FORM OF SUBSCRIPTION AGREEMENT
Exhibit 10.1
FORM OF SUBSCRIPTION AGREEMENT
Gentlemen:
The undersigned (the “Investor”) hereby confirms its agreement with Cyclacel Pharmaceuticals, Inc.,
a Delaware corporation (the “Company”) as follows:
1. This Subscription Agreement, including the Terms and Conditions For Purchase of Units
attached hereto as Annex I (collectively, (this “Agreement”) is made as of the date set forth below
between the Company and the Investor.
2. The Company has authorized the sale and issuance to certain investors of up to an aggregate
of 2,350,000 units (the “Units”), subject to adjustment by the Company’s Board of Directors, or a
committee thereof, each consisting of (i) one share (each a “Share,” collectively, the “Shares”) of
its common stock, par value $0.001 per share (the “Common Stock”) and (ii) one warrant (each, a
“Warrant,” collectively, the “Warrants”) to purchase 0.30 of one share of Common Stock and
exercisable for a period of five (5) years, in substantially the form attached hereto as
Exhibit B, for a purchase price of $2.50 per Unit (the “Purchase Price”). Units will not
be issued or certificated. The Shares and Warrants are immediately separable and will be issued
separately. The shares of Common Stock issuable upon exercise of the Warrants are referred to
herein as the “Warrant Shares” and, together with the Units, the Shares and the Warrants, are
referred to herein as the “Securities”).
3. The offering and sale of the Units (the “Offering”) are being made pursuant to (1) an
effective Registration Statement on Form S-3, No. 333-140034 (the “Registration Statement”) filed
by the Company with the Securities and Exchange Commission (the “Commission”) (including the
prospectus contained therein (the “Base Prospectus”), (2) if applicable, certain “free writing
prospectuses” (as that term is defined in Rule 405 under the Securities Act of 1933, as amended
(the “Securities Act”)), that have been or will be filed with the Commission and delivered to the
Investor on or prior to the date hereof (the “Issuer Free Writing Prospectus”), containing certain
supplemental information regarding the Units, the terms of the Offering and the Company and (3) a
Prospectus Supplement (the “Prospectus Supplement” and together with the Base Prospectus, the
“Prospectus”) containing certain supplemental information regarding the Securities and terms of the
Offering that has been or will be filed with the Commission and delivered to the Investor (or made
available to the Investor by the filing by the Company of an electronic version thereof with the
Commission).
4. The Company and the Investor agree that the Investor will purchase from the Company and the
Company will issue and sell to the Investor the Units set forth below for the aggregate purchase
price set forth below. The Units shall be purchased pursuant to the Terms and Conditions for
Purchase of Units attached hereto as Annex I and incorporated herein by this reference as
if fully set forth herein. The Investor acknowledges that the Offering is not being
underwritten by the placement agent (the “Placement Agent”) named in the Prospectus Supplement
and that there is no minimum offering amount.
5. The manner of settlement of the Shares included in the Units purchased by the Investor
shall be determined by such Investor as follows (check one):
| o | A. Delivery by crediting the account of the Investor’s prime broker (as specified by such
Investor on Exhibit A annexed hereto) with the Depository Trust Company (“DTC”) through its
Deposit/Withdrawal At Custodian (“DWAC”) system, whereby Investor’s prime broker shall
initiate a DWAC transaction on the Closing Date using its DTC participant identification
number, and released by American Stock Transfer & Trust Company, the Company’s transfer agent
(the “Transfer Agent”), at the Company’s direction. NO LATER THAN ONE (1) BUSINESS DAY AFTER
THE EXECUTION OF THIS AGREEMENT BY THE INVESTOR AND THE COMPANY, THE INVESTOR SHALL: |
| (I) | DIRECT THE BROKER-DEALER AT WHICH THE ACCOUNT OR ACCOUNTS TO BE
CREDITED WITH THE SHARES ARE MAINTAINED TO SET UP A DWAC INSTRUCTING THE
TRANSFER AGENT TO CREDIT SUCH ACCOUNT OR ACCOUNTS WITH THE SHARES, AND |
||
| (II) | REMIT BY WIRE TRANSFER THE AMOUNT OF FUNDS EQUAL TO THE
AGGREGATE PURCHASE PRICE FOR THE UNITS BEING PURCHASED BY THE INVESTOR TO THE
FOLLOWING ACCOUNT: |
ABA No.
Cyclacel Pharmaceuticals Inc.
Account No.
Attention:
Phone:
Cyclacel Pharmaceuticals Inc.
Account No.
Attention:
Phone:
—OR—
| o | B. Delivery versus payment (“DVP”) through DTC (i.e., on the
Closing Date, the Company shall issue Shares registered in
the Investor’s name and address as set forth below and
released by the Transfer Agent directly to the account(s)
at Xxxx Capital Partners, LLC (“Xxxx”) identified by the
Investor; upon receipt of such Shares, Xxxx shall promptly
electronically deliver such Shares to the Investor, and
simultaneously therewith payment shall be made by Xxxx by
wire transfer to the Company). NO LATER THAN ONE (1)
BUSINESS DAY AFTER THE EXECUTION OF THIS AGREEMENT BY THE
INVESTOR AND THE COMPANY, THE INVESTOR SHALL: |
| (III) | NOTIFY XXXX OF THE ACCOUNT OR ACCOUNTS AT XXXX TO BE CREDITED
WITH THE SHARES BEING PURCHASED BY SUCH INVESTOR, AND |
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| (IV) | CONFIRM THAT THE ACCOUNT OR ACCOUNTS AT XXXX TO BE CREDITED
WITH THE SHARES BEING PURCHASED BY THE INVESTOR HAVE A MINIMUM BALANCE EQUAL TO
THE AGGREGATE PURCHASE PRICE FOR THE UNITS BEING PURCHASED BY THE INVESTOR. |
IT IS THE INVESTOR’S RESPONSIBILITY TO (A) MAKE THE NECESSARY WIRE TRANSFER OR CONFIRM THE
PROPER ACCOUNT BALANCE IN A TIMELY MANNER AND (B) ARRANGE FOR SETTLEMENT BY WAY OF DWAC OR DVP IN A
TIMELY MANNER. IF THE INVESTOR DOES NOT DELIVER THE AGGREGATE PURCHASE PRICE FOR THE UNITS OR DOES
NOT MAKE PROPER ARRANGEMENTS FOR SETTLEMENT IN A TIMELY MANNER, THE SHARES AND WARRANTS MAY NOT
BE DELIVERED AT CLOSING TO THE INVESTOR OR THE INVESTOR MAY BE EXCLUDED FROM THE CLOSING
ALTOGETHER.
6. The executed Warrants shall be delivered in accordance with the terms thereof.
7. The Investor represents that, except as set forth below, (a) it has had no position, office
or other material relationship within the past three years with the Company or persons known to it
to be affiliates of the Company, (b) it is not a member of the Financial Industry Regulatory
Authority, Inc. (“FINRA”) or an Associated Person (as such term is defined under the FINRA’s NASD
Membership and Registration Rules Section 1011) as of the Closing, and (c) neither the Investor nor
any group of Investors (as identified in a public filing made with the Commission) of which the
Investor is a part in connection with the Offering, acquired, or obtained the right to acquire, 20%
or more of the Common Stock (or securities convertible into or exercisable for Common Stock) or the
voting power of the Company on a post-transaction basis. Exceptions:
(If no exceptions, write “none.” If left blank, response will be deemed to be “none.”)
8. The Investor represents that it has received (or otherwise had made available to it by the
filing by the Company of an electronic version thereof with the Commission) the Base Prospectus,
dated February 12, 2007, which is a part of the Company’s Registration Statement, the documents
incorporated by reference therein and any free writing prospectus (collectively, the “Disclosure
Package”), prior to or in connection with the receipt of this Agreement. The Investor acknowledges
that, prior to the delivery of this Agreement to the Company, the Investor will receive certain
additional information regarding the Offering, including pricing information (the “Offering
Information”). Such information may be provided to the Investor by any means permitted under the
Securities Act, including the Prospectus Supplement, a free writing prospectus and oral
communications.
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9. No offer by the Investor to buy Units will be accepted and no part of the Purchase Price
will be delivered to the Company until the Investor has received the Offering Information and the
Company has accepted such offer by countersigning a copy of this Agreement, and any such offer may
be withdrawn or revoked, without obligation or commitment of any kind, at any
time prior to the Company (or Xxxx on behalf of the Company) sending (orally, in writing or by
electronic mail) notice of its acceptance of such offer. An indication of interest will involve no
obligation or commitment of any kind until the Investor has been delivered the Offering Information
and this Agreement is accepted and countersigned by or on behalf of the Company.
10. The Company acknowledges that the only material, non-public information relating to the
Company or its subsidiaries that the Company, its employees or agents has provided to the Investor
in connection with the Offering prior to the date hereof is the existence of the Offering.
11. For so long as any Warrants remain outstanding, the Company shall not, in any manner,
issue or sell any rights, warrants or options to subscribe for or purchase Common Stock that are
directly or indirectly convertible into or exchangeable for Common Stock at a price which resets as
a function of market price of the Common Stock at the time of such exercise, exchange or
conversion.
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Number of Units:
Purchase Price Per Unit: $2.50
Aggregate Purchase Price: $
Number of Warrant Shares (Equal to Number of Units multiplied by 0.30 and rounded down to the
nearest whole number):
Please confirm that the foregoing correctly sets forth the agreement between us by signing in
the space provided below for that purpose.
| Dated as of: January 21, 2010 | ||||||||
| INVESTOR | ||||||||
| By: | ||||||||
| Print Name: | ||||||||
| Title: | ||||||||
| Address: | ||||||||
Agreed and Accepted
this 21st day of January, 2010:
this 21st day of January, 2010:
By:
|
|
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ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF UNITS
1. Authorization and Sale of the Units. Subject to the terms and conditions of this
Agreement, the Company has authorized the sale of the Units.
2. Agreement to Sell and Purchase the Units; Placement Agent.
2.1 At the Closing (as defined in Section 3.1), the Company will sell to the Investor,
and the Investor will purchase from the Company, upon the terms and conditions set forth herein,
the number of Units set forth on the last page of the Agreement to which these Terms and Conditions
for Purchase of Units are attached as Annex I (the “Signature Page”) for the aggregate
purchase price therefor set forth on the Signature Page.
2.2 The Company proposes to enter into substantially this same form of Subscription Agreement
with certain other investors (the “Other Investors”) and expects to complete sales of Units to
them. The Investor and the Other Investors are hereinafter sometimes collectively referred to as
the “Investors,” and this Agreement and the Subscription Agreements executed by the Other Investors
are hereinafter sometimes collectively referred to as the “Agreements.”
2.3 Investor acknowledges that the Company has agreed to pay Xxxx Capital Partners, LLC (the
“Placement Agent”) a fee (the “Placement Fee”) and certain expenses in respect of the sale of Units
to the Investor.
2.4 The Company has entered into a Placement Agent Agreement, dated the date hereof, (the
“Placement Agreement”), with the Placement Agent that contains certain representations, warranties,
covenants and agreements of the Company that may be relied upon by the Investor, which shall be a
third party beneficiary thereof. The Company confirms that neither it nor any other Person acting
on its behalf has provided the Investor or their agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, nonpublic information, except
as will be disclosed in the Prospectus and/or in the Company’s Form 8-K to be filed with the
Commission in connection with the Offering. The Company understands and confirms that the Investor
will rely on the foregoing representations in effecting transactions in securities of the Company.
3. Closings and Delivery of the Units and Funds.
3.1 Closing. The completion of the purchase and sale of the Units (the “Closing”)
shall occur at a place and time (the “Closing Date”) to be specified by the Company and the
Placement Agent, and of which the Investors will be notified in advance by the Placement Agent, in
accordance with Rule 15c6-l promulgated under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). At the Closing, (a) the Company shall cause American Stock Transfer & Trust
Company, the Company’s “Transfer Agent”, to deliver to the Investor the number of Shares set forth
on the Signature Page registered in the name of the Investor or, if so indicated on the Investor
Questionnaire attached hereto as Exhibit A, in the name of a nominee designated by the
Investor, (b) the Company shall cause to be delivered to the Investor one Warrant for the number of
Warrant Shares set forth on the Signature Page and (c) the aggregate
purchase price for the Units being purchased by the Investor will be delivered by or on behalf
of the Investor to the Company.
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3.2 Conditions to the Obligations of the Parties.
(a) Conditions to the Company’s Obligations. The Company’s obligation to issue and
sell the Units to the Investor shall be subject to: (i) the receipt by the Company of the purchase
price for the Units being purchased hereunder as set forth on the Signature Page and (ii) the
accuracy of the representations and warranties made by the Investor and the fulfillment of those
undertakings of the Investor to be fulfilled prior to the Closing Date.
(b) Conditions to the Investor’s Obligations. The Investor’s obligation to purchase
the Units will be subject to the accuracy of the representations and warranties made by the Company
and the fulfillment of those undertakings of the Company to be fulfilled prior to the Closing Date,
including without limitation, those contained in the Placement Agreement, and to the condition that
the Placement Agent shall not have: (a) terminated the Placement Agreement pursuant to the terms
thereof or (b) determined that the conditions to the closing in the Placement Agreement have not
been satisfied. The Investor’s obligations are expressly not conditioned on the purchase by any or
all of the Other Investors of the Units that they have agreed to purchase from the Company. The
Investor understands and agrees that, in the event that the Placement Agent in its sole discretion
determines that the conditions to closing in the Placement Agreement have not been satisfied or if
the Placement Agreement may be terminated for any other reason permitted by such Placement
Agreement, then the Placement Agent may, but shall not be obligated to, terminate such Agreement,
which shall have the effect of terminating this Subscription Agreement pursuant to Section
14 below.
3.3 Delivery of Funds.
(a) DWAC Delivery. If the Investor elects to settle the Shares purchased by
such Investor through DTC’s Deposit/Withdrawal at Custodian (“DWAC”) delivery system, no
later than one (1) business day after the execution of this Agreement by the Investor and
the Company, the Investor shall remit by wire transfer the amount of funds equal to the
aggregate purchase price for the Units being purchased by the Investor to the following
account designated by the Company:
ABA No.
Cyclacel Pharmaceuticals Inc.
Account No.
Attention:
Phone:
Cyclacel Pharmaceuticals Inc.
Account No.
Attention:
Phone:
(b) Delivery Versus Payment through The Depository Trust Company. If the
Investor elects to settle the Shares purchased by such Investor by delivery versus payment
through DTC, no later than one (1) business day after the execution of this Agreement by
the Investor and the Company, the Investor shall confirm that the account or accounts at
the Placement Agent to be credited with the Units being
purchased by the Investor have a minimum balance equal to the aggregate purchase price
for the Units being purchased by the Investor.
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3.4 Delivery of Shares.
(a) DWAC Delivery. If the Investor elects to settle the Shares purchased by such
Investor through DTC’s DWAC delivery system, no later than one (1) business day after the
execution of this Agreement by the Investor and the Company, the Investor shall direct the
broker-dealer at which the account or accounts to be credited with the Shares being purchased by
such Investor are maintained, which broker/dealer shall be a DTC participant, to set up a DWAC
instructing the Transfer Agent to credit such account or accounts with the Shares. Such DWAC
instruction shall indicate the settlement date for the deposit of the Shares, which date shall be
provided to the Investor by the Placement Agent. Upon the closing of the Offering, the Company
shall direct the Transfer Agent to credit the Investor’s account or accounts with the Shares
pursuant to the information contained in the DWAC.
(b) Delivery Versus Payment through The Depository Trust Company. If the Investor
elects to settle the Shares purchased by such Investor by delivery versus payment through DTC,
no later than one (1) business day after the execution of this Agreement by the Investor and
the Company, the Investor shall notify the Placement Agent of the account or accounts at the
Placement Agent to be credited with the Shares being purchased by such Investor. On the Closing
Date, the Company shall deliver the Shares to the Investor through DTC directly to the account(s)
at the Placement identified by Investor and simultaneously therewith payment shall be made by the
Placement Agent by wire transfer to the Company.
4. Representations, Warranties and Covenants of the Investor.
The Investor acknowledges, represents and warrants to, and agrees with, the Company and the
Placement Agent that:
4.1 The Investor (a) is knowledgeable, sophisticated and experienced in making, and is
qualified to make decisions with respect to, investments in securities presenting an investment
decision like that involved in the purchase of the Units, including investments in securities
issued by the Company and investments in comparable companies, (b) has answered all questions on
the Signature Page and the Investor Questionnaire and the answers thereto are true and correct
as of the date hereof and will be true and correct as of the Closing Date and (c) in connection
with its decision to purchase the number of Units set forth on the Signature Page, has received
and is relying only upon the Disclosure Package and the documents incorporated by reference
therein and the Offering Information.
4.2 (a) No action has been or will be taken in any jurisdiction outside the United States
by the Company or the Placement Agent that would permit an offering of the Units, or possession
or distribution of offering materials in connection with the issue of the Securities in any
jurisdiction outside the United States where action for that purpose is required, (b) if the
Investor is outside the United States, it will comply with all applicable laws and regulations
in each foreign jurisdiction in which it purchases, offers, sells or delivers Securities or has
in its possession or distributes any offering material, in all cases at its own
expense and (c) the Placement Agent is not authorized to make and has not made any
representation, disclosure or use of any information in connection with the issue, placement,
purchase and sale of the Units, except as set forth or incorporated by reference in the Base
Prospectus, the Prospectus Supplement or any free writing prospectus.
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4.3 (a) The Investor has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement, and (b) this
Agreement constitutes a valid and binding obligation of the Investor enforceable against the
Investor in accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as to the enforceability of any rights to indemnification or
contribution that may be violative of the public policy underlying any law, rule or regulation
(including any federal or state securities law, rule or regulation).
4.4 The Investor understands that nothing in this Agreement, the Prospectus, the Disclosure
Package, the Offering Information or any other materials presented to the Investor in connection
with the purchase and sale of the Units constitutes legal, tax or investment advice. The
Investor has consulted such legal, tax and investment advisors and made such investigation as
it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase
of Units. The Investor also understands that there is no established public trading market for
the Warrants being offered in the Offering, and that the Company does not expect such a market
to develop. In addition, the Company does not intend to apply for listing of the Warrants on any
securities exchange. The Investor understands that without an active market, the liquidity of
the Warrants will be limited.
4.5 The Investor will maintain the confidentiality of all information acquired as a result
of the transactions contemplated hereby prior to the public disclosure of that information by
the Company in accordance with Section 13 of this Annex.
4.6 Since the time at which the Placement Agent first contacted such Investor about the
Offering, the Investor has not disclosed any information regarding the Offering to any third
parties (other than its legal, accounting and other advisors) and has not engaged in any
purchases or sales of the securities of the Company (including, without limitation, any Short
Sales (as defined herein) involving the Company’s securities). The Investor covenants that it
will not engage in any purchases or sales of the securities of the Company (including Short
Sales) prior to the time that the transactions contemplated by this Agreement are publicly
disclosed. The Investor agrees that it will not use any of the Securities acquired pursuant to
this Agreement to cover any short position in the Common Stock if doing so would be in violation
of applicable securities laws. For purposes hereof, “Short Sales” include, without limitation,
all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange
Act, whether or not against the box, and all types of direct and indirect stock pledges, forward
sales contracts, options, puts, calls, short sales, swaps, “put equivalent positions” (as
defined in Rule 16a-1(h) under the Exchange Act) and similar arrangements
(including on a total return basis), and sales and other transactions through non-U.S.
broker dealers or foreign regulated brokers.
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5. Survival of Representations, Warranties and Agreements; Third Party Beneficiary.
Notwithstanding any investigation made by any party to this Agreement or by the Placement Agent,
all covenants, agreements, representations and warranties made by the Company and the Investor
herein will survive the execution of this Agreement, the delivery to the Investor of the Shares and
Warrants being purchased and the payment therefor. The Placement Agent shall be a third party
beneficiary with respect to the representations, warranties and agreements of the Investor in
Section 4 hereof.
6. Notices. All notices, requests, consents and other communications hereunder will be in
writing, will be mailed (a) if within the domestic United States by first-class registered or
certified airmail, or nationally recognized overnight express courier, postage prepaid, or by
facsimile or (b) if delivered from outside the United States, by International Federal Express or
facsimile, and will be deemed given (i) if delivered by first-class registered or certified mail
domestic, three business days after so mailed, (ii) if delivered by nationally recognized overnight
carrier, one business day after so mailed, (iii) if delivered by International Federal Express, two
business days after so mailed and (iv) if delivered by facsimile, upon electronic confirmation of
receipt and will be delivered and addressed as follows:
(a) if to the Company, to:
Cyclacel Pharmaceuticals, Inc.
000 Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxx Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Facsimile: (000) 000-0000
000 Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxx Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
The Chrysler Center
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
The Chrysler Center
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
(b) if to the Investor, at its address on the Signature Page hereto, or at such other
address or addresses as may have been furnished to the Company in writing.
7. Changes. This Agreement may not be modified or amended except pursuant to an instrument in
writing signed by the Company and the Investor.
8. Headings. The headings of the various sections of this Agreement have been inserted for
convenience of reference only and will not be deemed to be part of this Agreement.
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9. Severability. In case any provision contained in this Agreement should be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of the remaining
provisions contained herein will not in any way be affected or impaired thereby.
10. Governing Law. This Agreement will be governed by, and construed in accordance with, the
internal laws of the State of New York, without giving effect to the principles of conflicts of law
that would require the application of the laws of any other jurisdiction.
11. Counterparts. This Agreement may be executed in two or more counterparts, each of which
will constitute an original, but all of which, when taken together, will constitute but one
instrument, and will become effective when one or more counterparts have been signed by each party
hereto and delivered to the other parties. The Company and the Investor acknowledge and agree that
the Company shall deliver its counterpart to the Investor along with the Prospectus Supplement (or
the filing by the Company of an electronic version thereof with the Commission).
12. Confirmation of Sale. The Investor acknowledges and agrees that such Investor’s receipt
of the Company’s signed counterpart to this Agreement, together with the Prospectus Supplement (or
the filing by the Company of an electronic version thereof with the Commission), shall constitute
written confirmation of the Company’s sale of Units to such Investor.
13. Press Release. The Company and the Investor agree that the Company shall (a) prior to the
opening of the financial markets in New York City on January 21, 2010 issue a press release
announcing the Offering and disclosing all material information regarding the Offering and (b) as
promptly as practicable on January 21, 2010 file a current report on Form 8-K with the Securities
and Exchange Commission including, but not limited to, a form of this Agreement and forms of
Warrant as exhibits thereto.
14. Termination. In the event that the Placement Agreement is terminated by the Placement
Agent pursuant to the terms thereof, this Agreement shall terminate without any further action on
the part of the parties hereto.
15. Waiver. Upon acceptance of this Agreement by the Company, the Investor hereby irrevocably
waives the provisions of Section 15 of the Subscription Agreement, dated January 11, 2010, by and
between the Company and the Investor.
16. Lock-Up; Participation Right.
(a) For a period of ten (10) Business Days (as defined in the Warrant) following the
execution of this Agreement, the Company will not, without the prior written consent of the
Investor, directly or indirectly offer, sell, assign, transfer, pledge, contract to sell, or
otherwise dispose of, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, other than: (i) the Company’s sale of the
Units pursuant to the Offering; (ii) the issuance of restricted Common Stock or options to
acquire Common Stock pursuant to the Company’s employee benefit plans, qualified stock
option plans or other employee compensation plans as such plans are in existence on the date
hereof and described in the Prospectus; (iii) the issuance of Common Stock
pursuant to the valid exercises of options, warrants or rights outstanding on the date
hereof; (iv) the issuance of Common Stock pursuant to the valid
exercise of the Warrants; and (v) the issuance of Common Stock pursuant to
acquisitions or strategic transactions approved
by a majority of the disinterested directors of the
Company, provided that any such issuance shall
only be to a entity which is, itself or through its
subsidiaries, an operating company in a business
synergistic with the business of the Company and
in which the Company receives benefits in addition to
the investment of funds, but shall not include a
transaction in which the Company is issuing
securities primarily for the purpose of
raising capital or to an entity whose primary
business is investing in securities
(collectively, “Excluded Issuances”).
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(b) For a period of 120 days from the date hereof (the “Participation Period”), the
Investor shall have the right to participate in any subsequent offering (a “Subsequent
Financing”) of Common Stock or securities convertible into, exercisable or exchangeable for,
or otherwise representing the right to acquire shares of Common Stock (“Common Stock
Equivalents”), other than an Excluded Issuance, as provided herein. At least twelve hours
prior to the execution of definitive documentation for a Subsequent Financing, the Company
shall deliver to the Investor a written notice of its intention to effect a Subsequent
Financing (“Pre-Notice”), which Pre-Notice shall ask the Investor if it wants to review the
details of such financing (such additional notice, a “Subsequent Financing Notice”). Upon
the written request of the Investor, and only upon a request by the Investor, for a
Subsequent Financing Notice, the Company shall promptly, but no later two hours after the
receipt of such request, deliver a Subsequent Financing Notice to the Investor. Such
request shall be delivered to the Company by the Investor not more than four hours after its
receipt of the Pre-Notice; provided, however that if such four-hour period would include a
period when the Investor is unable to respond due to a religious observance, then the
four-hour period shall be deemed to have commenced upon the termination of such religious
observance. The Subsequent Financing Notice shall describe in reasonable detail the
proposed terms of such Subsequent Financing, including a description of the material terms
of any Common Stock Equivalents to be offered, and the expected amount of gross proceeds of
such Subsequent Financing (the “Subsequent Financing Gross Proceeds”). The Investor shall
notify the Company in writing within four hours after its receipt of the Subsequent
Financing Notice of its willingness to participate in the Subsequent Financing on the terms
described in the Subsequent Financing Notice, subject to completion of mutually acceptable
documentation; provided, however that if such four-hour period would include a period when
the Investor is unable to respond due to a religious observance, then the four-hour period
shall be deemed to have commenced upon the termination of such religious observance. If the
Investor fails to timely respond to a Pre-Notice or Subsequent Financing Notice, the
Investor shall have no right to participate in the Subsequent Financing. In the event that
the Investor timely notifies the Company that it wishes to participate in the Subsequent
Financing, the Investor shall have the right to participate in the Subsequent Financing in
an amount not to exceed the result obtained by multiplying its Pro Rata Portion (as defined
below) by 50% of the Subsequent Financing Gross Proceeds. As used herein, “Pro Rata
Portion” equals the ratio (expressed as a fraction) of (x) the aggregate purchase price of
the Units purchased by the Investor pursuant to this Agreement (the “Subscription Amount”)
and (y) the aggregate sum of all of the Subscription Amounts of all investors participating
in the Offering (the “Participating Investors”). The Company shall have the right to sell
any amount of the Subsequent Financing not purchased by the Investor and the Participating
Investors to such investors as it may determine in its sole discretion; provided, however,
that any such sales shall be on terms no more favorable to the investors than those
described in the Subsequent Financing Notice. Notwithstanding the delivery of any
Pre-Notice or Subsequent Financing Notice, the Company shall have the right to terminate or
delay the Subsequent Financing as it may determine in its sole
discretion. The Investor acknowledges and agrees that, upon its receipt of a
Subsequent Financing Notice, the Investor shall be deemed to be in material non-public
information regarding the Company and agrees to hold such information in confidence and not
to disclose such information to any other person and not to effect any transactions in the
Common Stock until the earlier of (i) the public announcement of the Subsequent Financing or
(ii) the receipt of written notice from the Company that it has abandoned the Subsequent
Financing (which notice shall be given promptly following a determination by the Company not
to proceed with a Subsequent Financing).
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