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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. __)*
Xechem International, Inc.
(Name of Issuer)
Common Stock, par value $.00001 per share
(Title of Class of Securities)
983895-103
(CUSIP Number)
Andrew J. Levinson, Herzfeld & Rubin, P.C., 40 Wall Street, New York NY 10005
(212) 344-5500
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 19, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement / /. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP No. 983895-103 SCHEDULE 13D Page 2
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
David Blech
###-##-####
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /x/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
PF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
7 SOLE VOTING POWER
90,000,000
NUMBER OF SHARES
8 SHARED VOTING POWER
BENEFICIALLY
20,000,000 shares
OWNED BY EACH
9 SOLE DISPOSITIVE POWER
REPORTING PERSON
90,000,000 shares
WITH
10 SHARED DISPOSITIVE POWER
20,000,000 shares
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
110,000,000 shares
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
93.6%
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
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CUSIP No. 983895-103 SCHEDULE 13D Page 3
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Edward A. Blech Trust
25-6381634
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /x/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
7 SOLE VOTING POWER
-0-
NUMBER OF SHARES
8 SHARED VOTING POWER
BENEFICIALLY
16,000,000 shares
OWNED BY EACH
9 SOLE DISPOSITIVE POWER
REPORTING PERSON
-0-
WITH
10 SHARED DISPOSITIVE POWER
16,000,000 shares
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
16,000,000 shares
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
68.1%
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
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The following Statement on Schedule 13D (the "Statement") with respect to
the common stock, par value $.00001 per share (the "Common Stock"), of Xechem
International, Inc. (the "Issuer") is being filed on behalf of David Blech and
The Edward A. Blech Trust.
Item 1. Security and Issuer.
This Statement relates to Common Stock of the Issuer. The Issuer's
principal executive offices are at 100 Jersey Avenue, Building B, Suite 310, New
Brunswick, New Jersey 08901.
Item 2. Identity and Background.
(a) This Statement is being filed on behalf of David Blech and The Edward
A. Blech Trust (the "Trust").
(b) The business address of David Blech is 225 Lafayette Street, New York,
New York 10012. The business address for the Trust is c/o Rabbi Mordechai Jofen,
Trustee, 418 Avenue I, Brooklyn, New York 11230.
(c) Mr. Blech is the President of D. Blech & Co., a financial advisory firm
located at 225 Lafayette Street, New York, New York 10012. The Trust is a
trust established pursuant to an agreement dated as of March 4, 1992 (the "Trust
Agreement") by Mr. Blech for the lifetime benefit of Edward A. Blech, a minor
son of Mr. Blech.
(d) - (e) Neither Mr. Blech nor the Trust has, during the last five years,
been convicted in any criminal proceeding (excluding traffic violations or
similar misdemeanors), nor has Mr. Blech or the Trust, during such period, been
a party to a
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civil proceeding of a judicial or administrative body and as a result of such
proceeding been subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, Federal or
State securities laws or finding any violation with respect to such laws.
(f) Mr. Blech and the Trust are citizens of the United States. The Trust
was organized pursuant to New York law.
Item 3. Source and Amount of Funds or Other Consideration.
Mr. Blech, Ramesh C. Pandey, the Issuer's Chief Executive Officer, and the
Issuer entered into a Stock Purchase Agreement dated as of November 18, 1996
(the "Stock Purchase Agreement") pursuant to which Mr. Blech agreed to purchase
$5.5 million (55,000 shares) of the Issuer's Class C, Series 2 Convertible
Voting Preferred Stock (the "Preferred Stock"). A copy of the Stock Purchase
Agreement is annexed hereto as Exhibit 2 and incorporated herein by reference,
and any discussion herein of the terms and conditions of the Stock Purchase
Agreement is qualified in its entirety by reference to the complete terms and
conditions of such agreement. The Preferred Stock is convertible into Common
Stock at a price of $.05 per share ($.0625 per share if Mr. Blech and his
designees fail to purchase at least $2.25 million (22,500 shares) of Preferred
Stock by January 15, 1997, subject to applicable grace periods. Pursuant to an
Assignment and Assumption dated as of November 18, 1996 by and between Mr. Blech
and the Trust (the "Assignment"), Mr. Blech assigned to the Trust the right to
acquire the first $1 millon (10,000 shares) of
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Preferred Stock pursuant to the Stock Purchase Agreement. A copy of the
Assignment is annexed hereto as Exhibit 3 and incorporated herein by reference,
and any discussion herein of the terms and conditions of the Assignment is
qualified in its entirety by reference to the complete terms and conditions of
such instrument. Mr. Blech has the right to assign his rights with respect to
subsequent purchases of Preferred Stock pursuant to the Stock Purchase Agreement
to the Trust or to other persons or entities reasonably satisfactory to the
Issuer.
On November 19, 1996, pursuant to the Stock Purchase Agreement and the
Assignment, the Trust purchased $500,000 (5,000 shares) of Preferred Stock for
$500,000, which came out of the working capital of the Trust. Any additional
shares of Preferred Stock acquired pursuant to the Stock Purchase Agreement by
Mr. Blech or the Trust will be acquired out of available funds constituting
personal funds or working capital of such party, as the case may be.
The Stock Purchase Agreement requires the following additional purchases of
Preferred Stock: $500,000 (5,000 shares) on December 2, 1996, which obligation
has been assigned to the Trust pursuant to the Assignment; $500,000 (5,000
shares) on December 16, 1996; $750,000 (7,500 shares) on January 15, 1996; $1.75
million (17,500 shares) on February 17, 1997; $1 million (10,000 shares) on June
2, 1997; and $500,000 (5,000 shares) on July 15, 1997. The purchases scheduled
on and after February 17, 1997 are subject to the condition that Dr. Pandey
exchange the
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Issuer's obligations to him on notes and preferred stock of $1,318,000 for
$1,318,000 (13,180 shares) of a new series of preferred stock of the Issuer
identical to the Preferred Stock except that it is convertible into Common Stock
at $.0625 per share. If the Issuer has sufficient authorized Common Stock to
permit the conversion of the Preferred Stock called for in such purchases by any
such date, the Issuer will issue the underlying Common Stock instead of
Preferred Stock. Moreover, the outstanding Preferred Stock will automatically be
converted into Common Stock when the Issuer has sufficient authorized Common
Stock to permit such conversion (or, if later, upon the closing of the purchase
scheduled for January 15, 1997). The Preferred Stock is entitled to as many
votes as the number of shares of Common Stock into which it is convertible and
votes as a single class with the Common Stock. The Issuer's sole remedy for the
failure of Mr. Blech to complete any required purchase of Preferred Stock under
the Stock Purchase Agreement after the purchase scheduled for December 2, 1996
is to terminate such agreement, in which case Mr. Blech would also lose the
benefit of certain provisions of a Stockholders Agreement dated as of November
18, 1996 by and among Mr. Blech, Dr. Pandey and the Issuer (the "Stockholders
Agreement"). A copy of the Stockholders Agreement is annexed hereto as Exhibit 4
and is incorporated herein by reference, and any discussion herein of the terms
and conditions of the Stockholders Agreement is
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qualified in its entirety by reference to the complete terms and conditions of
such agreement.
Item 4. Purpose of Transaction.
Except as set forth in the Stock Purchase Agreement or the Stockholders
Agreement or as otherwise described herein, Mr. Blech and the Trust have no
proposals or plans which would result in any of the transactions or events
enumerated in paragraphs (a) through (j) of this Item. The Trust acquired the
Preferred Stock purchased on November 19, 1996 for investment purposes, and Mr.
Blech and the Trust intend to acquire the other shares of Preferred Stock
covered by the Stock Purchase Agreement and the Assignment for investment
purposes. Notwithstanding the foregoing, Mr. Blech and the Trust reserve the
right at any time or from time to time to acquire additional shares of the
capital stock of the Issuer or to dispose of any shares of capital stock of the
Issuer in open market or privately negotiated transactions on terms deemed by
them or either of them to be appropriate or to propose any of the transactions
described in Item 4 to the Issuer's board of directors or to seek control of
such board and thereafter to cause or seek to cause any of such transactions to
take place.
Pursuant to the Stock Purchase Agreement, Mr. Blech has agreed to vote for
or consent to an amendment to the Issuer's certificate of incorporation to
authorize sufficient Common Stock to permit conversion of the Preferred Stock.
Pursuant to the Stockholders Agreement, Mr. Blech has agreed that he and his
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designees, including the Trust, will, with limited exceptions, vote for the
continuous reelection of Dr. Pandey as a director and will use their best
efforts to cause Dr. Pandey to remain as the Issuer's Chairman, President and
Chief Executive Officer, and Dr. Pandey and the current directors of the Company
have agreed, subject to any fiduciary duties they may have, to cause the
election of designees of Mr. Blech, upon his request, as a majority of the
Issuer's board of directors.
Item 5. Interest in Securities of the Issuer
(a) The Trust has acquired $500,000 (5,000 shares) of Preferred Stock and
has the right, pursuant to the Stock Purchase Agreement and the Assignment to
acquire an additional $500,000 (5,000 shares) of Preferred Stock within the next
60 days. If these shares are acquired and no other shares are acquired pursuant
to the Stock Purchase Agreement, they will be convertible into 16,000,000 shares
of Common Stock. Accordingly, the Trust beneficially owns 68.1% of the Common
Stock deemed outstanding pursuant to Rule 13d-3(d) promulgated pursuant to the
Securities Exchange Act of 1934, as amended, based on 7,483,494 shares of Common
Stock reported by the Issuer as outstanding on August 15, 1996 in its Quarterly
Report on Form 10-QSB for the period ended June 30, 1996. The $500,000 (5,000
shares) of Preferred Stock actually purchased to date is currently convertible
into 8,000,000 shares of Common Stock, or 51.7% of the Common Stock deemed to be
outstanding. Mr. Blech could be deemed to beneficially own such Common Stock
pursuant to Article
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Five of the Trust Agreement, which reserves to him the investment powers with
respect to the Trust's securities of companies of which the securities holdings
by Mr. Blech and the Trust could be deemed to be significant from the viewpoint
of voting control within the meaning of Section 675(4)(B) of the Internal
Revenue Code of 1986, as amended.
Pursuant to the Stock Purchase Agreement, Mr. Blech has the right to
acquire $4,500,000 (45,000 additional shares) of Preferred Stock and has the
right to do so within the next 60 days, notwithstanding the scheduled purchase
dates. Accordingly, he could be deemed to own the Common Stock into which such
Preferred Stock is convertible--i.e., 90,000,000 shares of Common Stock.
Moreover, if such purchases are effected, the $1,000,000 (10,000 shares) of
Preferred Stock owned or subject to a purchase right by the Trust would be
convertible into 20,000,000 shares of Common Stock. Accordingly, Mr. Blech could
be deemed to beneficially own 110,000,000 shares of Common Stock, or 93.6% of
the Common Stock deemed to be outstanding (without taking into account the
conversion of Dr. Pandey's preferred stock described above).
(b) Mr. Blech has sole voting and dispositive powers with respect to
90,000,000 shares of Common Stock and shares with the Trust the voting and
dispositive powers with respect to the remaining shares identified in this
Statement.
(c) The only transaction with respect to the securities of the Issuer by
either Mr. Blech or the Trust within
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the past 60 days was the Trust's purchase from the Issuer of $500,000 (5,000
shares) of Preferred Stock for $500,000 on November 19, 1996 pursuant to the
Stock Purchase Agreement and the Assignment.
(d) No person other than Mr. Blech or the Trust has the right to receive or
direct the receipt of dividends or sales proceeds of the Preferred Stock or the
Common Stock owned or sold by Mr. Blech or the Trust, respectively.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer
As described above, Mr. Blech, Dr. Pandey and the Issuer are parties to the
Stock Purchaser Agreement and the Stockholders Agreement, which agreements have
been assigned in part to the Trust pursuant to the Assignment. In addition to
the provisions described above, the Stockholders Agreement provides that Dr.
Pandey will not sell any shares of capital stock of the Issuer for 5 years
without the consent of Mr. Blech; Dr. Pandey and Mr. Blech provide each other
the right to join on a pro rata basis in any private sales of capital stock by
the other; and Mr. Blech has certain demand and piggyback registration rights
with respect to capital stock of the Issuer purchased pursuant to the Stock
Purchase Agreement. As described above, the Trust Agreement gives Mr. Blech
certain rights with respect to Common Stock and Preferred Stock held by the
Trust.
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Item 7. Material to be Filed as Exhibits.
The following agreements, instruments and documents are filed as exhibits
to this Statement:
1. Joint Filing Agreement.
2. Stock Purchase Agreement.
3. Assignment.
4. Stockholders Agreement.
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SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: November 27, 1996
THE EDWARD A. BLECH TRUST,
Rabbi Mordechai Jofen, Trustee
By: /s/ RABBI MORDECHAI JOFEN
Rabbi Mordechai Jofen, Trustee
/s/ DAVID BLECH
David Blech
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EXHIBIT INDEX
No. Description Page
--- ----------- ----
1. Joint Filing Agreement.
2. Stock Purchase Agreement.
3. Assignment.
4. Stockholders Agreement.
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EXHIBIT 1
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Joint Filing Agreement
The undersigned hereby consent to the joint filing by any of them of a
Statement on Schedule 13D and any amendments thereto, whether heretofore or
hereafter filed, relating to the common stock, par value $.00001 per share, of
Xechem International, Inc.
Dated: November 27, 1996
THE EDWARD A. BLECH TRUST,
Rabbi Mordechai Jofen, Trustee
By: /s/ RABBI MORDECHAI JOFEN
Rabbi Mordechai Jofen, Trustee
/s/ DAVID BLECH
David Blech
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EXHIBIT 2
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STOCK PURCHASE AGREEMENT
AMONG
XECHEM INTERNATIONAL, INC.,
DAVID BLECH,
AND
RAMESH C. PANDEY
November 18, 1996
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
I. The Exchanges 1
1.1. Terms of the Exchange 1
1.2. The Closings 3
II Representations and Warranties of the Company and Pandey 3
2.1. Organization and Qualification 3
2.2. SEC Reports 3
2.3. Capitalization 3
2.4. Litigation and Claims 4
2.5. Authority to Sell 4
2.6. No Conflicts 4
2.7. Valid Issuance, Etc. 5
2.8. Completeness of Disclosure 5
III Additional Representations and Warranties of Pandey 5
3.1. Authority to Act 5
3.2. No Conflicts 5
3.3. Non-Distributive Intent 6
3.4. Pandey Debt and Preferred Stock 6
3.5. Completeness of Disclosure 6
IV Representations and Warranties of the Purchaser 6
4.1. Authority to Buy 6
4.2. No Conflicts 6
4.3. Non-Distributive Intent 7
4.4. Completeness of Disclosure 7
V Conditions to Obligations of the Purchaser 7
5.1. Accuracy of Representations and Compliance with Conditions 7
5.2. Opinion of Counsel 8
5.3. Legal Action 8
5.4. No Governmental Action 8
5.5. Contractual Consents Needed 8
5.6. Stockholders Agreement 8
5.7. Pandey Closing 8
5.8. Consulting Agreement 8
5.9. Bankruptcy 8
5.10. Chief Executive 8
VI Conditions to the Obligations of the Company and Pandey 9
6.1. Accuracy of Representations and Compliance with Conditions 9
6.2. Opinion of Counsel 9
6.3. Legal Action 9
6.4. No Governmental Action 9
6.5. Contractual Consents Needed 9
</TABLE>
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Page
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<S> <C>
6.6. Stockholders Agreement 9
6.7. Purchaser Closing 9
6.8. Fairness Opinion 9
VII Covenants and Agreements 9
7.1. Advice of Changes 10
7.2. Confidentiality 10
7.3. Public Statements 10
7.4. Furnish Future Information 10
7.5. Amendment 10
7.6. Nasdaq 11
7.7. Employment Agreement 11
7.8. Expenses 11
7.9. Pandey Debt 11
VIII Indemnification 11
8.1. General 11
8.2. Indemnity Procedures 11
8.3. Exclusivity 12
8.4. Survival 12
IX Termination 12
9.1. Termination 12
9.2. Effect of Termination 13
X Miscellaneous 13
10.1. Further Actions 13
10.2. Availability of Equitable Remedies 13
10.3. Modification 13
10.4. Notices 14
10.5. Waiver 14
10.6. Binding Effect 14
10.7. No Third Party Beneficiaries 15
10.8. Separability 15
10.9. Headings 15
10.10. Counterparts; Governing Law 15
LIST OF EXHIBITS
Exhibit 1.1 - Stockholders Agreement
Exhibit 2.3A - Capitalization
Exhibit 2.3B - Commitments
Exhibit 2.3C - Warrant Adjustments
</TABLE>
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Exhibit 2.5 - Certificate of Designation
Exhibit 2.6 - Consents
Exhibit 4.3 - Disclosure Documents
Exhibit 5.2 - Opinion of Duane, Morris & Heckscher
Exhibit 5.8 - Consulting Agreement
Exhibit 6.2 - Opinion of Herzfeld & Rubin
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STOCK PURCHASE AGREEMENT
Agreement, dated November 18, 1996, among Xechem International, Inc.,
a Delaware corporation (the "Company"); David Blech (the "Purchaser"); and
Ramesh C. Pandey ("Pandey").
The Purchaser and Pandey desire to acquire certain shares of the
capital stock of the Company, in exchange for cash and debt of the Company as
hereinafter provided, and the Company desires to effect such exchange.
I. The Exchanges
1.1. Terms of the Exchange. On the basis of the representations,
warranties, covenants, and agreements contained in this Agreement and subject to
the terms and conditions of this Agreement:
(a) at the Initial Closing (as defined below):
(i) the Company shall issue to the Purchaser a
certificate registered in the name of the Purchaser for 5,000
shares (the "Initial Shares") of the Class C Series 2
Convertible Voting Preferred Stock (the "Series 2 Stock") of
the Company;
(ii) in consideration for the Initial Shares, the
Purchaser shall deliver to the Company (A) the promissory
note, dated October 17, 1996, from the Company to The Edward
A. Blech Trust, in the principal amount of $100,000, and any
subsequent promissory notes issued by the Company to such
Trust or the Purchaser, each marked paid in full, and (B) the
excess, if any, of $500,000 over the aggregate principal
amount of such promissory notes and any other advances made
by such Trust or the Purchaser, by wire transfer of
immediately available funds (the Purchaser hereby agreeing to
provide evidence, reasonably acceptable to the Company, at
the Initial Closing that repayment to the Trust of such
advances has been made); and
(iii) the parties shall enter into a Stockholders
Agreement (the "Stockholders Agreement") in the form attached
as Exhibit 1.1 hereto;
(b) at each of the Second Closing and the Third Closing
(each as defined below):
(i) the Company shall issue to the Purchaser a
certificate registered in the name of the Purchaser for 5,000
shares (the "Second Shares" or "Third Shares," respectively)
of the Series 2 Stock; and
(ii) in consideration for the Second Shares or Third
Shares, as the case may be, the Purchaser shall deliver to
the Company $500,000 by wire transfer of immediately
available funds;
(c) at the Fourth Closing (as defined below),
(i) the Company shall issue to the Purchaser a
certificate registered in the name of the Purchaser for 7,500
shares (the "Fourth Shares") of the Series 2 Stock;
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(ii) in consideration for the Third Shares, the
Purchaser shall deliver to the Company $750,000 by wire
transfer of immediately available funds;
(iii) the Company shall issue to Pandey a
certificate registered in his name for 13,180 shares (the
"Pandey Shares") of the Class C Series 3 Convertible Voting
Preferred Stock (the "Series 3 Stock") of the Company; and
(iv) in consideration for the Pandey Shares, Pandey
shall deliver to the Company (A) all promissory notes or
other instruments evidencing the indebtedness owed as of the
date of this Agreement by the Company or any of its
subsidiaries to Pandey (the "Pandey Debt"), marked paid in
full, and (B) the stock certificate(s) held by Pandey
representing the Class B 8% Preferred Stock of the Company
(the "Class B Preferred Stock"), together with a stock power
related thereto;
(d) at the Fifth Closing (as defined below):
(i) the Company shall issue to the Purchaser a
certificate registered in the name of the Purchaser for 17,500
shares (the "Fifth Shares") of the Series 2 Stock; and
(ii) in consideration for the Fifth Shares, the
Purchaser shall deliver to the Company $1,750,000 by wire
transfer of immediately available funds; and
(e) at the Sixth Closing (as defined below),
(i) the Company shall issue to the Purchaser a
certificate registered in the name of the Purchaser for 10,000
shares (the "Sixth Shares") of the Series 2 Stock;
(ii) in consideration for the Sixth Shares, the
Purchaser shall deliver to the Company $1,000,000 by wire
transfer of immediately available funds;
(f) at the Final Closing (as defined below):
(i) the Company shall issue to the Purchaser a
certificate registered in the name of the Purchaser for 5,000
shares (the "Final Shares" and, together with the Initial
Shares, the Second Shares, the Third Shares, the Fourth
Shares, the Fifth Shares, and the Sixth Shares, the
"Purchaser Shares") of the Series 2 Stock;
(ii) in consideration for the Final Shares, the
Purchaser shall deliver to the Company $500,000 by wire
transfer of immediately available funds.
(g) Notwithstanding the foregoing, if, prior to any Closing Date (as
hereinafter defined), the Conversion Date (as defined in the Certificate of
Designation (as hereinafter defined)) has occurred, the Purchaser and Pandey,
to the extent applicable, shall receive, at the Closing (as hereinafter
defined) held on such Closing Date, in lieu of the shares of Series 2 Stock or
Series 3 Stock, respectively, issuable as provided above, the shares of Common
Stock into which such shares of Series 2 Stock or Series 3 Stock would have
been convertible on such Closing Date. In such case, the shares of Common Stock
so delivered shall be deemed the Purchaser Shares or Pandey Shares delivered at
such Closing.
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(h) At the option of the Purchaser, the Purchaser may, at any Closing,
purchase some or all of the Purchaser Shares to be purchased at a subsequent
Closing. The Purchaser shall give the Company five business days prior notice
of intent to exercise the option set forth in this Section 1.1(h).
1.2. The Closings. The closing of the transactions contemplated by
Section 1.1(a) (the "Initial Closing") shall take place on or as soon as
practicable after the date hereof (the "Initial Closing Date"). The closings of
the transactions contemplated by Sections 1.1(b), (c), (d), (e), and (f) (the
"Second Closing," "Third Closing," "Fourth Closing," "Fifth Closing," "Sixth
Closing," and "Final Closing," consecutively, and collectively, including the
Initial Closing, the "Closings") shall take place on such dates (the "Second
Closing Date," "Third Closing Date," "Fourth Closing Date," "Fifth Closing
Date," "Sixth Closing Date," and "Final Closing Date," consecutively, and
collectively, including the Initial Closing Date, the "Closing Dates") shall
take place on or before December 2, 1996, December 16, 1996, January 15, 1997,
February 17, 1997, June 2, 1997, and July 15, 1997, consecutively, as the
Purchaser shall, on five business days notice, inform the Company that the
Purchaser is prepared to proceed with the respective Closing. Each Closing
shall take place at the offices of Duane, Morris & Heckscher, 122 East 42nd
Street, New York, New York.
II Representations and Warranties of the Company and Pandey
The Company and Pandey, jointly and severally, represent and warrant
to the Purchaser as follows:
2.1. Organization and Qualification. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Delaware, with all requisite power and authority to own, lease, license, and
use its properties and assets and to carry on the business in which it is now
engaged and the business in which it contemplates engaging.
2.2. SEC Reports. The Company has delivered to the Purchaser true and
correct copies of its Annual Report on Form 10-KSB, as amended, for the year
ended December 31, 1995 (the "10-K"), Quarterly Reports on Form 10-QSB for the
periods ended March 31 and June 30, 1996, all Current Reports on Form 8-K filed
with the Securities and Exchange Commission (the "SEC") since the filing of the
10-K, and its Proxy Statement dated May 24, 1996 (collectively, the "SEC
Reports"). None of the SEC Reports when filed with the SEC contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein not misleading.
From the date of the last SEC Report to each Closing Date, no event has
occurred which caused a material adverse change in the business of the Company,
except as disclosed (a) in this Agreement or one of the Exhibits hereto, (b) in
a report or statement filed with the SEC on or before such Closing Date, a copy
of which is delivered to the Purchaser in accordance with Section 7.4, or (c)
to the Purchaser in writing prior to such Closing Date.
2.3. Capitalization. Set forth on Exhibit 2.3A is the capitalization
of the Company (a) as of August 31, 1996 and (b) pro forma, giving effect to
certain transactions described on Exhibit 2.3A which occurred subsequent to
such date and prior to the date hereof and to the transactions contemplated by
this Agreement as if all such transactions (including the issuance of all of
the Purchaser Shares and Pandey Shares) had occurred on such date. Since August
31, 1996, the Company has not issued any shares of its capital stock except (c)
as indicated on Exhibit 2.3A or Exhibit 2.3B, (d) issuances on exercises of
previously outstanding stock options, (e) pursuant to this Agreement, or (f)
issuance approved in writing
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by the Purchaser or approved by the Board of Directors of the Company at a time
when a majority of the directors of the Company were nominees of the Purchaser.
Other than this Agreement or as described on Exhibit 2.3B, there is (g) no
commitment, plan, or arrangement to issue, or outstanding option, warrant, or
other right calling for the issuance of, any share of capital stock of the
Company, or to issue or calling for the issuance of any security or other
instrument convertible into, exercisable for, or exchangeable for capital stock
of the Company, and (h) no outstanding security or other instrument convertible
into or exchangeable for capital stock of the Company. Set forth as Exhibit
2.3C is a description of the adjustments made in the exercise price of certain
outstanding warrants (the "Warrants") and estimated adjustments which will
result from the transactions contemplated hereby. It is understood that such
estimated adjustments are based on various assumptions, as indicated on Exhibit
2.3C (including, without limitation, dates for and numbers of shares to be
issued at the Closings which are not identical to the dates and numbers of
shares set forth in Section 1.1), and that no representation is made as to
whether such assumptions are reasonable, are likely to be or will be achieved,
or as to the adjustments to such exercise price which would result from facts
different than those set forth in such assumptions.
2.4. Litigation and Claims. Except as disclosed in the SEC Reports,
there is no litigation, arbitration, claim, governmental or other proceeding
(formal or informal), or investigation pending or threatened, with respect to
the Company, except as would not be reasonably likely to have a material
adverse effect on the Company and its subsidiaries (each, a "Subsidiary") taken
as a whole.
2.5. Authority to Sell. The Company has all requisite power and
authority to execute, deliver, and perform this Agreement and the Stockholders
Agreement. All necessary corporate proceedings of the Company have been duly
taken to authorize the execution, delivery, and performance of this Agreement
and the Stockholders Agreement by the Company, except for (a) the filing of the
Amended and Restated Certificate of Designation setting forth the terms of the
Series 2 Stock and the Series 3 Stock (the "Certificate of Designation"), which
will be filed, in the form attached hereto as Exhibit 2.5, on or before the
First Closing Date and (b) approval of the stockholders of the Company
("Stockholder Approval") of an amendment to the Certificate of Incorporation
(the "Amendment") to increase the number of authorized shares of the Company's
Common Stock (the "Common Stock") as contemplated by Section 7.5. Each of this
Agreement and the Stockholders Agreement has been duly authorized by the
Company, this Agreement has been, and at the Initial Closing the Stockholders
Agreement will be, duly executed and delivered by the Company, and each of this
Agreement and the Stockholders Agreement constitutes or will constitute the
legal, valid, and binding obligation of the Company and is or will be
enforceable as to the Company in accordance with its terms.
2.6. No Conflicts. Except as set forth in Sections 7.5 and 7.6, no
consent, authorization, approval, order, license, certificate, or permit of or
from, or declaration or filing with, any federal, state, local, or other
governmental authority or any court or other tribunal is required by the
Company for the execution, delivery, or performance of this Agreement and the
Stockholders Agreement by the Company. No consent of any party to any contract,
agreement, instrument, lease, or license (collectively, "Contracts") to which
the Company or any Subsidiary is a party, or to which it or any of its
businesses, properties, or assets are subject, is required for the execution,
delivery, or performance of this Agreement and the Stockholders Agreement by
the Company (except consents referred to in Exhibit 2.6); and the execution,
delivery, and performance of this Agreement and the Stockholders Agreement by
the Company will not (if the consents referred to in Exhibit 2.6 are obtained
prior to the Initial Closing) violate, result in a breach of, conflict with, or
(with or without the giving of notice or the passage of time or both) entitle
any party to terminate or call a default under, entitle any party to rights and
privileges that such
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party was not receiving or entitled to receive immediately before this
Agreement was executed under, or create any obligation on the part of the
Company or any Subsidiary that it was not paying or obligated to pay
immediately before this Agreement was executed under, any term of any such
Contract or violate or result in a breach of any term of the certificate of
incorporation (or other charter document) or by-laws of the Company or any
Subsidiary, or violate, result in a breach of, or conflict with any law, rule,
regulation, order, judgment, or decree binding on the Company or any Subsidiary
or to which it or any of its businesses, properties, or assets are subject.
2.7. Valid Issuance, Etc. At each Closing, the Purchaser Shares or
Pandey Shares to be issued at such Closing will be validly authorized, validly
issued, fully paid, and nonassessable and will not have been issued in
violation of any preemptive right of stockholders, and the Purchaser or Pandey,
as the case may be, will receive good title to the shares issued to it or him,
free and clear of all liens, security interests, pledges, charges,
encumbrances, stockholders' agreements, and voting trusts, other than the
Stockholders Agreement. Subject to receipt of the Stockholder Approval and
filing of the Amendment, the shares of Common Stock issuable on conversion of
the Purchaser Shares and Pandey Shares (the "Conversion Shares") have been
reserved for issuance and, when issued and delivered on conversion of the
Purchaser Shares or Pandey Shares, will be validly authorized, validly issued,
fully paid, and nonassessable and will not have been issued in violation of any
preemptive right of stockholders, and the holders of such converted the
Purchaser Shares or Pandey Shares, as the case may be, will receive good title
to the shares issued to it or him, free and clear of all liens, security
interests, pledges, charges, encumbrances, stockholders' agreements, and voting
trusts, other than the Stockholders Agreement.
2.8. Completeness of Disclosure. No representation or warranty by the
Company in this Agreement contains or (except for changes beyond the control of
the Company) on any Closing Date will contain an untrue statement of a material
fact or omits or (except for changes beyond the control of the Company) on any
Closing Date will omit to state a material fact required to be stated therein
or necessary to make the statements made therein not misleading.
III Additional Representations and Warranties of Pandey
Pandey represents and warrants to the other parties hereto as follows:
3.1. Authority to Act. This Agreement has been, and at the Initial
Closing the Stockholders Agreement will be, duly executed and delivered by
Pandey, and each of this Agreement and the Stockholders Agreement constitutes
or will constitute the legal, valid, and binding obligation of Pandey and is or
will be enforceable as to Pandey in accordance with its terms.
3.2. No Conflicts. No consent, authorization, approval, order,
license, certificate, or permit of or from, or declaration or filing with, any
federal, state, local, or other governmental authority or any court or other
tribunal is required by Pandey for the execution, delivery, or performance of
this Agreement and the Stockholders Agreement by Pandey. No consent of any
party to any Contract to which Pandey is a party, or to which he or any of his
businesses, properties, or assets are subject, is required for the execution,
delivery, or performance of this Agreement and the Stockholders Agreement by
Pandey (except consents referred to in Exhibit 2.6); and the execution,
delivery, and performance of this Agreement and the Stockholders Agreement by
Pandey will not (if the consents referred to in Exhibit 2.6 are obtained prior
to the Initial Closing) violate, result in a breach of, conflict with, or (with
or without the giving of notice or the passage of time or both) entitle any
party to terminate or call a default
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under, entitle any party to rights and privileges that such party was not
receiving or entitled to receive immediately before this Agreement was executed
under, or create any obligation on the part of Pandey that he was not paying or
obligated to pay immediately before this Agreement was executed under, any term
of any such Contract, or violate, result in a breach of, or conflict with any
law, rule, regulation, order, judgment, or decree binding on Pandey or to which
he or any of his businesses, properties, or assets are subject.
3.3. Non-Distributive Intent. Pandey is an "accredited investor," as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). Pandey is acquiring the Pandey Shares, and on
conversion of any Pandey Shares will acquire the underlying Conversion Shares,
for his own account (and not for the account of others) for investment and not
with a view to the distribution thereof. Pandey will not sell or otherwise
dispose of the Pandey Shares or Conversion Shares (whether pursuant to a
liquidating dividend or otherwise) without registration under the Securities
Act or an exemption therefrom, and the certificate or certificates representing
the Pandey Shares and the Conversion Shares may contain a legend to the
foregoing effect. Pandey has been given access to the kind of financial and
other information about the Company as would be contained in a registration
statement filed under the Securities Act. Pandey understands that he may not
sell or otherwise dispose of the Pandey Shares or Conversion Shares in the
absence of either a registration statement under the Securities Act or an
exemption from the registration provisions of the Securities Act.
3.4. Pandey Debt and Preferred Stock. Pandey owns all of the Pandey
Debt and all of the shares of Class B Preferred Stock, in each case free and
clear of all liens, security interests, pledges, charges, encumbrances,
stockholders' agreements, and voting trusts, other than this Agreement and the
agreement referred to on Exhibit 2.6. Pandey owns no other shares of preferred
stock of the Company, except 2,500 shares of the Class A Voting Preferred Stock
of the Company.
3.5. Completeness of Disclosure. No representation or warranty by
Pandey in this Agreement contains or (except for changes beyond the control of
Pandey) on any Closing Date will contain an untrue statement of a material fact
or omits or (except for changes beyond the control of Pandey) on any Closing
Date will omit to state a material fact required to be stated therein or
necessary to make the statements made therein not misleading.
IV Representations and Warranties of the Purchaser
The Purchaser represents and warrants to the other parties hereto as
follows:
4.1. Authority to Buy. This Agreement has been, and at the Initial
Closing the Stockholders Agreement will be, duly executed and delivered by the
Purchaser, and each of this Agreement and the Stockholders Agreement is or will
be the legal, valid, and binding obligation of the Purchaser and is or will be
enforceable as to the Purchaser in accordance with its terms.
4.2. No Conflicts. No consent, authorization, approval, order,
license, certificate, or permit of or from, or declaration or filing with, any
federal, state, local, or other governmental authority or any court or other
tribunal is required by the Purchaser for the execution, delivery, or
performance of this Agreement and the Stockholders Agreement by the Purchaser.
No consent of any party to any Contract to which the Purchaser is a party, or
to which it or any of its businesses, properties, or assets are subject,
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is required for the execution, delivery, or performance of this Agreement and
the Stockholders Agreement by the Purchaser; and the execution, delivery, and
performance of this Agreement and the Stockholders Agreement by the Purchaser
will not violate, result in a breach of, conflict with, or (with or without the
giving of notice or the passage of time or both) entitle any party to terminate
or call a default under, entitle any party to rights and privileges that such
party was not receiving or entitled to receive immediately before this
Agreement was executed under, or create any obligation on the part of the
Purchaser that it was not paying or obligated to pay immediately before this
Agreement was executed under, any term of any such Contract, or violate, result
in a breach of, or conflict with any law, rule, regulation, order, judgment, or
decree binding on the Purchaser or to which it or any of its businesses,
properties, or assets are subject.
4.3. Non-Distributive Intent. The Purchaser is an accredited investor.
The Purchaser is acquiring the Purchaser Shares, and on conversion of any the
Purchaser Shares will acquire the underlying Conversion Shares, for its own
account (and not for the account of others) for investment and not with a view
to the distribution thereof. The Purchaser will not sell or otherwise dispose
of the Purchaser Shares or Conversion Shares (whether pursuant to a liquidating
distribution or otherwise) without registration under the Securities Act or an
exemption therefrom, and the certificate or certificates representing the
Purchaser Shares and the Conversion Shares may contain a legend to the
foregoing effect. The Purchaser has been given access to the kind of financial
and other information about the Company as would be contained in a registration
statement filed under the Securities Act. Without limiting the foregoing, the
Purchaser acknowledges receipt of the SEC reports and the other documents
listed in or attached to Exhibit 4.3. The Purchaser understands that it may not
sell or otherwise dispose of the Purchaser Shares or Conversion Shares in the
absence of either a registration statement under the Securities Act or an
exemption from the registration provisions of the Securities Act.
4.4. Completeness of Disclosure. No representation or warranty by the
Purchaser in this Agreement contains or (except for changes beyond the control
of the Purchaser) on any Closing Date will contain an untrue statement of a
material fact or omits or (except for changes beyond the control of the
Purchaser) on any Closing Date will omit to state a material fact required to
be stated therein or necessary to make the statements made therein not
misleading.
V Conditions to Obligations of the Purchaser
The obligations of the Purchaser at any Closing under this Agreement
are subject, at the option of the Purchaser, to the following conditions:
5.1. Accuracy of Representations and Compliance with Conditions. All
representations and warranties of the Company or Pandey contained in this
Agreement shall be accurate when made and, in addition, shall be accurate as of
such Closing as though such representations and warranties were then made in
exactly the same language by the Company or Pandey (except for changes beyond
its or his control); as of the Closing the Company and Pandey shall have
performed and complied with all covenants and agreements and satisfied all
conditions required to be performed and complied with by any of them at or
before such time by this Agreement; and the Purchaser shall have received
certificates executed by the President or Vice President - Finance and
Operations of the Company and by Pandey, dated the respective Closing Date, to
that effect.
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5.2. Opinion of Counsel. The Purchaser shall have received on such
Closing Date the opinion of Duane, Morris & Heckscher, counsel to the Company,
dated as of such date, in the form attached as Exhibit 5.2.
5.3. Legal Action. There shall not have been instituted or
threatened any legal proceeding relating to, or seeking to prohibit or otherwise
challenge the consummation of, the transactions contemplated by this Agreement,
or to obtain substantial damages with respect thereto.
5.4. No Governmental Action. There shall not have been any action
taken, or any law, rule, regulation, order, or decree proposed, promulgated,
enacted, entered, enforced, or deemed applicable to the transactions
contemplated by this Agreement by any federal, state, local, or other
governmental authority or by any court or other tribunal, including the entry
of a preliminary or permanent injunction, which makes any of the transactions
contemplated by this Agreement illegal or prohibits, restricts, or delays
consummation of any of the transactions contemplated by this Agreement.
5.5. Contractual Consents Needed. The Company shall have obtained at
or prior to such Closing the consents listed in Exhibit 2.6.
5.6. Stockholders Agreement. The Stockholders Agreement shall have
been duly authorized, executed, and delivered by Pandey and the Company at or
prior to such Closing and at such Closing shall be in full force.
5.7. Pandey Closing. The exchange by Pandey of the Pandey Debt and
shares of Class B Preferred Stock for the Pandey Shares shall have been
consummated; provided, that this Section 5.7 shall be a condition only with
respect to the Fourth Closing and each subsequent Closing.
5.8. Consulting Agreement. At the Initial Closing, the Company shall
have executed and delivered a Consulting Agreement with Mark Germain
substantially in the form attached hereto as Exhibit 5.8.
5.9. Bankruptcy. At such Closing Date, there shall not have been
entered any decree or order by a court having jurisdiction adjudging the
Company a bankrupt or insolvent, or approving a petition seeking
reorganization, arrangement, adjustment, or composition of or in respect of the
Company, under any federal or state bankruptcy law, and the Company shall not
have (a) commenced a voluntary case under any federal or state bankruptcy law,
(b) consented to the institution of bankruptcy or insolvency proceedings
against it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under federal or state bankruptcy law or the
appointment of a receiver, liquidator, assignee, trustee, sequestrator, or
similar official of the Company or of any substantial part of its property, (c)
made an assignment for the benefit of creditors, (d) admitted in writing its
inability to pay its debts generally as they become due, or (e) taken any
action in furtherance of any such action.
5.10. Chief Executive. At such Closing Date, Pandey shall be the Chief
Executive Officer of the Company; provided, that this Section 5.10 shall not
apply if Pandey shall have been removed (other than for cause) as Chief
Executive Officer by action of the Purchaser or any of its nominees as
directors of the Company.
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VI Conditions to the Obligations of the Company and Pandey
The obligations of the Company and Pandey under this Agreement are
subject, at the option of the Company and Pandey, to the following conditions:
6.1. Accuracy of Representations and Compliance with Conditions. All
representations and warranties of the Purchaser contained in this Agreement
shall be accurate when made and, in addition, shall be accurate as of such
Closing as though such representations and warranties were then made in exactly
the same language by the Purchaser (except for changes beyond its control); as
of the Closing the Purchaser shall have performed and complied with all
covenants and agreements and satisfied all conditions required to be performed
and complied with by it at or before such time by this Agreement; and the
Company and Pandey shall have received a certificate executed on behalf of the
Purchaser, dated the respective Closing Date, to that effect.
6.2. Opinion of Counsel. The Company shall have received on the First
Closing Date the opinion of Herzfeld & Rubin, counsel to the Purchaser, dated as
of such date, in the form attached as Exhibit 6.2.
6.3. Legal Action. There shall not have been instituted or threatened
any legal proceeding relating to, or seeking to prohibit or otherwise challenge
the consummation of, the transactions contemplated by this Agreement, or to
obtain substantial damages with respect thereto.
6.4. No Governmental Action. There shall not have been any action
taken, or any law, rule, regulation, order, or decree proposed, promulgated,
enacted, entered, enforced, or deemed applicable to the transactions
contemplated by this Agreement by any federal, state, local, or other
governmental authority or by any court or other tribunal, including the entry
of a preliminary or permanent injunction, which makes any of the transactions
contemplated by this Agreement illegal or prohibits, restricts, or delays
consummation of any of the transactions contemplated by this Agreement.
6.5. Contractual Consents Needed. The Company shall have obtained at
or prior to such Closing the consents listed in Exhibit 2.6.
6.6. Stockholders Agreement. The Stockholders Agreement shall have
been duly authorized, executed, and delivered by the Purchaser at or prior to
such Closing and at such Closing shall be in full force.
6.7. Purchaser Closing. The purchase by the Purchaser of the Purchaser
Shares to be purchased on or prior to such Closing Date shall have been
consummated.
6.8. Fairness Opinion. The Company shall have received a written
fairness opinion, in form and substance satisfactory to the Company, from The
Griffin Group, Inc. with respect to the transactions contemplated by this
Agreement.
VII Covenants and Agreements
The parties covenant and agree as follows:
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7.1. Advice of Changes. Until the Final Closing or the termination of
this Agreement, each party will advise the others of any fact or occurrence of
which such party obtains knowledge and which (if existing and known at the date
of the execution of this Agreement) would have been required to be set forth or
disclosed in or pursuant to this Agreement or an Exhibit hereto, which (if
existing and known at any time prior to or at the Closing) would make the
performance by any party of a covenant contained in this Agreement impossible
or make such performance materially more difficult than in the absence of such
fact or occurrence, or which (if existing and known at the time of a subsequent
Closing) would cause a condition to any party's obligations under this
Agreement not to be fully satisfied.
7.2. Confidentiality. Each party shall insure that all confidential
information which such party or any of its officers, directors, employees,
counsel, agents, investment bankers, or accountants may now possess or may
hereafter create or obtain relating to the financial condition, results of
operations, business, properties, assets, liabilities, or future prospects of
any other party shall not be published, disclosed, or made accessible by any of
them to any other person or entity at any time or used by any of them except in
the business and for the benefit of the party to whom such information belongs,
in each case without the prior written consent of such party; provided,
however, that the restrictions of this sentence shall not apply (a) as may
otherwise be required by law, (b) as may be necessary or appropriate in
connection with the enforcement of this Agreement, or (c) to the extent such
information shall have otherwise become publicly available.
7.3. Public Statements. Before any party shall release any information
concerning this Agreement or the transactions contemplated by this Agreement
which is intended for or would be likely to result in public dissemination
thereof, it shall cooperate with the other parties, shall furnish drafts of
such disclosure to the other parties for comments, and shall not release any
such information without the written consent of such other parties, such
consent not to be unreasonably withheld; provided, that (a) any party may,
without complying with this Section 7.3, make such disclosure if such
disclosure is substantially similar to public disclosure previously made by any
party and (b) nothing contained herein shall prevent any party from releasing
any information to any governmental authority if required to do so by law or
the Company from describing this Agreement and the transactions contemplated
herein to the extent the Company reasonably believes it is required in its
reports and filings under the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act").
7.4. Furnish Future Information. Until the Final Closing or the
termination of this Agreement, and thereafter so long as the Purchaser and its
permitted assignees hereunder shall hold at least 10% of the Purchaser Shares
or underlying Conversion Shares, the Company will furnish to the Purchaser and
such assignees, promptly upon their becoming available, copies of all financial
statements, reports, notices, and proxy statements sent by the Company to its
stockholders, all regular and periodic reports filed by the Company with any
securities exchange or with the SEC, and all press releases.
7.5. Amendment. The Company will, and Pandey will cause the Company
to, use their best efforts to, as soon as practicable, (a) file a proxy or
information statement relating to, and call and hold a meeting of or obtain
written consent of the stockholders of the Company to approve, the Amendment,
(b) obtain the Stockholder Approval, and (c) file the Amendment. The Company
shall give the Purchaser prompt notice of the filing of the Amendment. Each of
Pandey and the Purchaser agrees to vote or execute a written consent with
respect to all shares of capital stock of the Company owned by him or it in
favor of the Amendment.
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7.6. Nasdaq. Promptly after the date hereof, the Company shall give
notice to the Nasdaq Stock Market, Inc. of the issuance or potential issuance
of the Purchaser Shares and Pandey Shares and the potential issuance of the
Conversion Shares.
7.7. Employment Agreement. For purposes of Section 5.5 of the
Employment Agreement, dated February 1994, between Pandey and the Company,
Pandey hereby agrees that he has approved the transactions contemplated by this
Agreement and that, accordingly, such transactions do not and will not result
in a "Change in Control" as defined in such Employment Agreement.
7.8. Expenses. The Company shall pay the reasonable attorneys' fees
and expenses of the Purchaser's counsel, not to exceed $15,000 in the aggregate.
The Company shall pay such expenses at the Initial Closing or thereafter upon
presentation of invoices therefor. Except for the foregoing, each party shall
be responsible for his or its own expenses in connection with this Agreement.
7.9. Pandey Debt. Effective upon delivery of the Pandey Shares, Pandey
hereby releases and discharges all claims and causes of action, whether known
or unknown, which he or his heirs, personal representatives, successors, or
assigns ever had, now have, or hereafter may have against the Company on
account of or relating to the Pandey Debt.
VIII Indemnification
8.1. General. Each party (the "indemnifying party") shall indemnify
and hold harmless the other parties and the other parties' affiliates,
officers, directors, trustees, stockholders, employees, agents, and
representatives (each, an "indemnified party") from and against any and all
liabilities, claims, demands, actions, suits, losses, damages, costs, and
expenses (including, without limitation, reasonable attorneys' fees and any and
all expenses whatsoever incurred in investigating, preparing, or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation)
(collectively, "Damages"), based upon or arising out of a breach of any
covenant, agreement, representation, or warranty made by the indemnifying party
in this Agreement or the Stockholders Agreement.
8.2. Indemnity Procedures. (a) An indemnified party seeking
indemnification under this Agreement in respect of, arising out of, or
involving a claim or demand made by any person or governmental authority
against the indemnified party (a "Third Party Claim") shall notify the
indemnifying party in writing of the Third Party Claim within 20 days after
receipt by the indemnified party of written notice of the Third Party Claim;
provided, however, that failure to give such notification shall not affect the
indemnification provided under this Agreement, except to the extent the
indemnifying party shall have been prejudiced by such failure. Thereafter, the
indemnified party shall deliver to the indemnifying party, promptly after the
indemnified party's receipt thereof, copies of all notices and documents
(including court papers) received by the indemnified party relating to the
Third Party Claim.
(b) The indemnifying party shall have the right, within 30 days after
being so notified, to assume the defense of such Third Party Claim with counsel
reasonably satisfactory to the indemnified party. In any such proceeding the
defense of which the indemnifying party shall have so assumed, the indemnified
party shall have the right to participate therein and retain its own counsel at
its own expense unless (i) the indemnified party and the indemnifying party
shall have mutually agreed to the retention
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of such counsel, (ii) the indemnified party shall have reasonably concluded on
the basis of an opinion of its counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party, or (iii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party, and representation of both parties by the same
counsel would be inappropriate in the opinion of the indemnified party's
counsel due to actual or potential differing interests between them; in any
such case, one such separate counsel may be retained by all indemnified parties
as a group at the indemnifying party's expense. To the extent that the
settlement of such a Third Party Claim, the defense of which has been assumed
by the indemnifying party, involves the payment of money only, the indemnifying
party shall have the right, in consultation with the indemnified party, to
settle those aspects dealing only with the payment of money, provided that the
indemnifying party pays such money and such settlement includes a general
release from the other parties to such Third Party Claim in favor of the
indemnified party. In connection with any such defense or settlement, the
indemnifying party shall not enter into a consent decree involving injunctive
or non-monetary relief or consent to an injunction without the indemnified
party's prior written consent.
(c) The indemnified party shall cooperate in all reasonable respects
with the indemnifying party in connection with any Third Party Claims and the
defense or compromise thereof. Such cooperation shall include the retention and
(upon the indemnifying party's request) the provision to the indemnifying party
of records and information reasonably relevant to the Third Party Claim, making
employees available on a mutually convenient basis to provide additional
information, and explanation of any material provided under this Agreement. If
the indemnifying party shall have assumed the defense of a Third Party Claim,
the indemnified party shall not, without first waiving the indemnity as to such
claim, admit any liability with respect to, or settle, compromise, or
discharge, the Third Party Claim, without the indemnifying party's prior
written consent, which consent shall not be unreasonably withheld; provided
that admissions of facts which a party may reasonably be required to make shall
not be deemed to be admissions of liability.
8.3. Exclusivity. The indemnification provided by this Article VIII
shall be the sole remedy (other than termination of this Agreement pursuant to
Article IX) for any matters relating to Third Party Claims; provided, that this
Section 8.3 shall not prohibit injunctive relief if available under applicable
law.
8.4. Survival. All representations, warranties, covenants, and
agreements contained in this Agreement shall survive the execution and delivery
of this Agreement and the Closings hereunder for a period of, and shall
terminate on, the first anniversary of, the Final Closing, and no claim with
respect to a breach thereof shall be made thereafter; provided, that
representations and warranties contained in Sections 2.3, 2.7, 3.3, 3.4, and
4.3 shall survive indefinitely.
IX Termination
9.1. Termination. This Agreement may be terminated at any time prior
to any Closing:
(a) by mutual written consent executed by the Company, Pandey,
and the Purchaser;
(b) by the Company and Pandey, acting jointly, or the
Purchaser, by notice given to the Company and Pandey in writing,
without liability to the terminating party or parties on
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account of such termination (providing the terminating party or
parties are not otherwise in default or in breach of this Agreement),
if (i) any of the conditions to their or its obligations under this
Agreement shall not have been satisfied or waived in writing by such
parties or party or (ii) the other party or parties shall have failed
to perform in any material respect its or their covenants or
agreements contained herein required to be performed prior to the
Closing, or shall have breached any of its or their representations or
warranties contained herein, in each instance in a material respect
(and provided that the terminating parties or party shall afford the
other party or parties at least 15 business days notice of and
opportunity to cure such breach), unless such failure is attributable
to the breach by the terminating party or parties of any of its or
their obligations to consummate the transactions contemplated hereby
or of any of its or their other obligations hereunder; or
(c) by any party, by notice given to the other parties in
writing, without liability, if the transactions contemplated hereby
shall violate any non-appealable final order, decree, or judgment of
any governmental authority having competent jurisdiction or if there
shall be a statute, rule, or regulation that makes such purchase
illegal or otherwise prohibited.
9.2. Effect of Termination. Upon any termination of this Agreement
pursuant to Section 9.1, none of the parties shall have any liability or
obligation to the others arising out of this Agreement except for any liability
arising from a party's breach of this Agreement prior to such termination;
provided that (a) if this Agreement shall be terminated after the occurrence of
a Closing and prior to the occurrence of one or more other Closing, this
Agreement shall remain in effect except with respect to the transactions
contemplated to occur after the date of such termination, (b) the termination
of this Agreement by a party or parties as a result of the failure or refusal
of another party or parties to close all or any part of the transactions
contemplated by Section 1.1 when and as required by this Agreement shall not
relieve the defaulting party or parties from any liability for such failure or
refusal to close (except that a termination resulting from the failure by the
Purchaser to consummate the purchase of the Third Shares, Fourth Shares, Fifth
Shares, Sixth Shares, or Final Shares shall relieve the Purchaser from such
liability and shall be the sole remedy for such failure), and (c) in any case,
the provisions of Sections 7.2, this Section 9.2, and Articles VIII and X shall
survive such termination.
X Miscellaneous
10.1. Further Actions. At any time and from time to time, each party
agrees, at its or his expense, to take such actions and to execute and deliver
such documents as may be reasonably necessary to effectuate the purposes of this
Agreement.
10.2. Availability of Equitable Remedies. Since a breach of the
provisions of this Agreement could not adequately be compensated by money
damages, any party shall be entitled, either before or after the Closing, in
addition to any other right or remedy available to it, to an injunction
restraining such breach or a threatened breach and to specific performance of
any such provision of this Agreement, and in either case no bond or other
security shall be required in connection therewith, and the parties hereby
consent to the issuance of such an injunction and to the ordering of specific
performance.
10.3. Modification. This Agreement and the Exhibits hereto set forth
the entire understanding of the parties with respect to the subject matter
hereof, supersede all existing agreements among them
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concerning such subject matter, and may be modified only by a written
instrument duly executed by each party.
10.4. Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be mailed by certified
mail, return receipt requested, or by Federal Express, Express Mail, or similar
overnight delivery or courier service, or delivered (in person or by telecopy,
telex, or similar telecommunications equipment) against receipt to the party to
whom it is to be given,
(a) if to the Company or Pandey, at
Xechem International, Inc.
100 Jersey Avenue
Building B, Suite 310
New Brunswick, NJ 08901
Attn: Dr. Ramesh C. Pandey, President
Facsimile No. (908) 247-4090
(b) if to the Purchaser,
225 Lafayette Street
Suite 1214
New York, NY 10012
Facsimile No. (212) 431-5952
or to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 10.4. Any notice or other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which
will be deemed given at the time of receipt thereof. Any notice given by other
means permitted by this Section 10.4 shall be deemed given at the time of
receipt thereof.
10.5. Waiver. Any waiver by any party of a breach of any term of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of that term or of any breach of any other term of this Agreement. The
failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions will not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver must be in writing.
10.6. Binding Effect. No party may sell, assign, transfer, or
otherwise convey any of its or his rights or delegate any of its or his duties
under this Agreement, except as hereinafter provided, and this Agreement shall
be binding upon and inure to the benefit of the parties hereto and the
respective permitted successors, assigns, and personal representatives of the
parties. Notwithstanding the foregoing, the Purchaser may assign its rights and
delegate its obligations to purchase any of the Shares to any person or
persons, provided that (a) such person or persons agree to be bound by this
Agreement and the Stockholders Agreement as if such person or persons were the
Purchaser, including, without limitation, that each such person shall make
representations with respect to himself or itself similar to those made by the
Purchaser herein, (b) each such person shall be reasonably acceptable to the
Company (the Company hereby agreeing that The Edward A. Blech Trust and Mark
Germain are reasonably acceptable assignees), and (c) no such assignment or
delegation shall relieve the Purchaser of its obligations to
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purchase any such shares if such assignee does not. Any attempted sale,
assignment, transfer, conveyance, or delegation in violation of this Section
10.6 shall be void. The provisions of this Agreement shall inure to the benefit
of each indemnified party and its successors and assigns (if not a natural
person) and his assigns, heirs, and personal representatives (if a natural
person).
10.7. No Third Party Beneficiaries. This Agreement does not create,
and shall not be construed as creating, any rights enforceable by any person not
a party to this Agreement (except as provided in Section 10.6).
10.8. Separability. If any provision of this Agreement is invalid,
illegal, or unenforceable, the balance of this Agreement shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
10.9. Headings. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
10.10. Counterparts; Governing Law. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. It shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to conflict of laws.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
XECHEM INTERNATIONAL, INC.
By /s/ Ramesh C. Pandey
-----------------------------------
Ramesh C. Pandey, President
/s/ Ramesh C. Pandey
-----------------------------------
Ramesh C. Pandey
/s/ David Blech
-----------------------------------
David Blech
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EXHIBIT 3
<PAGE>
ASSIGNMENT AND ASSUMPTION
ASSIGNMENT AND ASSUMPTION, dated November 18, 1996, between David
Blech ("Blech") and The Edward A. Blech Trust, a New York trust (the "Trust").
WHEREAS, Blech is the "Purchaser" under and as defined in the Stock
Purchase Agreement, dated as of November 18, 1996 (the "Agreement"; terms used
and not defined herein shall have the respective meanings as defined in the
Agreement), among Blech, Xechem International, Inc., a Delaware corporation
(the "Company"), and Ramesh C. Pandey, pursuant to which, among other things,
the Purchaser has agreed to purchase certain shares of the capital stock stock
of the Company; and
WHEREAS, Blech wishes to assign to the Trust, and the Trust wishes to
assume, the obligations of Blech to purchase certain of such shares;
NOW, THEREFORE, Blech and the Trust hereby agree as follows:
1. Blech hereby assigns to the Trust Blech's rights to purchase the
Initial Shares and the Second Shares.
2. The Trust hereby assumes, and agrees to perform, all of Blech's
obligations under the Agreement with respect to the Initial Shares and the
Second Shares, as if the Trust were the "Purchaser" with respect thereto.
3. The Trust further agrees to be bound by, and hereby becomes a party
to, the Stockholders Agreement, as a "Purchaser Stockholder" as defined therein.
4. Pursuant to Section 1.1(a)(ii) of the Agreement, the Trust hereby
acknowledges and agrees that delivery to it of the Initial Shares includes
payment in full of the promissory note referred to in such Section 1.1(a)(ii)
and of all other advances made by the Trust to the Company prior to the date
hereof.
5. Pursuant to Section 10.6(b) of the Agreement, the Trust hereby
represents and warrants as follows:
(a) Organization. The Trust is a trust duly organized and
validly existing under the laws of the State of New York, with all
requisite power and authority to own, lease, license, and use its
properties and assets and to carry on the business in which it is now
engaged and the business in which it contemplates engaging.
(b) Authority to Buy. The Trust has all requisite power and
authority to execute, deliver, and perform this Assignment (which
performance, for all purposes of this Assignment, shall include
performance of the obligations assumed by the Trust under the
Agreement and the Stockholders Agreement). All necessary trust
proceedings of the Trust have been duly taken to authorize the
execution, delivery, and performance of this Assignment by the Trust.
This Assignment has been duly authorized, executed, and delivered by
the Trust, and this Assignment is the legal, valid, and binding
obligation of the Trust and is enforceable as to the Trust in
accordance with its terms.
<PAGE>
(c) No Conflicts. No consent, authorization, approval, order,
license, certificate, or permit of or from, or declaration or filing
with, any federal, state, local, or other governmental authority or
any court or other tribunal is required for the execution, delivery,
or performance by the Trust of this Assignment. No consent of any
party to any Contract to which the Trust is a party, or to which it or
any of its businesses, properties, or assets are subject, is required
for the execution, delivery, or performance of this Assignment by the
Trust; and the execution, delivery, and performance of this Assignment
by the Trust will not violate, result in a breach of, conflict with,
or (with or without the giving of notice or the passage of time or
both) entitle any party to terminate or call a default under, entitle
any party to rights and privileges that such party was not receiving
or entitled to receive immediately before this Assignment was executed
under, or create any obligation on the part of the Trust that it was
not paying or obligated to pay immediately before this Assignment was
executed under, any term of any such Contract or violate or result in
a breach of any term of the trust agreement of the Trust, or violate,
result in a breach of, or conflict with any law, rule, regulation,
order, judgment, or decree binding on the Trust or to which it or any
of its businesses, properties, or assets are subject.
(d) Non-Distributive Intent. The Trust is an accredited
investor. The Trust is acquiring the Purchaser Shares, and on
conversion of any the Purchaser Shares will acquire the underlying
Conversion Shares, for its own account (and not for the account of
others) for investment and not with a view to the distribution
thereof. The Trust will not sell or otherwise dispose of the Purchaser
Shares or Conversion Shares (whether pursuant to a liquidating
distribution or otherwise) without registration under the Securities
Act or an exemption therefrom, and the certificate or certificates
representing the Purchaser Shares and the Conversion Shares may
contain a legend to the foregoing effect. The Trust has been given
access to the kind of financial and other information about the
Company as would be contained in a registration statement filed under
the Securities Act. Without limiting the foregoing, the Trust
acknowledges receipt of the SEC reports and the other documents listed
in or attached to Exhibit 4.3 to the Agreement. The Trust understands
that it may not sell or otherwise dispose of the Purchaser Shares or
Conversion Shares in the absence of either a registration statement
under the Securities Act or an exemption from the registration
provisions of the Securities Act.
(e) Completeness of Disclosure. No representation or warranty
by the Trust in this Assignment contains or (except for changes beyond
the control of the Trust) on any Closing Date on which the Trust
purchases Purchaser Shares will contain an untrue statement of a
material fact or omits or (except for changes beyond the control of
the Trust) on any such Closing Date will omit to state a material fact
required to be stated therein or necessary to make the statements made
therein not misleading.
6. The Company shall be entitled to rely on, and shall be a third
party beneficiary of, the representations, warranties, covenants, and
agreements of Blech and the Trust contained in this Assignment.
7. The address for notices to the Trust shall be c/o Rabbi Mordechai
Jofen, Trustee, 418 Avenue I, Brooklyn, New York 11230 facsimile no. (718)
338-7605.
8. At any time and from time to time, each party hereto agrees, without
further consideration, to take such actions and to execute and deliver such
documents as may be reasonably
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necessary more effectively to carry out the transfer of assets and assumption
of liabilities contemplated by this Assignment.
9. This Assignment shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to conflict of
laws.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Assignment as of the date first above written.
/s/ David Blech
-------------------------------
David Blech
THE EDWARD A. BLECH TRUST
By: /s/ Mordechai Jofen
-------------------------------
Mordechai Jofen, Trustee
3
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EXHIBIT 4
<PAGE>
STOCKHOLDERS AGREEMENT
AGREEMENT, dated November 18, 1996, among Xechem International, Inc.,
a Delaware corporation (the "Company"); David Blech (the "Purchaser"); and
Ramesh C. Pandey ("Pandey").
WHEREAS, Pandey is the principal stockholder of the Company;
WHEREAS, pursuant to a Stock Purchase Agreement (the "Purchase
Agreement") among the Company, the Purchaser, and Pandey, the Purchaser and
Pandey are on and after the date hereof acquiring certain shares of the capital
stock of the Company; and
WHEREAS, Pandey and the Purchaser desire to provide reasonable
restrictions upon the transfer of shares of such capital stock and to agree to
vote such shares in accordance with this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
I Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated:
1.1. Common Shares. "Common Shares" shall mean shares of the
Company's Common Stock, par value $.00001 per share.
1.2. Dispose Of. "Dispose Of" shall mean pledge, hypothecate, give
away, sell, grant an option with respect to, or otherwise transfer, other than
pursuant to a plan of merger or consolidation, to anyone, whether or not he is
then a Stockholder. The term "Disposition" shall have a correlative meaning.
1.3. Eligible Holders. "Eligible Holders" shall mean holders of
Registrable Securities.
1.4. Exchange Act. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.5. Family Donee. "Family Donee" with respect to a Stockholder shall
mean (a) any parent, child, descendant, or sibling of the Stockholder, the
spouse of any of the foregoing, or the spouse of the Stockholder; (b) any trust
established by the Stockholder, or any trustee, custodian, fiduciary, or
foundation which will hold the shares of Shares for charitable purposes or for
the benefit of the Stockholder or any of the persons described in Section
1.5(a); and (c) committees, guardians, or other legal representatives of the
Stockholder or of any of the persons described in Section 1.5(a).
<PAGE>
1.6. Majority Holders. "Majority Holders" shall mean stockholders who
hold (or would hold, if all Purchaser Shares were converted to Common Shares) a
majority of the Registrable Securities.
1.7. Pandey Stockholders. "Pandey Stockholders" shall mean Pandey and
all persons who obtain Shares from Pandey or another Pandey Stockholder in
accordance with Section 2.1(b).
1.8. Public Transaction. "Public Transaction" shall mean any
Disposition of Shares in an open market broker's or underwritten transaction,
whether pursuant to an offering registered under the Securities Act or pursuant
to Rule 144 under the Securities Act.
1.9. Purchaser Shares. "Purchaser Shares" shall have the meaning as
defined in the Purchase Agreement.
1.10. Purchaser Stockholders. "Purchaser Stockholders" shall mean the
Purchaser, any other person who acquires Purchaser Shares pursuant to the
Purchase Agreement, and any person who acquires Shares from another Purchaser
Stockholder other than in a Public Transaction.
1.11. Registrable Securities. "Registrable Securities" at any time
shall mean then outstanding or reserved for issuance Common Shares (or, if the
Amendment (as defined in the Purchase Agreement) is not filed by July 1, 1997,
shares of Series 2 Stock) which are Purchaser Shares or underlying Conversion
Shares (as defined in the Purchase Agreement) and which (i) are owned by (or
issuable upon conversion of Purchaser Shares owned by) the Purchaser
Stockholders and (ii) are not then eligible for immediate sale pursuant to an
effective registration statement under the Securities Act or pursuant to
paragraph (k) of Rule 144 under the Securities Act.
1.12. SEC. "SEC" shall mean the Securities and Exchange Commission.
1.13. Securities Act. "Securities Act" shall mean the Securities Act
of 1933, as amended.
1.14. Shares. "Shares" shall mean all shares of capital stock of the
Company, including Common Shares.
1.15. Stockholder. "Stockholder" shall mean any person, other than
the Company, who is or becomes a party to this Agreement.
II Restrictions on Transfer
2.1. Permitted Transfer. (a) No Pandey Stockholder shall Dispose Of
any Shares without the consent of the Purchaser, except as permitted by Section
2.1(b) or the last sentence of Section 2.2. Any other purported disposition
shall be void.
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(b) Notwithstanding Section 2.1(a), any Pandey Stockholder may at any
time and from time to time (i) Dispose Of all or a part of his Shares to (A)
one or more of his Family Donees if each such Family Donee becomes a party to
this Agreement upon acquisition of such Shares or (B) any other Pandey
Stockholder who is a party to this Agreement or (ii) pledge Shares if the
pledgee agrees not to seek the transfer of such Shares (on foreclosure or
otherwise) except in accordance with Section 2.1(a). Any Pandey Stockholder
effecting a Disposition pursuant to this Section 2.1(b) shall give immediate
notice thereof to the Purchaser, including the name and address of the
recipient of the Disposed Of Shares and a copy of such transferee's agreement
as required pursuant to this Section 2.1(b).
2.2. Tag-Along. If (a) any Pandey Stockholder shall propose to Dispose
Of any Shares other than pursuant to Section 2.1(b), or (b) any Purchaser
Stockholder shall propose to Dispose Of any Shares, such Stockholder (the
"Selling Stockholder") shall give notice (a "Notice") of such proposed
Disposition to the Purchaser, if the Selling Stockholder is a Pandey
Stockholder, or Pandey, if such Selling Stockholder is a Purchaser Stockholder,
describing the proposed Disposition. If such Disposition is a sale of Common
Shares other than pursuant to a Public Transaction, then, in addition to the
requirements of Section 2.1 (if the Selling Stockholder is a Pandey
Stockholder), the Purchaser Stockholders collectively (if the Selling
Stockholder is a Pandey Stockholder) or the Pandey Stockholders collectively
(if the Selling Stockholder is a Purchaser Stockholder) (the Purchaser
Stockholders collectively, or any of them, or the Pandey Stockholders
collectively, or any of them, as the case may be, being the "Tagging
Stockholders") shall have the right, by giving notice (a "Tag-Along Notice") to
the Selling Stockholder within 10 days of the Notice, to sell, on the terms and
to the transferee(s) described in the Notice, a number of Common Shares equal
to the number of Common Shares then held by the Tagging Stockholders multiplied
by a fraction (the "Fraction"), the numerator of which is the number of Common
Shares proposed to be sold by such Selling Stockholder and the denominator of
which is the number of Common Shares held by all Pandey Stockholders (if the
Selling Stockholder is a Pandey Stockholder) or Purchaser Stockholders (if the
Selling Stockholder is a Purchaser Stockholder) at the date of the Notice; and,
if the Tagging Stockholders give a Tag-Along Notice, such Selling Stockholder
shall not effect such Disposition unless the Tagging Stockholders are afforded
such opportunity to sell such portion of their Common Shares. Any notice given
by Pandey or the Purchaser pursuant to this Section 2.2 shall be deemed given
by all Pandey Stockholders or Purchaser Stockholders, respectively; and, if the
Pandey Stockholders or Purchaser Stockholders are entitled to sell shares
pursuant to this Section 2.2, the shares to be sold shall be allocated among
the Pandey Stockholders or Purchaser Stockholders, as the case may be, in
proportion to their holdings of shares of Common Stock, or as they may
otherwise agree. In the case of a Disposition by a Purchaser Stockholder
pursuant to a Public Transaction, then, notwithstanding Section 2.1(a), each
Pandey Stockholder shall be entitled to sell the Fraction of his shares of
Common Stock, on such terms as such Pandey Stockholder may obtain.
2.3. Termination. The provisions of this Article II shall terminate
on the earliest of (a) the fifth anniversary of the date hereof, (b) the date,
if any, on which the Purchaser or Pandey shall have defaulted on any of its or
his obligations under Section 1.1 of the Purchase Agreement (provided, that (i)
only a party's rights, but not its or his obligations, shall terminate as a
result
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of such a default and (ii) such termination shall not take effect until the
non-defaulting parties or party have afforded the defaulting party or parties
at least 15 business days notice of and opportunity to cure such default), and
(c) the date on which the Purchaser Stockholders or Pandey Stockholders
beneficially own (as determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations thereunder) less than 10% of the
outstanding Common Shares.
III Voting Agreement
3.1. Voting. (a) Subject to any fiduciary obligations it may have,
each Purchaser Stockholder agrees to vote all Shares beneficially owned by such
Purchaser Stockholder for the election of Pandey as a director of the Company,
and, further, to use his or its best efforts to cause Pandey to be named as the
Chairman of the Board, President, and Chief Executive Officer of the Company.
The Purchaser and each subsequent Purchaser Stockholder agrees not to Dispose
Of any Shares to any person (other than in a Public Transaction) unless such
transferee agrees to become a party to this Agreement as a Purchaser
Stockholder, and a copy of such agreement is provided to Pandey.
(b) The provisions of this Section 3.1 shall terminate on the earliest
of (i) the date on which Pandey is discharged from the employ of the Company
"for cause" (as such term is defined in the Employment Agreement, dated
February 1994, between Pandey and the Company), (ii) the date, if any, on which
Pandey shall have defaulted on any of his obligations under Section 1.1 of the
Purchase Agreement (provided, that such termination shall not take effect until
the Purchaser has afforded Pandey at least 15 business days notice of and
opportunity to cure such default), and (iii) the date on which Pandey
beneficially owns (as determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations thereunder) less than 10% of the
outstanding Common Shares.
3.2. Directors. (a) Following the Fourth Closing (as defined in the
Purchase Agreement), the Company, Pandey, and, by their signature at the end
hereof, each other current director of the Company agrees (subject to their
fiduciary duties to the Company and its stockholders) to from time to time take
such action as the Purchaser shall request from time to time (including,
without limitation, calling and holding meetings of the Board of Directors or
stockholders of the Company and amending the By-laws of the Company) to cause
to be elected as directors of the Company such nominees of the Purchaser, in
such number, as the Purchaser shall request.
(b) The provisions of this Section 3.2 shall terminate on the earliest
of (i) the fifth anniversary of the date hereof, (ii) the date, if any, on
which the Purchaser shall have defaulted on any of its obligations under
Section 1.1 of the Purchase Agreement (provided, that such termination shall
not take effect until Pandey has afforded the Purchaser at least 15 business
days notice of and opportunity to cure such default), (iii) the date, if any,
on which nominees of the Purchaser constitute a majority of the Board of
Directors, and (iv) the date on which the
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Purchaser beneficially owns (as determined in accordance with Section 13(d) of
the Exchange Act and the rules and regulations thereunder) less than 50% of the
outstanding Common Shares.
IV Registration Rights
4.1. Request for Registration. (a) Subject to Sections 4.1(b) and (c),
if the Company shall receive a written request (specifying that it is being
made pursuant to this Article IV) from Majority Holders that the Company file a
registration statement under the Securities Act covering the registration of at
least 5% of the Registrable Securities, the Company shall, within ten business
days of the receipt thereof, give written notice of such request to all
Eligible Holders and shall file as soon as practicable, and in any event within
60 days of the receipt of such request, a registration statement under the
Securities Act covering all Registrable Securities which the Eligible Holders
request to be registered within 30 days of the mailing of such notice to all
Eligible Holders.
(b) Notwithstanding the foregoing, (i) the Company shall not be
obligated to effect a registration pursuant to this Section 4.1 during the
period starting with the date 60 days prior to the Company's estimated date of
filing of, and ending on a date six months following the effective date of, a
registration statement pertaining to an underwritten public offering of
securities for the account of the Company, provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing such registration statement is made in good faith; (ii) if
the Company shall furnish to the Eligible Holders initiating the registration
request hereunder (the "Initiating Eligible Holders") a certificate signed by
the President of the Company stating that in the good faith judgment of the
Board of Directors it would be materially detrimental to the Company or its
stockholders for a registration statement to be filed in the near future, then
the Company's obligation to file a registration statement shall be deferred for
a period not to exceed six months; provided, however, that the Company may
furnish such a certificate to Initiating Eligible Holders only once in any
one-year time period; and (iii) if the managing underwriter of an underwritten
offering to be made pursuant to this Section 4.1 advises the Initiating
Eligible Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Initiating Eligible Holders shall
so advise all Eligible Holders whose Registrable Securities would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the underwriting shall be allocated among
all Eligible Holders thereof in proportion to the amount of Registrable
Securities owned by each Eligible Holder.
(c) The Company shall be obligated to effect only two registrations
pursuant to this Section 4.1.
4.2. "Piggyback" Registration. (a) Subject to Section 4.2(b), if at
any time the Company determines to register (including for this purpose a
registration effected by the Company for stockholders other than the Eligible
Holders) any Common Shares under the
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Securities Act in connection with the public offering of such securities solely
for cash on an SEC Form that would also permit the registration of the
Registrable Securities (other than Forms S-4 and S-8), the Company shall
promptly give each Eligible Holder written notice of such determination. Upon
the written request of each Eligible Holder given within 20 days after mailing
of any such notice by the Company, the Company shall, subject to the provisions
of this Section 4.2, cause to be registered under the Securities Act all of the
Registrable Securities that each such Eligible Holder has requested be
registered; provided however, that the Company shall not be required to proceed
with such registration if the offering is abandoned in its entirety and no
other securities are offered for sale.
(b) In connection with any offering involving an underwriting of
shares being issued by the Company, the Company shall not be required under
this Section 4.2 to include any of the Eligible Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it, and then only in such
quantity as will not, in the reasonable opinion of the underwriters, jeopardize
the success of the offering by the Company. If the total amount of securities,
including Registrable Securities, requested by the Eligible Holders and other
stockholders having registration rights to be included in such offering exceeds
the amount of securities to be sold other than by the Company (or the
stockholders initiating the registration) that the underwriters reasonably
believe compatible with the success of the offering, then the Company shall be
required to include in the offering only that number of such securities,
including Registrable Securities, which the underwriters believe will not
jeopardize the success of the offering. In such event, the securities requested
to be included which are excluded shall be apportioned pro rata among the
Eligible Holders and, to the extent permitted by the contractual rights of
other selling stockholders, all other prospective selling stockholders
according to the total amount of securities requested to be included therein
owned by each such Eligible Holder and other selling stockholder or in such
other proportions as shall mutually be agreed to by such Eligible Holders and
such other selling stockholders.
4.3. Obligations of the Company. Whenever required under this Article
IV to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its commercially
reasonable efforts to cause such registration statement to become
effective, and, upon the request of the holders of a majority of the
Registrable Securities registered thereunder, to keep such
registration statement effective for up to 90 days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement.
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(c) Furnish to the Eligible Holders such numbers of copies of
a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents as
they may reasonably request to facilitate the disposition of
Registrable Securities owned by them.
(d) Use its commercially reasonable efforts to register and
qualify the securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as shall
be necessary for the Eligible Holders to dispose of the Registrable
Securities, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process or subject
itself to taxation in any such states or jurisdictions.
(e) Enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the managing
underwriter, if any, of such offering. Each Eligible Holder
participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
(f) Notify each Eligible Holder of Registrable Securities
covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes
an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing.
(g) Make generally available to its stockholders an earnings
statement satisfying the provisions of Section 11(a) of the Securities
Act (including by means of satisfying the provisions of Rule 158 under
the Securities Act) as soon as reasonably practical covering the
12-month period beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the registration
statement.
4.4. Furnish Information. The Company shall not be required to include
in any registration any Registrable Securities unless the holder thereof shall
have furnished to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of the
Registrable Securities.
4.5. Expenses of Registration. All expenses other than underwriting
discounts and commission incurred in connection with any registration, filing,
or qualification pursuant to this Article IV, including, without limitation,
all registration, filing, and qualification fees, printers' and accounting
fees, fees and disbursements of counsel for the Company, and the reasonable
fees and disbursements of a single counsel for the Eligible Holders and any
other selling stockholders selected by them shall be borne by the Company;
provided, however, that the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 4.1
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if the registration request is subsequently withdrawn at the request of the
Eligible Holders of a majority of the Registrable Securities to be registered
(in which case all participating Eligible Holders shall bear such expenses),
unless, at the time of such withdrawal, the Eligible Holders have learned of a
material adverse change in the condition, business or prospects of the Company
from that known to the Eligible Holders at the time of their request, in which
case the Eligible Holders shall not be required to pay any such expenses and
shall retain all rights pursuant to Section 4.1.
4.6. Indemnification and Contribution. In the event any Registrable
Securities are included in a registration statement under this Article IV:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Eligible Holder participating in such
registration, the officers and directors of each such Eligible Holder,
any underwriter (as defined in the Securities Act) for such Eligible
Holder and each person, if any, who controls such Eligible Holder or
underwriter within the meaning of the Securities Act or the Exchange
Act, against any Damages (as defined in the Purchase Agreement) to
which they may become subject under the Securities Act, the Exchange
Act, or other federal or state law, insofar as such Damages arise out
of or are based upon any of the following statements, omissions or
violations (collectively, a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by
the Company of the Securities Act, the Exchange Act, any state
securities law, or any rule or regulation promulgated under the
Securities Act, the Exchange Act, or any state securities law; and the
Company will reimburse each such Eligible Holder, officer or director,
underwriter, or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such action; provided, however, that the Company shall
not be liable in any such case for any such Damages to the extent that
it arises out of or is based upon (x) a Violation which occurs in
reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such
Eligible Holder or underwriter or (y) any untrue statement or alleged
untrue statement made in, or omission or alleged omission from, any
preliminary prospectus or final prospectus, if the final prospectus or
the final prospectus as amended or supplemented, respectively, which
shall have been furnished, to the underwriter or Eligible Holder
claiming indemnification, prior to the time such underwriter sent
written confirmation of or the Eligible Holder made such sale to the
person alleging such statement, alleged statement, omission, or
alleged omission, does not contain such statement, alleged statement,
omission, or alleged omission and a copy of such final prospectus or
such prospectus as amended or supplemented, respectively, shall not
have been sent or given to such person; and provided, further, that in
no case shall the Company be liable for amounts paid in
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settlement if such settlement is effected without the written consent
of the Company, which consent shall not be unreasonably withheld.
(b) To the extent permitted by law, each Eligible Holder
participating in any registration will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed
the registration statement, each controlling person, and any
underwriters, against any Damages to which the Company or any such
director, officer, controlling person, or underwriter may become
subject, under the Securities Act, the Exchange Act, or other federal
or state law, insofar as such Damages arise out of or are based upon
any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with
written information furnished by such Eligible Holder expressly for
use in connection with such registration or as a result of a
circumstance described in clause (y) of Section 4.6(a); and each such
Eligible Holder will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling
person, or underwriter in connection with investigating or defending
any such action; provided, however, that the indemnity agreement
contained in this Section 4.6(b) shall not apply to amounts paid in
settlement if such settlement is effected without the consent of the
Eligible Holder, which consent shall not be unreasonably withheld;
provided further that, in no event shall any indemnity under this
Section 4.6(b) exceed the net proceeds from the offering received by
such Eligible Holder.
(c) Promptly after receipt by an indemnified party under this
Section 4.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under
this Section 4.6, deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually reasonably
satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if representation
of such indemnified party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party
represented by such counsel in such proceeding.
(d) To provide for just and equitable contribution under the
Securities Act in any case in which (i) any indemnified party makes
claim for indemnification pursuant to this Section 4.6 but it is
judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding the fact the express
provisions of this Section 4.6 provide for indemnification, or (ii)
contribution under the Securities Act may be required on the part of
any indemnified party, then the indemnifying party in lieu of
indemnifying such
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indemnified party hereunder shall contribute to the amount paid or
payable by such indemnified party as a result of such Damages in such
proportion as is appropriate to reflect the relative fault of the
indemnifying parties on the one hand and of the indemnified parties on
the other in connection with the statements or omissions which
resulted in such Damages as well as any other relevant equitable
considerations. The relative fault of the indemnifying parties and of
the indemnified parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the indemnifying party, or by the indemnified
party, and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission.
The parties further agree that it would not be just and
equitable if contribution pursuant to this Section 4.6(d) were
determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the Damages referred to in the
immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim. Notwithstanding the
provisions of this Section 4.6(d), in no event shall any contribution
under this Section 4.6(d) exceed the net proceeds from the offering
received by such Eligible Holder. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and Eligible Holders under
this Section 4.6 shall survive the completion of any offering of
Registrable Securities.
4.7. Amendment of Registration Rights. Any provision of this Article
IV may be amended and the observance thereof may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the Majority Holders. Any amendment or
waiver effected in accordance with this Section 4.7 shall be binding upon each
holder of Registrable Securities, each future holder of all such securities,
and the Company.
V Miscellaneous
5.1. Legend. The following legend shall be noted conspicuously on all
certificates representing shares of Shares heretofore or hereafter issued which
are subject to the terms of this Agreement:
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"The shares represented by this certificate are subject to
restrictions on transfer and voting, as provided in an agreement dated
November 18, 1996 among the Company and certain of its stockholders, a
copy of which is on file with the Secretary of the Company."
Each person signing this Agreement other than the Company agrees severally and
not jointly to deliver to the Company, as promptly as possible but in any event
within ten business days from the date of this Agreement, certificates
representing shares of Shares owned by him for legending.
5.2. Transfers. The Company agrees not to effect a transfer on its
books of any Shares which are subject to the terms of this Agreement except in
accordance with such terms.
5.3. Secretary to Retain Copy. A copy of this Agreement shall be
filed with the Secretary of the Company.
5.4. Stock Changes. The provisions of this Agreement shall be deemed
to apply equally to any Shares or other securities distributed in respect of
Shares.
5.5. Further Actions. At any time and from time to time each party
agrees, at its or his expense, to take such actions and to execute and deliver
such documents as may be reasonably necessary to effectuate the purposes of
this Agreement.
5.6. Availability of Equitable Remedies. Since a breach of the
provisions of this Agreement could not adequately be compensated by money
damages, any party shall be entitled, in addition to any other right or remedy
available to him, to an injunction restraining such breach or a threatened
breach and to specific performance of any such provision of this Agreement, and
in either case no bond or other security shall be required in connection
therewith, and the parties hereby consent to such injunction and to the
ordering of specific performance.
5.7. Modification. This Agreement sets forth the entire understanding
of the parties with respect to the subject matter hereof, supersedes all
existing agreements among them concerning such subject matter, and may be
modified only by a written instrument duly executed by each party.
5.8. Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be mailed by certified
mail, return receipt requested, or delivered against receipt to the party to
whom it is to be given at the address of such party set forth in the Purchase
Agreement or, in the case of a person who becomes a Stockholder after the date
of this Agreement, at the address of such party as reflected on the books and
records of the Company (or to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section 5.8).
Notices to the estate of a Stockholder shall be sufficient if addressed to the
Stockholder as provided in this Section 5.8. Except as otherwise specifically
provided in this Agreement, any notice given by certified mail shall be deemed
given at the time of certification thereof except for a notice changing a
party's address which shall be deemed given at the time of receipt thereof.
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5.9. Waiver. Any waiver by any party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term
of this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
5.10. Binding Effect. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and the respective
successors and assigns of the corporate parties hereto and the respective
assigns, heirs, and personal representatives of the individual parties hereto,
and shall inure to the benefit of the indemnified parties under Article IV.
5.11. No Third Party Beneficiaries. This Agreement does not create,
and shall not be construed as creating, any rights enforceable by any person
not a party to this Agreement (except as provided in Section 5.10).
5.12. Separability. If any provision of this Agreement is invalid,
illegal, or unenforceable, the balance of this Agreement shall remain in
effect, and if any provision is inapplicable to any person or circumstance, it
shall nevertheless remain applicable to all other persons and circumstances.
5.13. Headings. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
5.14. Pronouns. Any masculine personal pronoun shall be considered to
mean the corresponding feminine or neuter personal pronoun, as the context
requires.
5.15. Counterparts; Governing Law. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. It shall be
governed by and construed in accordance with the laws of the State of New York
(except with respect to matters governed by the General Corporation Law of the
State of Delaware), without giving effect to conflict of laws.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
XECHEM INTERNATIONAL, INC.
By /s/ Ramesh C. Pandey
----------------------------------
Ramesh C. Pandey, President
/s/ Ramesh C. Pandey
----------------------------------
Ramesh C. Pandey
/s/ David Blech
----------------------------------
David Blech
AGREED AS TO SECTION 3.2:
/s/ Brian Arenare
---------------------------
Brian Arenare
/s/ Lester A. Mitscher
---------------------------
Lester A. Mitscher
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