Amendment to Registration of Securities of a Small-Business Issuer — Form 10-SB
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10SB12G/A Amendment to Registration of Securities of a 96 577K
Small-Business Issuer
2: EX-3.(I) Articles of Incorporation and Amendments 5 19K
3: EX-3.(II) By-Laws 14 78K
4: EX-10.1 Advisory Agreements 11 68K
5: EX-10.2 Confidentiality Agreement 2 11K
6: EX-10.3 Employee Agreements 47 237K
7: EX-10.4 Management Agreement 2 14K
8: EX-10.5 Property Lease Agreement 26 138K
9: EX-10.6 Consulting Agreement 2± 11K
10: EX-10.7 Stock Option Plan 2000 17 85K
11: EX-10.8 Securities Purchase Agreement 28 139K
12: EX-21 List of Subsidiaries 6 21K
13: EX-27 Financial Data Schedule 1 10K
EXHIBIT 10.8
SECURITIES PURCHASE AGREEMENT
DATED AS OF
OCTOBER 23, 2000
BY AND BETWEEN
PHAGE THERAPEUTICS INTERNATIONAL INC.
AS THE ISSUER,
AND
THE PURCHASERS
(as defined)
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TABLE OF CONTENTS
ARTICLE I: DEFINITIONS..................................................................................................... 1
1.1 Definitions............................................................................................................ 1
1.2 Accounting Terms and Determinations........................................................................... 4
ARTICLE II. PURCHASE AND SALE OF SECURITIES................................................................................ 4
2.1 Purchase and Sale of Units.................................................................................... 4
2.2 Closing and Mechanics of Payment.............................................................................. 4
ARTICLE III. REPRESENTATIONS AND WARRANTIES................................................................................ 4
3.1 Organization and Qualification................................................................................ 4
3.2 Authorization and Execution................................................................................... 4
3.3 Capitalization................................................................................................ 5
3.4 Governmental Authorization.................................................................................... 5
3.5 Issuance of Shares............................................................................................ 5
3.6 No Conflicts.................................................................................................. 5
3.7 Financial Information......................................................................................... 6
3.8 Litigation.................................................................................................... 6
3.9 Employees..................................................................................................... 6
3.10 Environmental Matters........................................................................................ 6
3.11 Taxes........................................................................................................ 6
3.12 Not an Investment Company.................................................................................... 6
3.13 Full Disclosure.............................................................................................. 6
3.14 No Solicitation; No Integration with Other Offerings......................................................... 7
3.15 Permits...................................................................................................... 7
3.16 Title........................................................................................................ 7
3.17 Intellectual Property Rights................................................................................. 7
3.18 Internal Accounting Controls................................................................................. 7
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS............................................................... 7
4.1 Investment Purpose............................................................................................ 7
4.2 Accredited Purchaser Status................................................................................... 8
4.3 Reliance on Exemptions........................................................................................ 8
4.4 Information................................................................................................... 8
4.5 No Governmental Review........................................................................................ 8
4.6 Transfer or Resale............................................................................................ 8
4.7 Legends....................................................................................................... 9
4.8 Authorization, Enforcement.................................................................................... 9
4.9 Receipt of Documents.......................................................................................... 9
4.10 Due Formation of Corporate and Other Purchasers.............................................................. 9
4.11 Due Authorization of Fiduciary Purchasers.................................................................... 9
4.12 Further Representations by Foreign Purchasers............................................................... 10
4.13 No Legal Advice From Phage.................................................................................. 10
ARTICLE V. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES................................................................. 10
5.1 Conditions Precedent to Purchaser's Obligations to Purchase.................................................. 10
5.2 Conditions to Phage's Obligations............................................................................ 11
ARTICLE VI AFFIRMATIVE COVENANTS.......................................................................................... 11
6.1 Information.................................................................................................. 11
6.2 Payment of Obligations....................................................................................... 11
6.3 Maintenance of Existence..................................................................................... 12
6.4 Compliance with Laws......................................................................................... 12
6.5 Inspection of Property, Books and Records.................................................................... 12
6.6 Investment Company Act....................................................................................... 12
6.7 Use of Proceeds.............................................................................................. 12
6.8 Compliance with Terms and Conditions of Material Contracts................................................... 12
6.9 Reserved Shares and Listings................................................................................. 12
6.10 Transfer Agent Instructions................................................................................. 13
6.11 Maintenance of Reporting Status; Supplemental Information................................................... 13
6.12 Form D; Blue Sky Laws....................................................................................... 13
6.13 Election of Directors....................................................................................... 13
6.14 Sales by the Purchasers..................................................................................... 13
6.15 Unit Offering............................................................................................... 13
6.16 Form 10SB-12g............................................................................................... 13
ARTICLE VII. RESTRICTIVE LEGENDS.......................................................................................... 13
7.1 Restrictions on Transfer..................................................................................... 13
7.2 Notice of Proposed Transfers................................................................................. 14
ARTICLE VIII. ADDITIONAL AGREEMENTS AMONG THE PARTIES..................................................................... 14
8.1 Registration Rights.......................................................................................... 14
8.2 Due Diligence Expenses....................................................................................... 14
ARTICLE IX. PURCHASERS' RIGHT OF FIRST REFUSAL............................................................................ 14
9.1 Right of First Refusal...................................................................................... 14
ARTICLE X. MISCELLANEOUS.................................................................................................. 15
10.1 Notices..................................................................................................... 15
10.2 No Waivers; Amendments...................................................................................... 15
10.3 Indemnification............................................................................................. 16
10.4 Expenses.................................................................................................... 17
10.5 Payment..................................................................................................... 17
10.6 Successors and Assigns...................................................................................... 17
10.7 Florida Law; Submission to Jurisdiction; Waiver of Jury Trial; Appointment of Agent......................... 17
10.8 Entire Agreement............................................................................................ 18
10.9 Survival; Severability...................................................................................... 18
10.10 Title and Subtitles........................................................................................ 18
10.11 Publicity.................................................................................................. 18
LIST OF SCHEDULES
-----------------
Schedule I List of Purchasers
Schedule 3.3 List of Outstanding Stock Options and Warrants
LIST OF EXHIBITS
----------------
Exhibit A Form of Registration Rights Agreement
Exhibit B Form of Common Stock Purchase Warrant
SECURITIES PURCHASE AGREEMENT
-----------------------------
AGREEMENT, dated as of October 23, 2000, between Phage Therapeutics
International Inc. ("Phage") a Florida Corporation and the persons and entities
listed on Schedule I "Schedule of Purchasers" attached to this Agreement
(individually the "Purchaser" collectively the "Purchasers").
R E C I T A L S:
WHEREAS:
A. Phage desires to sell and issue to the Purchasers, and the Purchasers
desire to purchase from Phage, 2,142,857 units for an aggregate purchase price
of $1,500,000;
B. Each "Unit" will consist of one share of Phage's common stock with a par
value of $0.001 per share (the "Common Stock") and one Common Stock purchase
warrant (the "Warrant"). For every one and a half Warrants the holder will
entitle the holder to acquire one additional share of Commons Stock of Phage at
an exercise price of $0.70 per share;
C. The Purchasers have agreed to invest an additional One Million Five
Hundred Thousand Dollars ($1,500,000) in equity into Phage within seven (7) days
from the date Phage files a Form 10SB-12g with the Securities and Exchange
Commission. In consideration of this investment Phage has agreed to issue to the
Purchasers an additional 2,142,857 Units ("Second Investment");
D. Phage will deliver the Form 10SB-12g to Mr. Robert Miller at least two
(2) business days prior to filing the Form 10SB-12g with the Securities and
Exchange Commission; and
E. Purchasers will have certain registration rights with respect to such
shares of Common Stock issuable as interest under the Units (the "Unit Shares")
and on exercise of the Warrants (the "Warrant Shares,")( the Unit Shares and the
Warrant Shares being collectively referred to herein as the "Shares") as set
forth in the Registration Rights Agreement in the form attached hereto as
Exhibit A;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I: DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the following
meanings:
"Affiliate" means, with respect to any Person (the "Subject Person"),
(i) any other Person (a "Controlling Person") that directly, or
indirectly through one or more intermediaries, Controls the Subject
Person or (ii) any other Person (other than the Subject Person or a
Consolidated Subsidiary of the Subject Person) which is Controlled by
or is under common Control with a Controlling Person.
"Agreement" means this Securities Purchase Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with
its terms.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of Seattle are authorized or
required by law to close.
"Closing Bid Price" will mean for any security as of any date, the
lowest closing bid price as reported by Bloomberg, L.P. ("Bloomberg")
on the principal securities exchange or trading market where such
security is listed or traded or, if the foregoing does not apply, the
lowest closing bid price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported
by Bloomberg, or, if no lowest trading price is reported for such
security by Bloomberg, then the average of the bid prices of any
market makers for such securities as reported in the "Pink Sheets" by
the National Quotation Bureau, Inc. If the lowest closing bid price
cannot be calculated for such security on such date on any of the
foregoing bases, the lowest closing bid price of such security on such
date will be the fair market value as mutually determined by The
Purchasers and Phage for which the calculation of the closing bid
price requires, and in the absence of such mutual determination, as
determined by the Board of Directors of Phage in good faith.
"Commission" means the Securities and Exchange Commission or any
entity succeeding to all of its material functions.
"Common Stock" means the common stock, $0.001 par value per share, of
Phage.
"Company Corporate Documents" means the articles of organization and
bylaws of Phage.
"Consolidated Subsidiary" means at any date with respect to any Person
or Subsidiary, any Person the accounts of which would be consolidated
with those of such Person or Subsidiary in its consolidated financial
statements if such statements were prepared as of such date.
"Control" (including, with correlative meanings, the terms
"Controlling," "Controlled by" and under "common Control with"), as
used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership
of voting securities, by contract or otherwise.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes, or other similar
instruments issued by such Person, (iii) all obligations of such
Person as lessee which (y) are capitalized in accordance with GAAP or
(z) arise pursuant to sale-leaseback transactions, (iv) all
reimbursement obligations of such Person in respect of letters of
credit or other similar instruments, (v) all Debt of others secured by
a Lien on any asset of such Person, whether or not such Debt is
otherwise an obligation of such Person and (vi) all Debt of others
Guaranteed by such Person.
"Default" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Directors" means the individuals then serving on the Board of
Directors or similar such management council of Phage.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, concessions, grants, franchises, licenses,
agreements or other governmental restrictions relating to the
environment or to emissions, discharges or releases of pollutants,
contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes into the
environment, including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, petroleum
or petroleum products, chemicals or industrial, toxic or hazardous
substances or wastes or the cleanup or other remediation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" has the meaning set forth in Section 1.2.
"Initial Closing Date" means the date of this Agreement or as
otherwise agreed to by the parties.
"Intellectual Property" has the meaning set forth in Section 3.17.
"Lien" means any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement,
title retention agreement, agreement to sell or convey, option, claim,
title imperfection, encroachment or other survey defect, pledge,
restriction, security interest or other adverse claim, whether arising
by contract or under law or otherwise (including, without limitation,
any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction in
respect of any of the foregoing).
"Listing Applications" has the meaning set forth in Section 3.4.
"Nasdaq Market" means the Nasdaq Stock Market's National Market
System.
"National Market" means the Nasdaq Market, the Nasdaq Small Cap
Market, the New York Stock Exchange, Inc. or the American Stock
Exchange, Inc.
"Notice of Exercise" means the form to be delivered by a holder of a
Warrant on exercise of all or a portion to Phage substantially in the
form of Exhibit A to the Warrant.
"OTC Bulletin Board" means the over-the-counter bulletin board
operated by the NASD.
"Permits" means all domestic and foreign licenses, franchises, grants,
authorizations, permits, easements, variances, exemptions, consents,
certificates, orders and approvals necessary to own, lease and operate
the properties of, and to carry on the business of Phage and its
Subsidiary.
"Person" means an individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
company, government (or any agency or political subdivision) or other
entity of any kind.
"Phage" means Phage Therapeutics International Inc., a Florida
corporation, and its successors.
"Purchase Price" means the purchase price for the Securities set forth
in Section 2.2 of this Agreement.
"Purchasers" means the persons and entities listed on Schedule I
"Schedule of Purchasers" attached to this Agreement.
"Registrable Securities" has the meaning set forth in Section 8.1.
"Registration Rights Agreement" means the agreement between Phage and
The Purchasers dated the date of this Agreement substantially in the
form set forth in Exhibit A attached hereto.
"Reserved Amount" has the meaning set forth in Section 6.9(a).
"Second Closing Date" means the seventh (7th) Business Day from the
date Phage files a Form 10SB-12g with the Commission.
"Securities" means the Units, the Warrants and, the Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" has the meaning set forth in the Recitals.
"Subsidiary" means, Phage Therapeutics, Inc., a Washington
corporation, and its successors.
"Subsidiary Corporate Documents" means the certificates of
incorporation and bylaws of Phage's Subsidiary.
"Transaction Agreements" means this Agreement, the Warrants and
Warrant Agreement, and the Registration Rights Agreement.
"Transfer" means any disposition of Securities whether or not such
disposition would constitute a sale under the Securities Act.
"Warrant" means the Common Stock Purchase Warrant substantially in the
form set forth in Exhibit B hereto.
1.2 Accounting Terms and Determinations. Unless otherwise specified herein,
all accounting terms used herein will be interpreted, all accounting
determinations hereunder will be made, and all financial statements required to
be delivered hereunder will be prepared, in accordance with generally accepted
accounting principles as in effect from time to time, applied on a consistent
basis with Phage's prior practice (except for interim financial statements and
for changes concurred in by Phage's independent public accountants) ("GAAP").
All references to "dollars," "Dollars" or "$" are to United States dollars
unless otherwise indicated.
ARTICLE II. PURCHASE AND SALE OF SECURITIES
2.1 Purchase and Sale of Units. Subject to the satisfaction (or waiver)
of the terms and conditions of this Agreement, each Purchaser agrees, severally
and not jointly, to purchase and Phage agrees to sell and issue to each
Purchaser, severally and not jointly:
(1) at the Initial Closing, Units in amounts corresponding with
the subscription amount set out opposite each Purchaser's name
on Schedule I attached to this Agreement. The aggregate
principal amount of all Units being issued at the Initial
Closing pursuant to this Agreement is One Million Five Hundred
Thousand Dollars ($1,500,000); and
(2) at the Second Closing, Units in the amount corresponding with
the subscription amount set out opposite each Purchaser's name
on Schedule I attached to this Agreement. The aggregate
principal amount of all Units being issued at the Second
Closing pursuant to this Agreement is One Million Five Hundred
Thousand Dollars ($1,500,000).
2.2 Closing and Mechanics of Payment.
(a) The Purchase Price will be paid on each respective Closing
date by wire transfer of immediately available funds. Phage
acknowledges having received the funds due in connection with
the Initial Closing under this Agreement.
2) Phage will issue the underlying Shares and Warrants forming
the Units within five business days of the receipt of the
requisite funds on each respective Closing date.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
Phage represents and warrants to the Purchasers, as of October 23,
2000, the following:
3.1 Organization and Qualification. Phage and each Subsidiary is a
corporation (or other legal entity) duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, with full power
and authority to own, lease, use and operate its properties and to carry on its
business as and where now owned, leased, used, operated and conducted. Phage is
qualified to conduct business as a foreign corporation and is in good standing
in every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except where such failure would not have a
Material Adverse Effect. A "Material Adverse Effect" means any material adverse
effect on the operations, results of operations, properties, assets or condition
(financial or otherwise) of Phage and its Subsidiary, taken as a whole, or on
the transactions contemplated under this Agreement or by the agreements or
instruments to be entered into in connection with this Agreement.
3.2 Authorization and Execution.
(a) Phage has all requisite corporate power and authority to
enter into and perform each Transaction Agreement and to
consummate the transactions contemplated under this Agreement
and to issue the Securities in accordance with the terms of
this Agreement.
(b) The execution, delivery and performance by Phage of each
Transaction Agreement and the issuance by Phage of the
Securities have been duly and validly authorized by the Board
of Directors of Phage and no further consent or authorization
of Phage, its Board of Directors or its shareholders is
required.
(c) This Agreement has been duly executed and delivered by Phage.
(d) This Agreement constitutes, and on execution and delivery by
Phage, each of the Transaction Agreements will constitute, a
valid and binding agreement of Phage, in each case
enforceable against Phage in accordance with its respective
terms subject to:
(i) applicable bankruptcy, insolvency or similar laws affecting
the enforceability of creditors rights generally; and
(ii) equitable principals of general applicability.
3.3 Capitalization. The authorized capital stock of Phage consists of
50,000,000 shares of common stock with a par value of $0.001 per share. As of
October 23, 2000, Phage had 8,566,873 shares of common stock issued and
outstanding. All of such outstanding shares of capital stock are validly issued,
fully paid and nonassessable. No shares of capital stock of Phage are subject to
preemptive rights or similar rights of the shareholders of Phage or any liens or
encumbrances imposed through the actions or failure to act of Phage. Other than
as set forth on Schedule 3.3 hereto, as of the date of this Agreement, (i) there
are no outstanding options, warrants, scrip, rights to subscribe for, puts,
calls, rights of first refusal, agreements, understandings, claims or other
commitments or rights of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for any shares of capital stock of Phage
or its Subsidiary, or arrangements by which Phage or its Subsidiary is or may
become bound to issue additional shares of capital stock of Phage or its
Subsidiary, and (ii) there are no agreements or arrangements under which Phage
or its Subsidiary are obligated to register the sale of any of its or their
securities under the Securities Act (except pursuant to the Registration Rights
Agreement) and (iii) there are no anti-dilution or price adjustment provisions
contained in any security issued by Phage (or in any agreement providing rights
to security holders) that will be triggered by the issuance of the Units or
Shares. Phage has furnished to the Purchasers true and correct copies of Phage's
Corporate Documents, and the terms of all securities convertible into or
exercisable for Common Stock.
3.4 Governmental Authorization. The execution and delivery by Phage of
the Transaction Agreements does not and will not, the issuance and sale by Phage
of the Securities does not and will not, and the consummation of the
transactions contemplated under this Agreement and by the other Transaction
Agreements will not, require any action by or in respect of, or filing with, any
governmental body, agency or governmental official except:
(a) such actions or filings that have been undertaken or made prior to the
date of this Agreement and that will be in full force and effect (or
as to which all applicable waiting periods have expired) on and as of
the date of this Agreement or which are not required to be filed on or
prior to the Initial Closing Date;
(b) such actions or filings that, if not obtained, would not result in a
Material Adverse Effect;
(c) listing applications ("Listing Applications") to be filed with the
Pink Sheets or the OTC Bulletin Board or the National Market relating
to the Shares, if applicable; and
(d) the filing of a "Form D" as described in Section 6.12 below and the
filing of any requisite documents under state securities ("Blue Sky")
laws.
3.5 Issuance of Shares. On issuance of the Unit Shares and exercise of the
Warrants, the Shares will be duly and validly issued and outstanding, fully paid
and nonassessable, free and clear of any Liens and charges and will not be
subject to preemptive rights or similar rights of any other shareholders of
Phage. Assuming the representations and warranties of the Purchasers herein are
true and correct in all material respects, each of the Securities will have been
issued in material compliance with all applicable U.S. federal and state
securities laws. Phage understands and acknowledges that the issuance of Shares
will dilute the ownership interests of other shareholders of Phage. Phage
further acknowledges that its obligation to issue Shares as part of the Units
and exercise of the Warrants is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
shareholders of Phage.
3.6 No Conflicts. The execution and delivery by Phage of the Transaction
Agreements to which it is a party did not and will not, the issuance and sale by
Phage of the Securities did not and will not and the consummation of the
transactions contemplated under this Agreement and by the other Transaction
Agreements will not, contravene or constitute a default under or violation of:
(a) any provision of applicable law or regulation known by Phage to be
applicable to it;
(b) Phage Corporate Documents;
(c) any material agreement, judgment, injunction, order, decree or other
instrument binding on Phage or any Subsidiary or any of their
respective assets, or result in the creation or imposition of any
material Lien on any asset of Phage or any Subsidiary.
To its knowledge, Phage and each Subsidiary is in compliance with and conforms
to all statutes, laws, ordinances, rules, regulations, orders, restrictions and
all other legal requirements of any domestic or foreign government or any
instrumentality having jurisdiction over the conduct of its businesses or the
ownership of its properties, except where such failure would not have a Material
Adverse Effect.
3.7 Financial Information. Since June 30, 2000 (the "Balance Sheet Date")
there has been (x) no material adverse change in the assets or liabilities, or
in the business or condition, financial or otherwise, or in the results of
operations or prospects, of Phage and its Subsidiary taken as a whole, whether
as a result of any legislative or regulatory change, revocation of any license
or rights to do business, fire, explosion, accident, casualty, labor trouble,
flood, drought, riot, storm, condemnation, act of God, public force or otherwise
and (y) no material, adverse change in the assets or liabilities, or in the
business or condition, financial or otherwise, or in the results of operations
or prospects, of Phage and its Subsidiary except in the ordinary course of
business; and to the knowledge of Phage no fact or condition exists which might
cause such a change in the future. The unaudited consolidated balance sheets of
Phage and its Subsidiary for the periods ending December 31, 1999, and June 30,
2000, respectively, and the related unaudited consolidated statements of income,
changes in shareholders' equity and changes in cash flows for the periods then
ended, including the footnotes thereto, except as indicated therein, (i)
complied in all material respects with applicable accounting requirements and
(ii) have been prepared in accordance with GAAP consistently applied throughout
the periods indicated, except that the unaudited financial statements do not
contain notes and may be subject to normal audit adjustments and normal annual
adjustments. Such financial statements fairly present the financial condition of
Phage and its Subsidiary at the dates indicated and the consolidated results of
their operations and cash flows for the periods then ended and, except as
indicated therein, reflect all claims against and all Debts and liabilities of
Phage and its Subsidiary, fixed or contingency required to be reflected therein
in accordance with GAAP.
3.8 Litigation. There is no action, suit or proceeding pending or, to the
knowledge of Phage, threatened against Phage or any Subsidiary, before any court
or arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could be reasonably expected
to have a Material Adverse Effect or which challenges the validity of any
Transaction Agreements.
3.9 Employees. Neither Phage nor its Subsidiary is involved in any labor
dispute nor, to the knowledge of Phage or its Subsidiary, is any such dispute
threatened. None of Phage's or its Subsidiary' employees is a member of a union
and Phage and its Subsidiary believe that their relations with their employees
are good. Phage does not have any employee benefit plan as defined by the
Employee Retirement Income Security Act of 1974, as amended.
3.10 Environmental Matters. Phage and its Subsidiary conducts its
businesses in compliance in all material respects with all applicable
Environmental Laws.
3.11 Taxes. All United States federal, state, county, municipality,
local or foreign income tax returns and all other material tax returns
(including foreign tax returns) which are required to be filed by or on behalf
of Phage and each Subsidiary have been or will be filed and all material taxes
due and payable pursuant to such returns or pursuant to any assessment received
by Phage and each Subsidiary have been or will be paid except those being
disputed in good faith and for which adequate reserves have been established.
The charges, accruals and reserves on the books of Phage and each Subsidiary in
respect of taxes and other governmental charges have been established in
accordance with GAAP.
3.12 Not an Investment Company. Neither Phage nor any Subsidiary is an
"Investment Company" within the meaning of Investment Company Act of 1940, as
amended.
3.13 Full Disclosure. The information heretofore furnished by Phage to the
Purchasers for purposes of or in connection with this Agreement or any
transaction contemplated by this Agreement does not contain any untrue statement
of a material fact.
3.14 No Solicitation; No Integration with Other Offerings. No form of
general solicitation or general advertising was used by Phage or, to its
knowledge, any other Person acting on behalf of Phage, in connection with the
offer and sale of the Securities. Neither Phage, nor, to its knowledge, any
Person acting on behalf of Phage, has, either directly or indirectly, sold or
offered for sale to any Person (other than the Purchasers) any of the Securities
or, within the six months prior to the date of this Agreement, any other similar
security of Phage except as contemplated by this Agreement, and Phage represents
that neither itself nor any Person authorized to act on its behalf (except that
Phage makes no representation as to the Purchasers and their Affiliates) will
sell or offer for sale any such security to, or solicit any offers to buy any
such security from, or otherwise approach or negotiate in respect with, any
Person or Persons so as thereby to cause the issuance or sale of any of the
Securities to be in violation of any of the provisions of section 5 of the
Securities Act. The issuance of the Securities to the Purchasers will not be
integrated with any other issuance of Phage's securities (past, current or
future).
3.15 Permits. To the best of Phage's knowledge, Phage and each of its
Subsidiary has, or is in the process of obtaining, all franchises, permits,
licenses and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could materially and adversely
affect its business, properties or financial condition and believes it can
obtain, without undue burden or expense, any similar authority for the conduct
of its business as planned to be conducted. Neither Phage nor any Subsidiary is
in default in any material respect under any of such franchises, permits,
licenses or other similar authority.
3.16 Title. Phage does not own any real property. Any real property and
facilities held under lease by Phage and its Subsidiary are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by Phage and its Subsidiary.
3.17 Intellectual Property Rights. Each of Phage and its Subsidiary owns,
or is licensed under, and has the rights to use, all material to the knowledge
of Phage, patents, trademarks, trade names, copyrights, technology, know-how and
processes (collectively, "Intellectual Property") used in, or necessary for the
conduct of its business; no claims have been asserted by any Person to the use
of any such Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement related thereto. To Phage's and its
Subsidiary' knowledge, there is no valid basis for any such claim and the use of
such Intellectual Property by Phage and its Subsidiary will not infringe on the
rights of any Person.
3.18 Internal Accounting Controls. Phage and each of its Subsidiary
maintain a system of internal accounting controls sufficient, in the judgment of
Phage's Board of Directors, to provide reasonable assurance that:
(1) transactions are executed in accordance with managements' general or
specific authorizations;
(2) transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset
accountability;
(3) access to assets is permitted only in accordance with management's
general or specific authorization; and
(4) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants, severally and not jointly,
that:
4.1 Investment Purpose. Each Purchaser is acquiring the Units and the
underlying Warrants and Shares, for its own account for investment only and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that by making the representations herein, such
Purchaser reserves the right to dispose of Shares at any time in accordance with
or pursuant to an effective registration statement covering such Shares or an
available exemption under the 1933 Act.
4.2 Accredited Purchaser Status. Each Purchaser is an "accredited
Purchaser" as that term is defined in Rule 501(a)(3) of Regulation D.
4.3 Reliance on Exemptions. Each Purchaser understands that the Units
and the underlying Warrants and Shares are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States Federal and state securities laws and that Phage is relying in part upon
the truth and accuracy of, and such Purchaser's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of such Purchaser to acquire such securities.
4.4 Information. Such Purchaser and its advisors (and his or, its
counsel), if any, have been furnished with all materials relating to the
business, finances and operations of Phage and information he deemed material to
making an informed investment decision regarding his purchase of the Units and
the underlying Warrants and Shares, which have been requested by such Purchaser.
Such Purchaser and its advisors, if any, have been afforded the opportunity to
ask questions of Phage and its management. Neither such inquiries nor any other
due diligence investigations conducted by such Purchaser or its advisors, if
any, or its representatives shall modify, amend or affect such Purchaser's right
to rely on Phage's representations and warranties contained in this Agreement.
Such Purchaser understands that its investment in the Units and the underlying
Warrants and Shares involves a high degree of risk. Purchaser is in a position
regarding Phage, which, based upon employment, family relationship or economic
bargaining power, enabled and enables Purchaser to obtain information from Phage
in order to evaluate the merits and risks of this investment. Such Purchaser has
sought such accounting, legal and tax advice, as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Units and the underlying Warrants and Shares.
4.5 No Governmental Review. Such Purchaser understands that no United
States Federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Units or the
underlying Warrants and Shares, or the fairness or suitability of the investment
in the Units or the underlying Warrants and Shares, nor have such authorities
passed upon or endorsed the merits of the offering of the Units or the
underlying Warrants and Shares.
4.6 Transfer or Resale. Such Purchaser understands that except as provided
in the Registration Rights
Agreement:
(a) the Units and the underlying Warrants and Shares have not
been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold,
assigned or transferred unless:
(i) subsequently registered there under; or
(ii) such Purchaser shall have delivered to Phage an
opinion of counsel, in a generally acceptable form,
to the effect that such securities to be sold,
assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such
registration requirements;
(b) any sale of such securities made in reliance on Rule 144
under the 1933 Act (or a successor rule thereto) ("Rule 144")
may be made only in accordance with the terms of Rule 144 and
further, if Rule 144 is not applicable, any resale of such
securities under circumstances in which the seller (or the
person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC there under; and
(c) neither Phage nor any other person is under any obligation to
register such securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of
any exemption there under. Phage reserves the right to place
stop transfer instructions against the shares and
certificates for the Warrants and Shares.
4.7 Legends. Such Purchaser understands that the certificates or other
instruments representing the stock certificates representing the Warrants and
Shares shall bear a restrictive legend in substantially the following form (and
a stop transfer order may be placed against transfer of such stock
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS.
The legend set forth above shall be removed and Phage shall issue a
certificate without such legend to the holder of the Shares upon which
it is stamped, if, unless otherwise required by state securities laws:
(a) in connection with a sale transaction, provided the Shares are
registered under the 1933 Act; or
(b) in connection with a sale transaction, such holder provides Phage
with an opinion of counsel, in form acceptable to Phage and its
counsel, to the effect that a public sale, assignment or transfer
of the Shares may be made without registration under the 1933
Act.
4.8 Authorization, Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Purchaser and is a valid
and binding agreement of such Purchaser enforceable in accordance with its
terms, except as such enforceability may be limited by general principles of
equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
4.9 Receipt of Documents. Such Purchaser and his or its counsel has
received and read in their entirety:
(a) this Agreement and each representation, warranty and covenant set
forth in this Agreement and the Registration Rights Agreement;
(b) all due diligence and other information necessary to verify the
accuracy and completeness of such representations, warranties and
covenants;
(c) Phage's unaudited financial statements for the periods ending
December 31, 1999 and June 30, 2000; and
(d) answers to all questions the Purchaser submitted to Phage
regarding an investment in Phage; and the Purchaser has relied on
the information contained therein and has not been furnished any
other documents, literature, memorandum or prospectus.
4.10 Due Formation of Corporate and Other Purchasers. If the
Purchaser(s) is a corporation, trust, partnership or other entity that is not an
individual person, it has been formed and validly exists and has not been
organized for the specific purpose of purchasing the Units and is not prohibited
from doing so.
4.11 Due Authorization of Fiduciary Purchasers. If the Purchaser(s) is
purchasing the in a fiduciary capacity for another person or entity, including
without limitation a corporation, partnership, trust or any other entity, the
Purchaser(s) has been duly authorized and empowered to execute this Agreement
and such other person fulfills all the requirements for purchase of the Units
and agrees to be bound by the obligations, representations, warranties, and
covenants contained herein. Upon request of Phage, the Purchaser(s) will provide
true, complete and current copies of all relevant documents creating the
Purchasers, authorizing its investment in Phage and/or evidencing the
satisfaction of the foregoing.
4.12 Further Representations by Foreign Purchasers. If Purchaser(s) is
not a U.S. Person (as defined), such Purchaser represents that such Purchaser(s)
is satisfied as to full observance of the laws of such Purchaser's jurisdiction
in connection with any invitation to subscribe for the securities or any use of
this Agreement, including:
(a) the legal requirements of such Purchaser's jurisdiction for the
purchase of the securities;
(b) any foreign exchange restrictions applicable to such purchase;
(c) any governmental or other consents that may need to be obtained;
and
(d) the income tax and other tax consequences, if any, which may be
relevant to the purchase, holding, redemption, sale, or transfer
of the securities.
Such Purchaser's subscription and payment for, and such Purchaser's continued
beneficial ownership of, the securities will not violate any applicable
securities or other laws of such Purchaser's jurisdiction. The term "U.S.
Person" as used herein shall mean any person who is a citizen or resident of the
United States or Canada, or any state, territory or possession thereof,
including but not limited to any estate of any such person, or any corporation,
partnership, trust or other entity created or existing under the laws thereof,
or any entity controlled or owned by any of the foregoing.
4.13 No Legal Advice From Phage. The Purchaser(s) acknowledge that it
had the opportunity to review this Agreement and the transactions contemplated
by this Agreement with his or its own legal counsel and investment and tax
advisors. The Purchaser is relying solely on such counsel and advisors and not
on any statements or representations of Phage or any of its representatives or
agents for legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any
jurisdiction.
ARTICLE V. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES
5.1 Conditions Precedent to Purchaser's Obligations to Purchase. The
obligation of the Purchaser(s) hereunder to purchase the Initial Units and the
Second Units is subject to the satisfaction, on or before the Initial Closing
Date, of each of the following conditions, provided that these conditions are
for Purchaser's sole benefit and may be waived by Purchaser(s) at any time in
its sole discretion:
(a) Phage will have duly executed this Agreement and the Registration
Rights Agreement, and delivered the same to the Purchaser(s);
(b) Phage will having agreed to deliver to the Purchaser(s) duly
executed certificates representing the Shares and Warrants
underlying the Units in accordance with section 2.2(b) of this
Agreement;
(c) The representations and warranties of Phage contained in each
Transaction Agreement will be true and correct in all material
respects as of the date when made and as of the Initial Closing
Date as though made at such time (except for representations and
warranties that speak as of a specified date) and Phage will have
performed, satisfied and complied with all covenants, agreements
and conditions required by such Transaction Agreements to be
performed, satisfied or complied with by it at or prior to the
Initial Closing Date;
(d) Phage will have received all governmental, Board of Directors,
shareholders and third party consents and approvals necessary or
desirable in connection with the issuance and sale of the
Securities and the consummation of the transactions contemplated
by the Transaction Agreements;
(e) Phage will have authorized and reserved for issuance the Common
Shares issuable as part of the Units and the exercise of all
Warrants pursuant to this Agreement.
(f) Phage Corporate Documents and the Subsidiary Corporate Documents,
if any, will be in full force and effect and no term or condition
will have been amended, waived or otherwise modified without the
prior written consent of the Purchasers;
(g) There will have occurred no material adverse change in the
business, condition (financial or otherwise), operations,
performance, properties or prospects of Phage or any Subsidiary
since June 30, 2000;
(h) There will exist no action, suit, investigation, litigation or
proceeding pending or threatened in any court or before any
arbitrator or governmental instrumentality that challenges the
validity of or purports to affect this Agreement or any other
Transaction Agreement, or other transaction contemplated under
this Agreement or that could reasonably be expected to have a
Material Adverse Effect, or any material adverse effect on the
enforceability of the Transaction Agreements or the Securities or
the rights of the holders of the Securities or the Purchasers
hereunder; and
(i) with regard to the Second Closing Date only, Phage will have
provided the Purchaser(s) evidence that it has filed a Form
10SB-12g with the Commission seven (7) days prior to the Second
Investment.
Subsection 5.1(i) is an obligation and condition to be met on or before the
Second Closing Date only and is not a condition of the Initial Closing Date.
5.2 Conditions to Phage's Obligations. The obligations of Phage to
issue and sell the Securities to the Purchasers pursuant to this Agreement are
subject to the satisfaction, at or prior to the Initial Closing Date, of the
following conditions:
(a) The representations and warranties of the Purchasers contained
herein will be true and correct in all material respects on the
Initial Closing Date and the Purchasers will have performed - and
complied in all material respects with all agreements required by
this Agreement to be performed or complied with by the Purchasers
at or prior to the Initial Closing Date;
(b) The issue and sale of the Securities by Phage will not be
prohibited by any applicable law, court order or governmental
regulation;
(c) Receipt by Phage of duly executed counterparts of this Agreement
and the Registration Rights Agreement signed by the Purchasers;
(d) Phage will have received payment of the Purchase Price; and
(e) There will exist no action, suit, investigation, litigation
or proceeding pending or threatened m any court or before any
arbitrator or governmental instrumentality that challenges
the validity of or purports to effect this Agreement or any
other Transaction Agreement, or other transaction
contemplated under this Agreement or that could reasonably be
expected to have a Material Adverse Effect, or any material
adverse effect on the enforceability of the Transaction
Agreements, or the Securities, or the rights of the holders
of the Securities or the Purchasers hereunder.
ARTICLE VI AFFIRMATIVE COVENANTS
Phage and the Purchasers hereby agree that, from and after the date of
this Agreement for so long as any Securities remain outstanding and for the
benefit of each other:
6.1 Information. Phage will deliver to each holder of the Securities
promptly on the mailing to the shareholders of Phage generally, copies of all
financial statements, reports and proxy statements so mailed and any other
document generally distributed to shareholders.
6.2 Payment of Obligations. Phage will, and will cause each Subsidiary
to, pay and discharge, at or before maturity, all their respective material
obligations, including, without limitation, tax liabilities, except where the
same may be contested in good faith by appropriate proceedings and will
maintain, in accordance with GAAP, appropriate reserves for the accrual of any
of the same.
6.3 Maintenance of Existence. Phage will, and will cause each
Subsidiary to, continue to engage in business of the same general type as now
conducted by Phage and such Subsidiary, and will preserve, renew and keep in
full force and effect its respective corporate existence and their respective
material rights, privileges and franchises necessary or desirable in the normal
conduct of business.
6.4 Compliance with Laws. Phage will, and will cause each Subsidiary
to, comply, in all material respects, with all federal, state, municipal, local
or foreign applicable laws, ordinances, rules, regulations, municipal by-laws,
codes and requirements of governmental authorities except where compliance
therewith is contested in good faith by appropriate proceedings or where
non-compliance therewith could not reasonably be expected, in the aggregate, to
have a Material Adverse Effect on the business, condition (financial or
otherwise), operations, performance, properties or prospects of Phage or such
Subsidiary.
6.5 Inspection of Property, Books and Records. Phage will, and will
cause each Subsidiary to, keep proper books of record and account in which full,
true and correct entries will be made of all dealings and transactions in
relation to their respective businesses and activities; and will permit, during
normal business hours, Purchasers' representative(s) or an affiliate(s), as
representatives of the Purchasers, to visit and inspect any of their respective
properties, on reasonable prior notice, to examine and make abstracts from any
of their respective books and records and to discuss their respective affairs,
finances and accounts with their respective executive officers and independent
public accountants (and by this provision Phage authorizes its independent
public accountants to disclose and discuss with the Purchasers the affairs,
finances and accounts of Phage and its Subsidiary in the presence of a
representative of Phage; provided, however, that such discussions will not
result in any unreasonable expense to Phage, without Company consent), all at
such reasonable times.
6.6 Investment Company Act. Phage will not be or become an open-end
investment trust, unit investment trust or face-amount certificate company that
is or is required to be registered under section 8 of the Investment Company Act
of 1940, as amended.
6.7 Use of Proceeds. The proceeds from the issuance and sale of the
Units by Phage will be used for general corporate purposes. None of the proceeds
from the issuance and sale of the Units by Phage pursuant to this Agreement will
be used directly or indirectly for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any "margin stock" within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System.
6.8 Compliance with Terms and Conditions of Material Contracts. Phage
will, and will cause each Subsidiary to, comply, in all material respects, with
all terms and conditions of all material contracts to which it is subject except
in particular circumstances in which Phage determines it to 'be in the best
interests of Phage not to comply.
6.9 Reserved Shares and Listings.
(a) Phage will at all times have authorized, and reserved for the
purpose of issuance, a sufficient number of shares of Common
Stock to provide for the full exercise of the Warrants and
issuance of the Shares as part of the Units in the Second
Investment (the "Reserved Amount"). Phage will not reduce the
Reserved Amount without the prior written consent of the
Purchasers. If at any time the number of shares of Common Stock
authorized and reserved for issuance is below the number of
Shares issued or issuable on purchaser of the Units in the Second
Investment and exercise of all Warrants, Phage will promptly take
all corporate action necessary to authorize and reserve a
sufficient number of shares, including, without limitation,
calling a special meeting of shareholders to authorize additional
shares, in the case of an insufficient number of authorized
shares.
(b) If required, Phage will promptly file the Listing Applications
and secure the listing of the Shares on each national securities
exchange or automated quotation system, if any, on which shares
of Common Stock are then listed (subject to official notice of
issuance) and will maintain, so long as any other shares of
Common Stock will be so listed, such listing of all Shares from
time to time issuable on purchase of the Units in the Second
Investment and Warrants, respectively. Phage will comply in all
respects with Phage's reporting, filing and other obligations
under the bylaws or rules of the National Association of
Securities Dealers, Inc. (the "NASD") and such exchanges, as
applicable.
6.10 Transfer Agent Instructions. On receipt of a Notice of Exercise,
Phage will immediately direct Phage's transfer agent to issue certificates,
registered in the name of Purchaser(s) or their nominees, for the Shares, in
such amounts as specified from time to time by the Purchasers to Phage on proper
exercise of the Warrants. On exercise of any Warrants in accordance with their
terms, Phage will, and will use its best lawful efforts to cause its transfer
agent to, issue one or more certificates representing shares of Common Stock in
such name or names and in such denominations specified by a Purchaser in a
Notice of Exercise. Nothing in this Section 6.10 will affect in any way a
Purchaser's obligation to comply with all securities laws applicable to a
Purchaser on resale of such shares of Common Stock, including any prospectus
delivery requirements.
6.11 Maintenance of Reporting Status; Supplemental Information. Phage
agrees to file a Form 10SB-12g with the Commission within sixty (60) days of the
date of this Agreement in order to become a "Reporting Issuer" as defined in the
Exchange Act. So long as any of the Securities are outstanding and Phage is
deemed a Reporting Issuer, Phage will timely file all reports required to be
filed with the Commission pursuant to the Exchange Act. If at anytime Phage is
not subject to the requirements of section 13 or 15(d) of the Exchange Act,
Phage will promptly furnish at its expense, on request, for the benefit of the
holders from time to time of Securities, and prospective purchasers of
Securities, information satisfying the information requirements of Rule 144
under the Securities Act.
6.12 Form D; Blue Sky Laws. Phage agrees to file a "Form D" with
respect to the Securities as required under Regulation D of the Securities Act
and to provide a copy to the the Purchasers promptly after such filing. Phage
will, on or before the Initial Closing Date, take such action as Phage will
reasonably determine is necessary to qualify the Securities for sale to the
Purchasers at the Initial Closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and will provide evidence of any such
action so taken to the Purchasers on or prior to the Initial Closing Date.
6.13 Election of Directors. The Board of Directors of Phage currently
consist of Messrs. Darren Pylot, Gaetano Morello, and Richard Honour. On Initial
Closing, the Board of Directors will appoint a non-Canadian resident nominee
selected by the Purchasers to the Board of Directors of Phage.
6.14 Sales by the Purchasers. Each Purchaser agrees that it will not
effect or cause any of its affiliates to effect a short sale of Common Stock for
so long as any of the Warrants remain outstanding or the Purchasers or their
affiliates hold any Securities.
6.15 Unit Offering. Subject to the satisfaction of the terms and
conditions of this Agreement, the Purchasers irrevocably agree to invest an
additional One Million Five Hundred Thousand Dollars ($1,500,000) in equity into
Phage within seven (7) days from the date Phage files a Form 10SB-12g with the
Commission. Phage in consideration of this investment has agreed to issue to the
Purchasers 2,142,857 units on receipt of these funds. Each "Initial Unit" will
consist of one share of Phage Common Stock and one common stock purchase warrant
(the "Series One Warrant"). For every one and a half Warrants the holder will be
entitled to acquire one additional share of common stock of Phage at an exercise
price of $0.70 per share. These Warrants will be exercisable at any time on or
before September 15, 2001 and their right of exercise will be subject to the
Purchasers having fully exercised the Warrants received at the Initial Closing.
6.16 Form 10SB-12g. Phage will deliver the Form 10SB-12g to Mr. Robert
Miller at least two (2) business days prior to filing the Form 10SB-12g with the
Securities and Exchange Commission.
ARTICLE VII. RESTRICTIVE LEGENDS
7.1 Restrictions on Transfer. From and after their respective dates of
issuance, none of the Securities will be transferable except on the conditions
specified in this Article VII and in Subsection 4(1)g concerning Legends, which
conditions are intended to ensure compliance with the provisions of the
Securities Act in respect of the Transfer of any of such Securities or any
interest therein. The Purchasers will cause any proposed transferee of any
Securities held by it to agree to take and hold such Securities subject to the
provisions and on the conditions specified in this Article VII.
7.2 Notice of Proposed Transfers. Prior to any proposed Transfer of the
Securities the holder will give written notice to Phage of such holder's
intention to effect such Transfer, setting forth the manner and circumstances of
the proposed Transfer, which will be accompanied by:
(a) an opinion of counsel reasonably acceptable to Phage, confirming
that such transfer does not give rise to a violation of the
Securities Act;
(b) representation letters in form and substance reasonably
satisfactory to Phage to ensure compliance with the provisions of
the Securities Act; and
(c) letters in form and substance reasonably satisfactory to
Phage from each such transferee stating such transferee's
agreement to be bound by the terms of this Agreement and the
Registration Rights Agreement.
Such proposed Transfer may be effected only if Phage will have received such
notice of transfer, opinion of counsel, representation letters and other letters
referred to in the immediately preceding sentence, whereon the holder of such
Securities will be entitled to Transfer such Securities in accordance with the
terms of the notice delivered by the holder to Phage.
ARTICLE VIII. ADDITIONAL AGREEMENTS AMONG THE PARTIES
8.1 Registration Rights. Phage will grant the Purchasers registration
rights covering the Shares (the: "Registrable Securities") on the terms set
forth in the Registration Rights Agreement and this Agreement.
8.2 Due Diligence Expenses. Phage agrees to offset the expenses incurred by
the Purchasers in conducting their due diligence of Phage and its subsidiary by
payment of the sum of twenty five thousand dollars ($25,000) as directed by Mr.
Robert Miller as agent for the Purchasers.
ARTICLE IX. PURCHASERS' RIGHT OF FIRST REFUSAL
9.1 Right of First Refusal. Phage hereby grants to each Purchaser the right
of first refusal to purchase its pro rata share of all or any part of any New
Securities (as defined in this Section 9.1) which Phage may, from time to time,
propose to sell and issue. A Purchaser's pro rata share, for purposes of this
right of first refusal, is the ratio that the sum of the Units held by such
Purchaser to the sum of the total number of Units as set out opposite of each
Purchaser's name on Schedule I attached to this Agreement.
(a) Except as set out below, "New Securities" will mean any shares of
capital stock of Phage including Common Stock and Preferred,
whether now authorized or not, and rights, options or warrants to
purchase said shares of Common Stock or Preferred, and securities
of any type whatsoever that are, or may become, convertible into
said shares of Common Stock or Preferred. Notwithstanding the
foregoing, "New Securities" does not include (i) the Shares and
the Conversion Stock, (ii) securities offered to the public
generally pursuant to a registration statement or pursuant to
Regulation A under the Securities Act, (iii) securities issued in
the acquisition of another corporation by Phage by merger,
purchase of substantially all of the assets or other
reorganization whereby Phage or its shareholders own not less
than fifty-one percent (51%) of the voting power of the surviving
or successor corporation, (iv) shares of Phage's Common Stock or
related options exercisable for such Common Stock issued to
employees, officers and directors of, and consultants, customers,
and vendors to, Phage, pursuant to any arrangement approved by
the Board of Directors of Phage, (v) stock issued pursuant to any
rights or agreements, including without limitation convertible
securities, options and warrants, provided that the rights of
first refusal established by this Section 9.1 apply with respect
to the initial sale or grant by Phage of such rights or
agreements, (vi) stock issued in connection with any stock split,
stock dividend or recapitalization by Phage.
(b) In the event Phage proposes to undertake an issuance of New
Securities, it will give each Purchaser written notice of its
intention, describing the type of New Securities, and the price
and terms upon which Phage proposes to issue the same. Each
Purchaser will have ten (10) days from the date of receipt of any
such notice to agree to purchase up to the Purchaser's respective
pro rata share of such New Securities for the price and upon the
terms specified in the notice by giving written notice to Phage
and stating therein the quantity of New Securities to be
purchased.
(c) In the event a Purchaser fails to exercise such right of first
refusal within said ten (10) day period, Phage will have ninety
(90) days thereafter to sell or enter into an agreement (pursuant
to which the sale of New Securities covered thereby will be
closed, if at all, within sixty (60) days from the date of said
agreement) to sell the New Securities not elected to be purchased
by Purchasers at the price and upon the terms no more favorable
to the purchasers of such securities than specified in Phage's
notice. In the event Phage has not sold the New Securities or
entered into an agreement to sell the New Securities within said
ninety (90) day period (or sold and issued New Securities in
accordance with the foregoing within sixty (60) days from the
date of said agreement), Phage will not thereafter issue or sell
any of such New Securities, without first offering such
securities in the manner provided above.
(d) The right of first refusal granted under this Agreement will
expire upon the first to occur of the following: (i) the closing
of the first public offering of the Common Stock of Phage to the
general public which is effected pursuant to a registration
statement filed with, and declared effective by, the Commission
under the Securities Act, and such right of first refusal and
related right of notice will not apply to the offer or sale of
shares pursuant to such public offering; (ii) September 30, 2001,
or (iii) as to a Purchaser if such Purchaser no longer holds at
least 2,000,000 shares of Common Stock and/or Warrants
(appropriately adjusted for Recapitalizations).
(e) The right of first refusal hereunder is not assignable except
by each of such Purchasers to any wholly-owned subsidiary or
constituent partner who acquires at least 500,000 shares
(appropriately adjusted for Recapitalizations).
ARTICLE X. MISCELLANEOUS
10.1 Notices. All notices, demands and other communications to any
party hereunder will be in writing (including telecopier or similar writing) and
will be given to such party at its address set forth on the signature pages of
this Agreement, or such other address as such party may hereafter specify for
the purpose to the other parties. Each such notice, demand or other
communication will be effective:
(a) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified on the signature page of this
Agreement, the sender has received electronic confirmation of the
transmission and the sender has provided contemporaneous
telephonic notice to the recipient of such transmission;
(b) if given by mail, four days after such communication is deposited
in the United States mail with first class postage prepaid,
addressed as aforesaid; or
(c) if given by any other means, when delivered at the address
specified in or pursuant to this Section.
For purposes of telephonic notice to Phage in clause (a) above, such telephonic
notice will be to Darren Pylot unless Phage notifies the Purchasers of other
individuals to whom telephone notice may be directed.
10.2 No Waivers; Amendments.
1) No failure or delay on the part of any party in exercising any right, power
or remedy hereunder will operate as a waiver, nor will any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise or the exercise of any other right, power or remedy.
b) Any provision of this Agreement may be amended, supplemented or waived if,
but only if, such amendment, supplement or waiver is in writing and is
signed by Phage and the Purchasers; provided, that without the consent of
each holder of any Unit affected thereby, an amendment or waiver may not:
(i) reduce the aggregate principal amount of Units whose holders must
consent to an amendment or waiver;
(ii) reduce the rate or extend the time for payment of interest on any
Unit;
(iii)reduce the principal amount of or extend the stated maturity of any
Unit; or
(iv) make any Unit payable in money or property other than as stated in
such Unit.
In determining whether the holders of the requisite principal amount of
Units have concurred in any direction, consent, or waiver as provided in
any Transaction Agreement, Units which are owned by Phage or any other
obligor on or guarantor of the Units, or by any Person Controlling,
Controlled by, or under common Control with any of the foregoing, will be
disregarded and deemed not to be outstanding for the purpose of any such
determination; and PROVIDED FURTHER that no such amendment, supplement or
waiver which affects the rights of the Purchasers and their affiliates
otherwise than solely in their capacities as holders of Units will be
effective with respect to them without their prior written consent.
10.3 Indemnification.
1) Phage agrees to indemnify and hold harmless the Purchaser(s), its
Affiliates, and each Person, if any, who controls Purchaser(s), or any of
its Affiliates, within the meaning of the Securities Act or the Exchange
Act (each, a "Controlling Person"), and the respective partners, agents,
employees, officers and Directors of the Purchasers, their Affiliates and
any such Controlling Person (each a "Purchaser Indemnified Party") and
collectively, the "Purchaser Indemnified Parties"), from and against any
and all losses, claims, damages, liabilities and expenses (including,
without limitation and as incurred, reasonable costs of investigating,
preparing or defending any such claim or action, whether or not such the
Purchasers Indemnified Party is a party thereto, provided that Phage will
not be obligated to advance such costs to any the Purchasers Indemnified
Party other than the Purchasers unless it has received from such the
Purchasers Indemnified Party an undertaking to repay to Phage the costs so
advanced if it should be determined by final judgment of a court of
competent jurisdiction that such the Purchasers Indemnified Party was not
entitled to indemnification hereunder with respect to such costs) which may
be incurred by such the Purchasers Indemnified Party in connection with any
investigative, administrative or judicial proceeding brought or threatened
that relates to or arises out of, or is in connection with any activities
contemplated by any Transaction Agreement or any other services rendered in
connection herewith; provided that Phage will not be responsible for any
claims, liabilities, losses, damages or expenses that are determined by
final judgment of a court of competent jurisdiction to result from such the
Purchasers Indemnified Party's gross negligence, willful misconduct or bad
faith.
2) The Purchasers agrees to indemnify and hold harmless Phage, its Affiliates,
and each Person, if any, who controls Phage, or any of its Affiliates,
within the meaning of the Securities Act or the Exchange Act (each, a
"Controlling Person"), and the respective employees, officers and Directors
of Phage (each a "Company Indemnified Party") and collectively, the
"Company Indemnified Parties"), from and against any and all losses,
claims, damages, liabilities and expenses (including, without limitation
and as incurred, reasonable costs of investigating, preparing or defending
any such claim or action, whether or not such Company Indemnified Party is
a party thereto, provided that the Purchasers will not be obligated to
advance such costs to any Company Indemnified Party other than Phage unless
it has received from such Company Indemnified Party an undertaking to repay
to the Purchaser the costs so advanced if it should be determined by final
judgment of a court of competent jurisdiction that such Company Indemnified
Party was not entitled to indemnification hereunder with respect to such
costs) which may be incurred by such Company Indemnified Party in
connection with any investigative, administrative or judicial proceeding
brought or threatened that relates to or arises out of, or is in connection
with any activities contemplated by any Transaction Agreement or any other
services rendered in connection herewith; provided that the Purchasers will
not be responsible for any claims, liabilities, losses, damages or expenses
that are determined by final judgment of a court of competent jurisdiction
to result from such Company Indemnified Party's gross negligence, willful
misconduct or bad faith.
c) If any action will be brought against a Purchasers Indemnified Party or a
Company Indemnified Party (each an "Indemnified Party") with respect to
which indemnity may be sought against a party under this Agreement, such
Indemnified Party will promptly notify the party or parties from whom
indemnification is being claimed (the "Indemnifying Party") in writing and
the Indemnifying Party, at its option, may, assume the defense, including
the employment of counsel reasonably satisfactory to such Indemnified Party
and payment of all reasonable fees and expenses. The failure to so notify
the Indemnifying Party will not affect any obligations the Indemnifying
Party may have to such Indemnified Party under this Agreement or otherwise
unless the Indemnifying Party is materially adversely affected by such
failure.. Such Indemnified Party will have 'the right to employ separate
counsel in such action and participate in the defense, but the fees and
expenses of such counsel will be at the expense of such Indemnified Party,
unless
(i) the Indemnifying Party has failed to assume the defense and
employ counsel; or
(ii) the named parties to any such action (including any impleaded
parties) include such Indemnified Party and the Indemnifying
Party, and such Indemnified Party will have been advised by
counsel that there may be one or more legal defenses available to
it which conflict with those available to the Indemnifying Party;
in which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party will not have the right to
assume the defense of such action or proceeding on behalf of such
Indemnified Party, PROVIDED, HOWEVER, that the Indemnifying Party will not,
in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances,
be responsible hereunder for the reasonable fees and expenses of more than
one such firm of separate counsel, in addition to any local counsel, which
counsel will be designated by the Indemnified Party. The Indemnifying Party
will not be liable for any settlement of any such action effected without
the written consent of the Indemnifying Party (which will not be
unreasonably withheld) and the Indemnifying Party agrees to indemnify and
hold harmless each Indemnified Party from and against any loss or liability
by reason of settlement of any action effected with the consent of the
Indemnifying Party. In addition, the Indemnifying Party will not, without
the prior written consent of the Indemnified Party, settle or compromise or
consent to the entry of any judgment in or otherwise seek to terminate any
pending or threatened action, claim, suit or proceeding in respect to which
indemnification may be sought hereunder (whether or not any Indemnified
Party is a party thereto) unless such settlement, compromise, consent or
termination includes an express unconditional release of the Indemnified
Party and the other Indemnified Parties, satisfactory in form and substance
to the Indemnified Party, from all liability arising out of such action,
claim, suit or proceeding.
(4) The indemnification and expense reimbursement obligations set
forth in this Section 10.3 will be in addition to any
liability any Indemnifying Party may have to any Indemnified
Party at common law or otherwise; will survive the termination
of this Agreement and the other Transaction Agreements and the
payment in full of the Units; and will remain operative and in
full force and effect regardless of any investigation made by
or on behalf of the Purchasers or Phage or any other
Indemnified Party.
10.4 Expenses. Phage and each Purchaser will bear its own expenses incurred
on its behalf with respect to this Agreement and the transactions contemplated
under this Agreement.
10.5 Payment. Phage agrees that, so long as the Purchasers will own any
Units purchased by it from Phage hereunder, Phage will make payments to the
Purchasers of all amounts due thereon by wire transfer by 5:00 P.M. (P.S.T.).
10.6 Successors and Assigns. This Agreement will be binding on Phage and on
the Purchasers and its respective successors and assigns. So long as the Units
remain outstanding, Phage will not assign or otherwise transfer its rights or
obligations under this Agreement to any other Person without the prior written
consent of the Purchasers. All provisions hereunder purporting to give rights to
the Purchasers and its affiliates or to holders of Securities are for the
express benefit of such Persons and their successors and assigns.
10.7 Florida Law; Submission to Jurisdiction; Waiver of Jury Trial;
Appointment of Agent. THIS AGREEMENT Will BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF FLORIDA. EACH PARTY HERETO HEREBY SUBMITS
TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE STATE
OF FLORIDA AND OF ANY FEDERAL DISTRICT COURT SITTING IN MIAMI, FLORIDA FOR
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY TO THIS AGREEMENT IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH PROCEEDING BY THE MAILING OF
COPIES BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS
ADDRESS SET FORTH HEREIN. NOTHING HEREIN Will AFFECT THE RIGHT OF ANY PARTY TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, EACH PARTY WAIVES ITS RIGHT
TO A TRIAL BY JURY.
10.8 Entire Agreement. This Agreement, the Exhibits or Schedules
attached, which include, but are not limited to the Warrant and the Registration
Rights Agreement, set forth the entire agreement and understanding of the
parties relating to the subject matter of this Agreement and supercedes all
prior and contemporaneous agreements, negotiations and understandings between
the parties, both oral and written relating to the subject matter of this
Agreement. The terms and conditions of all Exhibits and Schedules to this
Agreement are incorporated herein by this reference and will constitute part of
this Agreement as is fully set forth herein.
10.9 Survival; Severability. The representations, warranties, covenants
and agreements of the parties hereto will survive the Initial Closing hereunder.
In the event that any provision of this Agreement becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement will continue in full force and effect without said provision;
provided that such severability will be ineffective if it materially changes the
economic benefit of this Agreement to any party.
10.10 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
10.11 Publicity. Phage and the Purchasers will consult with each other
in issuing any press releases or otherwise making public statements with respect
to the transactions contemplated hereby and no party will issue any such press
release or otherwise make any such public statement without the prior written
consent of the other parties, which consent will not be unreasonably withheld or
delayed, except that no prior consent will be required if such disclosure is
required by law, in which such case the disclosing party will provide the other
parties with prior notice of such public statement. Notwithstanding the
foregoing, Phage will not publicly disclose the name of Purchaser(s) without the
prior written consent of Purchaser, except to the extent required by law, in
which case Phage will provide Purchaser with prior written notice of such public
disclosure.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
above written.
PHAGE THERAPEUTICS INTERNATIONAL INC.
/s/ Darren Pylot /s/
By: Darren Pylot
Title: President
Address: Phage Therapeutics International Inc.
22116 23rd Drive SE
Bothell, Washington 98201
Tel: (425) 482-9511
Fax.: (425) 482-0834
/s/ Robert Miller/s/ /s/ Bolivar Longines SA /s/
----------------------------------------- -------------------------------------
Name: Robert Miller Name: Bolivar Longines SA
Address: 1645 South Miami Avenue Address: Centro Comercial Naraya
Miami, Florida 33129 Piso 4 Oficina L-10
Alta Vista, Puerto Ordaz
Venezula
/s/ Ricardo Requena /s/ /s/ Cadaques S.A. /s/
----------------------------------------- -------------------------------------
Name: Ricardo Requena Name: Cadaques S.A.
Address: 25 de Mayo 444 Piso 2 Address: Benito Blanco 675, Apt. 401
11000 Montevideo 11300 Montevideo
Urguay Urguay
/s/ Blanca de Longo /s/ /s/ Stratton S.A. /s/
----------------------------------------- -------------------------------------
Name: Blanca de Longo Name: Stratton S.A.
Address: Carace 524, Apt. 701 Address: 25 de Mayo 444 Piso 2
Montevideo 11000 Montevideo
Urguay Urguay
/s/ GIG Limited /s/
-----------------------------------------
Name: GIG Limited
Address: 105 Marbel Drive
Grand Cayman BWI
SCHEDULE I
SCHEDULE OF PURCHASERS
----------------------
Name Address/Facsimile Number $ Amount of Subscription
----------------------- ----------------------------- ------------------------
Robert Miller 1645 South Miami Avenue $ 130,000
$ 220,000
Miami, Florida 33129 ------------
$ 350,000 = Total
------------------------ ------------------------------ ------------------------
Bolivar Longines SA Centro Comercial Naraya $ 70,000
Piso 4 Oficina L-10
Alta Vista, Puerto Ordaz
Venezula
----------------------- ----------------------------- ------------------------
Ricardo Requena 25 de Mayo 444 Piso 2 $ 140,000
11000 Montevideo
Urguay
----------------------- ----------------------------- ------------------------
Cadaques S.A. Benito Blanco 675, Apt. 401 $ 350,000
11300 Montevideo
Urguay
----------------------- ----------------------------- ------------------------
Blanca de Longo Carace 524, Apt. 701 $ 70,000
Montevideo
Urguay
----------------------- ----------------------------- ------------------------
Stratton S.A. 25 de Mayo 444 Piso 2 $ 180,000
11000 Montevideo
Urguay
----------------------- ----------------------------- ------------------------
GIG Limited 105 Marbel Drive $ 350,000
Grand Cayman BWI
----------------------- ----------------------------- ------------------------
TOTAL: $ 1,510,000
Dates Referenced Herein and Documents Incorporated by Reference
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