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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) - September 26, 1997
Advanced Viral Research Corp.
(Exact name of registrant as specified in its charter)
Delaware 33-2262-A 59-2646820
(State or other juris- (Commission File (IRS Employer
diction of incorporation) Number) Identification No.)
1250 East Hallandale Beach Blvd.
Suite 501
Hallandale, Florida 33009
(Address or principal executive offices (zip code)
Registrant's telephone number, including area code: (954) 458-7636
NONE
(Former name or former address, if changed since last report)
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Item 1. Changes in Control of Registrant
Not Applicable
Item 2. Acquisition or Disposition of Assets
Not Applicable
Item 3. Bankruptcy or Receivership
Not Applicable
Item 4. Changes in Registrant's Certifying Accountant
Not Applicable
Item 5. Other Events
On September 26, 1997 Advanced Viral Research Corp. ("ADVR")
sold $3,000,000 face amount of its ten-year 7% Convertible
Debenture to RBB Bank AG ("RBB") in an offshore transaction
pursuant to Regulation S under the Securities Act of 1933. The
Debenture is convertible into common shares of the Company
pursuant to a formula more particularly described in the
Debenture, a copy of which is attached hereto as Exhibit 4(h).
In connection with the aforesaid transaction, the Company
issued to RBB three Warrants to purchase its common stock,
each such Warrant entitling the holder to purchase 600,000
shares of the Company's common stock. The exercise prices of
the three Warrants are $0.20, $0.23 and $0.27 per Warrant
share, respectively. Each Warrant contains anti-dilution
provisions which provide for the adjustment of Warrant price
and Warrant shares as more particularly set forth therein. A
copy of the first of the three Warrants is attached hereto as
Exhibit 4(i) with the second and third being identical in all
respects except as set forth above.
Item 6. Resignation of Registrant's Directors
Not Applicable
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired
None
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(b) Pro forma financial information
None
(c) Exhibits
10(aa) Copy of Purchase and Sale agreement dated
September 26, 1997 between the Company and
RBB Bank AG.
4(h) The Company's 7% Convertible Debenture
4(i) The Company's Warrant to Purchase Common
Stock
Item 8. Change in Fiscal Year
Not Applicable
[This Space Intentionally Left Blank]
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ADVANCED VIRAL RESEARCH CORP.
(Registrant)
By: /s/ William Bregman
--------------------------
William Bregman,
Secretary-Treasurer
Date: September 26, 1997
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LIST OF EXHIBITS
10(aa) Copy of Purchase and Sale Agreement dated September 26, 1997
between the Company and RBB Bank AG
4(h) The Company's 7% Convertible Debenture
4(i) The Company's Warrant to Purchase Common Stock
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ADVANCED VIRAL RESEARCH CORP.
$3,000,000
7% CONVERTIBLE DEBENTURE
DUE AUGUST 30, 2007
WARRANTS TO PURCHASE
1,800,000 SHARES OF COMMON STOCK, PAR VALUE $.00001 PER SHARE
PURCHASE AGREEMENT
DATED SEPTEMBER 26, 1997
SECURITIES PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
Page
ARTICLE I
AUTHORIZATION OF THE SECURITIES............................................ 1
ARTICLE II
SALE AND PURCHASE OF THE SECURITIES; CLOSING............................... 1
2.1. Sale and Purchase of the Securities.................. 1
2.2. Closing.............................................. 1
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............................ 2
3.1. Offshore Transaction................................. 2
3.2. Beneficial Owner..................................... 2
3.3. Directed Selling Efforts............................. 3
3.4. Short Position....................................... 3
3.5. Independent Investigation............................ 3
3.6. No Government Recommendation or Approval............. 3
3.7. Further Limitations on Disposition................... 3
3.8. Legal Representation................................. 4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................. 4
4.1. Organization and Existence, etc...................... 4
4.2. Subsidiaries and Affiliates.......................... 4
4.3. Capitalization....................................... 4
4.4. Authorization........................................ 5
4.5. Binding Obligations; No Material Adverse
Contracts, etc....................................... 5
4.6. Financial Information................................ 5
4.7. Compliance with Instruments, etc..................... 5
4.8. Litigation........................................... 6
4.9. Offering............................................. 6
4.10. Permits; Governmental and Other Approvals...... 6
4.11. Reporting Company Status....................... 6
4.12. Offshore Transaction................................. 6
4.13. Prearranged Sale..................................... 7
4.14. No Directed Selling Efforts.......................... 7
4.15. Copyrights, Trademarks and Patents............. 7
4.16. No Relationship Between Parties................ 7
4.17. Other Material Contracts....................... 7
4.18. Disclosure..................................... 7
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ARTICLE V
CONDITIONS TO CLOSING OF THE PURCHASER..................................... 7
5.1. Representations and Warranties Correct............... 7
5.2. Performance.......................................... 8
5.3. No Impediments....................................... 8
5.4. Other Agreements..................................... 8
5.5. Legal Investment..................................... 8
5.6. Due Diligence Investigation.......................... 8
5.7. Proceedings and Other Documents...................... 8
ARTICLE VI
CONDITIONS TO CLOSING OF THE COMPANY....................................... 8
6.1. Representations...................................... 8
6.2. Legal Investment..................................... 9
6.3. Payment of Purchase Price............................ 9
ARTICLE VII
OPTIONAL PREPAYMENTS....................................................... 9
7.1. Optional Prepayments................................. 9
7.2. Notice of Prepayment................................. 9
7.3. Exercise of Conversion Privilege Upon
Receipt of Prepayment Notice......................... 9
ARTICLE VIII
AFFIRMATIVE COVENANTS...................................................... 9
8.1. Maintenance of Corporate Existence,
Properties and Leases; Taxes; Insurance.............. 10
8.2. Basic Financial Information.......................... 11
8.3. Notice of Adverse Change............................. 11
8.4. Compliance With Agreements; Compliance With Laws..... 12
8.5. Protection of Licenses, etc.......................... 12
8.6. Accounts and Records; Inspections.................... 12
8.7. NASDAQ or American Stock Exchange Listing............ 13
8.8. Reverse Stock Split.................................. 13
8.9. Further Assurances................................... 13
ARTICLE IX
EVENTS OF DEFAULTS......................................................... 13
9.1. Events of Default.................................... 13
9.2. Remedies............................................. 15
9.3. Enforcement.......................................... 16
ARTICLE X
AMENDMENT AND WAIVER....................................................... 16
ARTICLE XI
EXCHANGE AND REPLACEMENT OF DEBENTURES..................................... 17
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ARTICLE XII
TRANSFER OF AND PAYMENT OF DEBENTURES...................................... 17
12.1. Notification of Proposed Sale........................ 17
12.2. Payment.............................................. 18
ARTICLE XIII
RIGHT OF FIRST REFUSAL..................................................... 18
13.1. Right of First Refusal............................... 18
ARTICLE XIV
MISCELLANEOUS.............................................................. 19
14.1. Governing Law........................................ 19
14.2. Survival............................................. 19
14.3. Successors and Assigns............................... 19
14.4. Entire Agreement..................................... 19
14.5. Notices, etc......................................... 20
14.6. Delays or Omissions.................................. 20
14.7. Rights; Severability................................. 20
14.8. Agent's Fees......................................... 21
14.9. Expenses............................................. 21
14.10. Litigation........................................... 21
14.11. Titles and Subtitles................................. 22
14.12. Counterparts......................................... 22
Exhibit A - Form of 7% Convertible Debenture
Exhibit B - Name and Address of Purchaser; Purchase Prices for Securities
Exhibit C - Schedule of Exceptions
Exhibit D - Form of Warrant
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September 26, 1997
Agreement dated this 26th day of September, 1997 by and between ADVANCED VIRAL
RESEARCH CORP., a Delaware corporation (the "Company"), with offices at 200
Corporate Boulevard South, Yonkers, New York 10701 and RBB Bank
Aktiengesellschaft (the "Purchaser" or "you") with offices at Burgring 16, 8010
Graz, Austria.
ARTICLE I
AUTHORIZATION OF THE SECURITIES
The Company represents that it has taken all corporate action
necessary to authorize the issuance and sale of (a) its 7% Convertible Debenture
due August 30, 2007 in the principal amount of $3,000,000 (the "Debenture") and
(b) warrants to purchase an aggregate of 1,800,000 shares of Common Stock, par
value $.00001 per share ("Common Stock"), of the Company (the "Warrants"). The
Debenture and the Warrants (collectively, the "Securities") are to be sold
pursuant to this Agreement to you. Interest on the Debenture is payable at the
rate of 7% per annum, as more particularly specified in the form of Debenture
attached hereto as Exhibit A. The Debenture is convertible from time to time
into shares of Common Stock as provided therein. For purposes of this Agreement
the term "Shares" shall mean the shares of Common Stock which may be issued upon
conversion of all or a portion of the principal amount of the Debenture and the
shares of Common Stock that may be issued from time to time pursuant to the
exercise of the Warrants.
ARTICLE II
SALE AND PURCHASE OF THE SECURITIES; CLOSING
2.1. Sale and Purchase of the Securities. Subject to the terms
and conditions hereof and in reliance on the representations and warranties
contained herein, or made pursuant hereto, the Company will issue and sell to
the Purchaser for its own account and for the accounts of its participants as
more particularly referred to below, and the Purchaser will purchase from the
Company, on the Closing Date specified in Section 2.2, the Securities for the
aggregate purchase price contemplated hereby.
2.2. Closing. (a) The closing of the purchase and sale of the
Securities (the "Closing") shall be deemed to occur when this Agreement has been
executed by both the Company and the Purchaser and the Company has received
payment for the Securities. Such date is herein called the "Closing Date."
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(b) On the Closing Date there will be delivered to the
Purchaser (i) a Debenture dated the Closing Date, in the principal amount set
forth opposite the Purchaser's name on Exhibit B and (ii) warrant certificates
in the forms of Exhibits D-1, D-2 and D-3 registered in the Purchaser's name
representing the right to purchase the number of shares of Common Stock set
forth opposite the Purchaser's name on Exhibit B. The foregoing Securities shall
be delivered by the Company, against delivery by the Purchaser to the Company of
an unendorsed certified or official bank check drawn upon or issued by a bank
which is a member of the New York Clearinghouse for banks (or wire transfer) for
$3,000,000 payable to the order of the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
3.1. Offshore Transaction. The Purchaser represents and
warrants to the Company that (a) the Purchaser is not a "U.S. person" as that
term is defined in Rule 902(o) of Regulation S promulgated by the United States
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"); (b) the Purchaser is not an
affiliate of the Company; (c) at the time of execution of this Agreement,
Purchaser was outside the United States and no offer to purchase the Securities
was made in the United States; (d) the Purchaser agrees that all offers and
sales of the Securities prior to the expiration of a period commencing on the
Closing Date and ending forty (40) days thereafter (the "Restricted Period")
shall not be made to U.S. persons or for the account or benefit of U.S. persons
and shall otherwise be made in compliance with the provisions of Regulation S;
(e) the Purchaser is not a distributor or dealer; (f) the transactions
contemplated hereby (i) have not been and will not be pre-arranged by the
Purchaser with a purchaser located in the United States or a purchaser which is
a U.S. Person, and (ii) are not and will not be part of a plan or scheme by the
Purchaser to evade the registration provisions of the Securities Act; (g) the
Purchaser shall take all reasonable steps to ensure its compliance with
Regulation S and shall promptly send to each purchaser (x) who acts as a
distributor, underwriter, dealer or other person participating pursuant to a
contractual arrangement in the distribution of the Securities or receiving a
selling concession, fee or other remuneration in respect of any of the
Securities, or (y) who purchases prior to the expiration of the Restricted
Period, a confirmation or other notice to the purchaser stating that the
purchaser is subject to the same restrictions on offers and sales as the
Purchaser pursuant to Section 903(c)(2)(iv) of Regulation S; and (h) none of the
Purchaser, its affiliates or persons acting on their behalf have conducted and
shall not conduct any "directed selling efforts" as that term is defined in Rule
902(b) of Regulation S; nor has the Purchaser, its affiliates or persons acting
on their behalf conducted any general solicitation to the offer and sale of any
of the Securities in the United States or elsewhere.
3.2. Beneficial Owner. The Purchaser is purchasing the
Securities for its own account or for the account of beneficiaries with respect
to the Securities and whom the Purchaser has full authority to bind, so that
each such beneficiary is bound hereby as if such beneficiary
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were a direct purchaser hereunder and all representations, warranties and
agreements herein were made directly by such beneficiary. Neither the Purchaser
nor any of such beneficiaries own, or upon completion of this transaction, or
upon conversion of all or any part of the Debentures, will beneficially own,
more than 4.5% of the Common Stock of the Company.
3.3. Directed Selling Efforts. The Purchaser will not engage
in any activity for the purpose of, or that could reasonably be expected to have
the effect of, conditioning the market in the United States for any of the
Securities sold hereunder. To the best knowledge of the Purchaser, neither the
Company nor any person acting for the Company has conducted any "directed
selling efforts" as that term is defined in Rule 902 of Regulation S.
3.4. Short Position. Neither the Purchaser nor any of its
affiliates will directly or indirectly maintain any short position in any
securities of the Company until after the end of the Restricted Period.
3.5. Independent Investigation. The Purchaser in electing to
purchase the Securities hereunder, has relied solely upon the representations
and warranties of the Company set forth in this Agreement and on independent
investigation made by it and its representatives, if any, and the Purchaser has
been given no oral or written representations or assurance from the Company or
any representation of the Company other than as set forth in this Agreement or
in a document executed by a duly authorized representative of the Company making
reference to this Agreement.
Prior to the commencement of the negotiations concerning this
transaction, the Purchaser had been a shareholder of the Company. In connection
therewith the Purchaser had conducted such due diligence investigations as it
deemed prudent in connection with its investment decision.
3.6. No Government Recommendation or Approval. The Purchaser
understands that no United States federal or state agency, or similar agency of
any other country, has passed upon or made any recommendation or endorsement of
the Company, this transaction or the purchase of the Securities.
3.7. Further Limitations on Disposition. Without in any way
limiting the representations set forth above, the Purchaser further agrees not
to make any disposition of all or any portion of the Securities (or the Common
Stock issuable upon the conversion or exercise thereof) unless and until:
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement, or the disposition is made in
compliance with Regulation S; or
(b) (1) The Purchaser, through RBB Bank, shall have notified
the Company of the proposed disposition and shall have furnished the Company
with a statement
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that it does not beneficially own more than 5% of the Common Stock of the
Company and is not an officer or director of the Company or (2) if, the
Purchaser shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of such Securities under the Securities Act.
3.8. Legal Representation. The Purchaser has the opportunity
to be represented in this transaction by counsel of its own choice and has been
so advised by counsel for the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Other than as provided in the Schedule of Exceptions attached
hereto as Exhibit C, the Company represents and warrants to you as follows:
4.1. Organization and Existence, etc. The Company is a
corporation duly organized and validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has all requisite corporate power
and authority to carry on its business as now conducted and proposed to be
conducted; the Company has all requisite corporate power and authority to enter
into this Agreement, to issue the Securities as contemplated herein and to carry
out and perform its obligations under the terms and conditions of this
Agreement. The Company does not own or lease any property or engage in any
activity in any jurisdiction which might require qualification to do business as
a foreign corporation in such jurisdiction and where the failure to so qualify
would have a material adverse effect on the financial condition of the Company
or subject the Company to a material liability. To the extent the Company has
not qualified to do business in such jurisdictions, it has, as of the date
hereof, prepared the necessary applications or documents to be filed with the
appropriate authorities in such jurisdictions to obtain such qualifications. The
Company has furnished you with true, correct and complete copies of its
Certificate of Incorporation, By-laws and all amendments thereto to date.
4.2. Subsidiaries and Affiliates. Except as set forth in the
Schedule of Exceptions, the Company has no subsidiaries and does not, and upon
the Closing will not, own of record or beneficially any capital stock or equity
interest or investment in any corporation, association or business entity.
4.3. Capitalization.
(a) As of the date hereof, the Company's authorized capital
stock consists of 1,000,000,000 shares of Common Stock, par value $.00001 per
share, of which 277,190,373 are outstanding, 30,982,400 of which are reserved
for issuance to certain persons for the purposes stated in the Schedule of
Exceptions, 60,000,000 of which have been reserved for issuance upon conversion
of the Debenture and 1,800,000 of which have been reserved for
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issuance upon exercise of the Warrants. As of the date hereof, the Company does
not hold any shares of its capital stock in its treasury.
(b) All the issued and outstanding shares of capital stock of
the Company shall, as of the Closing, (i) have been duly authorized and validly
issued, (ii) be fully paid and nonassessable, and (iii) have been offered,
issued, sold and delivered by the Company in compliance with applicable federal
and state securities laws. Other than as set forth in Section 4.3(a), there are
no outstanding preemptive, conversion or other rights, options, warrants, calls,
agreements or commitments granted or issued by or binding upon the Company, for
the purchase or acquisition of any shares of its capital stock.
4.4. Authorization. All corporate action on the part of the
Company and the directors and stockholders of the Company necessary for the
authorization, execution, delivery and performance by the Company of this
Agreement and the transactions contemplated herein, and for the authorization,
issuance and delivery of the Securities, has been taken or will have been taken
prior to the Closing.
4.5. Binding Obligations; No Material Adverse Contracts, etc.
This Agreement is a valid and binding obligation of the Company enforceable in
accordance with its terms. The execution, delivery and performance by the
Company of this Agreement and compliance herewith will not result in any
violation of and will not conflict with, or result in a breach of any of the
terms of, or constitute a default under, any provision of state or Federal law
to which the Company is subject, the Certificate of Incorporation, as amended,
or the By-laws, as amended, of the Company, or any mortgage, indenture,
agreement, instrument, judgment, decree, order, rule or regulation or other
restriction to which the Company is a party or by which it is bound, or, result
in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of the Company pursuant to any such term. Except as set
forth herein no stockholder of the Company has or will have any preemptive
rights or rights of first refusal by reason of the issuance of the Securities.
4.6. Financial Information. The Company has delivered to the
Purchaser true and complete copies of the financial information concerning the
Company identified in the Schedule of Exceptions. Except as may be indicated
thereon, all financial statements included in the information given to the
Purchaser fairly present the financial position and results of operations of the
Company as at their respective dates and for their respective periods in
conformity with generally accepted accounting principles consistently applied
throughout the periods covered thereby. As of their respective dates the Company
had no liabilities or obligations of any nature (absolute, accrued, contingent
or otherwise) which would normally be reflected on a balance sheet and which are
not reflected on any balance sheet contained in the financial information given
to the Purchaser or disclosed in accordance with generally accepted auditing
standards.
4.7. Compliance with Instruments, etc. The Company is not (a)
in default past any grace, notice or cure period under any indenture, agreement
or instrument to which it is a
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party or by which it is bound, (b) in violation of its Certificate of
Incorporation, By-laws or of any applicable law, (c) in default with respect to
any order, writ, injunction or decree of any court, administrative agency or
arbitrator, or (d) in default under any order, license, regulation or demand of
any government agency, which default or violation would materially and adversely
affect the business, properties, condition (financial or otherwise) or business
prospects of the Company.
4.8. Litigation. Except as set forth in the Schedule of
Exceptions, there is no action, suit or proceeding pending, or, to the knowledge
of the Company, threatened, against the Company before any court, administrative
agency or arbitrator or any action, suit or proceeding pending, or, to the
knowledge of the Company, threatened, which challenges the validity of any
action taken or to be taken pursuant to or in connection with this Agreement or
the issuance of the Securities.
4.9. Offering. Subject in part to the truth and accuracy of
the Purchaser's representations and the compliance by the Purchaser with its
covenants set forth in this Agreement, the offer, sale and issuance of the
Securities as contemplated by this Agreement are not subject to the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the Company, or anyone acting on its behalf, will not take any action
hereafter that would cause such registration requirements to be applicable.
4.10. Permits; Governmental and Other Approvals. The Company
possesses such franchises, licenses, permits and other authority as are
necessary for the conduct of its business as now being conducted and proposed to
be conducted by the Company and the Company is not in default under any of such
franchises, licenses, permits or other authority. No approval, consent,
authorization or other order of, and no designation, filing, registration,
qualification or recording with, any governmental authority or any other person
or entity is required in connection with the Company's valid execution, delivery
and performance of this Agreement or the offer, issuance and sale of the
Securities by the Company to the Purchaser or the consummation of any other
transaction contemplated on the part of the Company hereby.
4.11. Reporting Company Status. The Company is a "Reporting
Issuer" as defined by Rule 902 of Regulation S. The Company has filed all
material required to be filed pursuant to all reporting obligations under
Section 15(d) of the Securities Exchange Act of 1934, as amended for a period of
at least twelve (12) months immediately preceding the offer or sale of the
Securities.
4.12. Offshore Transaction. The Company has not offered or
sold the Securities to any person in the United States, or, to the best
knowledge of the Company, any identifiable groups of U.S. citizens abroad, or
any U.S. person as that term is defined in Regulation S. At the time the buy
order of the Securities was originated the Company and/or its agents reasonably
believed Purchaser was outside the United States and was not a U.S. Person.
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4.13. Prearranged Sale. The Company and/or its agents believe
that the transaction contemplated hereby has not been pre-arranged with a buyer
in the United States.
4.14. No Directed Selling Efforts. The Company has not
conducted any "directed selling efforts" as that term is defined in Rule 902 of
Regulation S nor has Company conducted any general solicitation relating to the
offer and sale of the Securities to persons resident within the United States or
any other U.S. person as that term is defined in Rule 902 of Regulation S.
4.15. Copyrights, Trademarks and Patents. Set forth in the
Schedule of Exceptions is a list of all the copyrights, trademark registrations
and patents and applications therefor owned by the Company.
4.16. No Relationship Between Parties. The Company is not an
owner of any shares of the stock of or equity interest in the Purchaser. No
officer, director or owner of any shares of the stock of the Company or its
subsidiaries or his close relatives is an officer or director of or owns any
shares of the stock of or equity interest in the Purchaser.
4.17. Other Material Contracts. Set forth in the Schedule of
Exceptions is a list of contracts material to the operations of the Company to
which reference is not made elsewhere in this Article IV.
4.18. Disclosure. The information heretofore provided and to
be provided pursuant to this Agreement, including the Schedules of Exceptions
and the Exhibits hereto, and each of the agreements, documents, certificates and
writings previously delivered to the Purchaser or its representatives, do not
and will not contain any untrue statement of a material fact and do not and will
not omit to state a material fact required to be stated herein or therein or
necessary in order to make the statements and writings contained herein and
therein not false or misleading in the light of the circumstances under which
they were made. To the knowledge of the Company, there is no fact which
materially adversely affects the business, prospects or condition (financial or
otherwise) of the Company which has not been set forth herein.
ARTICLE V
CONDITIONS TO CLOSING OF THE PURCHASER
The obligation of the Purchaser to purchase the Securities at
the Closing is subject to the fulfillment to the Purchaser's satisfaction on or
prior to the Closing Date of each of the following conditions, any of which may
be waived by the Purchaser:
5.1. Representations and Warranties Correct. The
representations and warranties in Article IV hereof shall be true and correct in
all material respects when made, and
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shall be true and correct in all material respects on the Closing Date with the
same force and effect as if they had been made on and as of the Closing Date.
5.2. Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the Closing Date shall have been performed or complied with by the
Company in all material respects.
5.3. No Impediments. Neither the Company nor the Purchaser
shall be subject to any order, decree or injunction of a court or administrative
agency of competent jurisdiction which would impose any material limitation on
the ability of the Purchaser to exercise full rights of ownership of the
Securities.
5.4. Other Agreements. The Company shall have issued to the
Purchaser all of the Securities (including the Warrants in the forms of Exhibits
D-1, D-2 and D-3 attached hereto).
5.5. Legal Investment. At the time of the Closing, the
purchase of the Securities to be purchased by the Purchaser hereunder shall be
legally permitted by all laws and regulations to which the Purchaser and the
Company are subject.
5.6. Due Diligence Investigation. The Purchaser shall not have
discovered any fact, whether or not reflected in the Schedule of Exceptions,
which in the Purchaser's determination would make the consummation of the
transactions contemplated by this Agreement not in the Purchaser's best
interests.
5.7. Proceedings and Other Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
shall have been taken and the Purchaser shall have received such other
documents, in form and substance reasonably satisfactory to the Purchaser and
the Purchaser's counsel, as to such other matters incident to the transaction
contemplated hereby as the Purchaser may reasonably request.
ARTICLE VI
CONDITIONS TO CLOSING OF THE COMPANY
The Company's obligation to sell the Securities at the Closing
is subject to the fulfillment to its satisfaction on or prior to the Closing
Date of each of the following conditions:
6.1. Representations. The representations made by the
Purchaser in Article III hereof shall be true and correct when made and shall be
true and correct on the Closing Date.
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6.2. Legal Investment. At the time of the Closing, the
purchase of the Securities shall be legally permitted by all laws and
regulations to which the Purchaser and the Company are subject.
6.3. Payment of Purchase Price. The Company shall have
received payment in full of the purchase price for the Securities.
ARTICLE VII
OPTIONAL PREPAYMENTS
7.1. Optional Prepayments. The Company may, at its option, at
any time prior to maturity, prepay the Debenture, in whole or in part without
premium or penalty at a price equal to the principal amount thereof plus accrued
interest thereon to the date fixed for prepayment. Any prepayments made pursuant
to this Section 7.1 shall be applied first to the payment of interest on and
then to principal of the Debenture at the time outstanding.
7.2. Notice of Prepayment. The right of the Company to prepay
the Debenture pursuant to Section 7.1 shall be conditioned upon its giving
notice of prepayment, signed by its President and by its Treasurer or an
Assistant Treasurer, to the holder of the Debenture not less than thirty (30)
days prior to the date upon which the prepayment is to be made (the "Prepayment
Notice"), specifying (a) the aggregate principal amount of the Debenture to be
prepaid, (b) the date of such prepayment, and (c) the accrued and unpaid
interest (to and including the date upon which the prepayment is to be made).
The Prepayment Notice having been so given, the aggregate principal amount of
the Debenture so specified in such Prepayment Notice, and all accrued and unpaid
interest thereon, shall become due and payable on the specified prepayment date.
7.3. Exercise of Conversion Privilege Upon Receipt of
Prepayment Notice. Upon receipt of a Prepayment Notice, the holder of the
Debenture may at any time up to the third day preceding the specified prepayment
date elect to convert all or a portion of the outstanding principal amount of
the Debenture in accordance with the terms of the Debenture.
ARTICLE VIII
AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees, so long as any
Securities remain outstanding, as follows:
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8.1. Maintenance of Corporate Existence, Properties and
Leases; Taxes; Insurance.
(a) The Company shall and shall cause each of its subsidiaries
to, maintain in full force and effect its corporate existence, rights and
franchises and all material terms of licenses and other rights to use licenses,
trademarks, trade names, service marks, copyrights, patents or processes owned
or possessed by it and necessary to the conduct of its business.
(b) The Company shall and shall cause each of its subsidiaries
to keep each of its properties necessary to the conduct of its business in good
repair, working order and condition, reasonable wear and tear excepted, and from
time to time make all needful and proper repairs, renewals, replacements,
additions and improvements thereto; and the Company shall and shall cause its
subsidiaries to at all times comply with each material provision of all leases
to which it is a party or under which it occupies property.
(c) The Company shall and shall cause each of its subsidiaries
to promptly pay and discharge, or cause to be paid and discharged when due and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, assets, property or business of the Company
and its subsidiaries, and all claims or indebtedness (including, without
limitation, claims or demands of workmen, materialmen, vendors, suppliers,
mechanics, carriers, warehousemen and landlords) which, if unpaid might become a
lien upon the assets or property of the Company or subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall be contested timely and in good faith by appropriate
proceedings, if the Company or subsidiary shall have set aside on its books
adequate reserves with respect thereto, and the failure to pay shall not be
prejudicial in any material respect to the holders of the Securities, and
provided, further, that the Company or subsidiary will pay or cause to be paid
any such tax, assessment, charge or levy forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security therefor.
The Company shall and shall cause its subsidiaries to pay or cause to be paid
all other indebtedness incident to the operations of the Company or
subsidiaries.
(d) The Company shall and shall cause each of its subsidiaries
to keep its assets which are of an insurable character insured by financially
sound and reputable insurers against loss or damage by theft, fire, explosion
and other risks customarily insured against by companies in the line of business
of the Company or its subsidiaries, in amounts sufficient to prevent the Company
or its subsidiaries from becoming a co-insurer of the property insured; and the
Company shall and shall cause its subsidiaries to maintain, with financially
sound and reputable insurers, insurance against other hazards and risks and
liability to persons and property to the extent and in the manner customary for
companies in similar businesses similarly situated or as may be required by law,
including, without limitation, general liability, fire and product liability
insurance as may be required pursuant to any license agreement to which the
Company or its subsidiaries is a party or by which it is bound.
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8.2. Basic Financial Information. The Company shall furnish
the following reports to the Purchaser (or any transferee of any Securities), so
long as the Purchaser is a holder of any Securities:
(a) within forty-five (45) days after the end of each of the
quarterly accounting periods in each fiscal year, unaudited consolidated
statements of income and retained earnings and cash flows of the Company and its
subsidiaries for such quarterly period and for the period from the beginning of
such fiscal year to the end of such quarterly period, together with consolidated
balance sheets of the Company and its subsidiaries as at the end of each
quarterly period, setting forth in each case comparisons to corresponding
periods in the preceding fiscal year, which statements will be prepared in
accordance with generally accepted accounting principles, consistently applied;
(b) within ninety (90) days after the end of each fiscal year,
consolidated statements of income and retained earnings and cash flows of the
Company and its subsidiaries for the period from the beginning of each fiscal
year to the end of such fiscal year, and consolidated balance sheets as at the
end of such fiscal year, setting forth in each case in comparative form
corresponding figures for the preceding fiscal year, which statements will be
prepared in accordance with generally accepted accounting principles,
consistently applied (except as approved by the accounting firm examining such
statements and disclosed by the Company), and will be accompanied by a report
thereon of certified public accountants.
(c) promptly as legally permitted, any additional reports or
other detailed information concerning significant aspects of the operations and
condition, financial or otherwise, of the Company and its subsidiaries, given to
the Company by its independent accountants;
(d) within ten (10) days after transmission or receipt
thereof, copies of all financial statements, proxy statements and reports which
the Company sends to its stockholders or directors, and copies of all
registration statements and all regular, special or periodic reports which it or
any of its officers or directors files with the Commission or with any
securities exchange on which any of the securities of the Company are then
listed or proposed to be listed, copies of all press releases and other
statements made generally available by the Company to the public concerning
material developments in the business of the Company and its subsidiaries and
copies of material communications sent to or received from stockholders,
directors or committees of the Board of Directors of the Company or any of its
subsidiaries and copies of all material communications sent to and received from
any lender to the Company; and
(e) with reasonable promptness such other information and
financial data concerning the Company as any person entitled to receive
materials under this Section 8.2 may reasonably request.
8.3. Notice of Adverse Change. The Company shall promptly give
notice to all holders of any Securities (but in any event within seven (7) days)
after becoming aware of the existence of any condition or event which
constitutes, or the occurrence of, any of the following:
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(a) any Event of Default;
(b) the institution of an action, suit or proceeding against
the Company before any court, administrative agency or arbitrator, including,
without limitation, any action of a foreign government or instrumentality,
which, if adversely decided, could materially adversely affect the business,
prospects, properties, financial condition or results of operations of the
Company, whether or not arising in the ordinary course of business; or
(c) any information relating to the Company which could
reasonably be expected to materially and adversely affect the assets, property,
business or condition (financial or otherwise) of the Company or its ability to
perform the terms of this Agreement. Any notice given under this Section 8.3
shall specify the nature and period of existence of the condition, event,
information, development or circumstance, the anticipated effect thereof and
what actions the Company has taken and/or proposes to take with respect thereto.
8.4. Compliance With Agreements; Compliance With Laws. The
Company and its subsidiaries shall comply with the material terms and conditions
of all material agreements, commitments or instruments to which the Company or
any of its subsidiaries is a party or by which it or they may be bound. The
Company shall and shall cause each of its subsidiaries to duly comply in all
material respects with any material laws, ordinances, rules and regulations of
any foreign, federal, state or local government or any agency thereof, or any
writ, order or decree, and conform to all valid requirements of governmental
authorities relating to the conduct of their respective businesses, properties
or assets, including, but not limited to, the requirements of ERISA, the
Environmental Protection Act, the Occupational Safety and Health Act, the
Foreign Corrupt Practices Act and the rules and regulations of each of the
agencies administering such acts.
8.5. Protection of Licenses, etc. The Company shall maintain,
defend and protect to the best of its ability licenses and sublicenses (and to
the extent the Company is a licensee or sublicensee under any license or
sublicense, as permitted by the license or sublicense agreement), trademarks,
trade names, service marks, patents and applications therefor and other
proprietary information owned or used by it and shall keep duplicate copies of
any licenses, trademarks, service marks or patents owned or used by it, if any,
at a secure place selected by the Company.
8.6. Accounts and Records; Inspections.
(a) The Company shall keep true records and books of account
in which full, true and correct entries will be made of all dealings or
transactions in relation to the business and affairs of the Company and its
subsidiaries in accordance with generally accepted accounting principles applied
on a consistent basis.
(b) The Company shall permit each holder of any Securities or
any of such holder's officers, employees or representatives during regular
business hours of the Company, upon reasonable notice and as often as such
holder may reasonably request, to visit and inspect the offices and properties
of the Company and its subsidiaries and (i) to make extracts or copies
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of the books, accounts and records of the Company or its subsidiaries, and (ii)
to discuss the affairs, finances and accounts of the Company and its
subsidiaries, with the Company's (or subsidiary's) directors and officers, its
independent public accountants, consultants and attorneys.
(c) Nothing contained in this Section 8.6 shall be construed
to limit any rights which a holder of any Securities (a "Holder") may have with
respect to the books and records of the Company and its subsidiaries, to inspect
its properties or to discuss its affairs, finances and accounts.
8.7. NASDAQ or American Stock Exchange Listing. The Company
will use its best efforts to list its Common Stock on either the NASDAQ SmallCap
Market or American Stock Exchange.
8.8. Further Assurances. From time to time the Company shall
execute and deliver to the Purchaser and the Purchaser shall execute and deliver
to the Company such other instruments, certificates, agreements and documents
and take such other action and do all other things as may be reasonably
requested by the other party in order to implement or effectuate the terms and
provisions of this Agreement and any of the Securities.
ARTICLE IX
EVENTS OF DEFAULTS
9.1. Events of Default. If any of the following events (herein
called an "Event of Default") shall occur and be continuing:
(a) if the Company shall default in the payment of (i) any
part of the principal of any Debenture, when the same shall become due and
payable, whether at maturity or at a date fixed for prepayment or by
acceleration or otherwise; or (ii) the interest on any Debenture; when the same
shall become due and payable, and such default in the payment of interest shall
have continued for ten (10) days; and in each case such default shall have
continued without cure for ten (10) days after written notice (a "Default
Notice") is given to the Company of such default; or
(b) If the Company shall default in the performance of any of
the covenants contained in Article VIII and such default shall have continued
without cure (i) for twenty (20) days after a Default Notice is given to the
Company with respect to a covenant relating to any payment of monies under an
agreement providing for payments of at least $50,000 in the aggregate or (ii)
twenty (20) days after a Default Notice is given to the Company with respect to
default in the case of a covenant not related to the payment of monies, by any
holder or holders of the Securities (the Company to give forthwith to all other
holders of the Securities at the time outstanding written notice of the receipt
of such Default Notice, specifying the default referred to therein).
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Notwithstanding the foregoing, if any such non-monetary
default shall, by its nature, be reasonably incapable of being cured within 20
days, the period within which the Company shall have the right to cure such
default shall be extended for such period of time as shall enable it to cure
such default upon the exercise of due diligence.
(c) If the Company shall default in the performance of any
other material agreement or covenant contained in this Agreement and such
default shall not have been remedied to the satisfaction of the holder or
holders of at least a majority in aggregate principal amount of the Debentures
then outstanding, within thirty (30) days after a Default Notice shall have been
given to the Company (the Company to give forthwith to all other holders of
Debentures and Shares at the time outstanding written notice of the receipt of
such Default Notice, specifying the default referred to therein); or
Notwithstanding the foregoing, if any such non-monetary
default shall, by its nature, be reasonably incapable of being cured within 20
days, the period within which the Company shall have the right to cure such
default shall be extended for such period of time as shall enable it to cure
such default upon the exercise of due diligence.
(d) If any representation or warranty made in this Agreement
or in or any certificate delivered pursuant hereto shall prove to have been
incorrect in any material respect when made; or
(e) If any default shall occur under any indenture, mortgage,
agreement, instrument or commitment evidencing or under which there is at the
time outstanding any indebtedness of the Company (or a Material Subsidiary, as
hereinafter defined), in excess of $50,000, or which results in such
indebtedness, in an aggregate amount (with other defaulted indebtedness) in
excess of $50,000 becoming due and payable prior to its due date and if such
indenture or instrument so requires, the holder or holders thereof (or a trustee
on their behalf) shall have declared such indebtedness due and payable; or
(f) If any of the Company or its subsidiaries shall default in
the observance or performance of any material term or provision of a material
agreement to which it is a party or by which it is bound, and such default is
not waived or cured within the applicable grace period; or
(g) If a final judgment which, either alone or together with
other outstanding final judgments against the Company and its subsidiaries,
exceeds an aggregate of $50,000 shall be rendered against the Company (or any
Material Subsidiary) and such judgment shall have continued undischarged or
unstayed for thirty (30) days after entry thereof; or
(h) If the Company (or any Material Subsidiary) shall make an
assignment for the benefit of creditors, or shall admit in writing its inability
to pay its debts; or if the Company (or any Material Subsidiary) shall suffer a
receiver or trustee for it or substantially all of its assets to be appointed,
and, if appointed without its consent, not to be discharged or stayed within
ninety (90) days; or if the Company (or any Material Subsidiary) shall suffer
proceedings under any law relating to bankruptcy, insolvency or the
reorganization or relief of debtors to be
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instituted by or against it, and, if contested by it, not to be dismissed or
stayed within ninety (90) days; or if the Company (or any Material Subsidiary)
shall suffer any writ of attachment or execution or any similar process to be
issued or levied against it or any significant part of its property which is not
released, stayed, bonded or vacated within ninety (90) days after its issue or
levy; or if the Company (or any Material Subsidiary) takes corporate action in
furtherance of any of the aforesaid purposes or conditions.
For purposes of this Section 9.1, "Material Subsidiary" means
any subsidiary with respect to which the Company has directly or indirectly
invested, loaned, advanced or guaranteed the obligations of, an aggregate amount
exceeding fifteen percent (15%) of the Company's gross assets, or the Company's
proportionate share of the assets or net income of which (based on the
subsidiary's most recent financial statements) exceed fifteen percent (15%) of
the Company's gross assets or net income, respectively, or the gross revenues of
which exceed fifteen percent (15%) of the gross revenues of the Company based
upon the most recent financial statements of such subsidiary and the Company.
9.2. Remedies.
(a) Upon the occurrence of an Event of Default, any holder or
holders of a majority in aggregate principal amount of the Debentures at the
time outstanding may at any time (unless all defaults shall theretofore have
been remedied) at its or their option, by written notice or notices to the
Company (i) declare all the Debentures to be due and payable, whereupon the same
shall forthwith mature and become due and payable, together with interest
accrued thereon, without presentment, demand, protest or notice, all of which
are hereby waived; and (ii) declare any other amounts payable to the Purchaser
under this Agreement or as contemplated hereby due and payable.
(b) Notwithstanding anything contained in Section 9.2(a), in
the event that at any time after the principal of the Debentures shall so become
due and payable and prior to the date of maturity stated in the Debentures all
arrears of principal of and interest on the Debentures (with interest at the
rate specified in the Debentures on any overdue principal and, to the extent
legally enforceable, on any interest overdue) shall be paid by or for the
account of the Company, then the holder or holders of at least a majority in
aggregate principal amount of the Debentures then outstanding, by written notice
or notices to the Company, may (but shall not be obligated to) waive such Event
of Default and its consequences and rescind or annul such declaration, but no
such waiver shall extend to or affect any subsequent Event of Default or impair
any right resulting therefrom. If any holder of a Debenture shall give any
notice or take any other action with respect to a claimed default, the Company,
forthwith upon receipt of such notice or obtaining knowledge of such other
action will give written notice thereof to all other holders of the Debentures
then outstanding, describing such notice or other action and the nature of the
claimed default.
9.3. Enforcement. In case any one or more Events of Default
shall occur and be continuing, the holder of a Debenture then outstanding may
proceed to protect and enforce the rights of such holder by an action at law,
suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained herein or in such Debenture
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or for an injunction against a violation of any of the terms hereof or thereof,
or in aid of the exercise of any power granted hereby or thereby or by law. Each
holder agrees that it will give written notice to the other holders prior to
instituting any such action. In case of a default in the payment of any
principal of or interest on any Debenture, the Company will pay to the holder
thereof such further amount as shall be sufficient to cover the cost and the
expenses of collection, including, without limitation, reasonable attorney's
fees, expenses and disbursements. No course of dealing and no delay on the part
of any holder of any Debenture in exercising any rights shall operate as a
waiver thereof or otherwise prejudice such holder's rights. No right conferred
hereby or by any Debenture upon any holder thereof shall be exclusive of any
other right referred to herein or therein or now available at law in equity, by
statute or otherwise.
ARTICLE X
AMENDMENT AND WAIVER
This Agreement may not be amended, discharged or terminated
(or any provision hereof waived) without the written consent of the Company and
the Purchaser. Provided that such written consent of the Company and the
Purchaser is given:
(a) Holders of at least a majority in aggregate principal
amount of the Debentures then outstanding may by written instrument amend or
waive any term or condition of this Agreement relating to the rights or
obligations of holders of Debentures, which amendment or waiver operates for the
benefit of such holders, except that no such amendment or waiver shall (i)
change the fixed maturity of any Debenture, the rate or the time of mandatory
prepayment of principal thereof or payment of interest thereon, the principal
amount thereof, or the terms of subordination, if any, without the consent of
the holder of the Debenture so affected, (ii) change the aforesaid percentage of
Debentures, the holders of which are required to consent to any such amendment
or waiver, without the consent of the holders of all the Debentures then
outstanding or (iii) change the percentage of the amount of the Debentures, the
holders of which may declare the Debentures to be due and payable under Article
IX.
(b) The Company and each holder of a Debenture then or
thereafter outstanding shall be bound by any amendment or waiver effected in
accordance with the provisions of this Article X, whether or not such Debenture
shall have been marked to indicate such modification, but any Debenture issued
thereafter shall bear a notation as to any such modification. Promptly after
obtaining the written consent of the holders herein provided, the Company shall
transmit a copy of such modification to all of the holders of the Debentures
then outstanding.
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ARTICLE XI
EXCHANGE AND REPLACEMENT OF DEBENTURES
11.1. Subject to Section 12.2, at any time at the request of
any holder of one or more of the Debentures to the Company at its office, the
Company at its expense (except for any transfer tax or any other tax arising out
of the exchange) will issue in exchange therefor new Debentures, in such
denomination or denominations ($100,000 or any larger multiple of $100,000, plus
one Debenture in a lesser denomination, if required) as such holder may request,
in aggregate principal amount equal to the unpaid principal amount of the
Debenture or Debentures surrendered and substantially in the form thereof, dated
as of the date to which interest has been paid on the Debenture or Debentures
surrendered (or, if no interest has yet been so paid thereon, then dated the
date of the Debenture or Debentures so surrendered) and payable to such person
or persons or order as may be designated by such holder.
11.2. Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of any Debenture and, in the case of
any such loss, theft, or destruction, upon delivery of a bond of indemnity
satisfactory to the Company (provided that if the holder is a Purchaser or a
financial institution, its own agreement will be satisfactory), or in the case
of any such mutilation, upon surrender and cancellation of such Debenture, the
Company will issue a new Debenture of like tenor as if the lost, stolen,
destroyed or mutilated Debenture were then surrendered for exchange in lieu of
such lost, stolen, destroyed or mutilated Debenture.
ARTICLE XII
TRANSFER OF AND PAYMENT OF DEBENTURES
12.1. Notification of Proposed Sale.
(a) Subject to Section 12.1(b), each holder of a Debenture by
acceptance thereof agrees that it will give the Company ten (10) days written
notice prior to selling or otherwise disposing of such Debenture during which
time the Company may prepay the Debenture in full. No such sale or other
disposition shall be made unless (i) the holder shall have supplied to the
Company an opinion of counsel for the holder reasonably acceptable to the
Company to the effect that no registration under the Securities Act is required
with respect to such sale or other disposition, or (ii) an appropriate
registration statement with respect to such sale or other disposition shall have
been filed by the Company and declared effective by the Commission.
(b) If the holder of Debentures has obtained an opinion of
counsel reasonably acceptable to the Company to the effect that the sale of its
Debentures may be made without registration under the Securities Act pursuant to
compliance with Rule 144 (or any successor rule under the Securities Act), the
holder need not provide the Company with the notice required in Section 12.1(a).
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(c) The Company may endorse on all Debentures an appropriate
legend restricting their transfer except upon compliance with this Section 12.1;
provided, however, that no such legend shall be endorsed on any Debenture which,
when issued, is no longer subject to the restrictions of this Section 12.1, and
provided, further, that if an opinion of counsel satisfactory to the Company
concludes that the legend is no longer necessary, the Company will deliver upon
transfer Debentures without such legends.
12.2. Payment. So long as the Purchaser shall be the holder of
any Debenture, the Company will make payments of principal and interest to the
Purchaser no later than 11 a.m. Eastern Time on the date when such payment is
due. Payments shall be made by delivery to the Purchaser at the Purchaser's
address furnished to the Company in accordance with this Agreement of a
certified or official bank check drawn upon or issued by a bank which is a
member of the New York Clearinghouse for banks or by wire transfer to such
Purchaser's (or such Purchaser's nominee's) account at any bank or trust company
in the United States of America. The Purchaser further agrees that, before the
Debenture is assigned or transferred, the Purchaser will make or cause to be
made a notation thereon of principal payments previously made thereof and of the
date to which interest thereon has been paid and will notify the Company of the
name and address of the transferee of such Debenture if such name and address
are known to the Purchaser.
ARTICLE XIII
RIGHT OF FIRST REFUSAL
13.1. Right of First Refusal.
(a) The Company hereby agrees that if at any time prior to one
year after the Closing Date the Company is considering making an offering of
securities in a transaction which would not require registration under the
Securities Act by virtue of an exemption therefrom afforded by Regulation D or
Regulation S thereunder, the Company shall prepare a term sheet for such
offering in reasonable detail (the "Term Sheet") and transmit such Term Sheet to
the Purchaser.
(b) The Purchaser shall have the right to accept or reject the
terms set forth in the Term Sheet, which such right must be exercised as to all
(but not less than all) of the securities being offered therein. Such right
shall be exercisable by the Purchaser within 20 days after receipt by it of the
Term Sheet and, if not exercised within such 20 day time period, it shall
expire, except as elsewhere provided in this Article XIII. If the Term Sheet is
accepted by the Purchaser, the Purchaser and the Company as shall be deemed to
have agreed to use their bona fide best efforts to consummate the transaction on
the terms set forth in the Term Sheet as promptly as possible. If the Term Sheet
is rejected by the Purchaser, or if the Purchaser does not serve notice of
acceptance of the Term Sheet within the aforesaid 20-day period, the Company,
without further obligation of any kind, including any requirement to give notice
to the Purchaser, may make one or more offerings to third parties on
substantially the same terms
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as those set forth in the Term Sheet or on different terms which in the
reasonable opinion of the Company are in the aggregate more favorable to the
Company than the terms set forth in the Term Sheet, and if such offer is
accepted by any such third party, the Company shall be free to consummate such
offering in accordance with its terms.
(c) If the Company shall have followed the procedures set
forth in subparagraphs (a) and (b) hereof, but no transaction shall have been
consummated within 120 days with the Purchaser or any third party pursuant to
the terms of the Term Sheet which shall have been distributed, such Term Sheet
shall be withdrawn by the Company from circulation and the provisions of this
Article XIII shall be applicable ab initio to any new Term Sheet.
(d) If the Company shall receive an offer from a third party
prospective investor with respect to the Term Sheet referred to in subparagraphs
(a) and (b) hereof, which is modified in any material business respect to the
benefit of such investor and the detriment of the Company, such modified Term
Sheet shall not be accepted by the Company until it shall have given the
Purchaser the right to accept the terms as so modified, which right shall be
exercisable by the Purchaser for 15 days after receipt of the modified Term
Sheet. Failure to accept the modified Term Sheet within the aforesaid time
period shall conclusively be deemed to be a rejection thereof.
(e) If the Company shall comply with the provision of this
Article XIII, and consummate Regulation D or Regulation S transaction with a
third party investor upon the terms and conditions contemplated hereby, the
right of First Refusal granted to the Purchaser in this Article XIII shall
terminate and be of no further force and effect immediately upon the
consummation of such transaction.
ARTICLE XIV
MISCELLANEOUS
14.1. Governing Law. This Agreement and the rights of the
parties hereunder shall be governed in all respects by the laws of the State of
New York.
14.2. Survival. The representations, warranties, covenants and
agreements made herein shall survive (a) any investigation made by the Purchaser
and (b) the Closing.
14.3. Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon and enforceable by and against, the successors, assigns, heirs,
executors and administrators of the parties hereto; provided, however, that the
Company may not assign its rights hereunder.
14.4. Entire Agreement. This Agreement (including the Exhibits
hereto) and the other documents delivered pursuant hereto and simultaneously
herewith constitute the full and entire understanding and agreement between the
parties with regard to the subject matter hereof and thereof.
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14.5. Notices, etc. All notices, demands or other
communications given hereunder shall be in writing and shall be sufficiently
given if delivered either personally or by a nationally recognized courier
service marked for next business day delivery or sent in a sealed envelope by
first class mail, postage prepaid and either registered or certified, addressed
as follows:
(a) if to the Company:
Advanced Viral Research Corp.
200 Corporate Boulevard South
Yonkers, New York 10701
Attention: Shalom Z. Hirschman, M.D., President and
Chief Executive Officer
(b) if to the Purchaser, to the address set forth on the first
page of this Agreement.
or to such other address with respect to any party hereto as such party may from
time to time notify (as provided above) the other parties hereto. Any such
notice, demand or communication shall be deemed to have been given (i) on the
date of delivery, if delivered personally, (ii) one business day after delivery
to a nationally recognized overnight courier service, if marked for next day
delivery or (iii) five business days after the date of mailing, if mailed.
Copies of any notice, demand or communication given to the
Company, shall be delivered to Lowenthal, Landau, Fischer & Bring, P.C., 250
Park Avenue, New York, New York, 10177, Attn.: Robert E. Fischer, Esq., or such
other address as may be directed.
14.6. Delays or Omissions. No delay or omission to exercise
any right, power or remedy accruing to any holder of any Securities upon any
breach or default of the Company under this Agreement shall impair any such
right, power or remedy of such holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence,therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any holder of any breach or default under
this Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement must be, made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either
under this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
14.7. Rights; Severability. Unless otherwise expressly
provided herein, each Purchaser's rights hereunder are several rights, not
rights jointly held with any other person. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
20
<PAGE>
14.8. Agent's Fees.
(a) The Company hereby (i) represents and warrants that except
for Interfi Group, Inc. ("Interfi"), the Company has not retained a finder or
broker in connection with the transactions contemplated by this Agreement and
(ii) agrees to indemnify and to hold the Purchaser harmless of and from any
liability for commission or compensation in the nature of an agent's fee to any
broker, person or firm (including Interfi), and the costs and expenses of
defending against such liability or asserted liability, including, without
limitation, reasonable attorney's fees, arising from any act by the Company or
any of the Company's employees or representatives; provided, however, that the
Company will have the right to defend against such liability by
representative(s) of its own choosing, and provided, further, that the Company
will not settle or compromise any claim or lawsuit without prior written notice
to the Purchaser of the terms and provisions thereof. In the event that the
Company shall fail to undertake the defense within ten (10) days of any notice
of such claim, the Purchaser shall have the right to undertake the defense,
compromise or settlement of such claim upon written notice to the Company by
holders of a majority in principal amount of the Debentures and the Company will
be responsible for and shall pay all costs and expenses of defending such
liability or asserted liability and any amounts paid in settlement.
(b) The Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby severally agrees to indemnify and to hold the
Company harmless from any liability for any commission or compensation in the
nature of an agent's or finder's fee to any broker or other person or firm (and
the costs, including reasonable legal fees, and expenses of defending against
such liability or asserted liability) for which such Purchaser, or any of its
employees or representatives, are responsible.
14.9. Expenses. Each of the parties shall bear its own
expenses and legal fees incurred on its behalf with respect to the negotiation,
execution and consummation of the transactions contemplated by this Agreement.
14.10. Litigation. The parties each hereby waive trial by jury
in any action or proceeding of any kind or nature in any court in which an
action may be commenced arising out of this Agreement or by reason of any other
cause or dispute whatsoever between them. The parties hereto agree that the
State and Federal Courts which sit in the State of New York and the County of
New York shall have exclusive jurisdiction to hear and determine any claims or
disputes between the Company and such holders, pertaining directly or indirectly
to this Agreement or to any matter arising therefrom. The parties each expressly
submit and consent in advance to such jurisdiction in any action or proceeding
commenced in such courts provided that such consent shall not be deemed to be a
waiver of personal service of the summons and complaint, or other process or
papers issued therein. The choice of forum set forth in this Section 14.10 shall
not be deemed to preclude the enforcement of any judgment obtained in such forum
or the taking of any action under this Agreement to enforce same in any
appropriate jurisdiction. The parties each waive any objection based upon forum
non conveniens and any objection to venue of any action instituted hereunder.
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<PAGE>
14.11. Titles and Subtitles. The titles of the articles,
sections and subsections of this Agreement are for convenience of reference only
and are not to be considered in construing this Agreement.
14.12. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
If the Purchaser is in agreement with the foregoing the
Purchaser shall sign where indicated below and thereupon this letter shall
become a binding agreement between the Purchaser and the Company.
Very truly yours,
ADVANCED VIRAL RESEARCH CORP.
By:
Shalom Z. Hirschman, M.D., President and
Chief Executive Officer
AGREED:
RBB BANK AKTIENGESELLSCHAFT
By:
22
7% CONVERTIBLE DEBENTURE DUE AUGUST 30, 2007
$3,000,000 September 26, 1997
New York, New York
FOR VALUE RECEIVED, ADVANCED VIRAL RESEARCH CORP., a Delaware
corporation (the "undersigned" or the "Company"), hereby promises to pay to the
order of RBB Bank AG, at its offices located at c/o ABN AMRO Bank N.V., New
York, New York or at such other place as the holder hereof shall designate to
the undersigned in writing, in lawful money of the United States of America or
in New York Clearing House Funds, the principal amount of Three Million Dollars,
and to pay interest (computed on the basis of a 360- day year and the actual
number of days elapsed) on the unpaid principal amount hereof at the rate of
seven (7%) percent per annum. The undersigned promises to pay the said principal
sum and interest as follows:
Until this Debenture is completely retired the undersigned
shall make payments of accrued interest on this Debenture on the first day of
January and July in each year (commencing with January 1, 1998), computed at the
rate of 7% per annum on the unpaid principal balance of this Debenture for the
period from the date of this Debenture until the date of such interest payment.
On August 30, 2007 the undersigned shall pay the holder all unpaid principal and
interest on this Debenture.
Interest on the indebtedness evidenced by this Debenture after
default or maturity accelerated or otherwise shall be due and payable at the
rate of ten (10%) percent per annum, subject to the limitations of applicable
law.
If this Debenture or any installment hereof becomes due and
payable on a Saturday, Sunday or public holiday under the laws of the State of
New York, the due date hereof shall be extended to the next succeeding business
day and interest shall be payable at the rate of seven (7%) percent per annum
during such extension. All payments received by the holder shall be applied
first to the payment of all accrued interest payable hereunder.
Subject to and in compliance with the provisions hereof, the
holder shall have the right to convert all or a portion of the outstanding
principal amount of this Debenture into such number of shares of Common Stock,
par value $.00001 per share, of the Company ("Common Stock") (the shares of
Common Stock issuable upon conversion of this Debenture are hereinafter referred
to as the "Conversion Shares") as shall equal the quotient obtained by dividing
(x) the principal amount of this Debenture to be converted by (y) the Applicable
Conversion Price (as hereinafter defined) and by surrender of this Debenture,
such surrender to be made in the manner provided herein; provided, however, that
the right to convert outstanding principal of this Debenture shall terminate at
the close of business on the third calendar day preceding the date fixed for
prepayment unless the Company shall default in making such prepayment.
<PAGE>
For purposes hereof the term "Applicable Conversion Price" shall mean
the lesser of (q) $0.26 and (r) the product obtained by multiplying (i) the
Average Closing Price (as hereinafter defined) by (iii) .70.
For purposes hereof the "Average Closing Price" with respect to any
conversion elected to be made by the holder shall be the average of the daily
closing prices for the five consecutive trading days ended on the trading day
immediately preceding the date on which the holder gives the Company a written
notice of the holder's election to convert outstanding principal of this
Debenture. The closing price on any trading day shall be (a) if the Common Stock
is then listed or quoted on either the NASD Bulletin Board, the NASDAQ SmallCap
Market or the NASDAQ National Market, the reported closing bid price for the
Common Stock on such day or (b) if the Common Stock is listed on either the
American Stock Exchange or New York Stock Exchange, the last reported sales
price for the Common Stock on such exchange on such day.
On the date notice is delivered in order to exercise its conversion
right, the holder shall surrender this Debenture to the Company at its office,
accompanied by written notice to the Company that the holder hereof elects to
convert all or a specified portion of the outstanding principal of this
Debenture (the "Conversion Notice"). Within five (5) business days after receipt
of this Debenture and the Conversion Notice, the Company will pay to the holder
all interest accrued on the principal amount of this Debenture to be converted
to the effective date of conversion or, at the sole option of the Company, issue
to the holder in lieu thereof such additional number of shares of Common Stock
as shall equal the quotient obtained by dividing the total amount of accrued
interest on the principal amount of this Debenture to be converted by the
Applicable Conversion Price. Within five (5) business days after the surrender
of this Debenture as aforesaid, the Company shall cause its transfer agent to
issue and deliver to such holder, or on its written order, a certificate or
certificates without any restrictive legend thereon for the number of shares of
Common Stock issuable upon the conversion hereof in accordance with the
provisions of this Debenture, and any fractional interest in respect of a share
of Common Stock arising upon such conversion shall be settled as hereinafter
provided. If the Company fails to deliver to the holder a certificate or
certificates for shares of Common Stock as aforesaid prior to the expiration of
five (5) business days after receipt of the Conversion Notice and surrender to
the Company of the Debenture, the Company shall pay to the holder a penalty. The
penalty shall be $1,000 if the certificate or certificates are not delivered
until the sixth business day after the delivery of the Conversion Notice and the
penalty shall double every business day until the certificate or certificates
are so delivered, but in no event shall such penalty exceed $100,000. For
example, if the certificates are delivered on the eighth business day after
delivery of the Conversion Notice and surrender of the Debenture the penalty
shall be $4,000.
If the entire outstanding principal amount of this Debenture is not
converted, the Company shall also issue and deliver to such holder a new
Debenture of like tenor in the principal amount equal to the principal which was
not converted and dated the effective date of conversion. Each conversion shall
be deemed to have been effected immediately prior to the close of business on
the date on which this Debenture shall have been surrendered and such notice
received by the Company as aforesaid, and the person or persons in whose name or
names any certificate of certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such time on such date.
All shares of Common Stock delivered upon
2
<PAGE>
conversion of this Debenture will, upon delivery, be duly authorized, validly
issued and fully paid and nonassessable. No fractional shares of Common Stock
shall be issued upon conversion of this Debenture. Instead of any fractional
share of Common Stock which would otherwise be deliverable upon the conversion
of a principal of this Debenture the Company shall pay to the holder an amount
in cash (computed to the nearest cent) equal to the Average Closing Price
multiplied by the fraction of a share of Common Stock represented by such
fractional interest.
Notwithstanding anything to the contrary contained herein, (w) until 60
days after the Closing Date (as defined in the Securities Purchase Agreement
dated September 26, 1997 between the Company and RBB Bank AG (the "Purchase
Agreement")) the holder may not elect to convert any portion of the principal of
this Debenture, (x) until 90 days after the Closing Date the holder may not
elect to convert more than 25% of the original principal amount of this
Debenture, (y) until 120 days after the Closing Date the holder may not elect to
convert more than 50% of the original principal amount of this Debenture and (z)
until 150 days after the Closing Date the holder may not elect to convert more
than 75% of the original principal amount of this Debenture.
The issuance of certificates for shares of Common Stock upon
any conversion of this Debenture shall be made without charge to the payee
hereof for any tax or other expense in respect to the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued only in the name of the registered holder of
this Debenture.
This Debenture has been issued pursuant to and shall be
subject to all of the provisions of the Purchase Agreement. The payee is
entitled to the benefits of the Purchase Agreement, and this Debenture may be
prepaid as provided in the Purchase Agreement. Reference is made to Sections 7.2
and 7.3 of the Purchase Agreement with respect to certain rights of the holder
to convert this Debenture into Common Stock upon receipt of a notice of
prepayment.
Upon the occurrence of any one or more of the events of
default specified or referred to in the Purchase Agreement or in the other
documents or instruments executed in connection therewith, all amounts then
remaining unpaid on this Debenture may be declared to be immediately due and
payable as provided in the Purchase Agreement.
In the event that this Debenture shall be placed in the hands
of an attorney for collection by reason of any event of default hereunder, the
undersigned agrees to pay reasonable attorney's fees and disbursements and other
reasonable expenses incurred by the payee in connection with the collection of
this Debenture.
The rights, powers and remedies given to the payee under this
Debenture shall be in addition to all rights, powers and remedies given to it by
virtue of the Purchase Agreement, any document or instrument executed in
connection therewith, or any statute or rule of law.
Any forbearance, failure or delay by the payee in exercising
any right, power or remedy under this Debenture, the Purchase Agreement, any
documents or instruments executed in connection therewith or otherwise available
to the payee shall not be deemed to be a waiver
3
<PAGE>
of such right, power or remedy, nor shall any single or partial exercise of any
right, power or remedy preclude the further exercise thereof.
No modification or waiver of any provision of this Debenture,
the Purchase Agreement or any documents or instruments executed in connection
therewith shall be effective unless it shall be in writing and signed by the
payee, and any such modification or waiver shall apply only in the specific
instance for which given.
This Debenture and the rights and obligations of the parties
hereto, shall be governed, construed and interpreted according to the laws of
the State of New York, and the undersigned consents and agrees that the State
and Federal Courts which sit in the State of New York, County of New York shall
have exclusive jurisdiction of all controversies and disputes arising hereunder.
The term "payee" as used herein shall be deemed to include the
payee and its successors, endorsees and assigns.
The undersigned hereby waives presentment, demand for payment,
protest, notice of protest and notice of non-payment hereof.
By:
Shalom Z. Hirschman, M.D., President and
Chief Executive Officer
WARRANT TO PURCHASE
COMMON STOCK, PAR VALUE $.00001 PER SHARE
OF
ADVANCED VIRAL RESEARCH CORP.
---------------------------------------------------------
This Warrant has not been registered under the
Securities Act of 1933, as amended (the "Act"),
because the issuance thereof is believed to be
exempt from registration under various regulations
promulgated under such Act.
This certifies that, for value received, RBB Bank AG, or registered assigns
("Warrantholder"), is entitled to purchase from ADVANCED VIRAL RESEARCH CORP.
(the "Company"), subject to the provisions of this Warrant, at any time and from
time to time until 5:00 p.m. Eastern Standard Time on August 30, 2007, 600,000
shares of the Company's Common Stock, par value $.00001 per share ("Warrant
Shares"). The purchase price payable upon the exercise of this Warrant shall be
$0.20 per Warrant Share. The Warrant Price and the number of Warrant Shares
which the Warrantholder is entitled to purchase is subject to adjustment upon
the occurrence of the contingencies set forth in Section 3 of this Warrant, and
as adjusted from time to time, such purchase price is hereinafter referred to as
the "Warrant Price."
This Warrant is subject to the following terms and conditions:
<PAGE>
1. Exercise of Warrant.
(a) This Warrant may be exercised in whole or in part but not for a
fractional share. Upon delivery of this Warrant at the offices of the Company or
at such other address as the Company may designate by notice in writing to the
registered holder hereof with the Subscription Form annexed hereto duly
executed, accompanied by payment of the Warrant Price for the number of Warrant
Shares purchased (in cash, by certified, cashier's or other check acceptable to
the Company, by Common Stock of the Company having a Market Value (as
hereinafter defined) equal to the aggregate Warrant Price for the Warrant Shares
to be purchased, or any combination of the foregoing), the registered holder of
this Warrant shall be entitled to receive a certificate or certificates for the
Warrant Shares so purchased. Such certificate or certificates shall be promptly
delivered to the Warrantholder. Upon any partial exercise of this Warrant, the
Company shall execute and deliver a new Warrant of like tenor for the balance of
the Warrant Shares purchasable hereunder.
(b) In lieu of exercising this Warrant pursuant to Section 1(a), the holder
may elect to receive shares of Common Stock equal to the value of this Warrant
determined in the manner described below (or any portion thereof remaining
unexercised) upon delivery of this Warrant at the offices of the Company or at
such other address as the Company may designate by notice in writing to the
registered holder hereof with the Notice of Cashless Exercise Form annexed
hereto duly executed. In such event the Company shall issue to the holder a
number of shares of the Company's Common Stock computed using the following
formula:
2
<PAGE>
X = Y (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 purchasable under this
Warrant (at the date of such calculation).
A = the Market Value of the Company's Common Stock on the
business day immediately preceding the day on which the Notice
of Cashless Exercise is received by the Company.
B = Warrant Price (as adjusted to the date of such calculation).
(c) The Warrant Shares deliverable hereunder shall, upon issuance, be fully
paid and non-assessable and the Company agrees that at all times during the term
of this Warrant it shall cause to be reserved for issuance such number of shares
of its Common Stock as shall be required for issuance and delivery upon exercise
of this Warrant.
(d) For purposes of this Warrant, the Market Value of a share of Common
Stock on any date shall be equal to (i) the closing sale price per share as
published by a national securities exchange on which shares of Common Stock (or
other units of the security) are traded (an "Exchange") on such date or, if
there is no sale of Common Stock on such date, the average of the bid and asked
prices on such exchange at the close of trading on such date
3
<PAGE>
or, (ii) if shares of Common Stock are not listed on a national securities
exchange on such date, the closing price per share as published on the National
Association of Securities Dealers Automatic Quotation System ("NASDAQ") National
Market System if the shares are quoted on such system on such date, or (iii) the
average of the bid and asked prices in the over-the-counter market at the close
of trading on such date if the shares are not traded on an exchange or listed on
the NASDAQ National Market System, or (iv) if the Common Stock is not traded on
a national securities exchange or in the over-the-counter market, the fair
market value of a share of Common Stock on such date as determined in good faith
by the Board of Directors. If the holder disagrees with the determination of the
Market Value of any securities of the Company determined by the Board of
Directors under Section 1(d)(iv) the Market Value of such securities shall be
determined by an independent appraiser acceptable to the Company and the holder
(or, if they cannot agree on such an appraiser, by an independent appraiser
selected by each of them, and Market Value shall be the median of the appraisals
made by such appraisers). If there is one appraiser, the cost of the appraisal
shall be shared equally between the Company and the holder. If there are two
appraisers, each of the Company and the holder shall pay for its own appraisal.
2. Transfer or Assignment of Warrant.
(a) Any assignment or transfer of this Warrant shall be made by surrender
of this Warrant at the offices of the Company or at such other address as the
Company may designate in writing to the registered holder hereof with the
Assignment Form annexed hereto duly executed and accompanied by payment of any
requisite transfer taxes, and the Company shall, without charge, execute and
deliver a new Warrant of like tenor in the name of
4
<PAGE>
the assignee for the portion so assigned in case of only a partial assignment,
with a new Warrant of like tenor to the assignor for the balance of the Warrant
Shares purchasable.
(b) Prior to any assignment or transfer of this
Warrant, the holder thereof shall deliver an opinion of counsel to the Company
to the effect that the proposed transfer may be effected without registration
under the Act.
3. Adjustment of Warrant Price and Warrant Shares -- Anti-Dilution
Provisions.
A. (1) Except as hereinafter provided, in case the Company shall at any
time after the date hereof issue any shares of Common Stock (including shares
held in the Company's treasury) without consideration, then, and thereafter
successively upon each issuance, the Warrant Price in effect immediately prior
to each such issuance shall forthwith be reduced to a price determined by
multiplying the Warrant Price in effect immediately prior to such issuance by a
fraction:
(a) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such issuance, and
5
<PAGE>
(b) the denominator of which shall be the total number of shares of
Common Stock outstanding immediately after such issuance.
For the purposes of any computation to be made in accordance
with the provisions of this clause (1), the following provisions shall be
applicable:
(i) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been
issued and to be outstanding at the close of business on the record
date fixed for the determination of stockholders entitled to receive
such dividend or other distribution and shall be deemed to have been
issued without consideration. Shares of Common Stock issued otherwise
than as a dividend, shall be deemed to have been issued and to be
outstanding at the close of business on the date of issue.
(ii) The number of shares of Common Stock at any time outstanding
shall not include any shares
6
<PAGE>
then owned or held by or for the account of the Company.
(2) In case the Company shall at any time subdivide or combine the
outstanding shares of Common Stock, the Warrant Price shall forthwith be
proportionately decreased in the case of the subdivision or proportionately
increased in the case of combination to the nearest one cent. Any such
adjustment shall become effective at the close of business on the date that
such subdivision or combination shall become effective.
B. In the event that the number of outstanding shares of Common Stock is
increased by a stock dividend payable in shares of Common Stock or by a
subdivision of the outstanding shares of Common Stock, which may include a stock
split, then from and after the time at which the adjusted Warrant Price becomes
effective pursuant to the foregoing Subsection A of this Section by reason of
such dividend or subdivision, the number of shares issuable upon the exercise of
this Warrant shall be increased in proportion to such increase in outstanding
shares. In the event that the number of outstanding shares of Common Stock is
decreased by a combination of the outstanding shares of Common Stock, then, from
and after the time at which the adjusted Warrant Price becomes effective
pursuant to such Subsection A of this Section by reason of such
7
<PAGE>
combination, the number of shares issuable upon the exercise of this Warrant
shall be decreased in proportion to such decrease in outstanding shares.
C. In the event of an adjustment of the Warrant Price, the number of shares
of Common Stock (or reclassified stock) issuable upon exercise of this Warrant
after such adjustment shall be equal to the number determined by dividing:
(1) an amount equal to the product of (i) the number of shares of
Common Stock issuable upon exercise of this Warrant immediately prior to
such adjustment, and (ii) the Warrant Price immediately prior to such
adjustment, by
(2) the Warrant Price immediately after such adjustment.
D. In the case of any reorganization or reclassification 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) or in the case of any consolidation of the Company with, or
merger of the Company with, another corporation, or in the case of any sale,
lease or conveyance of all, or substantially all, of the property, assets,
business and goodwill of the Company as an entity, the holder of this Warrant
shall thereafter have the right upon exercise to purchase the kind and amount of
8
<PAGE>
shares of stock and other securities and property receivable upon such
reorganization, reclassification, consolidation, merger or sale by a holder of
the number of shares of Common Stock which the holder of this Warrant would have
received had all Warrant Shares issuable upon exercise of this Warrant been
issued immediately prior to such reorganization, reclassification,
consolidation, merger or sale, at a price equal to the Warrant Price then in
effect pertaining to this Warrant (the kind, amount and price of such stock and
other securities to be subject to adjustment as herein provided).
E. In case the Company shall, at any time prior to the expiration of this
Warrant and prior to the exercise thereof, dissolve, liquidate or wind up its
affairs, the Warrantholder shall be entitled, upon the exercise thereof, to
receive, in lieu of the Warrant Shares of the Company which it would have been
entitled to receive, the same kind and amount of assets as would have been
issued, distributed or paid to it upon such Warrant Shares of the Company, had
it been the holder of record of shares of Common Stock receivable upon the
exercise of this Warrant on the record date for the determination of those
entitled to receive any such liquidating distribution. After any such
dissolution, liquidation or winding up which shall result in any distribution in
excess of the Warrant Price provided for by this Warrant, the Warrantholder may
at its option exercise the same without making payment of the aggregate Warrant
Price and in such case the Company shall upon the distribution to said
Warrantholder consider that the aggregate Warrant Price has been paid in full to
it and in making settlement to
9
<PAGE>
said Warrantholder, shall deduct from the amount payable to such Warrantholder
an amount equal to the aggregate Warrant Price.
F. In case the Company shall, at any time prior to the expiration of this
Warrant and prior to the exercise thereof make a distribution of assets (other
than cash) or securities of the Company to its stockholders (the "Distribution")
the Warrantholder shall be entitled, upon the exercise thereof, to receive, in
addition to the Warrant Shares it is entitled to receive, the same kind and
amount of assets or securities as would have been distributed to it in the
Distribution had it been the holder of record of shares of Common Stock
receivable upon exercise of this Warrant on the record date for determination of
those entitled to receive the Distribution.
G. Irrespective of any adjustments in the number of Warrant Shares and the
Warrant Price or the number or kind of shares purchasable upon exercise of this
Warrant, this Warrant may continue to express the same price and number and kind
of shares as originally issued.
4. Officer's Certificate. Whenever the number of Warrant Shares and the
Warrant Price shall be adjusted pursuant to the provisions hereof, the Company
shall forthwith file, at its principal executive office a statement, signed by
the Chairman of the Board, President, or one of the Vice Presidents of the
Company and by its Chief Financial Officer or one of its Treasurers or Assistant
Treasurers, stating the adjusted number of Warrant Shares and
10
<PAGE>
the new Warrant Price calculated to the nearest one hundredth and setting forth
in reasonable detail the method of calculation and the facts requiring such
adjustment and upon which such calculation is based. Each adjustment shall
remain in effect until a subsequent adjustment hereunder is required. A copy of
such statement shall be mailed to the Warrantholder.
5. Charges, Taxes and Expenses. The issuance of certificates for Warrant
Shares upon any exercise of this Warrant shall be made without charge to the
Warrantholder for any tax or other expense in respect to the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued only in the name of the Warrantholder.
6. Miscellaneous.
(a) The terms of this Warrant shall be binding upon and shall inure to the
benefit of any successors or assigns of the Company and of the holder or holders
hereof and of the shares of Common Stock issued or issuable upon the exercise
hereof.
(b) No holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be deemed to be a stockholder of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder of this Warrant, as such, any rights of a stockholder of the
Company or any right to vote, give or withhold consent to any corporate action,
receive notice of meetings, receive dividends or subscription rights, or
otherwise.
11
<PAGE>
(c) Receipt of this Warrant by the holder hereof shall constitute
acceptance of an agreement to the foregoing terms and conditions.
(d) The Warrant and the performance of the parties hereunder shall be
construed and interpreted in accordance with the laws of the State of New York
and the parties hereunder consent and agree that the State and Federal Courts
which sit in the State of New York and the County of New York shall have
exclusive jurisdiction with respect to all controversies and disputes arising
hereunder.
(e) Shares issued upon exercise of this Warrant shall be legended
substantially as follows:
"The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, and
must be held indefinitely unless they are transferred pursuant
to an effective registration statement under that Act or after
receipt of an opinion of counsel satisfactory to the Company
that registration is not required."
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer and its corporate seal to be affixed hereto.
Dated: September 26, 1997
12
<PAGE>
ADVANCED VIRAL RESEARCH CORP.
BY:
Shalom Hirschman, M.D.
President
13
<PAGE>
SUBSCRIPTION FORM
(TO BE EXECUTED BY THE REGISTERED HOLDER
IF HE DESIRES TO EXERCISE THE WARRANT)
To: ADVANCED VIRAL RESEARCH CORP.
The undersigned hereby exercises the right to purchase
_________ shares of Common Stock, par value $.00001 per share, covered by the
attached Warrant in accordance with the terms and conditions thereof, and
herewith makes payment of the Warrant Price for such shares in full.
SIGNATURE
ADDRESS
DATED:
<PAGE>
NOTICE OF EXERCISE OF COMMON STOCK WARRANT
PURSUANT TO NET ISSUE ("CASHLESS") EXERCISE PROVISIONS
, 199
Advanced Viral Research Corp. Aggregate Price of $
a Delaware corporation of Warrant
200 Corporate Boulevard South
Yonkers, New York 10701 Aggregate Price Being
Exercised: $
Attention:
Warrant Price
(per share): $
Number of Shares of
Common Stock to be
Issued Under this
Notice:
CASHLESS EXERCISE
Gentlemen:
The undersigned, registered holder of the Warrant to Purchase
Common Stock delivered herewith ("Warrant") hereby irrevocably exercises such
Warrant for, and purchases thereunder, shares of the Common Stock of ADVANCED
VIRAL RESEARCH CORP., a Delaware corporation, as provided below. Capitalized
terms used herein, unless otherwise defined herein, shall have the meanings
given in the Warrant. The portion of the Aggregate Price (as hereinafter
defined) to be applied toward the purchase of Common Stock pursuant to this
Notice of Exercise is $ , thereby leaving a remainder Aggregate Price (if any)
equal to $ . Such exercise shall be pursuant to the net issue exercise
provisions of Section 1(b) of the Warrant; therefore, the holder makes no
payment with this Notice of Exercise. The number of shares to be issued pursuant
to this exercise shall be determined by reference to the formula in Section 1(b)
of the Warrant which requires the use of the Market Value (as defined in Section
1(d) of the Warrant) of the Company's Common Stock on the business day
immediately preceding the day on which this Notice is received by the Company.
To the extent the foregoing exercise is for less than the full Aggregate Price
of the Warrant, the remainder of the Warrant representing a number of Shares
equal to the quotient obtained by dividing the remainder of the Aggregate Price
by the Warrant Price (and otherwise of like form, tenor and effect) may be
exercised under Section 1(a) of the Warrant. For purposes of this
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Notice the term "Aggregate Price" means the product obtained by multiplying the
number of shares of Common Stock for which the Warrant is exercisable times the
Warrant Price.
SIGNATURE
DATE:
ADDRESS
2
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ASSIGNMENT
(To be Executed by the Registered Holder
if he Desires to Transfer the Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto the right to purchase shares of Common Stock of ADVANCED VIRAL
RESEARCH CORP., evidenced by the within Warrant, and does hereby irrevocably
constitute and appoint Attorney to transfer the said Warrant on the books of the
Company, with full power of substitution.
SIGNATURE
ADDRESS
DATED:
IN THE PRESENCE OF:
