Purchase Price; and
WHEREAS, at or before the Closing, the parties hereto are
executing and delivering, one to the other, the Registration Rights Agreement
(look at requirements for Company), pursuant to which, among other things, the
Company will agree to provide certain registration rights under the 1933 Act,
and the rules and regulations promulgated thereunder, and applicable state
securities laws for the resale of the shares of Common Stock issuable upon
conversion of the Note and issuable upon exercise of the Warrant.
NOW THEREFORE, in consideration of the premises and the mutual
covenants made herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions.
1.1 As used in this Agreement, the terms "Agreement",
"Company" and "Purchaser" shall have the respective meanings assigned to such
terms in the introductory paragraph of this Agreement.
1.2 All the agreements or instruments herein defined shall
mean such agreements or instruments as the same may from time to time be
supplemented or amended or the terms thereof waived or modified to the extent
permitted by, and in accordance with, the terms thereof and of this Agreement.
1.3 The following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Affiliate" means, with respect to any Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with the subject Person.
For purposes of this definition, "control" (including, with correlative meaning,
the terms "controlled by" and "under common control with"), as used with respect
to any Person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
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"Aggregation Parties" shall have the meaning provided in
Section 6.3(b).
"AMEX" means the American Stock Exchange, Inc.
"Approved Markets" shall have the meaning provided in Section
6.9.
"Board of Directors" means the Board of Directors of the
Company.
"Business Day" means any day other than a Saturday, Sunday or
a day on which commercial banks in the City of Dallas are authorized or required
by law or executive order to remain closed.
"Change in Control Transaction" shall have the meaning to be
provided or provided in the Note.
"Closing" means the closing of the purchase and sale of the
Note and Warrant on the Closing Date.
"Closing Date" means 10 a.m., Dallas, Texas time, on September
8, 2003, or such other time or date as mutually agreed by the parties hereto.
"Closing Location" means ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
"Common Stock" means the Common Stock, $.001 per share, of the
Company.
"Common Stock Equivalent" means any warrant, option,
subscription or purchase right with respect to shares of Common Stock, any
security convertible into, exchangeable for, or otherwise entitling the holder
thereof to acquire, shares of Common Stock or any warrant, option, subscription
or purchase right with respect to any such convertible, exchangeable or other
security.
"Encumbrances" means all mortgages, deeds of trust, claims,
security interests, liens, pledges, leases, subleases, charges, escrows,
options, proxies, rights of occupancy, rights of first refusal, preemptive
rights, covenants, conditional limitations, hypothecations, prior assignments,
easements, title retention agreements, indentures, security agreements or any
other encumbrances of any kind.
"Environmental Law" shall have the meaning provided in Section
3.17.
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"Event of Default" shall have the meaning to be provided or
provided in the Note.
"Excluded Shares" shall have the meaning provided in Section
6.3(b).
"Generally Accepted Accounting Principles" means, for any
Person, the United States generally accepted accounting principles and practices
applied by such Person from time to time in the preparation of its audited
financial statements.
"Intellectual Property" means all franchises, patents,
trademarks, service marks, tradenames (whether registered or unregistered),
copyrights, corporate names, licenses, trade secrets, proprietary software or
hardware, proprietary technology, technical information, discoveries, designs
and other proprietary rights, whether or not patentable, and confidential
information (including, without limitation, know-how, processes and technology)
used in the conduct of the business of the Company or any Subsidiary, or in
which the Company or any Subsidiary has an interest.
"Material Adverse Effect" means a material adverse effect on
the (i) business, properties, operations, condition (financial or other),
results of operations or prospects of the Company and the Subsidiaries, taken as
a whole; (ii) the validity or enforceability of, or the ability of the Company
to perform its obligations under, the Transaction Documents; or (iii) rights and
remedies of the Purchaser under the terms of the Transaction Documents.
"Nasdaq" means the Nasdaq National Market.
"Nasdaq Small Cap" means the Nasdaq Small Cap Market.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"1933 Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Note" means the Company's 8% Convertible Note due 2006 in the
principal amount of $600,000.00 in the form attached as Exhibit A.
"NYSE" means the New York Stock Exchange, Inc.
"OTCBB" means the OTC Bulletin Board.
"Person" means an individual, corporation, partnership,
limited liability company, trust, business trust, association, joint stock
company, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization, governmental authority or any other form of entity not
specifically listed herein.
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"Purchase Price" means the amount shown on the signature
pages to this Agreement as the Purchaser's Purchase Price.
"Purchaser Share Notice" shall have the meaning provided in
Section 6.12.
"Registration Rights Agreement" means the Registration Rights
Agreement by and between the Company and the Purchaser in the form attached as
Exhibit C.
"Registration Statement" shall have the meaning provided in
the Registration Rights Agreement.
"Regulation D" means Regulation D adopted by the SEC under the
1933 Act.
"Restricted Ownership Percentage" shall have the meaning
provided in Section 6.3(b).
"SEC" means the U.S. Securities and Exchange Commission.
"SEC Filings" means the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2002 and all other reports filed by the
Company pursuant to Section 13 or 15(d) of the 1934 Act since December 31, 2002.
"Securities" means the Note, the Underlying Shares, the
Warrant and the Warrant Shares.
"Subsidiary" means any corporation or other entity of which a
majority of the capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by the
Company.
"Transaction Documents" means this Agreement, the Registration
Rights Agreement, the Note and the Warrant.
"20% Cap" shall have the meaning provided in Section 6.1(a).
"2002 10-K" means the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2002, as filed as the SEC.
"Underlying Shares" means the shares of Common Stock issued or
issuable upon conversion of the Note.
"Variable Rate Transaction" means a transaction in which the
Company issues or sells any Common Stock or Common Stock Equivalent (a) that is
convertible into, exchangeable or exercisable for, or includes the right to
receive additional shares of Common Stock either (x) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the Common Stock at any time after the
initial issuance of such debt or equity securities, or (y) with a fixed
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conversion, exercise, exchange or purchase price that is subject to being reset
at some future date after the initial issuance of Common Stock or Common Stock
Equivalent or upon the occurrence of specified or contingent events directly or
indirectly related to the business of the Company or the market for the Common
Stock (but excluding standard stock split, reverse stock split and stock
dividend anti-dilution provisions), or (b) pursuant to an "equity line"
structure which provides for the sale, from time to time, of securities of the
Company which are registered for sale or resale pursuant to the 1933 Act.
"Warrant" means the Company's Common Stock Purchase Warrant in
the form attached hereto as EXHIBIT B.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of or otherwise pursuant to the Warrant.
2. PURCHASES AND SALES OF THE NOTE AND WARRANT.
2.1 PURCHASE AND SALE. Upon the terms and subject to the
conditions of this Agreement, the Purchaser hereby agrees to purchase from the
Company, and the Company hereby agrees to sell to the Purchaser, on the Closing
Date, the Note and the Warrant for the Purchase Price.
2.2 PAYMENT. Payment by the Purchaser of the Purchase Price
to the Company at the Closing on the Closing Date shall be made as follows:
(a) the Purchaser shall pay to ▇▇▇▇▇▇ ▇. Garden, P.C.
an amount equal to $17,500 payable by the Company pursuant to Section 9.5,
by wire transfer of immediately available funds to an account designated by
such firm;
(b) the Purchaser shall pay to ▇▇ ▇▇▇▇▇▇ & Company an amount
equal to $66,000 payable by the Company to such firm as a finder, by wire
transfer of immediately available funds to an account designated by such firm;
and
(c) Purchaser shall pay to the Company the balance of the
Purchase Price, after determination and deduction therefrom of the amounts to be
paid pursuant to Sections 2.2(a) and (b), by wire transfer of immediately
available funds to an account designated by the Company.
(d) For all purposes, upon payment of the amounts provided for
in this Section 2.2, the Purchaser shall be deemed to have paid the Purchase
Price in full to the Company and to have disbursed on behalf of the Company the
amounts provided in Sections 2.2(a) and (b). By agreeing to disburse funds on
behalf of the Company as provided in this Section 2.2, in no event shall the
Purchaser have any liability to any Person, including, without limitation, the
Persons identified in Sections 2.2(a) and (b), for payment or performance of any
obligation or liability of the Company to such Person.
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2.3 CLOSING. The sale and purchase of the Note and Warrant
shall occur on the Closing Date at the Closing Location. At the Closing on the
Closing Date, upon the terms and subject to the conditions of this Agreement,
(A) the Company shall issue and sell to the Purchaser the Note
and the Warrant and payment by the Purchaser to the Company of an amount equal
to the Purchase Price as provided in Section 2.2, and
(B) the Purchaser shall pay to the Company an amount equal to
the Purchase Price, as provided in Section 2.2, against issuance and sale by the
Company to the Purchaser of the Note and Warrant.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to, and covenants and agrees with, the Purchaser
that:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
and each Subsidiary is a corporation duly incorporated, validly existing and
subsisting under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its business as now
conducted and to own its properties. The Company and each Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification or licensing necessary unless the
failure to so qualify would not be reasonably likely to result in a Material
Adverse Effect. The Company has no Subsidiaries other than those listed in
Schedule 3.1 and has no investment in any other Person except such investments
as would be classified as current assets on a balance sheet of the Company,
prepared in accordance with Generally Accepted Accounting Principles.
3.2 AUTHORIZATION. The Company has full corporate power and
authority and has taken all requisite action on the part of the Company, its
officers, directors and stockholders necessary for (i) the authorization,
execution and delivery of the Transaction Documents, (ii) the authorization of
the performance of all obligations of the Company under the Transaction
Documents, and (iii) the authorization, issuance (or reservation for issuance)
and delivery of the Securities. The Transaction Documents constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability, relating to or affecting
creditors' rights generally.
3.3 CAPITALIZATION. Set forth on SCHEDULE 3.3 (check schedule
to make sure it is accurate given the uncertainty of some stock issuances,
cancellation of stock, etc.) hereto is (a) the authorized capital stock of the
Company on the date hereof; (b) the number of shares of capital stock issued and
outstanding on the date hereof; (c) the number of shares of capital stock
issuable pursuant to the Company's stock option, stock purchase, stock award and
similar plans; and (d) the number of shares of capital stock issuable and
6
reserved for issuance pursuant to all Common Stock Equivalents outstanding or
which the Company has agreed to issue (other than the Note and the Warrant). All
of the issued and outstanding shares of the Company's capital stock have been
duly authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights. No Person is entitled to preemptive or similar statutory or
contractual rights with respect to any securities of the Company. Except as set
forth on SCHEDULE 3.3 or in the SEC Filings, there are no outstanding Common
Stock Equivalents or other rights, agreements or arrangements of any character
under which the Company is or may be obligated to issue any equity securities of
any kind, and except as contemplated by this Agreement, the Company is not
currently in negotiations for the issuance of any Common Stock Equivalents or
capital stock of any kind. The Company has no knowledge of any voting
agreements, buy-sell agreements, option or right of first purchase agreements or
other agreements of any kind among any of the security holders of the Company
relating to the securities of the Company held by them. Except as set forth on
SCHEDULE 3.3 and except for registration statements currently on file, the
Company has not granted any Person the right (which is now outstanding or
effective) to require the Company to register any securities of the Company
under the 1933 Act, whether on a demand basis or in connection with the
registration of securities of the Company for its own account or for the account
of any other Person.
3.4 VALID ISSUANCE. The aggregate number of shares of Common
Stock issued, outstanding and reserved for issuance is _______. The Company does
not have any obligation to issue shares of Common Stock for which it has not
reserved an adequate number of shares of Common Stock. The Note and Warrant are
duly authorized, and such Securities, and the Underlying Shares issuable upon
conversion of the Note and Warrant Shares issuable upon exercise of the Warrant,
have been duly authorized and when issued in accordance herewith and with the
terms of the Note and Warrant, will be validly issued, fully paid,
non-assessable and free and clear of all Encumbrances and restrictions, except
for restrictions on transfer imposed by applicable securities laws.
3.5 CONSENTS. The execution, delivery and performance by the
Company of the Transaction Documents and the offer, issuance and sale of the
Securities require no consent of, action by or in respect of, or filing with,
any Person, governmental body, agency, or official other than filings that have
been or will be made pursuant to applicable state securities laws and the
requirements of the OTCBB and other than the filing of a Form D by the Company
with the SEC, each of which the Company undertakes to file within the applicable
time periods.
3.6 DELIVERY OF SEC FILINGS; BUSINESS; NON-PUBLIC INFORMATION.
The Company has timely filed all material reports and other documents required
to be filed with the SEC pursuant to the 1934 Act since December 31, 1999. At
their respective times of filing with the SEC, the SEC Filings complied in all
material respects with the requirements of the 1934 Act and did not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. The Company and the Subsidiaries are
engaged only in the business described in the SEC Filings, and the SEC Filings
contain a complete and accurate description of the business of the Company and
the Subsidiaries. The Company has not provided to the Purchaser (i) any
information required to be filed under the 1934 Act that has not been so filed
or (ii) any material non-public information concerning the Company and the
Subsidiaries.
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3.7 USE OF PROCEEDS. The proceeds of the sale of the Note and
the Warrant hereunder shall be used by the Company to partially fund the
Company's obligations under its definitive agreement to acquire InnoFood, Inc.
3.8 NO MATERIAL ADVERSE CHANGE. Since the filing of the 2002
10-K or as otherwise identified and described in the SEC Filings subsequently
filed by the Company with the SEC pursuant to the 1934 Act there has not been:
(i) any material change in the consolidated assets, liabilities, financial
condition or operating results of the Company and the Subsidiaries from
that reflected in the financial statements included in the 2002 10-K,
except changes in the ordinary course of business which have not had,
in the aggregate, a Material Adverse Effect;
(ii) any declaration or payment of any dividend, or any authorization
or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the
Company or any Subsidiary;
(iii) any material damage, destruction or loss, whether or not covered by
insurance, to any assets or properties of the Company or any
Subsidiary;
(iv) any waiver by the Company or any Subsidiary of a material right or
of a material debt owed to it which waiver is adverse to the Company
or any Subsidiary;
(v) any satisfaction or discharge of any Encumbrance or payment of any
obligation by the Company or any Subsidiary, except in the ordinary
course of business and which is not material to the assets, properties,
prospects, financial condition, operating results or business of the
Company and the Subsidiaries taken as a whole (as such business is
presently conducted and the Company has publicly disclosed it is
proposed to be conducted);
(vi) any material change or amendment to a material contract or arrangement
by which the Company or any Subsidiary or any of their respective
assets or properties is bound or subject;
(vii) any material labor difficulties or labor union organizing activities
with respect to employees of or contractors to the Company or any
Subsidiary;
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(viii) any transaction entered into by the Company or any Subsidiary other
than in the ordinary course of business; or
(ix) any other event or condition of any character that may have a Material
Adverse Effect.
3.9 REGISTRATION STATEMENTS. During the preceding two years,
each registration statement and any amendment thereto filed by the Company
pursuant to the 1933 Act, as of the date such registration statement or
amendment became effective, complied as to form in all material respects with
the 1933 Act, and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading; and each prospectus or supplement filed
pursuant to Rule 424 under the 1933 Act, as of its issue date and as of the
closing of any sale of securities pursuant thereto did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
3.10 FORM S-3 ELIGIBILITY. The Company is currently eligible
to register the resale of its Common Stock in a secondary offering on a
registration statement on Form S-3 under the 1933 Act and the Company shall
maintain such eligibility at least until the Registration Statement is ordered
effective by the SEC.
3.11 NO CONFLICT, BREACH, VIOLATION OR DEFAULT. (a) The
execution, delivery and performance of the Transaction Documents by the Company
and the issuance and sale of the Securities will not conflict with or result in
a breach or violation of any of the terms and provisions of, or constitute a
default under (i) the Company's Articles of Incorporation (including any
articles of amendment or articles designating series of shares) or the Company's
Bylaws, both currently in effect (copies of which have been provided to the
Purchaser before the date hereof) and as in effect on the date of issuance of
the Securities, (ii) any statute, rule, regulation or order of any governmental
agency or body or any court, domestic or foreign, having jurisdiction over the
Company or any Subsidiary or any of their respective assets or properties, or
(iii) any agreement or instrument to which the Company or any Subsidiary is a
party or by which the Company or any Subsidiary is bound or to which any of the
properties of the Company or any Subsidiary is subject.
(b) Except where it would not have a Material Adverse Effect,
the Company and each Subsidiary (i) is not in violation of any statute, rule or
regulation applicable to the Company or any Subsidiary or its assets, (ii) is
not in violation of any judgment, order or decree applicable to the Company or
any Subsidiary or any of their respective assets, and (iii) is not in breach or
violation of any agreement, note or instrument to which it or its assets are a
party or are bound or subject. To the best of the Company's knowledge, neither
the Company nor any Subsidiary has received notice from any Person of any claim
or investigation that, if adversely determined, would render the preceding
sentence untrue or incomplete.
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3.12 TAX MATTERS. The Company and the Subsidiaries have timely
prepared and filed all tax returns required to have been filed by the Company
with all appropriate governmental agencies and timely paid all taxes owed by
them, except where failure to make such payment would not have a Material
Adverse Effect. The charges, accruals and reserves on the books of the Company
and the Subsidiaries in respect of taxes for all fiscal periods are adequate in
all material respects, and there are no material unpaid assessments against the
Company or any Subsidiary nor, to the knowledge of the Company, any basis for
the assessment of any additional taxes, penalties or interest for any fiscal
period or audits by any foreign, U.S. federal, state, representations or
warranties in or local taxing authority, except such as are not material. All
material taxes and other assessments and levies that the Company or any
Subsidiary is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third party
when due. There are no tax liens or claims pending or threatened against the
Company or any Subsidiary or any of their respective assets or property which if
adversely decided, would have a Material Adverse Effect. There are no
outstanding tax sharing agreements or other such arrangements between the
Company or any Subsidiary and any other Person.
3.13 TITLE TO PROPERTIES. Except as disclosed in the SEC
Filings, the Company and each Subsidiary has good and marketable title to all
real properties and all other properties and assets owned by it, in each case
free from Encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or currently planned to be
made thereof by the Company or such Subsidiary; and except as disclosed in the
SEC Filings, the Company and each Subsidiary holds any leased real or personal
property under valid and enforceable leases with no exceptions that would
materially interfere with the use made or currently planned to be made thereof
by the Company or such Subsidiary.
3.14 CERTIFICATES, LICENSES, AUTHORIZATIONS AND PERMITS. The
Company and each Subsidiary possesses adequate certificates, licenses,
authorizations or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by it and has not received any
notice of proceedings relating to the revocation or modification of any such
certificate, license, authorization or permit that, if determined adversely to
the Company or any Subsidiary, would individually or in the aggregate have a
Material Adverse Effect.
3.15 NO LABOR DISPUTES. No material labor dispute with the
employees of or contractors to the Company or any Subsidiary exists or, to the
knowledge of the Company, is imminent.
3.16 INTELLECTUAL PROPERTY. (1) The Company and each
Subsidiary holds all Intellectual Property, free and clear of all Encumbrances
and restrictions on use or transfer, whether or not recorded, and has sole title
to and ownership of or has the full, exclusive (subject to the rights of its
licensees or licensors) right to use in its field of business, for the life of
the proprietary right all Intellectual Property; (2) the use of the Intellectual
Property by the Company or any Subsidiary does not, to the knowledge of the
Company after due inquiry, violate or infringe on the rights of any other
Person; (3) neither the Company nor any Subsidiary has received any notice of
any conflict between the asserted rights of others and the Company or any
Subsidiary with respect to any Intellectual Property; (4) the Company and each
Subsidiary has used its best efforts to perfect its rights in and to all
Intellectual Property used by it in its business or in which it has an interest;
10
(5) the Company and each Subsidiary are in compliance with all material terms
and conditions of its agreements relating to the Intellectual Property; (6)
neither the Company nor any Subsidiary is or has been a defendant in any action,
suit, investigation or proceeding relating to infringement or misappropriation
by the Company or any Subsidiary of any Intellectual Property; (7) neither the
Company nor any Subsidiary has been notified of any alleged claim of
infringement or misappropriation by the Company or any Subsidiary of any
Intellectual Property; (8) the Company has no knowledge of any claim of
infringement or misappropriation by the Company or any Subsidiary of any
Intellectual Property; (9) to the knowledge (after due inquiry) of the Company,
none of the products the Company and the Subsidiaries are researching,
developing, propose to research and develop, make, have made, use, or sell,
infringes or misappropriates any Intellectual Property right of any third party;
(10) none of the trademarks and service marks used by the Company or any
Subsidiary, to the knowledge of the Company after due inquiry, infringes the
trademark or service ▇▇▇▇ rights of any third party; (11) to the Company's
knowledge none of the material processes and formulae, research and development
results and other know-how relating to the Company's or the Subsidiaries'
respective businesses, the value of which to the Company or any Subsidiary is
contingent upon maintenance of the confidentiality thereof, has been disclosed
to any Person other than Persons bound by written confidentiality agreements;
and (12) the Company owns directly, or possesses adequate rights to use, all
Intellectual Property used in or relating to the development, manufacture, use,
distribution or marketing of the Company's products, and none of such
Intellectual Property is owned, claimed or used by, or subject to any
Encumbrance of or by, any Subsidiary.
3.17 ENVIRONMENTAL MATTERS. Neither the Company nor any
Subsidiary is in violation of any statute, rule, regulation, decision or order
of any governmental agency or body or any court, domestic or foreign, relating
to the use, disposal or release of hazardous or toxic substances or relating to
the protection or restoration of the environment or human exposure to hazardous
or toxic substances (collectively, "Environmental Laws"), does not own or
operate any real property contaminated with any substance that is subject to any
Environmental Laws, is not liable for any off-site disposal or contamination
pursuant to any Environmental Laws, and is not subject to any claim relating to
any Environmental Laws, which violation, contamination, liability or claim would
individually or in the aggregate have a Material Adverse Effect; and neither the
Company nor any Subsidiary is aware of any pending investigation that might lead
to such a claim.
3.18 LITIGATION. Except as set forth in the SEC Filings, there
are no pending actions, suits or proceedings against or affecting the Company or
any Subsidiary or any of their respective properties that, if determined
adversely to the Company or such Subsidiary, would individually or in the
aggregate have a Material Adverse Effect, or which are otherwise material in the
context of the sale of the Securities; and to the Company's knowledge, no such
actions, suits or proceedings are threatened or contemplated.
11
3.19 FINANCIAL STATEMENTS. The consolidated financial
statements included in each SEC Filing present fairly and accurately in all
material respects the consolidated financial position of the Company and the
Subsidiaries as of the dates reported and the consolidated results of
operations, changes in stockholders' equity and cash flows for the periods
reported, all in conformity with Generally Accepted Accounting Principles
applied on a consistent basis and in conformity with the rules and regulations
of the SEC under the 1934 Act applicable to the Company. Except as set forth in
the consolidated financial statements of the Company included in the SEC Filings
filed prior to the date hereof, neither the Company nor any Subsidiary has any
liabilities, contingent or otherwise, except those which individually or in the
aggregate are not material to the financial condition or operating results of
the Company and the Subsidiaries, taken as a whole.
3.20 INSURANCE COVERAGE. The Company and each Subsidiary
maintains in full force and effect insurance coverage that is customary for
comparably situated companies for the business being conducted and properties
owned or leased by it, and the Company reasonably believes such insurance
coverage to be adequate against all liabilities, claims and risks against which
it is customary for comparably situated companies to insure.
3.21 ▇▇▇▇▇▇▇▇-▇▇▇▇▇. The Company is in compliance with any and
all applicable requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 that are effective
as of the date hereof, and any and all applicable rules and regulations
promulgated by the SEC thereunder that are effective as of the date hereof,
except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect.
3.22 ACKNOWLEDGEMENT OF POTENTIAL DILUTION. The Company
understands that the number of shares of Common Stock issuable pursuant to the
Note and Warrant may increase substantially and that such increase may have a
dilutive effect on the Company's equity capitalization.
3.23 BROKERS AND FINDERS. The Purchaser shall have no
liability or responsibility for the payment of any commission or finder's fee to
any third party in connection with or resulting from this Agreement or the
transactions contemplated by this Agreement by reason of any agreement of or
action taken by the Company.
3.24 NO DIRECTED SELLING EFFORTS OR GENERAL SOLICITATION.
Notwithstanding anything contained on any schedule hereto, neither the Company
nor any Person acting on its behalf has conducted any general solicitation or
general advertising (as those terms are used in Regulation D) in connection with
the offer or sale of any of the Securities.
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3.25 NO INTEGRATED OFFERING. Neither the Company nor any of
its Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would (1) adversely affect reliance
by the Company on Section 4(2) of the 1933 Act for the exemption from
registration for the transactions contemplated hereby or would require
registration of the offer and sale of the Note and Warrant to the Purchaser
under the 1933 Act; or (2) require the integration of the offering of the
Securities with any other offering of securities for purposes of determining the
need to obtain stockholder approval of the transactions contemplated hereby
under the rules of the OTCBB.
3.26 DISCLOSURES. For purposes of this Agreement and the
transactions contemplated hereby, none of the representations or warranties made
by the Company under any of the Transaction Documents and no written information
furnished by the Company pursuant hereto, or in any other document, certificate
or written statement furnished by the Company to the Purchaser or any authorized
representative of the Purchaser, pursuant to the Transaction Documents or in
connection therewith, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
herein and therein, in light of the circumstances under which they were made,
not misleading.
3.27 ABSENCE OF RIGHTS AGREEMENT. The Company has not adopted
a shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change of control in the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser hereby represents and warrants to the Company that:
4.1 ORGANIZATION AND EXISTENCE. Such Purchaser is a validly
existing partnership and has all requisite partnership power and authority to
invest in the Securities pursuant to this Agreement.
4.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Securities to be
acquired by the Purchaser pursuant to this Agreement will be acquired for the
Purchaser's own account, not as nominee or agent, and not with a view to the
resale or distribution of any part thereof in violation of applicable securities
laws, and the Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing the same in violation of applicable
securities laws.
4.3 INVESTMENT EXPERIENCE. The Purchaser acknowledges that it
can bear the economic risk and complete loss of its investment in the Securities
and has such knowledge of and experience with securities and financial or
business matters that it is capable of evaluating the merits and risks of the
purchase of the Note and Warrant.
4.4 DISCLOSURE OF INFORMATION. The Purchaser has had an
opportunity to review documents related to the Company and to ask questions of
and receive answers from the Company regarding the terms and conditions of the
offering of the Securities; provided however, that neither such inquiries nor
any other investigation conducted by the Purchaser shall modify, amend, limit or
otherwise affect the Purchaser's right to rely on the Company's representations
and warranties contained in the Transaction Documents or made pursuant to the
Transaction Documents.
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4.5 RESTRICTED SECURITIES. The Purchaser understands that the
Note and Warrant are characterized as "restricted securities" under the U.S.
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.
4.6 ACCREDITED INVESTOR. The Purchaser is an "accredited
investor" as defined in Rule 501(a) of Regulation D.
4.7 NO GENERAL SOLICITATION. The Purchaser did not learn of
the offering of the Note and Warrant through any public advertising or general
solicitation (as these terms are used in Regulation D).
4.8 RESIDENCY OF PURCHASER. The Purchaser is a resident of the
state or other jurisdiction indicated in the first paragraph of this Agreement.
4.9 BROKERS AND FINDERS. The Company shall have no liability
or responsibility for the payment of any commission or finder's fee to any third
party in connection with or resulting from this Agreement or the transactions
contemplated by this Agreement by reason of any agreement of the Purchaser.
4.10 AUTHORIZATION. The Purchaser has full partnership power
and authority and has taken all requisite action on the part of the Purchaser
and its partners necessary for (i) the authorization, execution and delivery of
the Transaction Documents and (ii) the authorization of the performance of all
obligations of the Purchaser under the Transaction Documents. The Transaction
Documents constitute the legal, valid and binding obligations of the Purchaser,
enforceable against the Purchaser in accordance with their terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors' rights generally.
4.11 RISK FACTORS. Without limiting any of the Purchaser's
other representations and warranties hereunder, the Purchaser acknowledges that
the Purchaser has reviewed and is aware of the risk factors described in the SEC
Filings.
4.12 RELIANCE. The Purchaser has consulted its own financial,
legal and tax advisors with respect to the economic, legal and tax consequences
of an investment in the Note and Warrant and has not relied on the SEC Filings
or the Company, its officers, directors or professional advisors as to such
consequences.
4.13 NO REPRESENTATIONS. No oral representations have been
made by the Company to the Purchaser in connection with the Transaction
Documents; and no written representations have been made by the Company to the
Purchaser other than as stated in the Transaction Documents and the SEC Filings.
14
4.14 SURVIVAL. The Purchaser acknowledges that the
representations, warranties and agreements made by the Purchaser herein shall
survive the execution and delivery of this Agreement and the purchase of the
Note and Warrant.
5. REGISTRATION RIGHTS AGREEMENT.
5.1 Registration Rights Agreement. The Company acknowledges
and agrees that the Company's execution and delivery of, and full performance of
its obligations under, the Registration Rights Agreement is a material
inducement to the Purchaser to execute and deliver this Agreement and purchase
and pay for the Note and Warrant. The Company agrees to execute and deliver to
the Purchaser the Registration Rights Agreement at or before the Closing.
6. CERTAIN COVENANTS OF THE COMPANY AND THE PURCHASER.
6.1 19.99% CAP; RULE 144.
(a) 19.99% CAP. Notwithstanding anything contained herein or
in the other Transaction Documents, if Rule 4350(i)(1)(D) of the Nasdaq is
applicable the Company shall not be entitled to issue upon conversion of the
Note and exercise of the Warrant an aggregate number of shares of Common Stock
in excess of 19.99% of the Common Stock issued and outstanding on the date
hereof, subject to appropriate and equitable adjustment for any stock split,
stock dividend or reclassification of the Common Stock or similar event
occurring after the date hereof (the "20% Cap"), unless the Company receives
stockholder approval for such issuance. If Rule 4350(i)(1)(D) of the Nasdaq is
applicable to the shares of Common Stock issuable upon conversion of the Note
and exercise of the Warrant and the limitations thereof restrict the Company
from issuing additional shares of Common Stock upon conversion of the Note or
exercise of the Warrant, then the Company shall use its commercially reasonable
best efforts to obtain, as promptly as practicable, but in no event later than
120 days thereafter, the stockholder approval that is necessary under the rules
of the Nasdaq so that the 20% Cap would no longer be applicable to issuance of
shares of Common Stock upon conversion of the Note and exercise of the Warrant.
(b) RULE 144. The Company acknowledges that, for purposes of
determining the holding period under Rule 144 for Underlying Shares issued upon
conversion of, or in lieu of cash payment of principal of or interest on, the
Note, the holding period of such Underlying Shares shall be tacked to the
holding period of the Note and for purposes of determining the holding period
under Rule 144 for Warrant Shares issued in a "net" or "cashless" exercise of
the Warrant, the holding period of such Warrant Shares may be tacked to the
holding period of the Warrant. The Company agrees not to take a position
contrary thereto unless the SEC or its staff by rule or interpretation changes
its rules and interpretations thereof in effect on the date of this Agreement or
such rules or interpretations are held invalid or incorrect by a court of
competent jurisdiction.
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6.2 LIMITATION ON CERTAIN TRANSACTIONS.
(a) Beginning as of the date of this Agreement and until the
effective date of the Registration Statement as contemplated by the Registration
Rights Agreement, without the prior written consent of the Purchaser (which
consent may be withheld in the Purchaser's discretion), the Company shall not
issue or sell or agree to issue or sell any securities in a capital raising
transaction prior to such date, unless such securities will not be, and are not,
registered for sale or resale under the 1933 Act until on or after the effective
date of the Registration Statement, provided that the limitation of this Section
6.2(a) shall not apply to securities issued pursuant to the Company's duly
adopted employee or director bona fide share and option plans.
(b) So long as the Note remains outstanding, without the prior
written consent of the registered holder of the Note (which consent may be
withheld in such holder's discretion), the Company shall not issue or sell, or
agree to issue or sell, any securities in a Variable Rate Transaction.
6.3 RIGHT OF THE PURCHASER TO PARTICIPATE IN FUTURE
TRANSACTIONS.
(a) RIGHT TO PARTICIPATE. So long as the Note remains
outstanding, the Purchaser will have a right to participate in any sales of any
of the Company's securities in a capital raising transaction on the terms and
conditions set forth in this Section 6.3. During such period, the Company shall
give ten Business Days advance written notice to the Purchaser prior to any
non-public offer or sale of any of the Company's capital stock or any Common
Stock Equivalents in a capital raising transaction by providing to the Purchaser
a comprehensive term sheet containing all significant business terms of such a
proposed transaction. The Purchaser shall have the right to participate in such
proposed transaction and to purchase 25 percent of such securities which are the
subject of such proposed transaction for the same consideration and on the same
terms and conditions as contemplated for such third-party sale (or such lesser
portion thereof as specified by the Purchaser). If the Purchaser elects to
exercise its rights hereunder it must deliver written notice to the Company
within five (5) Business Days following receipt of the notice and comprehensive
term sheet from the Company, which notice from the Purchaser shall be contingent
upon receipt of satisfactory definitive documents for such transaction from the
Company. If, subsequent to the Company giving notice to the Purchaser hereunder
but prior to the Purchaser exercising its right to participate (or the
expiration of the five-day period without response from the Purchaser or the
rejection of such offer for such financing by the Purchaser), the terms and
conditions of the proposed third-party sale are changed from that disclosed in
the comprehensive term sheet provided to the Purchaser, the Company shall be
required to provide a new notice and comprehensive term sheet reflecting such
revised terms to the Purchaser hereunder and the Purchaser shall have the right,
which must be exercised within five (5) Business Days of such new notice and
16
such revised comprehensive term sheet, to exercise its rights to purchase the
securities on such changed terms and conditions as provided hereunder. In the
event the Purchaser does not exercise its rights hereunder with respect to a
proposed transaction within the period or periods provided, or affirmatively
declines to engage in such proposed transaction with the Company, then the
Company may proceed with such proposed transaction on the same terms and
conditions as noticed to the Purchaser (assuming the Purchaser has consented to
the transaction, if required, pursuant to Section 6.2 of this Agreement) with
the Purchaser if it has elected to participate in such proposed transaction,
provided that if such proposed transaction is not consummated within 60 days
following the Company's notice hereunder, then the right of first refusal
hereunder shall again apply to the Purchaser for such proposed transaction. The
rights and obligations under this Section 6.3 shall in no way diminish the other
rights of the Purchaser pursuant to this Section 6.
(b) LIMITATION ON RIGHT OF FIRST REFUSAL. Notwithstanding
anything to the contrary contained herein, the number of shares of Common Stock
that may be acquired directly or through acquisition of Common Stock Equivalents
by the Purchaser pursuant to any capital raising transaction as described in
subsection (a) above shall not exceed a number that, when added to the total
number of shares of Common Stock deemed beneficially owned by the Purchaser
(other than by virtue of the ownership of securities or rights to acquire
securities (including the Note and Warrant) that have limitations on the
Purchaser's right to convert, exercise or purchase similar to the limitation set
forth herein (the "Excluded Shares")), together with all shares of Common Stock
deemed beneficially owned (not counting such affiliate's Excluded Shares) by the
Purchaser (as defined in Rule 144 of the 1933 Act) (the "Aggregation Parties")
that would be aggregated for purposes of determining whether such securities are
beneficially owned by the Purchaser or for purposes of determining whether a
group exists, in each such case for purposes of Section 13(d) of the 1934 Act
and Regulation 13D-G thereunder, would result in beneficial ownership by the
Purchaser or such group of more than 9.9% of the shares of the Company's Common
Stock (the "Restricted Ownership Percentage"), computed in accordance with
Regulation 13D-G. The Purchaser shall have the right at any time and from time
to time to reduce its Restricted Ownership Percentage immediately upon notice to
the Company in the event and only to the extent that Section 16 of the 1934 Act
or the rules promulgated thereunder (or any successor statute or rules) is
changed to reduce the beneficial ownership percentage threshold thereunder from
10%. If the Purchaser is unable by reason of the Restricted Ownership Percentage
to acquire the full amount of securities which the Purchaser would otherwise be
entitled to acquire pursuant to this Section 6.3 and thereafter, at any time
prior to the repayment or conversion in full of the Purchaser's Note the
Purchaser could acquire such securities without exceeding its Restricted
Ownership Percentage, then the Purchaser shall be entitled to acquire such
securities at such time.
6.4 REPORTS AND INFORMATION. For so long as the Purchaser
beneficially owns any of the Securities, the Company will furnish to the
Purchaser the following reports and information, each of which shall be provided
to the Purchaser by e-mail (at such address as specified in writing by the
Purchaser for such purpose) or reputable overnight courier:
17
(a) QUARTERLY FINANCIAL INFORMATION. In the absence of a
Quarterly Report on Form 10-Q timely filed with the SEC for any of the Company's
first three fiscal quarters in any fiscal year, within 45 days after the end of
any such fiscal quarter consolidated balance sheets of the Company as at the end
of each of the Company's first three fiscal quarters and the related
consolidated statements of operations, stockholders' equity and cash flows for
such period and for the portion of the Company's fiscal year ended on the last
day of such quarter, all in reasonable detail and certified by the principal
financial officer of the Company to have been prepared in accordance with
Generally Accepted Accounting Principles, subject to year-end and audit
adjustments.
(b) ANNUAL FINANCIAL INFORMATION. In the absence of a Form
10-K timely filed with the SEC within 105 days after the end of any fiscal year,
then within such period consolidated balance sheets of the Company as at the end
of each fiscal year and the related consolidated statements of earnings,
stockholders' equity and cash flows for such year, all in reasonable detail and
accompanied by the report on such consolidated financial statements of an
independent certified public accountant selected by the Company and reasonably
satisfactory to the Purchaser.
(c) STOCKHOLDER AND ANALYST REPORTS AND INFORMATION. Copies of
all notices, financial statements, reports and documents as the Company shall
send or make available generally to its stockholders or to financial analysts,
promptly after providing same to the stockholders or financial analysts.
(d) OTHER INFORMATION. Such other information relating to the
Company and the Subsidiaries as from time to time may reasonably be requested by
the Purchaser provided the Company or its Subsidiary has such information
available to it in the ordinary course of its business, and further provided
that the Company, solely in its own discretion, determines that such information
is not confidential in nature and disclosure to such Purchaser would not be
harmful to the Company or its Subsidiary.
Notwithstanding anything to the contrary contained in this Section 6.4, the
Company shall not disclose material nonpublic information to the Purchaser, or
to advisors to or representatives of the Purchaser, unless prior to disclosure
of such information the Company identifies such information as being material
nonpublic information and provides the Purchaser, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review. The Company may, as a condition to disclosing
any material nonpublic information hereunder, require the Purchaser's advisors
and representatives to enter into a confidentiality agreement (including an
agreement with such advisors and representatives prohibiting them from trading
in Common Stock during such period of time as they are in possession of material
nonpublic information) in form reasonably satisfactory to the Company and the
Purchaser.
(e) RULE 144. The Company agrees to make publicly available on
a timely basis the information required by Rule 144(c) under the 1933 Act.
18
6.5 PRESS RELEASES. Any press release or other publicity
concerning this Agreement or the transactions contemplated by this Agreement
shall be submitted to the Purchaser for comment at least two (2) Business Days
prior to issuance, unless the release is required to be issued within a shorter
period of time by law or pursuant to the rules of any Approved Market (if
applicable). The Company shall, on the Closing Date, issue a press release
concerning the transactions contemplated hereby. The Company's other press
releases and other public information, to the extent concerning the Transaction
Documents, shall contain such information as reasonably requested by the
Purchaser and be reasonably approved by the Purchaser in writing prior to
issuance.
6.6 NO CONFLICTING AGREEMENTS. The Company will not take any
action, enter into any agreement or make any commitment that would conflict or
interfere in any material respect with the obligations to the Purchaser under
the Transaction Documents.
6.7 INSURANCE. For so long as the Purchaser beneficially owns
any of the Securities, the Company shall, and shall cause each Subsidiary to,
have in full force and effect (a) insurance reasonably believed to be adequate
on all assets and activities of a type customarily insured, covering property
damage and loss of income by fire or other casualty, and (b) insurance
reasonably believed to be adequate protection against all liabilities, claims
and risks against which it is customary for companies similarly situated as the
Company and the Subsidiaries to insure.
6.8 COMPLIANCE WITH LAWS. So long as the Purchaser
beneficially owns any Securities, the Company will use reasonable efforts to
comply with all applicable laws, rules, regulations, orders and decrees of all
governmental authorities, except to the extent non-compliance (in one instance
or in the aggregate) would not have a Material Adverse Effect.
6.9 LISTING OF UNDERLYING SHARES AND WARRANT SHARES AND
RELATED MATTERS. The Company agrees that if the Company applies to have its
Common Stock or other securities traded on any other principal stock exchange or
market, it will include in such application the Underlying Shares and Warrant
Shares and will take such other action as is necessary to cause such Common
Stock to be so listed. For so long as any Note or Warrant remains outstanding,
the Company will take all action necessary to continue the listing and trading
of its Common Stock on at least one of the OTC Bulletin Board, the Nasdaq Small
Cap, the Nasdaq, the NYSE or the AMEX (collectively, "Approved Markets"), and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of such exchange or market, as applicable,
to ensure the continued eligibility for trading of the Common Stock thereon.
Neither the Company nor any of its Affiliates, nor any Person acting on its or
their behalf, shall directly or indirectly make any offers or sales of any
security or solicit any offers to buy any security which may cause the
integration of the offering hereunder with any other offering of securities for
purposes of determining the need to obtain stockholder approval of the
transactions contemplated hereby under any applicable rules of any Approved
Market. Unless in its reasonable judgment such would constitute material
non-public information, the Company shall notify the Purchaser in advance if it
intends to make any private placement of securities within the six-month period
after the Closing Date, and unless the Company shall have received stockholder
approval of the transactions contemplated hereby under the rules of any Approved
Market (if applicable), at the Purchaser's reasonable request, the Company shall
request a ruling from such Approved Market in advance that such private
placement will not be integrated with the transactions contemplated hereunder
pursuant to the rules of such Approved Market.
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6.10 CORPORATE EXISTENCE. So long as any Note or Warrant
remains outstanding, the Company shall maintain its corporate existence, except
in the event of a merger, consolidation, amalgamation or sale of all or
substantially all of the Company's assets, as long as the surviving or successor
entity in such transaction (a) assumes (jointly and severally with the Company
if the Company continues to exist) the Company's obligations hereunder and under
the agreements and instruments entered into in connection herewith, regardless
of whether or not the Company would have had a sufficient number of shares of
Common Stock authorized and available for issuance in order to fulfill its
obligations hereunder and effect the conversion in full of all Notes and
exercise in full of all Warrants outstanding as of the date of such transaction;
(b) has no legal, contractual or other restrictions on its ability to perform
the obligations of the Company hereunder and under the agreements and
instruments entered into in connection herewith; and (c)(i) is a publicly traded
corporation whose common stock and the shares of capital stock issuable upon
conversion of the Note and exercise of the Warrant are (or would be upon
issuance thereof) listed for trading on an Approved Market or (ii) if not such a
publicly traded corporation, then the Person who will be the successor or
surviving entity in such transaction, at the time it shall enter into a
definitive agreement to complete such transaction, shall have agreed in writing
with the Purchaser that it will, at the election of the Purchaser, purchase the
Purchaser's Securities at a price equal to the greater of (a) 120% of the
Purchase Price of such Securities or (b) the fair market value of such
Securities on an as-converted and as-exercised basis based on the closing price
immediately preceding such transaction or the redemption date, whichever is
greater.
6.11 FORM 8-K. Within one Business Day after the Closing Date,
the Company will publicly report the issue and sale of the Note and Warrant by
filing with the SEC a Current Report on Form 8-K under the 1934 Act which report
shall describe the material terms and include copies of the Transaction
Documents as exhibits to such report.
6.12 LEGENDS. Until registration for resale pursuant to the
Registration Rights Agreement or until sales under Rule 144 under the 1933 Act
are permitted, certificates evidencing the Underlying Shares and the Warrant
Shares may bear one or both of the following legends or legends substantially
similar thereto:
(a) "The shares represented by this certificate may not be transferred
without (i) the opinion of counsel reasonably satisfactory to the
corporation that such transfer may lawfully be made without
registration under the Securities Act of 1933 or qualification under
applicable state securities laws; or (ii) such registration or
qualification."
20
(b) If required by the authorities of any state in connection with the
issuance of sale of the Securities, the legend required by such state.
Upon registration for resale pursuant to the Registration Rights Agreement or
upon Rule 144(k) under the 1933 Act becoming available, the Company shall
promptly (but in no event later than five Business Days after surrender of the
legended certificates to the Company) cause certificates evidencing the
Underlying Shares and Warrant Shares previously issued to be replaced with
certificates which do not bear the restrictive legends set forth in the
preceding clause (a) of this Section, and all Underlying Shares and Warrant
Shares subsequently issued shall not bear the restrictive legend set forth in
the preceding clause (a) of this Section. If the Purchaser notifies the Company
that the Purchaser has not received such certificates without the restrictive
legend set forth in the preceding clause (a) of this Section within three
Business Days after surrender of such legended certificates (each, a "Purchaser
Share Notice"), and the Purchaser does not receive such certificates without the
restrictive legend set forth in the preceding clause (a) of this Section within
two Business Days after giving a particular Purchaser Share Notice, then the
Company shall pay cash liquidated damages to the Purchaser at the rate of 2% per
month of the original Purchase Price of the Note and Warrant in respect of which
such Underlying Shares and Warrant Shares are issuable or issued and for which
the certificates have not been provided in compliance with the above, for so
long as the Company fails to provide such certificates. A Purchaser Share Notice
may be given by telephone or e-mail to the Company's Chief Financial Officer or
General Counsel. The Purchaser agrees that any sale by the Purchaser of
Underlying Shares and Warrant Shares pursuant to the Registration Statement
shall be made by the Purchaser in compliance with the prospectus delivery
requirements of the 1933 Act and in accordance with the plan of distribution set
forth in the Registration Statement and related prospectus, as amended and
supplemented from time to time.
7. CONDITIONS TO THE COMPANY'S OBLIGATIONS TO ISSUE AND SELL.
The Company's obligation to issue and sell the Note and Warrant to the Purchaser
pursuant to this Agreement is conditioned upon satisfaction of the following
conditions precedent on or before the Closing Date (any or all of which may be
waived by the Company in its sole discretion):
(a) On the Closing Date, no legal action, suit or proceeding
shall be pending or threatened which seeks to restrain or prohibit the
transactions contemplated by this Agreement; and
(b) The representations and warranties of the Purchaser
contained in this Agreement shall have been true and correct on the date of this
Agreement and the representations and warranties of the Purchaser contained in
the Transaction Documents shall be true and correct on the Closing Date as if
given on and as of the Closing Date (except for representations given as of a
specific date, which representations shall be true and correct as of such date),
and on or before the Closing Date the Purchaser shall have performed all
covenants and agreements of the Purchaser contained herein or in any of the
other Transaction Documents required to be performed by the Purchaser on or
before the Closing Date.
21
8. CONDITIONS TO THE PURCHASER'S OBLIGATIONS TO PURCHASE. The
Purchaser's obligations to purchase the Note and Warrant are conditioned upon
satisfaction of the following conditions precedent on or before the Closing Date
(any or all of which may be waived by the Purchaser in its sole discretion):
(a) On the Closing Date, no legal action, suit or proceeding
shall be pending or threatened which seeks to restrain or prohibit the
transactions contemplated by this Agreement;
(b) The representations and warranties of the Company
contained in this Agreement shall have been true and correct on the date of this
Agreement and the representations and warranties of the Company contained in the
Transaction Documents shall be true and correct on the Closing Date as if given
on and as of the Closing Date (except for representations given as of a specific
date, which representations shall be true and correct as of such date), and on
or before the Closing Date the Company shall have performed all covenants and
agreements of the Company contained herein or in any of the other Transaction
Documents required to be performed by the Company on or before the Closing Date;
(c) No event which, if the Note were outstanding, would
constitute an Event of Default or which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default shall have
occurred and be continuing;
(d) No Change in Control Transaction shall have occurred;
(e) The Company shall have delivered to the Purchaser a
certificate, dated the Closing Date, duly executed by its Chief Executive
Officer or Chief Financial Officer, to the effect set forth in subparagraphs
(a), (b), (c) and (d) of this Section 8;
(f) The Company shall have delivered to the Purchaser a
certificate, dated the Closing Date, of the Secretary of the Company certifying
(A) the Certificate of Incorporation and By-Laws of the Company as in effect on
the Closing Date, (B) all resolutions of the Board of Directors (and committees
thereof) of the Company relating to this Agreement and the other Transaction
Documents and the transactions contemplated hereby and thereby and (C) such
other matters as reasonably requested by the Purchaser;
(g) On the Closing Date, the Purchaser shall have received an
opinion of counsel for the Company, dated the Closing Date, addressed to the
Purchaser, in form, scope and substance reasonably satisfactory to the
Purchaser, substantially in the form attached as EXHIBIT D; and
22
(h) On the Closing Date, (i) trading in securities on the
OTCBB shall not have been suspended or materially limited and (ii) a general
moratorium on commercial banking activities in the State of Texas shall not have
been declared by either federal or state authorities, nor shall there have
occurred any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the good
faith judgment of the Purchaser, makes it impracticable or inadvisable to
purchase the Note and Warrant.
9. MISCELLANEOUS.
9.1 SUCCESSORS AND ASSIGNS. This Agreement may not be assigned
by the Company. This Agreement may not be assigned by the Purchaser prior to the
Closing without the prior written consent of the Company, which consent may not
be unreasonably withheld, conditioned or delayed, except that after the Closing,
without the prior written consent of the Company, but after notice given to the
Company, the Purchaser may assign its rights and delegate its duties hereunder
in whole or in part to an Affiliate or to any transferee of Securities from the
Purchaser. The terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and permitted assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
permitted assigns any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement.
9.2 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.3 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.4 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given only upon delivery to each party to be notified by (i)
personal delivery, (ii) telephone line facsimile transmission, upon receipt of
confirmation of complete transmittal, or (iii) a recognized overnight air
courier, addressed to the party to be notified at the address as follows, or at
such other address as such party may designate by ten days' advance written
notice to the other party:
23
If to the Company:
Biogentech Corp.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
============
------------
Attention: _________, Esq.
Telephone: (___) _______
Fax: (___) _______
If to the Purchaser, to the address set forth on the
signature pages hereto.
9.5 EXPENSES. The parties hereto shall pay their own costs and
expenses in connection herewith, except that the Company shall pay or reimburse
the Purchaser, at or before the Closing, the flat sum of $17,500 for its legal
and due diligence expenses incurred in connection with the transactions
contemplated by this Agreement. The Company shall pay all fees and expenses of
any placement agents in connection with the transactions contemplated by this
Agreement pursuant to a separate agreement between such parties.
9.6 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Purchaser;
provided, however, that any such amendment or waiver effected in accordance with
this paragraph shall be binding upon each holder of any Securities purchased
under this Agreement at the time outstanding, each future holder of all such
securities, and the Company.
9.7 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
24
9.8 ENTIRE AGREEMENT. This Agreement, including the Exhibits
and Schedules hereto, the other Transaction Documents and other documents
contemplated hereby and thereby constitute the entire agreement among the
parties hereof with respect to the subject matter hereof and thereof and
supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof and thereof.
9.9 SURVIVAL. All representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to be representations,
warranties, covenants and agreements as of the date hereof, except as expressly
provided to be made or deemed made as of another date. The representations and
warranties shall survive the execution and delivery of, and the Closing under,
this Agreement.
9.10 FURTHER ASSURANCES. The parties shall execute and deliver
all such further instruments and documents and take all such other actions as
may reasonably be required to carry out the transactions contemplated hereby and
to evidence the fulfillment of the agreements herein contained.
9.11 APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Nevada without regard to
principles of conflicts of laws.
9.12 REMEDIES.
(a) The Purchaser shall be entitled to specific performance of
the Company's obligations under the Transaction Documents.
(b) The Company on the one hand and the Purchaser on the other
shall indemnify the other and hold it harmless from any loss, cost, expense or
fees (including reasonable attorneys' fees and expenses) arising out of any
breach of any of its representations, warranties, covenants or agreements in any
of the Transaction Documents, or arising out of the enforcement of this Section
9.12.
9.13 JURISDICTION. The parties hereby agree that all actions
or proceedings arising directly or indirectly from or in connection with this
Agreement shall be litigated only in the United States District Court for the
Northern District of Texas located in Dallas County, Dallas, Texas. The parties
consent and submit to the jurisdiction and venue of the foregoing courts and
consent that any process or notice of motion or other application to said court
or a judge thereof may be served inside or outside the State of Texas or the
Northern District of Texas (but with respect to any party hereto, such consent
shall not be deemed a general consent to jurisdiction and service for any third
parties) by registered mail, return receipt requested, directed to the party
being served at its address provided in or pursuant to this Agreement (and
service so made shall be deemed complete three (3) days after the same has been
posted as aforesaid) or by personal service or in such other manner as may be
permissible under the rules of said court. The Company hereby waives any right
to a jury trial in connection with any litigation pursuant to this Agreement.
25
[SIGNATURE PAGES FOLLOW]
26
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
THE COMPANY:
BIOGENTECH CORP.
By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: CEO and President
27
<
THE PURCHASER:
GRYPHON MASTER FUND, L.P.
By: Gryphon Partners, L.P., its General Partner
By: Gryphon Management Partners, L.P.,
its General Partner
By: Gryphon Advisors, LLC,
its General Partner
By: /s/ ▇.▇. ▇▇▇▇
----------------------------------
▇.▇. ▇▇▇▇, ▇▇, Authorized Agent
Purchase Price: $600,000
Number of Warrant Shares: 90,000
Initial Conversion Price of Note: $2.00
Initial Exercise Price of Warrant: $2.88
Address for Notices:
Gryphon Master Fund, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
with copies to:
▇▇▇▇▇▇ ▇. Garden, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. Garden, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
28
Exhibit D
Legal Opinion of Company's Counsel
----------------------------------
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Nevada and has the requisite
corporate power to own, lease and operate its properties and assets, and to
carry on its business as presently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the failure to so qualify would have a Material Adverse Effect.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Transaction Documents and to issue
the Note, the Underlying Shares, the Warrant and the Warrant Shares. The
execution, delivery and performance of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated thereby have
been duly and validly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors is
required. Each of the Transaction Documents have been duly executed and
delivered, and the Note and the Warrant have been duly executed, issued and
delivered by the Company and each of the Transaction Documents constitutes a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its respective terms. The Underlying Shares and the
Warrant Shares are not subject to any preemptive rights under the Certificate or
the Bylaws.
3. The Underlying Shares have been duly authorized and reserved for
issuance, and, when delivered upon conversion of the Note, will be validly
issued, fully paid and nonassessable. The Warrant Shares have been duly
authorized and reserved for issuance, and, when delivered upon exercise or
against payment in full as provided in the Warrant, will be validly issued,
fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with the
terms of the Transaction Documents and the issuance of the Note, the Underlying
Shares, the Warrant and the Warrant Shares do not (a) violate any provision of
the Company's Articles of Incorporation or Bylaws, (b) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party and which is known to us, (c) create
or impose any Encumbrance on any property of the Company under any agreement or
any commitment known to us to which the Company is a party or by which the
Company is bound or by which any of its respective properties or assets are
bound, or (d) result in a violation of any Federal, state, local or foreign
statute, rule, regulation, order, judgment, injunction 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, in
all cases other than violations pursuant to clauses (a) and (d) above, for such
conflicts, default, terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect.
29
5. No consent, approval or authorization of or designation, declaration
or filing with any governmental authority on the part of the Company is required
under Federal, state or local law, rule or regulation in connection with the
valid execution, delivery and performance of the Transaction Documents, or the
offer, sale or issuance of the Note, the Underlying Shares, the Warrant or the
Warrant Shares other than filings as may be required by applicable Federal and
state securities laws and regulations and the OTCBB rules and regulations.
6. To our knowledge, there is no action, suit, claim, investigation or
proceeding pending or threatened against the Company which questions the
validity of the Agreement or the transactions contemplated thereby or any action
taken or to be taken pursuant thereto. There is no action, suit, claim,
investigation or proceeding pending, or to our knowledge, threatened, against or
involving the Company or any of its properties or assets and which, if adversely
determined, is reasonably likely to result in a Material Adverse Effect. There
are no outstanding orders, judgments, injunctions, awards or decrees of any
court, arbitrator or governmental or regulatory body against the Company or any
officers or directors of the Company in their capacities as such.
7. The offer, issuance and sale of the Note and the Warrant and the
offer, issuance and sale of the Underlying Shares and the Warrant Shares
pursuant to the Purchase Agreement and the Warrant, as applicable, are exempt
from the registration requirements of the 1933 Act.
8. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
30
Exhibit A
to
Purchase
Agreement
NEITHER THIS SECURITY NOR THE ISSUANCE TO THE HOLDER OF THE SECURITIES INTO
WHICH THIS SECURITY IS CONVERTIBLE HAS BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION 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.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THIS NOTE IN THE EVENT OF A
PARTIAL REDEMPTION, REPAYMENT OR CONVERSION. AS A RESULT, FOLLOWING ANY
REDEMPTION, REPAYMENT OR CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING
PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT
SET FORTH BELOW.
8% CONVERTIBLE NOTE DUE 2006
OF
BIOGENTECH CORP.
Note No.: G-1 Original Principal Amount: $600,000
Issuance Date: September 8, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
FOR VALUE RECEIVED, the Company hereby promises to pay to or
upon the order of GRYPHON MASTER FUND, L.P. or its registered assigns or
successors-in-interest (the "Holder") the principal sum of Six Hundred Thousand
Dollars ($600,000.00), together with all accrued but unpaid interest thereon, if
any, on the third anniversary of the Issuance Date, to the extent such principal
amount and interest have not been repaid or converted into shares of the
Company's Common Stock, $.001 par value (the "Common Stock"), in accordance with
the terms hereof. Interest on the unpaid principal balance hereof shall accrue
at the rate of 8% per annum from the date of original issuance hereof (the
"Issuance Date") until the same becomes due and payable on the Final Maturity
Date, or such earlier date upon acceleration or by conversion, repayment or
redemption in accordance with the terms hereof. Interest on this Note shall
accrue daily commencing on the Issuance Date, shall be compounded quarterly and
shall be computed on the basis of a 360-day year, 30-day months and actual days
elapsed and shall be payable in accordance with Section 2 hereof.
Notwithstanding anything contained herein, this Note shall bear interest on the
outstanding Principal Amount from and after the occurrence and during the
continuance of an Event of Default, at the rate (the "Default Rate") equal to
the lower of eighteen percent (18%) per annum or the highest rate permitted by
applicable law. Unless otherwise agreed or required by applicable law, payments
will be applied first to any unpaid collection costs, then to unpaid interest
and fees and any remaining amount to unpaid principal.
1
All payments of principal of and interest on this Note shall
be made in lawful money of the United States of America by wire transfer of
immediately available funds to such account as the Holder may from time to time
designate by written notice in accordance with the provisions of this Note. This
Note may not be prepaid in whole or in part except as specifically provided
herein. Whenever any amount expressed to be due by the terms of this Note is due
on any day which is not a Business Day (as defined below), the same shall
instead be due on the next succeeding day which is a Business Day and such
extension shall be taken into account in determining the amount of interest
accrued on this Note.
The following terms and conditions shall apply to this Note:
1. DEFINITIONS.
(a) Capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the Purchase Agreement.
(b) For purposes hereof the following terms shall have the
meanings ascribed to them below:
"Aggregation Parties" shall have the meaning provided in
Section 4(i).
"Bankruptcy Event" means any of the following events: (a) the
Company or any material subsidiary commences a case or other proceeding under
any bankruptcy, reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction relating to the Company or any material subsidiary thereof; (b)
there is commenced against the Company or any material subsidiary any such case
or proceeding that is not dismissed within 60 days after commencement; (c) the
Company or any material subsidiary thereof is adjudicated insolvent or bankrupt
or any order of relief or other order approving any such case or proceeding is
entered; (d) the Company or any material subsidiary suffers any appointment of
any trustee, custodian or the like for it or any substantial part of its
property that is not discharged or stayed within 60 days; (e) the Company or any
material subsidiary makes a general assignment for the benefit of creditors; (f)
the Company or any material subsidiary fails to pay, states that it is unable to
pay, or is unable to pay, its debts (excluding those reasonably disputed in good
faith by the Company in the case of failure to pay and for which it has reserves
on its books and financial statements) generally as they become due; (g) the
Company or any material subsidiary calls a meeting of its creditors with a view
to arranging a composition, adjustment or restructuring of its debts; or (h) the
Company or any material subsidiary, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the foregoing or
takes any corporate or other action for the purpose of effecting any of the
foregoing.
2
"Call Amount" means for any exercise of the Call Right
pursuant to Section 3, the sum of (1) the product of (x) the principal amount of
this Note to be prepaid by reason of such exercise of the Call Right times (y)
the applicable Call Percentage plus (2) accrued and unpaid interest on the
principal amount of this Note to be prepaid by reason of such exercise of the
Call Right to the applicable Call Date.
"Call Date" shall have the meaning provided in Section 3(b).
"Call Notice" shall have the meaning provided in Section 3(b).
"Call Percentage" means 125%.
"Call Right" shall have the meaning provided in Section 3(a).
"Cash" or "cash" means at any time such coin or currency of
the United States of America as shall at such time be legal tender for the
payment of public and private debts.
"Change in Control Transaction" will be deemed to exist if (i)
there occurs any consolidation, merger, amalgamation or other business
combination of the Company with or into any other corporation or other entity or
person (whether or not the Company is the surviving corporation), or any other
corporate reorganization or transaction or series of related transactions in
which in any of such events the persons who are holders of the voting stock of
the Company immediately prior to such event cease to own 50% or more of the
voting stock, or corresponding voting equity interests, of the surviving
corporation or other entity immediately after such event (including without
limitation any "going private" transaction under Rule 13e-3 promulgated pursuant
to the Exchange Act or tender offer by the Company under Rule 13e-4 promulgated
pursuant to the Exchange Act for 20% or more of the Company's Common Stock),
(ii) any person (as defined in Section 13(d) of the Exchange Act), together with
its affiliates and associates (as such terms are defined in Rule 405 under the
Securities Act), beneficially owns or is deemed to beneficially own (as
described in Rule 13d-3 under the Exchange Act without regard to the 60-day
exercise period) in excess of 50% of the voting power of the Company's
outstanding securities, (iii) there is a replacement of more than one-half of
the members of the Company's Board of Directors which is not approved by those
individuals who are members of the Company's Board of Directors on the date
thereof or (iv) in one or a series of related transactions, there is a sale or
transfer of all or substantially all of the assets of the Company, determined on
a consolidated basis.
3
"Conversion Date" shall have the meaning provided in Section
4(b).
"Conversion Delay Payments" shall have the meaning provided in
Section 4(b)(ii).
"Conversion Notice" shall have the meaning provided in Section
4(a).
"Conversion Price" means $2.00, subject to adjustment as set
forth herein.
"Conversion Ratio" means, at any time, a fraction, of which
the numerator is the entire outstanding Principal Amount of this Note (or such
portion thereof that is being redeemed or repurchased), and of which the
denominator is the then applicable Conversion Price.
"DTC" shall have the meaning provided in Section 4(b)(ii).
"Effective Date" means the date on which a Registration
Statement covering all the Underlying Shares and other Registrable Securities
(as defined in the Registration Rights Agreement) is declared effective by the
SEC.
"Effective Registration" means (i) the Company has complied in
all material respects with its obligations under all the Transaction Documents
where the failure to comply by the Company would have a material adverse effect
on the ability of the Holder to publicly resell the Underlying Shares and the
Warrant Shares and no Event of Default shall have occurred and be continuing;
(ii) the resale of all Registrable Securities (as defined in the Registration
Rights Agreement) is covered by an effective Registration Statement in
accordance with the terms of the Registration Rights Agreement and such
Registration Statement is not subject to any suspension or stop order and is
expected to remain effective and available for use by the selling stockholders
named therein or in any related prospectus supplement for at least 20 Trading
Days thereafter; (iii) the resale of such Registrable Securities may be effected
pursuant to a current and deliverable prospectus that is not subject to any
blackout or similar circumstance; (iv) such Registrable Securities are listed,
or approved for listing prior to issuance, on an Approved Market and are not
subject to any trading suspension (nor shall trading generally have been
suspended on such exchanges or markets), and the Company shall not have been
notified of any pending or threatened proceeding or other action to delist or
suspend the Common Stock on the Approved Market on which the Common Stock is
then traded or listed; (v) the requisite number of shares of Common Stock shall
have been duly authorized and shall be available for issuance as required by the
terms of the Transaction Documents; (vi) the Holder is not identified as an
underwriter in the Registration Statement; and (vii) the Company is not subject
to any Bankruptcy Event.
"Event of Default" shall have the meaning provided in Section
5(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
4
"Final Maturity Date" means September 8, 2006.
"Holder Share Notice" shall have the meaning provided in
Section 4(b)(ii).
"Newly Issued Shares" shall have the meaning provided in
Section 4(c)(iii).
"Principal Amount" means at any time the sum of (i) the
outstanding principal amount of this Note at such time, (ii) all accrued but
unpaid interest hereunder to such time, and (iii) any default payments owing at
such time to the Holder under the Transaction Documents but not theretofore paid
or added to the Principal Amount.
"Principal Market" means the OTC Bulletin Board or such other
U.S. market or exchange which is the principal market on which the Common Stock
is then listed for trading.
"Purchase Agreement" means the Purchase Agreement, dated as of
September 8, 2003, by and between the Company and Gryphon Master Fund, L.P., a
Bermuda limited partnership, pursuant to which this Note was originally issued.
"Quarterly Interest Payment Date" means each October 1,
January 1, April 1 and July 1, commencing October 1, 2003, and the Final
Maturity Date.
"QIB" means a qualified institutional buyer as defined in Rule
144A.
"Post-Notice Period" shall have the meaning provided in
Section 3(b).
"Restricted Ownership Percentage" shall have the meaning
provided in Section 4(i).
"Rule 144A" means Rule 144A as promulgated by the SEC under
the Securities Act or any successor thereto.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means a day on which the Principal Market is
open for the general trading of securities.
"Underlying Shares" means the shares of Common Stock issued or
issuable upon conversion of, in lieu of cash payment of principal of, or
interest on, as repayment of principal under, or otherwise pursuant to, this
Note in accordance with the terms hereof and the Purchase Agreement.
5
SECTION 2. PAYMENTS OF PRINCIPAL AND INTEREST.
(a) INTEREST. The Company shall pay interest accruing on this
Note (from the date hereof) on all principal outstanding, quarterly on the
Quarterly Interest Payment Dates, commencing on October 1, 2003, in cash.
(b) PRINCIPAL. The entire Principal Amount of this Note, plus
any and all default payments owing under the Transaction Documents but not
previously paid, shall become due and payable on the Final Maturity Date. Any
principal of this Note that is prepaid by the Company pursuant to Section 3 or
converted by the Holder pursuant to Section 4 shall be applied to reduce the
principal payable under this Section 2(b).
SECTION 3. PREPAYMENT AT THE COMPANY'S OPTION.
(a) The Company shall have the right, subject to the
conditions set forth below (the "Call Right"), to prepay all or any portion (in
increments of $100,000) of this Note, in cash, at the applicable Call Amount.
(b) The Call Right may be exercised by the Company by
delivering to the Holder an irrevocable, written notice (the "Call Notice"),
which notice shall specify the date for the Company's prepayment of this Note
(as the same may be extended as herein provided, the "Call Date"), which date
shall be not less than 30 nor more than 40 days after the date the Call Notice
is delivered to the Holder (the "Post-Notice Period").
(c) Notwithstanding the foregoing, the Company may not give a
Call Notice or effect a prepayment pursuant to Section 3(a) above unless, at all
times from the date that is 20 Trading Days prior to the date the Company gives
such Call Notice to and including the applicable Call Date:
(i) there is Effective Registration and it is expected that
Effective Registration will continue for at least 20 Trading Days
after the Call Date; and
(ii) conversion by the Holder pursuant to Section 4 of the
portions of this Note that is being called contemporaneously therewith
would not cause the Holder's beneficial ownership of shares of Common
Stock to exceed the limits set forth in Section 4(i)(A).
If such conversion would cause the Holder to exceed such beneficial ownership
limitation, the prepayment of that portion of this Note the conversion of which
would cause such beneficial ownership limitation to be exceeded shall be
deferred until the date that is 20 Trading Days after the date the conversion
thereof would not exceed such limitations, and this Note shall continue to
accrue interest on the amount being called until the same is paid or converted
pursuant to Section 4.
6
(d) If the Company gives a Call Notice, the Holder shall
continue to have the right to convert the portion of this Note to which the Call
Notice relates pursuant to Section 4 until the prepayment of such portion of
this Note pursuant to this Section 3. A prepayment pursuant to this Section
shall occur on the applicable Call Date. If the Company fails to pay the Call
Amount in full on the applicable Call Date in immediately available funds, (i)
the Company shall lose its right to prepay this Note by reason of such Call
Notice or thereafter in accordance with this Section 3, and (ii) in addition to
any other rights or remedies it may have, the Holder shall have the right to
require the Company to repurchase this Note (or any portion hereof as selected
by the Holder) at a price equal to the sum of 125% of the Principal Amount, plus
accrued interest thereon to the date of such repurchase.
(e) Except as specifically provided herein, this Note may not
be prepaid, redeemed or repurchased at the option of the Company prior to the
applicable Repayment Dates.
SECTION 4. CONVERSION.
(a) CONVERSION RIGHT. Upon the terms and subject to the
conditions hereof, the Holder shall have the right, at the Holder's option, to
convert the outstanding Principal Amount and accrued and unpaid interest
thereon, in whole at any time or in part from time to time, by delivering to the
Company a duly executed notice of conversion in the form attached hereto as
Exhibit A (the "Conversion Notice"), which may be transmitted by telephone line
facsimile transmission. Notwithstanding anything to the contrary herein, this
Note and the outstanding Principal Amount hereunder shall not be convertible
into Common Stock at any time to the extent, and only to the extent, that such
conversion at such time would result in the Holder exceeding the limitation
contained in, or otherwise violating the provisions of, Section 4(i)(A) below.
(b) COMMON STOCK ISSUANCE UPON CONVERSION.
(i) CONVERSION PROCEDURES. Upon any conversion of
this Note pursuant to Section 4(a) above, the outstanding Principal
Amount being converted and accrued and unpaid interest thereon to the
applicable Conversion Date shall be converted into such number of fully
paid, validly issued and non-assessable shares of Common Stock, free of
any liens, claims and encumbrances, as is determined by dividing the
outstanding Principal Amount being converted and accrued and unpaid
interest thereon to the applicable Conversion Date by the then
applicable Conversion Price. The date of any Conversion Notice
hereunder shall be referred to herein as the "Conversion Date". If a
conversion under this Note cannot be effected in full for any reason,
or if the Holder is converting less than all of the outstanding
Principal Amount hereunder pursuant to a Conversion Notice, the Company
shall, upon request of the Holder, promptly deliver to the Holder (but
no later than five Trading Days after the surrender of this Note to the
Company) a new Note having a Principal Amount equal to the amount of
such outstanding Principal Amount as has not been converted. The Holder
shall not be required physically to surrender this Note to the Company
upon any conversion unless the full outstanding Principal Amount of
7
this Note is being converted or repaid. The Holder and the Company
shall maintain records showing the outstanding Principal Amount so
converted and repaid and the dates of such conversions or repayments or
shall use such other method, reasonably satisfactory to the Holder and
the Company, so as not to require physical surrender of this Note upon
each such conversion or repayment. The Holder agrees that, if the
outstanding Principal Amount of this Note is less than the Principal
Amount stated on the face of this Note, the Holder will not voluntarily
transfer this Note at any time when no Event of Default has occurred
and is continuing without first surrendering this Note to the Company
for issuance, without charge to the Holder, of a replacement instrument
that reflects the outstanding Principal Amount of this Note. The
Company will deliver such replacement instrument to the Holder as
promptly as practical, but in no event later than three Trading Days,
after surrender by the Holder.
(ii) STOCK CERTIFICATES OR DWAC. The Company will
deliver to the Holder not later than five (5) Trading Days after a
particular Conversion Date, a certificate or certificates, which shall
be free of restrictive legends and trading restrictions (except to the
extent permitted under Section 6.12 of the Purchase Agreement), for the
number of shares of Common Stock issuable upon such conversion of this
Note. In lieu of delivering physical certificates for the shares of
Common Stock issuable upon any conversion of this Note, provided the
Company's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer ("FAST") program,
upon request of the Holder, the Company shall use commercially
reasonable efforts to cause its transfer agent electronically to
transmit such shares issuable upon conversion to the Holder (or its
designee), by crediting the account of the Holder's (or such
designee's) broker with DTC through its Deposit Withdrawal Agent
Commission system (provided that the same time periods herein as for
stock certificates shall apply). If in the case of any conversion
hereunder, such shares are not delivered to or as directed by the
Holder by the third Trading Day after the applicable Conversion Date,
the Holder shall be entitled by written notice to the Company at any
time on or before its receipt of such shares, to rescind such
conversion, in which event the Company shall immediately return this
Note to the Holder if the Holder has tendered it to the Company in
connection with such conversion. If the Holder notifies the Company
that the Holder has not received such shares (free of any restrictions
8
on transfer or legends except as permitted by Section 6.12 of the
Purchase Agreement) within three Trading Days after a particular
Conversion Date (each, a "Holder Share Notice") and the Holder does not
receive such shares (free of any restrictions on transfer or legends
except as permitted by Section 6.12 of the Purchase Agreement) within
two Trading Days after giving such Holder Share Notice, then, in
addition to any other liability the Company may have, the Company shall
pay to the Holder, in cash, an amount, computed at the rate of 2% of
the outstanding Principal Amount per month, for the period such failure
continues (the "Conversion Delay Payments"), without duplication of any
amount payable to the Holder pursuant to clause (F) of Section 2(c)(i)
of the Registration Rights Agreement. A Holder Share Notice may be
given by telephone or e-mail to the Company's Chief Financial Officer
or General Counsel. The Company's obligation to issue and deliver such
shares of Common Stock upon conversion of this Note shall be absolute
and unconditional, irrespective of the absence of any action by the
Holder to enforce the same, of any waiver or consent with respect to
any provision hereof, the recovery of any judgment against any Person
or any action to enforce the same, any failure or delay in the
enforcement of any other obligation of the Company to the Holder, or
any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any
obligation to the Company or any violation or alleged violation of law
by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company
to the Holder in connection with such exercise.
(iii) LIABILITY FOR LATE DELIVERY; FORCE MAJEURE. If
in any case the Company shall fail to issue and deliver the shares of
Common Stock to the Holder pursuant to this Note on the due date
therefor, in addition to any other liabilities the Company may have
hereunder and under applicable law (A) the Company shall pay or
reimburse the Holder on demand for all out-of-pocket expenses,
including, without limitation, reasonable fees and expenses of legal
counsel, incurred by the Holder as a result of such failure, so long as
the Holder shall have given the Company a Holder Share Notice with
respect to such shares of Common Stock, (B) if as a result of such
failure the Holder shall suffer any direct damages or liabilities from
such failure (including, without limitation, margin interest and the
cost of purchasing securities to cover a sale (whether by the Holder or
the Holder's securities broker) or borrowing of shares of Common Stock
by the Holder for purposes of settling any trade involving a sale of
shares of Common Stock made by the Holder during the period beginning
on the Issuance Date and ending on the date the Company delivers or
causes to be delivered to the Holder such shares of Common Stock), then
the Company shall upon demand of the Holder pay to the Holder an amount
equal to the actual, direct out-of-pocket damages and liabilities
suffered by the Holder by reason thereof which the Holder documents to
the reasonable satisfaction of the Company, so long as the Holder shall
have given the Company a Holder Share Notice with respect to such
shares of Common Stock, and (C) the Holder may by written notice (which
may be given by mail, courier, personal service or telephone line
facsimile transmission) or oral notice (promptly confirmed in writing),
given at any time prior to delivery to the Holder of the shares of
Common Stock issuable in connection with any exercise of the Holder's
rights by reason of which such shares are deliverable, rescind such
exercise in whole or in part, in which case the Holder shall thereafter
9
be entitled to exercise its rights with respect to that portion of this
Note as to which such exercise is so rescinded and to exercise its
other rights and remedies with respect to such failure by the Company.
Notwithstanding the foregoing and Section 4(b)(ii), (x) the Company
shall not be liable to the Holder under clauses (A) and (B) of the
immediately preceding sentence or (y) for Conversion Delay Payments, in
either such case of the preceding clause (x) or (y) to the extent the
failure of the Company to deliver or to cause to be delivered such
shares of Common Stock results from fire, flood, storm, earthquake,
shipwreck, strike, war, acts of terrorism, crash involving facilities
of a common carrier, acts of God, or any similar event outside the
control of the Company (it being understood that the action or failure
to act of the Company's Transfer Agent shall not be deemed an event
outside the control of the Company except to the extent resulting from
fire, flood, storm, earthquake, shipwreck, strike, war, acts of
terrorism, crash involving facilities of a common carrier, acts of God,
or any similar event outside the control of such Transfer Agent or the
bankruptcy, liquidation or reorganization of such Transfer Agent under
any bankruptcy, insolvency or other similar law). The Holder shall
notify the Company in writing (or by telephone conversation, confirmed
in writing) as promptly as practicable following the third Trading Day
after the due date for delivery to it of shares of Common Stock under
this Note if the Holder becomes aware that such shares of Common Stock
so issuable have not been received as provided herein, but any failure
so to give such notice shall not affect the Holder's rights under this
Note or otherwise. If pursuant to this Section 4(b)(iii) the Company is
relieved of its obligation to make Conversion Delay Payments, then the
Principal Amount of this Note for which a Conversion Notice has been
given and for which the Company has not issued the shares of Common
Stock within the period provided in Section 4(b)(ii) shall continue to
bear interest at the applicable rate provided in this Note from the
applicable Conversion Date to the date the Company so issues such
shares of Common Stock.
(c) CONVERSION PRICE ADJUSTMENTS.
(i) STOCK DIVIDENDS, SPLITS AND COMBINATIONS. If the
Company or any of its subsidiaries, at any time while this Note is
outstanding, shall (A) pay a stock dividend or otherwise make a
distribution or distributions on any equity securities (including
Common Stock Equivalents) in shares of Common Stock, (B) subdivide
outstanding Common Stock into a larger number of shares, or (C) combine
outstanding Common Stock into a smaller number of shares, then the
Conversion Price shall be multiplied by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding before
such event and the denominator of which shall be the number of shares
of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section 4(c)(i) shall become effective immediately
after the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision or
combination.
(ii) DISTRIBUTIONS. Neither the Company nor any of
its subsidiaries, at any time this Note is outstanding, shall
distribute to all or substantially all holders of Common Stock (a)
evidences of its indebtedness or (b) assets or (c) cash or (d) rights
(other than rights issued pursuant to a shareholder rights plan adopted
for the benefit of stockholders generally, the rights under which are
attached to shares of Common Stock until a trigger event such as a
tender offer, change of control, accumulation of a specified percentage
of the outstanding shares of Common Stock or similar events) or (e)
warrants to subscribe for or purchase any security of the Company or
any of its subsidiaries (excluding those referred to in Section 4(c)(i)
above) without obtaining the prior written consent of the Holder.
10
(iii) ADJUSTMENT FOR CERTAIN ISSUANCES.
(A) If at any time or from time to time the Company
issues shares of Common Stock or Common Stock Equivalents
(collectively, the "Newly Issued Shares") at a price per share at which
the Company sells such shares of Common Stock or the price per share at
which the holders of such Common Stock Equivalents are entitled to
acquire shares of Common Stock upon conversion or exercise thereof
which is less than or equal to the lower of (x) $1.75 per share (such
price to be subject to equitable adjustment for stock splits, stock
dividends, reverse stock splits and recapitalizations), and (y) the
Conversion Price in effect at the time of such issuance, then following
such issuance the Conversion Price shall be reduced to the price per
share that equals:
(i) the lower of the amounts specified in the
immediately preceding clauses (x) and (y) of this Section
4(c)(iii)
minus
(ii) an amount equal to 50 percent of (a) the lower of
the amounts specified in the preceding clauses (x) and (y)
of this Section 4(c)(iii) minus (b) the price per share (or
weighted average price per share, if such shares are issued,
or such Common Stock Equivalents may be converted or
exercised, at different prices) at which such shares of
Common Stock are issued or at which such Common Stock
Equivalents may be exercised.
For example, if the Company hereafter issues shares of Common Stock at
a per share purchase price of $1.50, and the Conversion Price in effect
at the time of such issuance is $2.00, then following such issuance the
Conversion Price would be reduced to $1.625 ($1.75 minus 50% of [$1.75
minus $1.50]).
The provisions of this Section 4(c)(iii) shall be applicable to
successive issuances of Common Stock and Common Stock Equivalents.
(B) Notwithstanding the foregoing, no adjustment
shall be made under this Section 4(c)(iii) by reason of:
(1) the issuance by the Company of shares of Common
Stock pro rata to all holders of the Common Stock so long as (i) any
adjustment required by Section 4(c)(i) is made and (ii) the Company
shall have given notice thereof to the Holder pursuant to Section
4(c)(vii);
(2) the issuance by the Company of this Note and the
Warrant pursuant to the Purchase Agreement or the issuance by the
Company of shares of Common Stock upon conversion of this Note in
accordance with its terms or upon exercise of the Warrant in accordance
with its terms; or
11
(3) the issuance by the Company of Common Stock or
options to purchase Common Stock to employees, directors and
consultants (or the exercise of such options by employees, directors
and consultants) under the Company's non-qualified and incentive stock
option plans existing as of the date hereof, as amended from time to
time hereafter or any other stock compensation plan duly adopted by the
Board of Directors.
For the purposes of the adjustments in this Section 4(c)(iii), in the case of
the issuance of any Common Stock Equivalents, the maximum number of shares of
Common Stock issuable upon exercise, exchange or conversion of such Common Stock
Equivalents shall be deemed to be outstanding, provided that no further
adjustment shall be made upon the actual issuance of Common Stock upon exercise,
exchange or conversion of such Common Stock Equivalents.
(iv) ROUNDING OF ADJUSTMENTS. All calculations under this
Section 4 or Section 2 shall be made to the nearest cent or the nearest 1/100th
of a share, as the case may be.
(v) NOTICE OF ADJUSTMENTS. Whenever the Conversion Price is
adjusted pursuant to Section 4(c)(i), (ii) or (iii) above, the Company shall
promptly deliver to the Holder a notice setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment, provided that any failure to so provide such notice shall not affect
the automatic adjustment hereunder.
(vi) CHANGE IN CONTROL TRANSACTIONS. In case of any Change in
Control Transaction, the Holder shall have the right thereafter, at its option,
(A) to convert this Note, in whole or in part, at the then applicable Conversion
Price into the shares of stock and other securities, cash and/or property
receivable upon or deemed to be held by holders of Common Stock following such
Change in Control Transaction, and the Holder shall be entitled upon such event
to receive such amount of securities, cash or property as the shares of the
Common Stock of the Company into which this Note could have been converted
immediately prior to such Change in Control Transaction would have been entitled
if such conversion were permitted (determined without regard to any limitations
contained in Section 4(i) hereof or equivalent provisions in the other
Transaction Documents), subject to such further applicable adjustments set forth
in this Section 4, or (B) to require the Company or its successor to redeem this
Note, in whole or in part, at a redemption price equal to 125% of the
outstanding Principal Amount being redeemed, plus accrued interest thereon. The
terms of any such Change in Control Transaction shall include such terms so as
to continue to give to the Holder the right to receive the amount of securities,
cash and/or property upon any conversion or redemption following such Change in
Control Transaction to which a holder of the number of shares of Common Stock
deliverable upon conversion of this Note immediately prior to such Change in
Control Transaction would have been entitled to receive in such Change in
Control Transaction and if such Holder had continued to hold such securities,
cash and/or property until the date of such conversion or redemption, and
interest payable hereunder after such Change in Control Transaction shall be
paid in cash or such new securities and/or property, at the Holder's option.
This provision shall similarly apply to successive reclassifications,
consolidations, mergers, amalgamations, sales, transfers or share exchanges.
12
(VII) NOTICE OF CERTAIN EVENTS. If:
A. the Company shall declare a dividend (or
any other distribution) on its Common
Stock; or
B. the Company shall declare a special
nonrecurring cash dividend on or a tender
offer for, offer to purchase or redemption
of its Common Stock; or
C. the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of
any rights; or
D. the approval of any stockholders of the
Company shall be required in connection with
any reclassification of the Common Stock of
the Company, any consolidation, amalgamation
or merger to which the Company is a party,
any sale or transfer of all or substantially
all of the assets of the Company, of any
compulsory share of exchange whereby the
Common Stock is converted into other
securities, cash or property; or
E. the Company shall authorize the voluntary
or involuntary dissolution, liquidation or
winding up of the affairs of the Company; or
F. there exists an agreement to which the
Company is a party or by which it is bound
providing for a Change in Control
Transaction, or a Change in Control
Transaction has occurred;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of this Note, and shall cause to be mailed to the
Holder at its last address as it shall appear upon the books of the Company, on
or prior to the date notice of such matter to the Company's stockholders
generally is given, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, tender offer, offer to
purchase, redemption, rights or warrants, or if a record is not to be taken, the
date as of which the holders of Common Stock of record to be entitled to such
dividend, distributions, tender offer, offer to purchase, redemption, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, amalgamation, merger, sale, transfer, share exchange or Change in
Control Transaction is expected to become effective or close, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, amalgamation, merger,
sale, transfer, share exchange or Change in Control Transaction.
13
(d) RESERVATION AND ISSUANCE OF UNDERLYING SECURITIES. The
Company covenants that it will at all times reserve from its authorized and
unissued Common Stock a sufficient number of shares solely for the purpose of
issuance upon conversion in full of this Note and exercise in full of the
Warrant, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder (subject to any additional requirements
of the Company as to reservation of such shares set forth in the Purchase
Agreement and taking into account the adjustments under this Section 4, but
determined without regard to any ownership limitations contained in this Note,
the Warrant or the Purchase Agreement). The Company represents, warrants and
covenants that all shares of Common Stock that shall be so issuable shall, upon
issue, be duly authorized, validly issued, fully paid, and nonassessable.
(e) NO FRACTIONS. Upon a conversion hereunder the Company
shall not be required to issue stock certificates for a fraction of a share of
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any fraction of a share based on the closing price of a share of Common Stock at
such time. If the Company elects not, or is unable, to make such a cash payment,
the Holder shall be entitled to receive, in lieu of the fraction of a share, one
whole share of Common Stock.
(f) CHARGES, TAXES AND EXPENSES. Issuance of shares of Common
Stock upon the conversion of this Note shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in respect of
the issuance of such shares, all of which taxes and expenses shall be paid by
the Company, and such shares shall be issued in the name of the Holder or in
such name or names as may be directed by the Holder; provided, however, that in
the event certificates for shares of Common Stock are to be issued in a name
other than the name of the Holder, the applicable Conversion Notice, when given
for such conversion shall be accompanied or followed by an assignment form for
the applicable portion of this Note or such shares, as the case may be; and
provided further, that the Company shall not be required to pay any tax or taxes
which may be payable in respect of any such transfer.
(g) CANCELLATION. After the entire Principal Amount (including
accrued but unpaid interest and default payments at any time owed on this Note)
has been paid in full or converted into Common Stock, this Note shall
automatically be deemed canceled and the Holder shall promptly surrender this
Note to the Company at the Company's principal executive offices; provided,
however, that the failure to surrender this Note shall not delay or limit such
cancellation.
(h) NOTICE PROCEDURES. Any and all notices or other
communications or deliveries to be provided by the Holder under this Note,
including, without limitation, any Conversion Notice, shall be in writing and
delivered personally, by confirmed facsimile, or by a nationally recognized
overnight courier service to the Company at the facsimile telephone number or
address of the principal place of business of the Company as set forth in, or
provided pursuant to, the Purchase Agreement. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile, or by a nationally recognized
overnight courier service addressed to the Holder at the facsimile telephone
number or address of the Holder appearing on the books of the Company, or if no
such facsimile telephone number or address appears, at the principal place of
business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed delivered (i) upon receipt, when delivered personally,
(ii) when sent by facsimile, upon receipt if received on a Business Day prior to
5:00 p.m. (Central Time), or on the first Business Day following such receipt if
received on a Business Day after 5:00 p.m. (Central Time) or on a day that is
not a Business Day or (iii) upon receipt, when deposited with a nationally
recognized overnight courier service.
14
(i) 9.9% LIMITATIONS.
(A) Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that the Holder
shall have the right to acquire upon conversion of this Note shall not
exceed a number that, when added to the total number of shares of
Common Stock deemed beneficially owned by the Holder (other than by
virtue of the ownership of securities or rights to acquire securities
(including this Note and the Warrant) that have limitations on the
Holder's right to convert, exercise or purchase similar to the
limitation set forth herein), together with all shares of Common Stock
deemed beneficially owned at such time (other than by virtue of the
ownership of securities or rights to acquire securities that have
limitations on the right to convert, exercise or purchase similar to
the limitation set forth herein) by the Holder's "affiliates" at such
time (as defined in Rule 144 of the Securities Act) (the "Aggregation
Parties") that would be aggregated for purposes of determining whether
a group exists or for purposes of determining the Holder's beneficial
ownership, in either such case for purposes of Section 13(d) of the
Exchange Act and Regulation 13D-G thereunder, would result in
beneficial ownership by the Holder or such group of more than 9.9% of
the outstanding shares of Common Stock (the "Restricted Ownership
Percentage"). The Holder shall have the right at any time and from time
to time to reduce its Restricted Ownership Percentage immediately upon
notice to the Company in the event and only to the extent that Section
16 of the Exchange Act or the rules promulgated thereunder (or any
successor statute or rules) is changed to reduce the beneficial
ownership percentage limitation thereunder from 10%. If at any time the
limits in this Section 4(i) make this Note inconvertible in whole or in
part, the Company shall not by reason thereof be relieved of its
obligation to issue shares of Common Stock at any time or from time to
time thereafter as shares of Common Stock may be issued in compliance
with such restrictions.
(B) For purposes of this Section 4(i), in determining
the number of outstanding shares of Common Stock at any time, the
Holder may rely on the number of outstanding shares of Common Stock as
reflected in (1) the Company's then most recent Form 10-Q, Form 10-K or
other public filing with the SEC, as the case may be, (2) a public
announcement by the Company that is later than any such filing referred
to in the preceding clause (1), or (3) any other notice by the Company
or its transfer agent setting forth the number of shares of Common
Stock outstanding. Upon the written or oral request of the Holder, the
Company shall within one Business Day confirm orally and in writing to
the Holder the number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of Common
Stock Equivalents, including this Note and the Warrant, by the Holder
or its Aggregation Parties, in each such case subsequent to, the date
as of which such number of outstanding shares of Common Stock was
reported.
15
SECTION 5. DEFAULTS AND REMEDIES.
(a) EVENTS OF DEFAULT. An "Event of Default" is: (i) a failure
to pay any Principal Amount or accrued but unpaid interest thereon of this Note
on the date such payment is due (to the extent such principal and/or amount has
not been converted into Common Stock in accordance with the terms hereof), which
failure continues for two Business Days after written notice of such non-payment
has been received by the Company from the Holder; (ii) a failure timely to issue
Underlying Shares upon and in accordance with terms hereof, which failure
continues for ten Business Days after the Company has received written notice
from the Holder informing the Company that it has failed to issue shares or
deliver stock certificates prior to the fifth Business Day following the
applicable Conversion Date; (iii) failure by the Company for twenty (20) days
after written notice has been received by the Company from the Holder to comply
with any material provision (other than as provided in the immediately preceding
clauses (i) and (ii)) of any of this Note, the Purchase Agreement, the
Registration Rights Agreement, the Warrant or any other agreement or instrument
of the Company or between the Company and the Holder relating thereto
(including, without limitation the failure to redeem this Note upon the Holder's
request following a Change in Control Transaction pursuant to Section 4(c)(vi));
(iv) a material breach by the Company of its representations or warranties in
this Note, the Purchase Agreement, Registration Rights Agreement or the Warrant;
(v) any default after any cure period under, or acceleration prior to maturity
of, any note, mortgage, indenture or instrument under which there may be issued
or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company for in excess of $1 million, or for money borrowed the
repayment of which is guaranteed by the Company for in excess of $1 million,
whether such indebtedness or guarantee now exists or shall be created hereafter;
(vi) if the Company is subject to any Bankruptcy Event; (vii) if (x) the Company
fails to obtain the stockholder approval contemplated by Section 6.1(a) of the
Purchase Agreement as and when required thereby, (y) under the rules of Nasdaq
the 20% Cap is applicable to the Company's issuance of shares of Common Stock
upon conversion of and issuance of shares of Common Stock upon exercise of the
Warrant without such stockholder approval, and (z) the Company is unable to
issue additional shares of Common Stock upon conversion of this Note within the
20% Cap; or (viii) if the Registration Statement required by Section 2(a)(i) of
the Registration Rights Agreement is not declared effective by the SEC within
one hundred and twenty (120) days following the Closing Date, or the
Registration Statement required by Section 2(a)(ii) of the Registration Rights
Agreement is not declared effective by the SEC within one hundred and twenty
(120) days following demand of the Holder pursuant to the Registration Rights
Agreement.
16
(b) REMEDIES. If an Event of Default occurs and is continuing,
the Holder may declare all of the then outstanding Principal Amount of this
Note, and any accrued and unpaid interest thereon, to be due and payable
immediately in cash, except that in the case of an Event of Default arising from
events described in clauses (v) and (vi) of Section 5(a), this Note shall become
automatically due and payable without further action or notice, and the Holder
may exercise all other rights and remedies available at law or in equity. In the
event of such acceleration, the amount due and owing to the Holder shall be 125%
of the outstanding Principal Amount of this Note (plus all accrued and unpaid
interest, if any). In any event the Company shall pay interest on such amount in
cash at the Default Rate to the Holder if such amount is not paid within one
Business Day after such acceleration. The remedies under this Note shall be
cumulative.
SECTION 6. CERTAIN COVENANTS; GENERAL.
(A) RULE 144A INFORMATION REQUIREMENT. Within the period prior
to the expiration of the holding period applicable to sales hereof under Rule
144(k) under the Securities Act (or any successor provision), the Company
covenants and agrees that it shall, during any period in which it is not subject
to Section 13 or 15(d) under the Exchange Act, make available to the Holder and
any prospective purchaser of this Note from the Holder, the information required
pursuant to Rule 144A(d)(4) under the Securities Act upon the request of the
Holder and it will take such further action as the Holder may reasonably
request, all to the extent required from time to time to enable the Holder to
sell this Note without registration under the Securities Act within the
limitations of the exemption provided by Rule 144A, as Rule 144A may be amended
from time to time. Upon the request of the Holder, the Company will deliver to
the Holder a written statement as to whether it has complied with such
requirements.
(B) PAYMENT OF EXPENSES. The Company agrees to pay all
reasonable charges and expenses, including attorneys' fees and expenses, which
may be incurred by the Holder in seeking to enforce this Note.
(C) SAVINGS CLAUSE. In case any provision of this Note is held
by a court of competent jurisdiction to be excessive in scope or otherwise
invalid or unenforceable, such provision shall be adjusted rather than voided,
if possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not in
any way be affected or impaired thereby. In no event shall the amount of
interest paid hereunder exceed the maximum rate of interest on the unpaid
principal balance hereof allowable by applicable law. If any sum is collected in
excess of the applicable maximum rate, the excess collected shall be applied to
reduce the principal debt. If the interest actually collected hereunder is still
in excess of the applicable maximum rate, the interest rate shall be reduced so
as not to exceed the maximum allowable under law.
17
(d) AMENDMENT. Neither this Note nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the Company and Holder.
(e) ASSIGNMENT, ETC. The Holder may assign or transfer this
Note, subject to compliance with applicable securities laws, without the consent
of the Company, except that the Holder may not assign or transfer this Note to a
Person who is a business competitor of the Company in any significant respect
without the Company's prior written consent, which the Company may withhold in
its sole discretion. The Holder shall notify the Company of any such assignment
or transfer promptly. The Company may not assign its rights or obligations under
this Note. This Note shall be binding upon the Company and its successors and
shall inure to the benefit of the Holder and its successors and permitted
assigns.
(f) NO WAIVER. No failure on the part of the Holder to
exercise, and no delay in exercising any right, remedy or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise by the
Holder of any right, remedy or power hereunder preclude any other or future
exercise of any other right, remedy or power. Each and every right, remedy or
power hereby granted to the Holder or allowed it by law or other agreement shall
be cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.
(g) GOVERNING LAW; JURISDICTION.
(i) Governing Law. THIS NOTE WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA WITHOUT
REGARD TO ANY CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD OTHERWISE
REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.
(ii) JURISDICTION. The Company irrevocably submits to
the exclusive jurisdiction of any State or Federal Court sitting in the
State of Texas, County of Dallas (such consent shall not be deemed a
general consent to jurisdiction and service for any third party) over
any suit, action, or proceeding arising out of or relating to this
Note. The Company irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying
of the venue of any such suit, action, or proceeding brought in such a
court and any claim that suit, action, or proceeding has been brought
in an inconvenient forum.
The Company agrees that the service of process upon
it mailed by certified or registered mail (and service so made shall be
deemed complete five Business Days after the same has been posted as
aforesaid) by personal service shall be deemed in every respect
effective service of process upon it in any such suit or proceeding.
Nothing herein shall affect Holder's right to serve process in any
other manner permitted by law. The Company agrees that a final
non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner.
18
(iii) NO JURY TRIAL. The Company knowingly and
voluntarily waives any and all rights it may have to a trial by jury
with respect to any litigation based on, or arising out of, under, or
in connection with, this Note.
(i) REPLACEMENT NOTES. This Note may be exchanged by Holder at
any time and from time to time for a Note or Notes with different denominations
representing an equal aggregate outstanding Principal Amount, as reasonably
requested by Holder, upon surrendering the same. No service charge will be made
for such registration or exchange. In the event that Holder notifies the Company
that this Note has been lost, stolen or destroyed, a replacement Note identical
in all respects to the original Note (except for registration number and
Principal Amount, if different than that shown on the original Note), shall be
issued to the Holder, without requirement for any surety bond, provided that the
Holder executes and delivers to the Company an agreement reasonably satisfactory
to the Company to indemnify the Company from any loss incurred by it in
connection with this Note.
[Signature Page Follows]
19
IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed on the day and in the year first above written.
BIOGENTECH CORP.
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: CEO and President
20
ASSIGNMENT
For value received hereby sell(s), assign(s) and transfer(s)
unto (Please insert social security or other Taxpayer Identification Number of
assignee: ) the within Note, and hereby irrevocably constitutes and appoints
attorney to transfer the said Note on the books of Biogentech Corp., a Nevada
corporation (the "Company"), with full power of substitution in the premises.
In connection with any transfer of the Note within the period
prior to the expiration of the holding period applicable to sales thereof under
Rule 144(k) under the Securities Act (or any successor provision) (other than
any transfer pursuant to a registration statement that has been declared
effective under the Securities Act), the undersigned confirms that such Note is
being transferred:
[ ] To the Company or a subsidiary thereof; or
[ ] To a QIB pursuant to and in compliance with Rule 144A; or
[ ] To an "accredited investor" pursuant to and in compliance
with the Securities Act; or
[ ] Pursuant to and in compliance with Rule 144 under the
Securities Act;
and unless the box below is checked, the undersigned confirms that, to the
knowledge of the undersigned, such Note is not being transferred to an
"affiliate" of the Company as defined in Rule 144 under the Securities Act (an
"Affiliate").
[ ] The transferee is an Affiliate of the Company.
Capitalized terms used in this Assignment and not defined in
this Assignment shall have the respective meanings provided in the Note.
Dated: NAME:
--------- ----------------------------
---------------------------------
Signature(s)
21
EXHIBIT A
FORM OF CONVERSION NOTICE
(To be executed by the Holder in order
to convert 8% Convertible Note Due 2006)
Re: 8% Convertible Note Due 2006 issued by BIOGENTECH CORP.
identified below (the "Note")
The undersigned hereby elects to convert the outstanding Principal Amount (as
defined in the Note) indicated below of the Note into shares of Common Stock, of
BIOGENTECH CORP., a Nevada corporation (the "Company") according to the terms
hereof and of the Note, as of the date written below. If shares are to be issued
in the name of a person other than undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the Holder for any conversion, except for
such transfer taxes, if any. The undersigned represents as of the date hereof
that, after giving effect to the conversion of the Note pursuant to this
Conversion Notice, the undersigned will not exceed the "Restricted Ownership
Percentage" contained in Section 4(i)(A) of the Note.
Conversion information:
----------------------------------------------
Note Number
----------------------------------------------
Conversion Date
----------------------------------------------
Principal Amount of Note Being Converted
----------------------------------------------
Number of Shares of Common Stock to Be Issued
----------------------------------------------
Applicable Conversion Price
----------------------------------------------
Signature
----------------------------------------------
Name
----------------------------------------------
Address
A-1
Exhibit B
to
Purchase
Agreement
NEITHER THIS WARRANT NOR ISSUANCE OF THE SECURITIES ISSUABLE UPON THE EXERCISE
HEREOF TO THE HOLDER HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
QUALIFIED OR REGISTERED UNDER STATE SECURITIES OR BLUE SKY LAWS. NEITHER THIS
WARRANT NOR SUCH SECURITIES MAY BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE SECURITIES ACT OF 1933, APPLICABLE STATE SECURITIES OR BLUE
SKY LAWS AND THE APPLICABLE RULES AND REGULATIONS THEREUNDER.
THIS WARRANT MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 23.
No. W-1 Right to Purchase 90,000 Shares of Common Stock of
Biogentech Corp.
BIOGENTECH CORP.
Common Stock Purchase Warrant
BIOGENTECH CORP., a Nevada corporation, hereby certifies that,
for value received, GRYPHON MASTER FUND, L.P. or registered assigns (the
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time before 5:00 p.m., Dallas, Texas
time, on the Expiration Date (such capitalized term and all other capitalized
terms used herein having the respective meanings provided herein), 90,000 fully
paid and nonassessable shares of Common Stock at a purchase price per share
equal to the Purchase Price. The number of such shares of Common Stock and the
Purchase Price are subject to adjustment as provided in this Warrant.
1. DEFINITIONS.
(a) As used in this Warrant, the term "Holder" shall have the
meaning assigned to such term in the first paragraph of this Warrant.
(b) All the agreements or instruments herein defined shall
mean such agreements or instruments as the same may from time to time be
supplemented or amended or the terms thereof waived or modified to the extent
permitted by, and in accordance with, the terms thereof and of this Warrant.
1
(c) The following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Affiliate" means, with respect to any Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with the subject
Person. For purposes of this definition, "control" (including, with
correlative meaning, the terms "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Aggregate Purchase Price" means at any time an amount equal
to the product obtained by multiplying (x) the Purchase Price times (y)
the number of shares of Common Stock for which this Warrant may be
exercised at such time.
"Aggregation Parties" shall have the meaning provided in
Section 2(c).
"Board of Directors" means the Board of Directors of the
Company.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the City of Dallas are
authorized or required by law or executive order to remain closed.
"Common Stock" includes the Company's Common Stock, par value
$.001 per share, (and any purchase rights issued with respect to the
Common Stock in the future) as authorized on the date hereof, and any
other securities into which or for which the Common Stock (and any such
rights issued with respect to the Common Stock) may be converted or
exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise and any stock (other than Common
Stock) and other securities of the Company or any other Person which
the Holder at any time shall be entitled to receive, or shall have
received, on the exercise of this Warrant, in lieu of or in addition to
Common Stock.
"Common Stock Equivalents" means any warrant, option,
subscription or purchase right with respect to shares of Common Stock,
any security convertible into, exchangeable for, or otherwise entitling
the holder thereof to acquire, shares of Common Stock or any warrant,
option, subscription or purchase right with respect to any such
convertible, exchangeable or other security.
"Company" shall include Biogentech Corp., a Nevada
corporation, and any corporation that shall succeed to or assume the
obligations of Biogentech Corp. hereunder in accordance with the terms
hereof.
2
"Current Fair Market Value" means when used with respect to
the Common Stock as of a specified date with respect to each share of
Common Stock, the average of the closing prices of the Common Stock
sold on all securities exchanges (including the Nasdaq and the Nasdaq
SmallCap) on which the Common Stock may at the time be listed, or, if
there have been no sales on any such exchange on such day, the average
of the highest bid and lowest asked prices on all such exchanges at the
end of such day, or, if on such day the Common Stock is not so listed,
the average of the representative bid and asked prices quoted in the
Nasdaq System as of 4:00 p.m., New York City time, or, if on such day
the Common Stock is not quoted in the Nasdaq System, the average of the
highest bid and lowest asked price on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case
averaged over a period of ten Trading Days consisting of the day as of
which the Current Fair Market Value of Common Stock is being determined
(or if such day is not a Trading Day, the Trading Day next preceding
such day) and the nine consecutive Trading Days prior to such day. If
on the date for which Current Fair Market Value is to be determined the
Common Stock is not listed on any securities exchange or quoted in the
Nasdaq System or the over-the-counter market, the Current Fair Market
Value of Common Stock shall be the highest price per share which the
Company could then obtain from a willing buyer (not an employee or
director of the Company at the time of determination) in an
arms'-length transaction for shares of Common Stock sold by the
Company, from authorized but unissued shares, as determined in good
faith by the Board of Directors.
"Expiration Date" means September 8, 2006.
"Gryphon" means Gryphon Master Fund, L.P., a Bermuda limited
partnership.
"Holder Share Notice" shall have the meaning provided in
Section 3(a).
"Issuance Date" means the date of original issuance of this
Warrant or its predecessor instrument.
"Nasdaq" means the Nasdaq National Market.
"Nasdaq SmallCap" means the Nasdaq SmallCap Market.
"1934 Act" means the Securities Exchange Act of 1934, as
amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Note" means the 8% Convertible Note due 2006 issued by the
Company pursuant to the Purchase Agreement.
3
"Other Securities" means any stock (other than Common Stock)
and other securities of the Company or any other Person which the
Holder at any time shall be entitled to receive, or shall have
received, on the exercise of this Warrant, in lieu of or in addition to
Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 5.
"Person" means an individual, corporation, partnership,
limited liability company, trust, business trust, association, joint
stock company, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization, governmental authority or any other form
of entity not specifically listed herein.
"Purchase Agreement" means the Purchase Agreement, dated as of
September 8, 2003, by and between the Company and Gryphon.
"Purchase Price" means $2.88, subject to adjustment as
provided in this Warrant.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of September 8, 2003, by and between the Company
and Gryphon.
"Registration Statement" shall have the meaning provided in
the Registration Rights Agreement.
"Restricted Ownership Percentage" shall have the meaning
provided in Section 2(c).
"Restricted Securities" means securities that are not eligible
for resale pursuant to Rule 144(k) under the 1933 Act (or any successor
provision).
"Reorganization Event" means the occurrence of any one or more
of the following events:
(i) any consolidation, merger or similar transaction
of the Company or any Subsidiary with or into another entity
(other than a merger or consolidation or similar transaction
of a Subsidiary into the Company or a wholly-owned
Subsidiary); or the sale or transfer of all or substantially
all of the assets of the Company and the Subsidiaries in a
single transaction or a series of related transactions; or
(ii) the occurrence of any transaction or event in
connection with which all or substantially all the Common
Stock shall be exchanged for, converted into, acquired for or
constitute the right to receive securities of any other Person
(whether by means of a Tender Offer, liquidation,
consolidation, merger, share exchange, combination,
reclassification, recapitalization, or otherwise); or
4
(iii) the acquisition by a Person or group of Persons
acting in concert as a partnership, limited partnership,
syndicate or group, as a result of a tender or exchange offer,
open market purchases, privately negotiated purchases or
otherwise, of beneficial ownership of securities of the
Company representing 50% or more of the combined voting power
of the outstanding voting securities of the Company ordinarily
(and apart from rights accruing in special circumstances)
having the right to vote in the election of directors.
"Rule 144A" means Rule 144A as promulgated under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" means any corporation or other entity of which a
majority of the capital stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors or
other Persons performing similar functions are at the time directly or
indirectly owned by the Company.
"Tender Offer" means a tender offer, exchange offer or other
offer by the Company to repurchase outstanding shares of its capital
stock.
"Trading Day" means a day on whichever of the OTC Bulletin
Board, any national securities exchange, the Nasdaq or the Nasdaq
SmallCap, which then constitutes the principal securities market for
the Common Stock, is open for general trading.
2. EXERCISE OF WARRANT.
(a) EXERCISE. This Warrant may be exercised by the Holder in
whole at any time or in part from time to time on or before the Expiration Date
by (x) surrendering this Warrant to the Company, (y) giving a subscription form
in the form of Exhibit 1 to this Warrant (duly executed by the Holder) to the
Company, and (z) making payment, in cash or by certified or official bank check
payable to the order of the Company, or by wire transfer of funds to the account
of the Company, in any such case, in the amount obtained by multiplying (a) the
number of shares of Common Stock designated by the Holder in the subscription
form by (b) the Purchase Price then in effect. On any partial exercise the
Company will forthwith issue and deliver to or upon the order of the Holder a
new Warrant or Warrants of like tenor, in the name of the Holder or as the
Holder (upon payment by the Holder of any applicable transfer taxes) may
request, providing in the aggregate on the face or faces thereof for the
purchase of the number of shares of Common Stock for which such Warrant or
Warrants may still be exercised. The subscription form may be surrendered by
telephone line facsimile transmission to such telephone number for the Company
as shall have been specified in writing to the Holder by the Company; provided,
however, that if the subscription form is given to the Company by telephone line
facsimile transmission the Holder shall send an original of such subscription
form to the Company within ten Business Days after such subscription form is so
given to the Company; provided further, however, that any failure or delay on
the part of the Holder in giving such original of any subscription form shall
not affect the validity or the date on which such subscription form is so given
by telephone line facsimile transmission.
5
(b) NET EXERCISE. The Holder may elect to exercise this
Warrant, in whole at any time or in part from time to time, by receiving shares
of Common Stock equal to the net issuance value (as determined below) of this
Warrant, or any part hereof, upon surrender of the subscription form annexed
hereto (duly executed by the Holder) to the Company (followed by surrender of
this Warrant to the Company within three Trading Days after surrender of such
subscription form), in which event the Company shall issue to the Holder a
number of shares of Common Stock computed using the following formula:
X = Y x (A - B)
-----------
A
where,
X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Common Stock as to which this
Warrant is to be exercised
A = the Current Fair Market Value of one share of
Common Stock calculated as of the last Trading Day
immediately preceding the exercise of this Warrant
B = the Purchase Price
(c) 9.9% LIMITATION.
(1) Notwithstanding anything to the contrary contained herein,
the number of shares of Common Stock that may be acquired by the Holder upon
exercise pursuant to the terms hereof shall not exceed a number that, when added
to the total number of shares of Common Stock deemed beneficially owned by the
Holder (other than by virtue of the ownership of securities or rights to acquire
securities (including the Note and this Warrant) that have limitations on the
Holder's right to convert, exercise or purchase similar to the limitation set
forth herein), together with all shares of Common Stock deemed beneficially
owned at such time (other than by virtue of the ownership of securities or
rights to acquire securities that have limitations on the right to convert,
exercise or purchase similar to the limitation set forth herein) by the Holder's
Affiliates (the "Aggregation Parties") that would be aggregated for purposes of
determining whether a group exists or for purposes of determining the Holder's
beneficial ownership, in either such case for purposes of Section 13(d) of the
1934 Act and Regulation 13D-G thereunder, would result in beneficial ownership
by the Holder or such group of more than 9.9% of the outstanding shares of the
Common Stock (the "Restricted Ownership Percentage"). The Holder shall have the
right (x) at any time and from time to time to reduce its Restricted Ownership
Percentage immediately upon notice to the Company in the event and only to the
extent that Section 16 of the 1934 Act or the rules promulgated thereunder (or
any successor statute or rules) is changed to reduce the beneficial ownership
percentage threshold thereunder from 10%, (y) at any time and from time to time,
to increase its Restricted Ownership Percentage immediately in the event of the
happening of any Change in Control Transaction (as defined in the Note), and (z)
by written instrument delivered to the Company to irrevocably waive its rights
under the immediately preceding clause (y). If at any time the limits in this
Section 2(c) make this Warrant unexercisable in whole or in part, the Company
shall not by reason thereof be relieved of its obligation to issue shares of
Common Stock at any time or from time to time thereafter as shares of Common
Stock may be issued in compliance with such restrictions.
6
(2) For purposes of this Section 2(c), in determining the
number of outstanding shares of Common Stock at any time the Holder may rely on
the number of outstanding shares of Common Stock as reflected in (A) the
Company's then most recent Form 10-Q, Form 10-K or other public filing with the
SEC, as the case may be, (B) a public announcement by the Company that is later
than any such filing referred to in the preceding clause (A), or (C) any other
notice by the Company or its transfer agent setting forth the number shares of
Common Stock outstanding. Upon the written or oral request of the Holder, the
Company shall within one Business Day confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of Common Stock Equivalents, including,
without limitation, the Note and the Warrant, by the Holder or its Aggregation
Parties, in each such case subsequent to the date as of which such number of
outstanding shares of Common Stock was reported.
3. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. (a) As
soon as practicable after the exercise of this Warrant and in any event within
five Trading Days thereafter, upon the terms and subject to the conditions of
this Warrant, the Company at its expense (including the payment by it of any
applicable issue or stamp taxes) will cause to be issued in the name of and
delivered to the Holder, or as the Holder (upon payment by the Holder of any
applicable transfer taxes) may direct, a certificate or certificates for the
number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled on such exercise, in such
denominations as may be requested by the Holder, which certificate or
certificates shall be free of restrictive and trading legends (except to the
extent permitted under Section 6.12 of the Purchase Agreement), plus, in lieu of
any fractional share to which the Holder would otherwise be entitled, cash equal
to such fraction multiplied by the then Current Fair Market Value of one full
share of Common Stock, together with any other stock or Other Securities or any
property (including cash, where applicable) to which the Holder is entitled upon
such exercise pursuant to Section 2 or otherwise. In lieu of delivering physical
certificates for the shares of Common Stock or (Other Securities) issuable upon
any exercise of this Warrant, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
7
Transfer ("FAST") program, upon request of the Holder, the Company shall use
commercially reasonable efforts to cause its transfer agent electronically to
transmit such shares of Common Stock (or Other Securities) issuable upon
conversion to the Holder (or its designee), by crediting the account of the
Holder's (or such designee's) broker with DTC through its Deposit Withdrawal
Agent Commission system (provided that the same time periods herein as for stock
certificates shall apply). The Company shall pay any taxes and other
governmental charges that may be imposed under the laws of the United States of
America or any political subdivision or taxing authority thereof or therein in
respect of the issue or delivery of shares of Common Stock (or Other Securities)
or payment of cash upon exercise of this Warrant (other than income taxes
imposed on the Holder). The Company shall not be required, however, to pay any
tax or other charge imposed in connection with any transfer involved in the
issue of any certificate for shares of Common Stock (or Other Securities)
issuable upon exercise of this Warrant or payment of cash to any Person other
than the Holder, and in case of such transfer or payment the Company shall not
be required to deliver any certificate for shares of Common Stock (or Other
Securities) upon such exercise or pay any cash until such tax or charge has been
paid or it has been established to the Company's reasonable satisfaction that no
such tax or charge is due. If the Holder notifies the Company that the Holder
has not received such shares of Common Stock (or Other Securities) (a "Holder
Share Notice") and the Company fails to deliver or cause to be delivered to the
Holder such shares of Common Stock (or Other Securities) pursuant to this
Section 3(a) (free of any restrictions on transfer or legends except to the
extent permitted under Section 6.12 of the Purchase Agreement) in accordance
herewith, within one Trading Day after the date the Holder gives such Holder
Share Notice, then, in addition to any other liability the Company may have, the
Company shall pay to the Holder, in cash, an amount, computed at the rate of 2%
per month of the Current Fair Market Value of the shares of Common Stock (or
Other Securities) not timely delivered by the Company, for the period such
failure continues (the "Exercise Delay Payments"), without duplication of any
amount payable to the Holder pursuant to clause (F) of Section 2(c)(i) of the
Registration Rights Agreement, with each change in the Current Fair Market Value
during such period being given effect. A Holder Share Notice may be given by
telephone or e-mail to the Company's Chief Financial Officer or General Counsel.
Upon exercise of this Warrant as provided herein, the Company's obligation to
issue and deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of the absence of any action by the Holder to
enforce the same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to enforce the
same, any failure or delay in the enforcement of any other obligation of the
Company to the Holder, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other Person
of any obligation to the Company or any violation or alleged violation of law by
the Holder or any other Person, and irrespective of any other circumstance which
might otherwise limit such obligation of the Company to the Holder in connection
with such exercise.
8
(b) If in any case the Company shall fail to issue and deliver
or cause to be delivered the shares of Common Stock to the Holder in connection
with a particular exercise of this Warrant within one Trading Day after the
Holder gives a Holder Share Notice to the Company, in addition to any other
liabilities the Company may have hereunder and under applicable law, (A) the
Company shall pay or reimburse the Holder on demand for all out-of-pocket
expenses, including, without limitation, reasonable fees and expenses of legal
counsel, incurred by the Holder as a result of such failure; (B) if as a result
of such failure the Holder shall suffer any direct damages or liabilities from
such failure (including, without limitation, margin interest and the cost of
purchasing securities to cover a sale (whether by the Holder or the Holder's
securities broker) or borrowing of shares of Common Stock by the Holder for
purposes of settling any trade involving a sale of shares of Common Stock made
by the Holder during the period beginning on the Issuance Date and ending on the
date the Company delivers or causes to be delivered to the Holder such shares of
Common Stock), then, in addition to any amounts payable pursuant to Section
3(a), the Company shall upon demand of the Holder pay to the Holder an amount
equal to the actual, direct, demonstrable out-of-pocket damages and liabilities
suffered by the Holder by reason thereof which the Holder documents to the
reasonable satisfaction of the Company, and (C) the Holder may by written notice
(which may be given by mail, courier, personal service or telephone line
facsimile transmission) or oral notice (promptly confirmed in writing), given at
any time prior to delivery to the Holder of the shares of Common Stock issuable
in connection with such exercise of the Holder's right, rescind such exercise
and the subscription form relating thereto, in which case the Holder shall
thereafter be entitled to exercise that portion of this Warrant as to which such
exercise is so rescinded and to exercise its other rights and remedies with
respect to such failure by the Company. Notwithstanding the foregoing the
Company shall not be liable to the Holder under clauses (A) or (B) of the
immediately preceding sentence to the extent the failure of the Company to
deliver or to cause to be delivered such shares of Common Stock results from
fire, flood, storm, earthquake, shipwreck, strike, war, acts of terrorism, crash
involving facilities of a common carrier, acts of God, or any similar event
outside the control of the Company (it being understood that the action or
failure to act of the Company's Transfer Agent shall not be deemed an event
outside the control of the Company except to the extent resulting from fire,
flood, storm, earthquake, shipwreck, strike, war, acts of terrorism, crash
involving facilities of a common carrier, acts of God, or any similar event
outside the control of such Transfer Agent or the bankruptcy, liquidation or
reorganization of such Transfer Agent under any bankruptcy, insolvency or other
similar law). The Holder shall notify the Company in writing (or by telephone
conversation, confirmed in writing) as promptly as practicable following the
third Trading Day after the Holder exercises this Warrant if the Holder becomes
aware that such shares of Common Stock so issuable have not been received as
provided herein, but any failure so to give such notice shall not affect the
Holder's rights under this Warrant or otherwise.
4. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
Reclassification, etc. In case at any time or from time to time on or after the
Issuance Date, all holders of Common Stock (or Other Securities) shall have
received, or (on or after the record date fixed for the determination of
stockholders eligible to receive) shall have become entitled to receive, without
payment therefor,
9
(a) other or additional stock, rights, warrants or other
securities or property (other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock, rights, warrants or other
securities or property (including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares or similar
corporate rearrangement,
other than (i) additional shares of Common Stock (or Other Securities) issued as
a stock dividend or in a stock-split (adjustments in respect of which are
provided for in Section 6) and (ii) rights or warrants to subscribe for Common
Stock at less than the Current Fair Market Value (adjustments in respect of
which are provided in Section 7), then and in each such case the Holder, on the
exercise hereof as provided in Section 2, shall be entitled to receive the
amount of stock, rights, warrants and Other Securities and property (including
cash in the cases referred to in subdivisions (b) and (c) of this Section 4)
which the Holder would hold on the date of such exercise if on the date of such
action specified in the preceding clauses (a) through (c) (or the record date
therefor) the Holder had been the holder of record of the number of shares of
Common Stock called for on the face of this Warrant and had thereafter, during
the period from the date thereof to and including the date of such exercise,
retained such shares and all such other or additional stock, rights, warrants
and Other Securities and property (including cash in the case referred to in
subdivisions (b) and (c) of this Section 4) receivable by the Holder as
aforesaid during such period, giving effect to all adjustments called for during
such period by Section 5.
5. EXERCISE UPON A REORGANIZATION EVENT. In case of any
Reorganization Event the Company shall, as a condition precedent to the
consummation of the transactions constituting, or announced as, such
Reorganization Event, cause effective provisions to be made so that the Holder
shall have the right thereafter, by exercising this Warrant (in lieu of the
shares of Common Stock of the Company and Other Securities or property
purchasable and receivable upon exercise of the rights represented hereby
immediately prior to such Reorganization Event) to purchase the kind and amount
of shares of stock and Other Securities and property (including cash) receivable
upon such Reorganization Event by a holder of the number of shares of Common
Stock that might have been received upon exercise of this Warrant immediately
prior to such Reorganization Event. Any such provision shall include provisions
for adjustments in respect of such shares of stock and Other Securities and
property that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. The provisions of this Section 5 shall
apply to successive Reorganization Events.
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6. ADJUSTMENT FOR CERTAIN EXTRAORDINARY EVENTS. If on or after
the Issuance Date the Company shall (i) issue additional shares of the Common
Stock as a dividend or other distribution on outstanding Common Stock, (ii)
subdivide or reclassify its outstanding shares of Common Stock, or (iii) combine
its outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then, in each such event, the Purchase Price shall, simultaneously with
the happening of such event, be adjusted by multiplying the Purchase Price in
effect immediately prior to such event by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such event and the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such event, and the product so obtained
shall thereafter be the Purchase Price then in effect. The Purchase Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 6. The Holder shall
thereafter, on the exercise hereof as provided in Section 2, be entitled to
receive that number of shares of Common Stock determined by multiplying the
number of shares of Common Stock which would be issuable on such exercise
immediately prior to such issuance, subdivision or combination, as the case may
be, by a fraction of which (i) the numerator is the Purchase Price in effect
immediately prior to such issuance, and (ii) the denominator is the Purchase
Price in effect on the date of such exercise.
7. ISSUANCE OF RIGHTS OR WARRANTS TO COMMON STOCKHOLDERS AT
LESS THAN CURRENT FAIR MARKET VALUE. If the Company shall on or after the
Issuance Date issue rights or warrants to all holders of its outstanding shares
of Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Current Fair Market Value on the record
date fixed for the determination of stockholders entitled to receive such rights
or warrants, then
(a) the Purchase Price shall be adjusted so that the same
shall equal the price determined by multiplying the Purchase Price in
effect at the opening of business on the day after such record date by
a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on such record date
plus the number of shares which the aggregate offering price of the
total number of shares so offered would purchase at such Current Fair
Market Value, and the denominator shall be the number of shares of
Common Stock outstanding on the close of business on such record date
plus the total number of additional shares of Common Stock so offered
for subscription or purchase; and
(b) the number of shares of Common Stock which the Holder may
thereafter purchase upon exercise of this Warrant at the opening of
business on the day after such record date shall be increased to a
number equal to the quotient obtained by dividing (x) the Aggregate
Purchase Price in effect immediately prior to such adjustment in the
Purchase Price pursuant to clause (a) of this Section 7 by (y) the
Purchase Price in effect immediately after such adjustment in the
Purchase Price pursuant to clause (a) of this Section 7.
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Such adjustment shall become effective immediately after the opening of business
on the day following the record date fixed for determination of stockholders
entitled to receive such rights or warrants. To the extent that shares of Common
Stock are not delivered pursuant to such rights or warrants, upon the expiration
or termination of such rights or warrants, the Purchase Price shall be
readjusted to the Purchase Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on the
basis of delivery of only the number of shares of Common Stock actually
delivered and the number of shares of Common Stock for which this Warrant may
thereafter be exercised shall be readjusted (subject to proportionate adjustment
for any intervening exercises of this Warrant) to the number which would then be
in effect had the adjustments made upon the issuance of such rights or warrants
been made on the basis of delivery of only the number of shares of Common Stock
actually delivered. In the event that such rights or warrants are not so issued,
the Purchase Price shall again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed and the number of
shares of Common Stock for which this Warrant may thereafter be exercised shall
again be adjusted (subject to proportionate adjustment for any intervening
exercises of this Warrant) to be the number which would then be in effect if
such record date had not been fixed. In determining whether any rights or
warrants entitle the Holder to subscribe for or purchase shares of Common Stock
at less than such Current Fair Market Value, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into account
any consideration received for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board of Directors.
8. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
(a) If any of the following events occur, namely (i) any reclassification or
change of the outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), (ii) any consolidation, merger,
statutory exchange or combination of the Company with another corporation as a
result of which holders of Common Stock shall be entitled to receive stock,
other securities or other property or assets (including cash) with respect to or
in exchange for such Common Stock, or (iii) any sale or conveyance of the
properties and assets of the Company as, or substantially as, an entirety to any
other Person as a result of which holders of Common Stock shall be entitled to
receive stock, other securities or other property or assets (including cash)
with respect to or in exchange for such Common Stock, then the Company, the
successor or purchasing Person and each Person who has agreed to issue such
stock or other securities or to transfer such other property or assets shall
execute and deliver to the Holder a written agreement providing that (x) this
Warrant shall thereafter entitle the Holder to purchase the kind and amount of
shares of stock and other securities or property or assets (including cash)
receivable upon such reclassification, change, consolidation, merger, statutory
exchange, combination, sale or conveyance, by the holder of a number of shares
of Common Stock issuable upon exercise of this Warrant (assuming, for such
purposes, a sufficient number of authorized shares of Common Stock available to
exercise this Warrant) immediately prior to such reclassification, change,
consolidation, merger, statutory exchange, combination, sale or conveyance,
assuming such holder of Common Stock did not exercise such holder's rights of
election, if any, as to the kind or amount of securities, cash or other property
12
receivable upon such reclassification, change, consolidation, merger, statutory
exchange, combination, sale or conveyance (provided that, if the kind or amount
of securities, cash or other property receivable upon such reclassification,
change, consolidation, merger, statutory exchange, combination, sale or
conveyance is not the same for each share of Common Stock in respect of which
such rights of election shall not have been exercised ("non-electing share"),
then for the purposes of this Section 8 the kind and amount of securities, cash
or other property receivable upon such reclassification, change, consolidation,
merger, statutory exchange, combination, sale or conveyance for each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares), (y) in the case of any such
successor or purchasing Person or any such Person who has agreed to issue such
stock or other securities or to transfer such other property or assets, upon
such consolidation, merger, statutory exchange, combination, sale or conveyance,
such successor or purchasing Person or any such Person who has agreed to issue
such stock or other securities or to transfer such other property or assets
shall be jointly and severally liable with the Company for the performance of
all of the Company's obligations under this Warrant, the Purchase Agreement and
the Registration Rights Agreement, and (z) if registration or qualification is
required under the 1933 Act or applicable state law for the public resale by the
Holder of such shares of stock and Other Securities so issuable upon exercise of
this Warrant, such registration or qualification shall be completed prior to
such reclassification, change, consolidation, merger, combination or sale. Such
written agreement shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. If, in the case of any such reclassification, change, consolidation,
merger, statutory exchange, combination, sale or conveyance, the stock or other
securities or other property or assets receivable thereupon by a holder of
shares of Common Stock includes shares of stock, other securities other property
or assets of a Person other than the Company or any such successor or purchasing
Person, as the case may be, in such reclassification, change, consolidation,
merger, statutory exchange, combination, sale or conveyance, then such written
agreement shall also be executed by such other Person and shall contain such
additional provisions to protect the interests of the Holder as the Board of
Directors shall reasonably consider necessary by reason of the foregoing.
(b) The above provisions of this Section 8 shall similarly
apply to successive reclassifications, changes, consolidations, mergers,
combinations, sales and conveyances.
(c) If this Section 8 applies to any event or occurrence,
Section 5 shall not apply to such event or occurrence.
9. TAX ADJUSTMENTS. The Company may make such reductions in
the Purchase Price, in addition to those required by Sections 4, 5, 6 and 7, as
the Board of Directors considers to be advisable to avoid or diminish any income
tax to holders of Common Stock or rights to purchase Common Stock resulting from
any dividend or distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes.
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10. MINIMUM ADJUSTMENT. (a) No adjustment in the Purchase
Price (and no related adjustment in the number of shares of Common Stock which
may thereafter be purchased upon exercise of this Warrant) shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Purchase Price; provided, however, that any adjustments which by reason of
this Section 10 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All such calculations under this
Warrant shall be made by the Company and shall be made to the nearest cent or to
the nearest one hundredth of a share, as the case may be.
(b) No adjustment need be made for a change in the par value
of the Common Stock or from par value to no par value or from no par value to
par value.
11. NOTICE OF ADJUSTMENTS. Whenever the Purchase Price is
adjusted as herein provided, the Company shall promptly, but in no event later
than five Trading Days thereafter, give a notice to the Holder setting forth the
Purchase Price and number of shares of Common Stock which may be purchased upon
exercise of this Warrant after such adjustment and setting forth a brief
statement of the facts requiring such adjustment but which such statement shall
not include any information which would be material non-public information for
purposes of the 1934 Act. Failure to deliver such notice shall not affect the
legality or validity of any such adjustment.
12. FURTHER ASSURANCES. The Company will take all action that
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock, free from all taxes,
liens and charges with respect to the issue thereof, on the exercise of all or
any portion of this Warrant from time to time outstanding.
13. NOTICE TO HOLDER PRIOR TO CERTAIN ACTIONS. In case on or
after the Issuance Date:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock (other than in cash out of retained earnings);
or
(b) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any share of
any class or any other rights or warrants; or
(c) the Board of Directors shall authorize any
reclassification of the Common Stock (other than a subdivision or combination of
its outstanding Common Stock, or a change in par value, or from par value to no
par value, or from no par value to par value), or any consolidation or merger or
other business combination transaction to which the Company is a party and for
which approval of any stockholders of the Company is required, or the sale or
transfer of all or substantially all of the assets of the Company; or
14
(d) there shall be pending the voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
the Company shall give the Holder, as promptly as possible but in any event at
least ten Trading Days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, other business
combination transaction, sale, transfer, dissolution, liquidation or winding-up
is expected to become effective or occur, and the date as of which it is
expected that holders of Common Stock of record who shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, other business combination
transaction, sale, transfer, dissolution, liquidation or winding-up shall be
determined. Such notice shall not include any information which would be
material non-public information for purposes of the 1934 Act. Failure to give
such notice, or any defect therein, shall not affect the legality or validity of
such dividend, distribution, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. In the case of any such action
of which the Company gives such notice to the Holder or is required to give such
notice to the Holder, the Holder shall be entitled to give a subscription form
to exercise this Warrant in whole or in part that is contingent on the
completion of such action.
14. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF
WARRANTS. The Company will at all times reserve and keep available out of its
authorized but unissued shares of capital stock, solely for issuance and
delivery on the exercise of this Warrant, a sufficient number of shares of
Common Stock (or Other Securities) to effect the full exercise of this Warrant
and the exercise, conversion or exchange of all other Common Stock Equivalents
from time to time outstanding (or Other Securities), and if at any time the
number of authorized but unissued shares of Common Stock (or Other Securities)
shall not be sufficient to effect such exercise, conversion or exchange, the
Company shall take such action as may be necessary to increase its authorized
but unissued shares of Common Stock (or Other Securities) to such number as
shall be sufficient for such purposes.
15. TRANSFER OF WARRANT. This Warrant shall inure to the
benefit of the successors to and assigns of the Holder. The Holder may not
assign or transfer this Warrant to a Person who is a business competitor of the
Company without the Company's prior written consent, which the Company may
withhold in its sole discretion. This Warrant and all rights hereunder, in whole
or in part, are registrable at the office or agency of the Company referred to
below by the Holder in Person or by his duly authorized attorney, upon surrender
of this Warrant properly endorsed accompanied by an assignment form in the form
attached to this Warrant, or other customary form, duly executed by the
transferring Holder.
16. REGISTER OF WARRANTS. The Company shall maintain, at the
principal office of the Company (or such other office as it may designate by
notice to the Holder), a register in which the Company shall record the name and
address of the Person in whose name this Warrant has been issued, as well as the
name and address of each successor and prior owner of such Warrant. The Company
shall be entitled to treat the Person in whose name this Warrant is so
registered as the sole and absolute owner of this Warrant for all purposes.
15
17. EXCHANGE OF WARRANT. This Warrant is exchangeable, upon
the surrender hereof by the Holder at the office or agency of the Company
referred to in Section 15, for one or more new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for and purchased hereunder,
each of such new Warrants to represent the right to subscribe for and purchase
such number of shares as shall be designated by the Holder at the time of such
surrender.
18. REPLACEMENT OF WARRANT. On receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and (a) in the case of loss, theft or
destruction, of indemnity from the Holder reasonably satisfactory in form to the
Company (and without the requirement to post any bond or other security), or (b)
in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company will execute and deliver to the Holder a new Warrant of like tenor
without charge to the Holder.
19. WARRANT AGENT. The Company may, by written notice to the
Holder, appoint the transfer agent and registrar for the Common Stock as the
Company's agent for the purpose of issuing Common Stock (or Other Securities) on
the exercise of this Warrant pursuant to Section 2, and the Company may, by
written notice to the Holder, appoint an agent having an office in the United
States of America for the purpose of exchanging this Warrant pursuant to Section
17, and replacing this Warrant pursuant to Section 18, or any of the foregoing,
and thereafter any such exchange or replacement, as the case may be, shall be
made at such office by such agent.
20. REMEDIES. The Company stipulates that the remedies at law
of the Holder in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement contained herein or by
an injunction against a violation of any of the terms hereof or otherwise.
21. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. This Warrant
shall not entitle the Holder to any voting rights or other rights as a
stockholder of the Company. Nothing contained in this Warrant shall be construed
as conferring upon the Holder the right to vote or to consent or to receive
notice as a stockholder of the Company on any matters or with respect to any
rights whatsoever as a stockholder of the Company. No dividends or interest
shall be payable or accrued in respect of this Warrant or the interest
represented hereby or the Common Stock (or Other Securities) purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised in accordance with its terms.
16
22. NOTICES, ETC. All notices and other communications from
the Company to the Holder shall be in writing and delivered personally, by
confirmed facsimile, by a nationally recognized overnight courier service or
mailed by first class certified mail, postage prepaid, at such facsimile
telephone number or address as may have been furnished to the Company in writing
by the Holder or at such facsimile telephone number or the address shown for the
Holder on the register of Warrants referred to in Section 16.
23. TRANSFER RESTRICTIONS. This Warrant has not been and is
not being registered under the provisions of the 1933 Act or any state
securities laws and this Warrant may not be transferred prior to the end of the
holding period applicable to sales hereof under Rule 144(k) unless (1) the
transferee is an "accredited investor" (as defined in Regulation D under the
▇▇▇▇ ▇▇▇) or a QIB in a transfer that meets the requirements of Rule 144A, and
(2) the Holder shall have delivered to the Company an opinion of counsel,
reasonably satisfactory in form, scope and substance to the Company, to the
effect that this Warrant may be sold or transferred without registration under
the 1933 Act. Prior to any such transfer, such transferee shall have represented
in writing to the Company that such transferee has requested and received from
the Company all information relating to the business, properties, operations,
condition (financial or other), results of operations or prospects of the
Company deemed relevant by such transferee; and that such transferee has been
afforded the opportunity to ask questions of the Company concerning the
foregoing and has had the opportunity to obtain and review the Registration
Statement and the prospectus related thereto, each as amended or supplemented to
the date of transfer to such transferee, and the reports and other information
concerning the Company which at the time of such transfer have been filed by the
Company with the SEC pursuant to the 1934 Act and which are incorporated by
reference in such prospectus as of the date of such transfer. If such transfer
is intended to assign the rights and obligations of the Holder the Purchase
Agreement and the Registration Rights Agreement, such transfer shall otherwise
be made in compliance with the applicable provisions of the Purchase Agreement
and the Registration Rights Agreement.
24. RULE 144A INFORMATION REQUIREMENT. Within the period prior
to the expiration of the holding period applicable to sales hereof under Rule
144(k) under the 1933 Act (or any successor provision), the Company covenants
and agrees that it shall, during any period in which it is not subject to
Section 13 or 15(d) under the 1934 Act, make available to the Holder and the
holder of any shares of Common Stock issued upon exercise of this Warrant which
continue to be Restricted Securities in connection with any sale thereof and any
prospective purchaser of this Warrant from the Holder, the information required
pursuant to Rule 144A(d)(4) under the 1933 Act upon the request of the Holder
and it will take such further action as the Holder may reasonably request, all
to the extent required from time to time to enable the Holder to sell this
Warrant without registration under the 1933 Act within the limitation of the
exemption provided by Rule 144A, as Rule 144A may be amended from time to time.
Upon the request of the Holder, the Company will deliver to the Holder a written
statement as to whether it has complied with such requirements.
17
25. Legend. The provisions of Section 6.12 of the Purchase
Agreement and the related definitions of capitalized terms used therein and
defined in the Purchase Agreement are by this reference incorporated herein as
if set forth in full at this place.
26. Amendment; Waiver. This Warrant and any terms hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought.
27. Miscellaneous. This Warrant shall be construed and
enforced in accordance with and governed by the internal laws of the State of
Nevada. The headings, captions and footers in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
28. Attorneys' Fees. In any litigation, arbitration or court
proceeding between the Company and Holder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant.
[Signature Page Follows]
18
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed on its behalf by one of its officers thereunto duly authorized.
Dated: September 8, 2003 BIOGENTECH CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:CEO and President
19
ASSIGNMENT
For value hereby sell(s), assign(s) and transfer(s) unto
(Please insert social security or other Taxpayer Identification Number of
assignee: ) the attached original, executed Warrant to purchase share of Common
Stock of Biogentech Corp., a Nevada corporation (the "Company"), and hereby
irrevocably constitutes and appoints attorney to transfer the Warrant on the
books of the Company, with full power of substitution in the premises.
In connection with any transfer of the Warrant within the period prior
to the expiration of the holding period applicable to sales thereof under Rule
144(k) under the 1933 Act (or any successor provision) (other than any transfer
pursuant to a registration statement that has been declared effective under the
1933 Act), the undersigned confirms that such Warrant is being transferred:
[ ] To the Company or a subsidiary thereof; or
[ ] To a QIB pursuant to and in compliance with Rule 144A; or
[ ] To an "accredited investor" (as defined in Regulation
D under the ▇▇▇▇ ▇▇▇) pursuant
to and in compliance with the 1933 Act; or
[ ] Pursuant to and in compliance with Rule 144 under the 1933
Act;
and unless the box below is checked, the undersigned confirms that, to the
knowledge of the undersigned, such Warrant is not being transferred to an
"affiliate" (as defined in Rule 144 under the ▇▇▇▇ ▇▇▇) of the Company.
[ ] The transferee is an affiliate of the Company.
Capitalized terms used in this Assignment and not defined in
this Assignment shall have the respective meanings provided in the Warrant.
Dated: NAME:
------------------------ ------------------------------
----------------------------------
Signature(s)
20
1-2
Exhibit 1
FORM OF SUBSCRIPTION
BIOGENTECH CORP.
(To be signed only on exercise of Warrant)
TO: Biogentech Corp.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
1. The undersigned Holder of the attached original, executed Warrant
hereby elects to exercise its purchase right under such Warrant with respect to
shares (the "Exercise Shares") of Common Stock, as defined in the Warrant, of
Biogentech Corp., a Nevada corporation (the "Company").
2. The undersigned Holder (check one):
|_| (a) elects to pay the Aggregate Purchase Price for such shares
of Common Stock (i) in lawful money of the United States or by
the enclosed certified or official bank check payable in
United States dollars to the order of the Company in the
amount of $ , or (ii) by wire transfer of United States funds
to the account of the Company in the amount of $ , which
transfer has been made before or simultaneously with the
delivery of this Form of Subscription pursuant to the
instructions of the Company;
or
|_| (b) elects to receive shares of Common Stock having a value
equal to the value of the Warrant calculated in accordance
with Section 2(b) of the Warrant.
3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned or
in such other name(s) as is specified below:
Name:
-------------------------------------------------------------
Address:
-------------------------------------------------------------
-------------------------------------------------------------
21
Social Security or Tax Identification Number (if any):
Dated:
-------------- ----------------------------------
(Signature must conform to name
of Holder as specified on the face
of the Warrant)
----------------------------------
(Address)
22
Exhibit C
to
Purchase
Agreement
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of September 8,
2003 (this "Agreement"), by and between BIOGENTECH CORP., a Nevada corporation
(the "Company"), and GRYPHON MASTER FUND, L.P., a Bermuda limited partnership
("Gryphon").
W I T N E S S E T H:
--------------------
WHEREAS, in connection with the Purchase Agreement (such
capitalized term and all other capitalized terms used herein having the
respective meanings provided herein), the Company has agreed to provide certain
registration rights under the 1933 Act and applicable state securities laws with
respect to the Registrable Securities issuable to Gryphon pursuant to the
Purchase Agreement;
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
Purchasers hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the terms "Agreement",
"Company" and "Gryphon" shall have the respective meanings assigned to such
terms in the introductory paragraph of this Agreement.
(b) All the agreements or instruments herein defined shall
mean such agreements or instruments as the same may from time to time be
supplemented or amended or the terms thereof waived or modified to the extent
permitted by, and in accordance with, the terms thereof and of this Agreement.
(c) The following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Additional Registrable Securities" means any shares of Common
Stock which are included within the definition of Registrable
Securities but not included in any Registration Statement filed
pursuant to Section 2(a)(i) below.
"Allowed Delay" shall have the meaning provided in Section
2(c)(ii).
"Approved Market" shall have the meaning provided in Section
2(c)(i).
1
"Availability Date" shall have the meanings provided in Section
3(l).
"Blackout Period" shall have the meaning provided in Section
2(c)(i).
"Common Stock" means the Common Stock, par value $.001 per share,
of the Company.
"Conversion Price" shall have the meaning provided in the Note.
"Initial Registrable Securities Amount" shall have the meaning
provided in Section 2(a)(i).
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"1933 Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"NASD" means the National Association of Securities Dealers,
Inc.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the
Registrable Securities or Additional Registrable Securities covered by
such Registration Statement and by all other amendments and supplements
to the prospectus, including post-effective amendments and all material
incorporated by reference in such prospectus.
"Purchase Agreement" means the Purchase Agreement, dated as of
September 8, 2003, by and between the Company and Gryphon.
"Purchasers" means Gryphon and each subsequent holder of the
Note, the Warrant, Registrable Securities or Additional Registrable
Securities, or any portion thereof.
"register," "registered" and "registration" refer to a
registration made by preparing and filing a registration statement or
similar document in compliance with the 1933 Act (as defined below),
and the declaration or ordering of effectiveness of such registration
statement or document by the SEC.
"Registrable Securities" means (i) the Underlying Shares, the
Warrant Shares and the shares of Common Stock or other securities
issued or issuable to each Purchaser or its permitted transferee or
designee (a) upon conversion of the Note and upon exercise of the
Warrant, or (b) upon any distribution with respect to, any exchange for
or any replacement of the Note or the Warrant, or (c) upon any
conversion, exercise or exchange of any securities issued in connection
with any such distribution, exchange or replacement; (ii) securities
issued or issuable upon any stock split, stock dividend,
recapitalization or similar event with respect to such shares of Common
Stock; and (iii) any other security issued as a dividend or other
distribution with respect to, in exchange for, or in replacement of,
the securities referred to in the preceding clauses.
2
"Registration Date" shall have the meaning provided in Section
2(c)(i).
"Registration Period" shall have the meaning provided in Section
3(a).
"Registration Statement" shall mean any registration statement
of the Company filed under the 1933 Act that covers the resale of any
of the Registrable Securities or Additional Registrable Securities
pursuant to the provisions of this Agreement, amendments and
supplements to such Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in
such Registration Statement.
"SEC" means the U.S. Securities and Exchange Commission.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of, or otherwise in respect of, the Note.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of, or otherwise in respect of, the Warrant.
(d) Capitalized terms used herein but not otherwise defined
herein shall have the respective meanings assigned to such terms in the Purchase
Agreement.
2. REGISTRATION.
(a) REGISTRATION STATEMENTS.
(i) REGISTRABLE SECURITIES. Promptly following the Closing of
the purchase and sale of the Note and the Warrant contemplated by the Purchase
Agreement on the Closing Date (but, subject to Section 2(a)(iii), no later than
thirty (30) days after the Closing Date), the Company shall prepare and file
with the SEC one Registration Statement on Form S-3 (or, if Form S-3 is not then
available to the Company, on such form of registration statement as is then
available to effect a registration for resale of the Registrable Securities,
subject to the Purchaser's consent), covering the resale of the Registrable
Securities in an amount at least equal to the sum of (1) 125% of the number of
Underlying Shares that would be issuable upon conversion of the Note in full
plus (2) 100% of the number of shares of Common Stock issuable upon exercise of
the Warrant in full for cash, in each case in the preceding clauses (1) and (2),
determined without regard to any restrictions on beneficial ownership contained
in the Note, the Warrant or the Purchase Agreement (such sum the "Initial
Registrable Securities Amount"). Such Registration Statement also shall cover,
3
to the extent allowable under the 1933 Act and the rules promulgated thereunder
(including Rule 416), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions with
respect to the Registrable Securities. In the Registration Statement the
Purchaser shall be identified as a selling securityholder and not as an
underwriter. No securities other than the Registrable Securities shall be
included in the Registration Statement without the consent of the Purchaser. The
Registration Statement (and each amendment or supplement thereto) shall be
provided in accordance with Section 3(c) to the Purchaser and its counsel prior
to its filing or other submission. If at any time the number of shares of Common
Stock included in a Registration Statement required to be filed as provided in
this Section 2(a) and remaining unsold thereunder shall be insufficient to cover
the resale of Registrable Securities in an amount at least equal to the sum of
(x) 125% of the number of Underlying Shares that would be issuable upon
conversion in full of the Note, plus (y) 100% of the number of shares of Common
Stock issuable upon exercise of the Warrant outstanding at such time in full for
cash, in each case in the preceding clauses (x) and (y) determined without
regard to any restrictions on beneficial ownership contained in the Note, the
Warrant or the Purchase Agreement, then promptly, but in no event later than
thirty (30) days after such insufficiency shall occur, the Company shall file
with the SEC an additional Registration Statement on Form S-3 covering such
number of shares of Common Stock as shall be sufficient to cover such amount.
Except as set forth above, the requirements with respect to a subsequent
Registration Statement shall be the same as those applicable to the initial
Registration Statement.
(ii) ADDITIONAL REGISTRABLE SECURITIES. At any time and from
time to time, promptly following the written demand of the Purchaser following
the issuance of any Additional Registrable Securities, and in any event within
thirty (30) days following such demand, the Company shall prepare and file with
the SEC either a new Registration Statement or a post-effective amendment to a
previously filed Registration Statement, to the extent permitted under the 1933
Act, on Form S-3 (or, if Form S-3 is not then available to the Company, on such
form of registration statement as is then available to effect a registration for
resale of the Additional Registrable Securities) covering the resale of the
Additional Registrable Securities in an amount equal to the number of Additional
Registrable Securities. Such Registration Statement also shall cover, to the
extent allowable under the 1933 Act and the rules promulgated thereunder
(including Rule 416), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions with
respect to the Additional Registrable Securities. The Registration Statement
(and each amendment or supplement thereto) shall be provided in accordance with
Section 3(c) to the Purchaser and its counsel prior to its filing or other
submission.
(iii) If the Company proposes to file with the SEC a
registration statement (other than on Form S-8) relating to securities other
than the Registrable Securities or Additional Registrable Securities, then on or
before the date the Company files such other registration statement with the SEC
the Company shall file the Registration Statement required by Section 2(a)(i)
with the SEC. In any such case, the Company shall not request acceleration of
effectiveness of such other registration statement unless simultaneously
therewith the Company requests acceleration of effectiveness of the Registration
Statement to the same date and time as so requested for such other registration
statement.
4
(B) EXPENSES. The Company will pay all expenses associated
with each registration, including the Purchaser's reasonable expenses (including
reasonable attorneys fees) in connection with the registration but excluding
discounts, commissions, fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals.
(C) EFFECTIVENESS.
(i) The Company shall use its best efforts to have each
Registration Statement declared effective as soon as practicable after it is
filed with the SEC. If (A) the Company fails to file with the SEC a Registration
Statement on or before the date by which the Company is required to file the
Registration Statement pursuant to Section 2(a)(i) above, (B) the Company fails
to file with the SEC the Registration Statement covering Additional Registrable
Securities within thirty (30) days following demand of the Purchaser relating to
the Additional Registrable Securities to be covered thereby, (C) the
Registration Statement covering Registrable Securities is not declared effective
by the SEC within one hundred and twenty (120) days following the Closing Date,
or the Registration Statement covering Additional Registrable Securities is not
declared effective by the SEC within one hundred and twenty (120) days following
demand of the Purchaser relating to the Additional Registrable Securities to be
covered thereby (each, a "Registration Date"), (D) after a Registration
Statement has been declared effective by the SEC, sales cannot be made pursuant
to such Registration Statement for any reason (including without limitation by
reason of a stop order, or the Company's failure to update the Registration
Statement) but except as excused pursuant to subparagraph (ii) below, (E) the
Common Stock generally or the Registrable Securities (or Additional Registrable
Securities after issuance) specifically are not listed or included for quotation
on the OTC Bulletin Board, the Nasdaq, the Nasdaq Small Cap, the NYSE or the
AMEX (each an "Approved Market"), or trading of the Common Stock is suspended or
halted on the Approved Market which at the time constitutes the principal market
for the Common Stock, or (F) the Company fails, refuses or is otherwise unable
timely to issue Underlying Shares upon conversion of the Note or Warrant Shares
upon exercise of the Warrant in accordance with the terms of the Note and the
Warrant, or certificates therefor as required under the Transaction Documents,
then the Company will make payments to the Purchaser as partial liquidated
damages for the minimum amount of damages to the Purchaser by reason thereof,
and not as a penalty, at the rate of (1) one percent (1%) of the purchase price
of the Note and the Warrant paid by the Purchaser pursuant to the Purchase
Agreement for the first thirty (30) day period, and (2) two percent (2%) of the
purchase price of the Note and the Warrant paid by the Purchaser pursuant to the
Purchase Agreement for the each thirty (30) day period thereafter (pro rated for
any period less than thirty (30) days), following the Registration Date during
which any of the events described in clause (A), (B), (C), (D), (E) or (F) above
occurs and is continuing (the "Blackout Period"). Each such payment shall be due
and payable within five (5) days after the end of each calendar month of the
Blackout Period until the termination of the Blackout Period and within five (5)
days after such termination. Such payments shall be in partial compensation to
the Purchaser, and shall not constitute the Purchaser's exclusive remedy for
such events. The Blackout Period shall terminate upon (v) the filing of the
applicable Registration Statement in the case of clauses (A) and (B) above; (w)
the effectiveness of the applicable Registration Statement in the case of
clauses (C) and (D) above; (x) listing or inclusion and/or trading of the Common
Stock on an Approved Market, as the case may be, in the case of clause (E)
above; (y) delivery of such shares or certificates in the case of clause (F)
above; and (z) in the case of the events described in clauses (C) or (D) above,
the earlier termination of the Registration Period (as defined in Section 3(a)
below). The amounts payable as liquidated damages pursuant to this paragraph
shall be payable, at the option of the Purchaser, in lawful money of the United
States or in shares of Common Stock valued for this purpose at the Conversion
Price. Amounts payable as liquidated damages hereunder shall cease when the
Purchaser no longer holds the Note, the Warrant, Registrable Securities or
Additional Registrable Securities.
5
(ii) For not more than five (5) consecutive Trading Days or
for a total of not more than twenty (20) Trading Days in any consecutive twelve
(12) month period, the Company may delay the disclosure of material non-public
information concerning the Company, by terminating or suspending effectiveness
of any registration contemplated by this Section, the disclosure of which
information at the time is not, in the good faith opinion of the Company, in the
best interests of the Company or would be unduly detrimental to the Company's
affairs (an "Allowed Delay"); provided, that the Company shall promptly (a)
notify the Purchaser in writing of the existence of (but in no event, without
the prior written consent of the Purchaser, shall the Company disclose to the
Purchaser any of the facts or circumstances regarding) material non-public
information giving rise to an Allowed Delay, and (b) advise the Purchaser in
writing to cease all sales under the Registration Statement until the end of the
Allowed Delay.
(d) UNDERWRITTEN OFFERING. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Purchaser shall have the right to select an investment banker and
manager to administer the offering, which investment banker or manager shall be
reasonably satisfactory to the Company.
3. COMPANY OBLIGATIONS. The Company will use its best efforts
to effect the registration of the Registrable Securities and Additional
Registrable Securities in accordance with the terms hereof, and pursuant thereto
the Company will, as expeditiously as possible:
(a) use its best efforts to cause such Registration Statement
to become effective and to remain continuously effective for a period (the
"Registration Period") that will terminate upon the earlier of (i) the date on
which all Registrable Securities or Additional Registrable Securities have been
sold (and the Note and the Warrant no longer remain outstanding), (ii) the date
on which all Registrable Securities or Additional Registrable Securities, as the
case may be, may be sold pursuant to Rule 144(k) (and the Note and Warrant no
longer remain outstanding), and (iii) the third anniversary of the Closing Date;
(b) prepare and file with the SEC such amendments,
post-effective amendments and prospectus supplements to the Registration
Statement and the Prospectus as may be necessary to keep the Registration
Statement effective for the period specified in Section 3(a) and to comply with
the provisions of the 1933 Act and the 1934 Act with respect to the distribution
of all Registrable Securities and Additional Registrable Securities; provided
that, at a time reasonably prior to the filing of a Registration Statement or
Prospectus, or any amendments or supplements thereto, the Company will furnish
to the Purchaser copies of all documents proposed to be filed, which documents
will be subject to the comments of the Purchaser provided reasonably promptly
after receipt of such documents;
6
(c) permit counsel designated by the Purchaser to review each
Registration Statement and Prospectus and all amendments and supplements thereto
no fewer than seven (7) Business Days (or as many Business Days as possible if
SEC rules do not allow such time for such review) prior to their filing with the
SEC and not file any document to which such counsel reasonably objects;
(d) furnish to the Purchaser and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of any Registration Statement and any
amendment thereto, each preliminary prospectus and Prospectus and each amendment
or supplement thereto, and each letter written by or on behalf of the Company to
the SEC or the staff of the SEC, and each item of correspondence from the SEC or
the staff of the SEC, in each case relating to such Registration Statement
(other than any portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number of copies of a
Prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as the Purchaser may reasonably
request in order to facilitate the disposition of the Registrable Securities and
Additional Registrable Securities owned by the Purchaser;
(e) in the event the Purchaser selects an underwriter for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriter of such offering;
(f) if required by the underwriter, or if the Purchaser is
described in the Registration Statement as an underwriter, the Company shall
furnish, on the effective date of the Registration Statement, on the date that
Registrable Securities or Additional Registrable Securities, as applicable, are
delivered to an underwriter, if any, for sale in connection with the
Registration Statement and at periodic intervals thereafter from time to time on
request, (i) an opinion, dated as of such date, from independent legal counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the underwriter and the Purchaser, and (ii) a letter, dated such
date, from the Company's independent certified public accountants in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriter
and the Purchaser;
7
(g) to prevent the issuance of any stop order or other
suspension of effectiveness and, if such order is issued, obtain the withdrawal
of any such order at the earliest possible moment;
(h) furnish to the Purchaser at least five copies of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules by air mail or reputable courier within three
(3) Business Days after the effective date thereof;
(i) prior to any public offering of Registrable Securities or
Additional Registrable Securities, use its best efforts to register or qualify
or cooperate with the Purchaser and its counsel in connection with the
registration or qualification of the Registrable Securities or Additional
Registrable Securities, as applicable, for offer and sale under the securities
or blue sky laws of such jurisdictions requested by the Purchaser and do any and
all other reasonable acts or things necessary or advisable to enable the
distribution in such jurisdictions of the Registrable Securities or Additional
Registrable Securities covered by the Registration Statement;
(j) cause all Registrable Securities or Additional Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange, interdealer quotation system or other market on which similar
securities issued by the Company are then listed;
(k) immediately notify the Purchaser at any time when a
Prospectus relating to the Registrable Securities or Additional Registrable
Securities is required to be delivered under the 1933 Act, upon discovery that,
or upon the happening of any event as a result of which, the Prospectus included
in such Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits 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 made, not misleading, and at the request of any such
holder, promptly prepare and furnish to such holder a reasonable number of
copies of a supplement to or an amendment of such Prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Registrable
Securities or Additional Registrable Securities, as applicable, such Prospectus
shall 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 in the light of the circumstances then existing; and
(l) otherwise to comply with all applicable rules and
regulations of the SEC under the 1933 Act and the 1934 Act, take such other
actions as may be reasonably necessary to facilitate the registration of the
Registrable Securities and Additional Registrable Securities, if applicable,
hereunder; and make available to its security holders, as soon as reasonably
practicable, but not later than the Availability Date, an earnings statement
covering a period of at least twelve months, beginning after the effective date
of each Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the 1933 Act (for the purpose of this subsection
3(l), "Availability Date" means the 45th day following the end of the fourth
fiscal quarter following the fiscal quarter that includes the effective date of
such Registration Statement, except that, if such fourth fiscal quarter is the
last quarter of the Company's fiscal year, "Availability Date" means the 90th
day after the end of such fourth fiscal quarter).
8
4. DUE DILIGENCE REVIEW; INFORMATION. The Company shall make
available, during normal business hours, for inspection and review by the
Purchaser, advisors to and representatives of the Purchaser (who may or may not
be affiliated with the Purchaser and who are reasonably acceptable to the
Company), and any underwriter participating in any disposition of Common Stock
on behalf of the Purchaser pursuant to the Registration Statement or amendments
or supplements thereto or any blue sky, NASD, or other filing, all financial and
other records, all SEC Filings and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of establishing a due diligence defense under applicable
securities laws and such other reasonable purposes, and cause the Company's
officers, directors and employees, within a reasonable time period, to supply
all such information reasonably requested by the Purchaser or any such
representative, advisor or underwriter in connection with such Registration
Statement (including, without limitation, in response to all questions and other
inquiries reasonably made or submitted by any of them), prior to and from time
to time after the filing and effectiveness of the Registration Statement for the
sole purpose of enabling the Purchaser and such representatives, advisors and
underwriters and their respective accountants and attorneys to conduct initial
and ongoing due diligence with respect to the Company and the accuracy of the
Registration Statement.
The above to the contrary notwithstanding, the Company shall
not disclose material nonpublic information to the Purchaser, or to advisors to
or representatives of the Purchaser, unless prior to disclosure of such
information the Company identifies such information as being material nonpublic
information and provides the Purchaser, such advisors and representatives with
the opportunity to accept or refuse to accept such material nonpublic
information for review. The Company may, as a condition to disclosing any
material nonpublic information hereunder, require the Purchaser's advisors and
representatives to enter into a confidentiality agreement (including an
agreement with such advisors and representatives prohibiting them from trading
in Common Stock during such period of time as they are in possession of material
nonpublic information) in form reasonably satisfactory to the Company and the
Purchaser. Nothing herein shall require the Company to disclose material
nonpublic information to the Purchaser or its advisors or representatives.
5. OBLIGATIONS OF THE PURCHASER.
(a) The Purchaser shall furnish in writing to the Company such
information regarding itself, the Registrable Securities or Additional
Registrable Securities, as applicable, held by it and the intended method of
disposition of the Registrable Securities or Additional Registrable Securities,
as applicable, held by it, as shall be required by the 1933 Act to effect the
registration of such Registrable Securities or Additional Registrable
Securities, as applicable, and shall execute such documents in connection with
such registration as the Company may reasonably request. At least ten (10)
Business Days prior to the first anticipated filing date of any Registration
Statement (or such shorter period as may be agreed to by the Purchaser), the
Company shall notify the Purchaser of the information the Company requires from
the Purchaser if the Purchaser's Registrable Securities or Additional
Registrable Securities are to be included in the Registration Statement.
9
(b) The Purchaser, by its acceptance of the Registrable
Securities and Additional Registrable Securities, if any, agrees to cooperate
with the Company as reasonably requested by the Company in connection with the
preparation and filing of a Registration Statement hereunder, unless the
Purchaser has notified the Company in writing of its election to exclude all of
its Registrable Securities or Additional Registrable Securities, as applicable,
from the Registration Statement.
(c) If the Purchaser determines to engage the services of an
underwriter, which underwriter is reasonably acceptable to the Company, the
Purchaser agrees to enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing underwriter of
such offering and take such other actions as are reasonably required in order to
expedite or facilitate the dispositions of the Registrable Securities or
Additional Registrable Securities, as applicable.
(d) The Purchaser agrees that, upon receipt of any notice from
the Company of the happening of any event rendering a Registration Statement no
longer effective or available for use by the Purchaser, the Purchaser will
immediately discontinue disposition of Registrable Securities or Additional
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities or Additional Registrable Securities, until the
Purchaser's receipt of the copies of the supplemented or amended Prospectus
filed with the SEC and declared effective and, if so directed by the Company,
the Purchaser shall deliver to the Company (at the expense of the Company) or
destroy all copies in the Purchaser's possession of the Prospectus covering the
Registrable Securities or Additional Registrable Securities, as applicable,
current at the time of receipt of such notice.
(e) The Purchaser may participate in any third party
underwritten registration hereunder unless it (i) agrees to sell the Registrable
Securities or Additional Registrable Securities, as applicable, on the basis
provided in any underwriting arrangements in usual and customary form entered
into by the Purchaser, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and (iii) agrees to
pay its pro rata share of all underwriting discounts and commissions and any
expenses in excess of those payable by the Company pursuant to the terms of this
Agreement.
6. INDEMNIFICATION.
(a) INDEMNIFICATION BY COMPANY. The Company agrees to
indemnify and hold harmless, to the fullest extent permitted by law, the
Purchaser, each investment advisor and investment sub-advisor of the Purchaser
and each of their respective officers, directors, partners, members and
10
employees and each person who controls the Purchaser (within the meaning of the
▇▇▇▇ ▇▇▇) against all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorney's fees) and expenses imposed on such
person caused by (i) any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or any preliminary
prospectus or any amendment or supplement thereto or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are based upon any information furnished in writing to the Company by the
Purchaser, expressly for use therein, or (ii) any violation by the Company of
any federal, state or common law, rule or regulation applicable to the Company
in connection with any Registration Statement, Prospectus or any preliminary
prospectus, or any amendment or supplement thereto, and shall reimburse in
accordance with subparagraph (c) below, each of the foregoing persons for any
legal and any other expenses reasonably incurred in connection with
investigating or defending any such claims. The foregoing is subject to the
condition that, insofar as the foregoing indemnities relate to any untrue
statement, alleged untrue statement, omission or alleged omission made in any
preliminary prospectus or Prospectus that is eliminated or remedied in any
Prospectus or amendment or supplement thereto, the above indemnity obligations
of the Company shall not inure to the benefit of any indemnified party if a copy
of such corrected Prospectus or amendment or supplement thereto had been
provided to such indemnified party and was not sent or given by such indemnified
party at or prior to the time such action was required of such indemnified party
by the 1933 Act and if delivery of such Prospectus or amendment or supplement
thereto would have eliminated (or been a sufficient defense to) any liability of
such indemnified party with respect to such statement or omission. Indemnity
under this Section 6(a) shall remain in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the transfer of the Registrable Securities and Additional Registrable
Securities.
(b) INDEMNIFICATION BY PURCHASER. In connection with any
registration pursuant to the terms of this Agreement, the Purchaser will furnish
to the Company in writing such information as required by the 1933 Act
concerning the Purchaser or the proposed manner of distribution for use in
connection with any Registration Statement or Prospectus and agrees to indemnify
and hold harmless, to the fullest extent permitted by law, the Company, its
directors, officers, and each person who controls the Company (within the
meaning of the ▇▇▇▇ ▇▇▇) against any losses, claims, damages, liabilities and
expense (including reasonable attorney's fees) resulting from any untrue
statement of a material fact or any omission of a material fact required to be
stated in the Registration Statement or Prospectus or preliminary prospectus or
amendment or supplement thereto or necessary to make the statements therein not
misleading, to the extent, but only to the extent that such untrue statement or
omission is contained in any information furnished in writing by such Purchaser
to the Company specifically for inclusion in such Registration Statement or
Prospectus or amendment or supplement thereto and that such information was
substantially relied upon by the Company in preparation of the Registration
Statement or Prospectus or any amendment or supplement thereto. In no event
shall the liability of the Purchaser be greater in amount than the dollar amount
of the proceeds (net of the cost of the Registrable Securities and Additional
Registrable Securities sold and all expenses paid by the Purchaser and not
reimbursed by the Company and the amount of any damages the Purchaser has
otherwise been required to pay by reason of such untrue statement or omission)
received by the Purchaser upon the sale of the Registrable Securities or
Additional Registrable Securities included in the Registration Statement giving
rise to such indemnification obligation.
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(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person
entitled to indemnification hereunder shall (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification,
(ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party, and (iii) by notice to
the indemnifying party, require the indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party;
provided, however, that any person entitled to indemnification hereunder shall
have the right to employ separate counsel and to participate in the defense of
such claim, but the fees and expenses of such counsel shall be at the expense of
such person unless (a) the indemnifying party has agreed to pay such fees or
expenses, or (b) the indemnifying party shall have failed to assume the defense
of such claim and employ counsel reasonably satisfactory to such person, or (c)
in the reasonable judgment of any such person, based upon written advice of its
counsel, a conflict of interest exists between such person and the indemnifying
party with respect to such claims (in which case, if the person notifies the
indemnifying party in writing that such person elects to employ separate counsel
at the expense of the indemnifying party, the indemnifying party shall not have
the right to assume the defense of such claim on behalf of such person); and
provided, however, further, that the failure of any indemnified party to give
notice as provided herein shall not relieve the indemnifying party of its
obligations hereunder, except to the extent that such failure to give notice
shall materially adversely affect the indemnifying party in the defense of any
such claim or litigation. It is understood that the indemnifying party shall
not, in connection with any proceeding in the same jurisdiction, be liable for
fees or expenses of more than one separate firm of attorneys at any time for all
such indemnified parties. No indemnifying party will, except with the consent of
each indemnified party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation.
(d) CONTRIBUTION. If for any reason the indemnification
provided for in the preceding paragraphs (a) and (b) is unavailable to an
indemnified party or insufficient to hold it harmless, other than as expressly
specified therein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect the relative fault
of the indemnified party and the indemnifying party, as well as any other
relevant equitable considerations. No person guilty of fraudulent
misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be
entitled to contribution from any person not guilty of such fraudulent
misrepresentation. In no event shall the contribution obligation of a holder of
Registrable Securities or Additional Registrable Securities be greater in amount
than the dollar amount of the proceeds (net of the cost of the Registrable
Securities or Additional Registrable Securities sold and all expenses paid by
such holder and not reimbursed by the Company and the amount of any damages such
holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission) received by it upon the sale
of the Registrable Securities or Additional Registrable Securities giving rise
to such contribution obligation.
7. MISCELLANEOUS.
(a) Amendments and Waivers. This Agreement may be amended only
by a writing signed by the Company and the Purchaser. The Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, action or omission to act, of the Purchasers affected by such
amendment, action or omission to act who hold, directly or indirectly, at least
80% of the Registrable Securities and Additional Registrable Securities held by
all Purchaser.
(b) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made as set forth in Section 9.4 of the Purchase
Agreement.
(c) ASSIGNMENTS AND TRANSFERS BY PURCHASER. This Agreement and
the rights and obligations of the Purchaser hereunder may be assigned or
transferred in whole to any transferee or assignee of the Note, the Warrant, the
Registrable Securities or the Additional Registrable Securities or in part to
any transferee or assignee of any portion thereof, except as otherwise set forth
herein. The Purchaser may make such assignment or transfer to any transferee or
assignee of the Note, the Warrant, the Registrable Securities or the Additional
Registrable Securities; provided, that (i) such transfer is made expressly
subject to this Agreement and the transferee agrees in writing to be bound by
the terms and conditions hereof, and (ii) the Company is provided with written
notice of such assignment.
(d) ASSIGNMENTS AND TRANSFERS BY THE COMPANY. This Agreement
may not be assigned by the Company without the prior written consent of the
Purchaser but, in any case of any successor-in-interest to the Company or any
Person other than the Company who is an issuer of Registrable Securities or
Additional Registrable Securities, such successor-in-interest or other issuer,
shall assume, jointly and severally with the Company, the rights and duties of
the Company hereunder, in the event of a merger or consolidation of the Company
with or into another corporation or the sale of all or substantially all of the
Company's assets (and it shall be a condition to any such merger, consolidation
or sale that such successor-in-interest or other issuer assume in writing all
obligations hereunder jointly and severally with the Company).
(e) BENEFITS OF THE AGREEMENT. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective permitted successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
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(f) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(h) SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms to the fullest extent permitted by law.
(i) FURTHER ASSURANCES. The parties shall execute and deliver
all such further instruments and documents and take all such other actions as
may reasonably be required to carry out the transactions contemplated hereby and
to evidence the fulfillment of the agreements herein contained.
(j) ENTIRE AGREEMENT. This Agreement, together with the
Purchase Agreement, the Note and the Warrant and documents contemplated thereby,
is intended by the parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein. This
Agreement, together with the Purchase Agreement, the Note and the Warrant and
documents contemplated thereby, supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(k) APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Nevada without regard to
principles of conflicts of law.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
THE COMPANY:
BIOGENTECH CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title CEO and President
THE PURCHASER:
GRYPHON MASTER FUND, L.P.
By: Gryphon Partners, L.P., its General Partner
By: Gryphon Management Partners, L.P.,
its General Partner
By: Gryphon Advisors, LLC,
its General Partner
By: /s/ ▇.▇. ▇▇▇▇
--------------------------------
▇.▇. ▇▇▇▇, ▇▇, Authorized Agent
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