Exhibit 10.1
SUBSCRIPTION AGREEMENT
NeoStem, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
Ladies and Gentlemen:
The undersigned investor (the "Investor") under the following terms and
conditions, offers to subscribe (the "Offer") for the securities of NeoStem,
Inc., a Delaware corporation. (the "Company" or "NeoStem"). The Company is
issuing units ("Units") at a per Unit price of $1.00 with each Unit consisting
of (a) two shares (the "Common Shares") of common stock, $.001 par value (the
"Common Stock") and (b) two accompanying warrants (each, a "Warrant" and
together the "Warrants") each for the purchase of one share of Common Stock at
an exercise price of $0.80 per share, subject to adjustment, expiring seven
years from the date of issuance (the "Warrant Shares"). The forms of Warrant are
attached hereto as Exhibits A and A-1. Emerging Growth Equities, Ltd., a
Pennsylvania limited partnership, is serving as the "Placement Agent" in
connection with this Offering and U.S. Bank National Association will serve as
the "Escrow Agent" hereunder. The Company, the Placement Agent and the Escrow
Agent have entered into an Escrow Agreement.
The Investor understands that the Units are being issued pursuant to
one or more exemptions from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act" or the "Act"), in a private placement
pursuant to an exemption from registration under Regulation D promulgated under
Section 4(2) and Rule 506 of the Act. As such, the Common Stock, the Warrants
and the Warrant Shares each are "restricted securities" and may not be sold or
transferred absent a registration statement declared effective under the Act or
an exemption from the registration requirements of the Act.
1. Subscription.
-------------
The closing (the "Closing") of the transactions hereunder shall take
place at the offices of Company or at such other location as the Company and the
Placement Agent shall mutually agree after the receipt by the Company of
subscriptions for Units from Investors with an aggregate Purchase Price of up to
$3,000,000 and after it has been determined that all conditions in this
Agreement and the Escrow Agreement have been met in the sole and absolute
discretion of the Company and the Placement Agent. At each Closing, in
accordance with the Escrow Agreement, funds equal to the Subscription Amount of
each Investor shall be delivered to the Company and the Company shall deliver to
each such Investor his, her or its respective Shares and Warrants as provided
herein.
Subject to the terms and conditions hereinafter set forth in this
Subscription Agreement, the Investor hereby offers to subscribe for Units as set
forth in the Investor Signature Page attached hereto and contemporaneously
herewith makes payment for the purchase of the Units by wire transfer or check
as set forth in the Escrow Agreement
2. Conditions.
-----------
The Offer is made subject to the following conditions: (i) that the
Company, acting in good faith, shall have the right to accept or reject this
Offer, in whole or in part, for any reason; (ii) that the Placement Agent shall
determine that the terms of the Escrow Agreement have been met; (iii) that the
Investor agrees to comply with the terms of this Subscription Agreement; (iv) at
the Closing (but not at subsequent closings), a legal opinion of Company
Counsel, in the form of Exhibit B attached hereto shall be delivered and (v) at
the Closing (but not at subsequent closings), the receipt of a lock-up letter
(in the Form attached hereto as Exhibit C) from each executive officer and
member of the Board of Directors of the Company shall be delivered.
1
Acceptance of this Offer shall be deemed given by the countersigning
of this Subscription Agreement by the Company and the funds being released from
the Escrow Agreement pursuant to joint written instructions of the Company and
the Placement Agent. In the event the Company does not accept the Offer, any and
all proceeds for the purchase of the Units by the Investor shall be returned to
Investor.
3. Representations and Warranties of the Investor.
-----------------------------------------------
The Investor, in order to induce the Company to accept this Offer,
hereby warrants and represents as follows:
(a) Organization; Authority. The Investor, if not an individual, is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization with the requisite power and authority to
enter into and to consummate the transactions contemplated by this Subscription
Agreement and otherwise to carry out its obligations hereunder. The purchase by
Investor of the Units hereunder has been duly authorized by all necessary action
on the part of Investor. This Subscription Agreement has been duly executed by
Investor, and when delivered by Investor in accordance with the terms hereof,
will constitute the valid and legally binding obligation of Investor,
enforceable against it in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
(b) Investor Representation. Investor understands that the Units,
Common Shares, Warrants and Warrant Shares are each "restricted securities" and
have not been registered under the Securities Act or qualified under any
applicable state securities law by reason of their issuance in a transaction
that does not require registration or qualification (based in part on the
accuracy of the representations and warranties of the Investor contained
herein), and that such securities must be held indefinitely unless a subsequent
disposition is registered under the Securities Act or any applicable state
securities laws or is exempt from such registration. The Investor hereby agrees
that the Company may insert the following or similar legend on the face of the
certificates evidencing the Units, Common Shares, Warrants and Warrant Shares,
if required in compliance with federal and state securities laws:
"These securities have not been registered under the Securities Act of
1933, as amended (the "Securities Act") nor under the securities laws of any
state. They may not be sold, offered for sale, or hypothecated in the absence of
a registration statement in effect with respect to the securities under such act
or an opinion of counsel reasonably satisfactory to the company that such
registration is not required pursuant to a valid exemption therefrom under the
Securities Act."
The Investor understands and acknowledges that the Commission
currently takes the position that coverage of short sales of shares of the
Common Stock "against the box" prior to the effective date of a registration
statement registering the re-sale of the Common Shares and the Warrant Shares is
a violation of Section 5 of the Securities Act, as set forth in Item 65, Section
5 under Section A, of the Manual of Publicly Available Telephone
Interpretations, dated July 1997, compiled by the Office of Chief Counsel,
Division of Corporation Finance. Accordingly, the Investor agrees not to use any
of the Common Shares or Warrant Shares to cover any short sales made prior to
the effective date of such registration statement.
(c) No Distribution. Investor is acquiring the Units as principal for
its own account, in the ordinary course of its business, and not with a view to
or for distributing or reselling such Units or any part thereof. Investor has no
present intention of distributing any of such Common Shares, Warrants or Warrant
Shares and has no agreement or understanding, directly or indirectly, with any
other individual, corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof), or other entity
of any kind (each, a "Person") regarding the distribution of such Common Shares,
Warrants or Warrant Shares (this representation and warranty not limiting such
Investor's right or intent to sell the Common Share, Warrants or Warrant Shares
pursuant to a Registration Statement or otherwise in compliance with applicable
federal and state securities laws).
2
(d) Investor Status. Investor is, and on each date on which it
exercises any Warrants it will be an "Accredited Investor" as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) under the Securities Act. In
general, an Accredited Investor is deemed to be an institution with assets in
excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or
annual income exceeding $200,000, or $300,000 jointly with their spouse.
(e) Experience of Investor. Investor, either alone or together with
its representatives, has such knowledge, sophistication, and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Units, and has so evaluated the
merits and risks of such investment. The Investor has not authorized any Person
to act as his Purchaser Representative (as that term is defined in Regulation D
of the General Rules and Regulations under the Act) in connection with this
transaction. Investor is able to bear the economic risk of an investment in the
Units and, at the present time, is able to afford a complete loss of such
investment.
(f) General Solicitation. Investor is not purchasing the Units as a
result of any advertisement, article, notice or other communication regarding
the Units published in any newspaper, magazine, or similar media or broadcast
over television or radio or presented at any seminar or any other general
solicitation or general advertisement.
(g) Access to Information. The Investor has reviewed the SEC Reports
(as that term is defined in Section 4(g)) and neither the Company nor any of its
representatives have made any other representations or warranties to the
Investor with respect to the Company except as contained herein or in the SEC
Reports. The Investor has also been afforded the opportunity to ask questions
of, and receive answers from, the officers and/or directors of the Company
concerning the terms and conditions of the Offering and to obtain any additional
information, to the extent that the Company possesses such information or can
acquire it without unreasonable effort or expense, necessary to verify the
accuracy of the information furnished; and has availed himself of such
opportunity to the extent he considers appropriate in order to permit him to
evaluate the merits and risks of an investment in the Units. It is understood
that all documents, records, and books pertaining to this investment have been
made available for inspection by the Investor during reasonable business hours
at the Company's principal place of business. Notwithstanding the foregoing, it
is understood that the Investor is purchasing the Units without being furnished
any prospectus setting forth all of the information that would be required to be
furnished under the Securities Act and this Offering has not been passed upon or
the merits thereof endorsed or approved by any state or federal authorities.
4. Representations and Warranties of the Company.
----------------------------------------------
The Company hereby makes the following representations and warranties
to the Investor:
(a) Organization and Qualification. Each of the Company and its
subsidiaries (each, a "Subsidiary") is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly qualified to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would not
have or reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of this Subscription Agreement, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or financial condition of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company's ability to perform in
any material respect on a timely basis its obligations under this Subscription
Agreement (any of (i), (ii), or (iii), a "Material Adverse Effect") and no
Proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and authority or
qualification.
3
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the Offering, to
issue the Units and, upon due exercise of the Warrants, to duly issue the shares
of Common Stock deliverable thereunder. The execution and delivery of this
Subscription Agreement and the Units by the Company and the consummation by it
of the transactions contemplated hereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company, other than the Required Approvals (as defined below).
This Subscription Agreement, when executed and delivered in accordance with the
terms hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.
(c) No Conflicts. The execution, delivery, and performance of this
Subscription Agreement by the Company and the consummation by the Company of the
Offering and issuance of the Units does not and will not: (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents
or (ii) subject to obtaining the Required Approvals, conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of any agreement, credit facility, debt, or other instrument
(evidencing the Company's or a Subsidiaries' debt or otherwise) or other
understanding to which the Company or either of the Subsidiaries is a party or
by which any property or asset of the Company or its Subsidiaries is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree, or other restriction of any court or governmental
authority as currently in effect to which the Company or any of the Subsidiaries
is subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or either of the Subsidiaries is
bound or affected; except in the case of each of clauses (ii) and (iii), such as
could not, individually or in the aggregate have a Material Adverse Effect.
(d) Filings, Consents, and Approvals. Neither the Company nor any of
the Subsidiaries is required to obtain any consent, waiver, authorization, or
order of, give any notice to, or make any filing or registration with, any court
or other federal, state, local, or other governmental authority or other Person
in connection with the execution, delivery and performance by the Company of
this Subscription Agreement, other than: (i) the filing with the Securities and
Exchange Commission ("Commission") of the Registration Statement pursuant to
Section 5, (ii) the filing with the Commission of a Form D pursuant to
Commission Regulation D, and (iii) applicable Blue Sky filings (collectively,
the "Required Approvals").
(e) Issuance of the Units. The Units, and each component or underlying
security, are duly authorized and, when issued and paid for in accordance with
this Subscription Agreement, will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens, and not subject to any preemptive
rights. The Company will reserve from its duly authorized capital stock a number
of shares of Common Stock required for issuance of the Warrant Shares.
4
(f) Capitalization. The number of shares and type of all authorized,
issued, and outstanding capital stock of the Company is as set forth in the SEC
Reports as of the respective dates set forth therein. No Person has any right of
first refusal, preemptive right, right of participation, or any similar right to
participate in the Offering. Except as set forth in the SEC Reports, and options
and shares of capital stock issued or issuable under the Company's stock option
plan and Warrants being offered hereunder and to other potential Investors in
the Units, there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person or entity any right to subscribe for or acquire, any shares of
Common Stock, or contracts, commitments, understandings or arrangements by which
the Company or either of the Subsidiaries is or may become bound to issue
additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock except for the Company's agreement with
Utek Corporation relating to the issuance of 120,000 shares of Common Stock. The
issuance and sale of the Units will not obligate the Company to issue shares of
Common Stock or other securities to any Person (other than pursuant to this
Offering) and will not result in a right of any holder of Company securities to
adjust the exercise, conversion, exchange or reset price under such securities.
All of the outstanding shares of capital stock of the Company are validly
issued, fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, and none of such outstanding shares was
issued in violation of any preemptive rights or similar rights to subscribe for
or purchase securities. No further approval or authorization of any stockholder,
the Board of Directors of the Company, or others is required for the issuance
and sale of the Units and the underlying Warrant Shares. Upon exercise of the
Warrants in accordance with their terms, the Warrant Shares issuable thereby
will be deemed duly authorized, validly issued, fully paid and non-accessible in
all respects.
(g) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively referred
to herein as the "SEC Reports"). As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Company has
advised Investor(s) that a copy of each of the SEC Reports (together with all
exhibits and schedules thereto and as amended to date) is available at
xxxx://xxx.xxx.xxx, a website maintained by the Commission where Investor(s) may
view the SEC Reports.
(h) Material Changes. Since the date of the latest audited financial
statements included in the SEC Reports, except as specifically disclosed in the
SEC Reports, (i) there has been no event, occurrence, or development that has
had a Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, and (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders except in
the ordinary course of business consistent with prior practice, or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock except consistent with prior practice or pursuant to existing Company
stock option or similar plans.
(i) Litigation. Except as set forth in the SEC Reports and routine
inquiries, there is no action, suit, inquiry, notice of violation, proceeding,
or investigation pending or, to the knowledge of the Company, threatened against
or affecting the Company, the Subsidiaries or any of its properties before or by
any court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local, or foreign) (collectively, an
"Action") which: (i) adversely affects or challenges the legality, validity or
enforceability of this Subscription Agreement or the Units or (ii) could, if
there were an unfavorable decision, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect. The Company does
not have pending before the Commission any request for confidential treatment of
information. There has not been, and to the knowledge of the Company, there is
not pending or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiaries under the Exchange Act or the Securities Act.
5
(j) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company or any Subsidiary which could reasonably be expected to result in a
Material Adverse Effect.
(k) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws applicable to its business except in each case as could not have
a Material Adverse Effect.
(l) Regulatory Permits. The Company and the Subsidiaries possess the
certificates, authorizations, and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct its business
as described in the SEC Reports, except where the failure to possess such
permits would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect ("Material Permits"), and the
Company has not received any notice of proceedings relating to the revocation or
modification of any Material Permit, except for routine inquiries.
(m) Title to Assets. Except as set forth in the SEC Reports, the
Company and the Subsidiaries have good and marketable title in all real and
personal property owned by them that is material to the business of the Company
and the Subsidiaries, in each case free and clear of any liens, encumbrances or
other restrictions. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting, and
enforceable leases of which the Company and the Subsidiaries are in compliance.
(n) Patents and Trademarks. To the best of the Company's knowledge,
the Company and the Subsidiaries have, or have rights to use, all patents,
patent applications, trademarks, trademark applications, service marks, trade
names, copyrights, licenses, and other similar rights necessary or material for
use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have could have a Material Adverse Effect
(collectively, the "Intellectual Property Rights"). Neither the Company nor any
Subsidiary has received a written notice that the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights of others.
(o) Insurance. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent in the Company's reasonable discretion. The Company has no reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business.
6
(p) Transactions with Employees. Except as set forth in the SEC
Reports and any purchase of the Units, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $60,000
other than (i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii) for
other employee benefits, including stock option agreements under any stock
option plan of the Company.
(q) Private Placement. Assuming the accuracy of the Investor
representations and warranties set forth in Section 3, no registration under the
Securities Act is required for the offer and sale of the Units by the Company to
the Investor as contemplated hereby or the exercise of the Warrants.
(r) Tax Status. Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary.
(s) No General Solicitation. Neither the Company nor any Person acting
on behalf of the Company has offered or sold any of the Units by any form of
general solicitation or general advertising. The Company has offered the Units
for sale only to each investor in the Offering and certain other "accredited
investors" within the meaning of Rule 501 under the Securities Act.
(t) Foreign Corrupt Practices. Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of the
Company, has (i) directly or indirectly, used any corrupt funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended
(u) Accountants. The Company's accountants are set forth in the SEC
Reports. To the Company's knowledge, such accountants, who the Company expects
will express their opinion with respect to the financial statements to be
included in the Company's upcoming financial statements, are a registered public
accounting firm as required by the Securities Act.
(v) Listing and Maintenance Requirements. The Company's Common Stock
currently is quoted on the Over-the-Counter Bulletin Board ("OTCBB"). The
Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with the periodic SEC reporting
requirements necessary to maintain quotations on the OTCBB.
5. Registration Rights.
--------------------
7
The Company grants registration rights to the Investor under the
following terms and conditions:
(a) The Company will prepare and file (which may include the
preparation and filing of one or more pre-effective amendments to any
registration statements that relates to the Company's securities, which may be
currently on file or may be subsequently filed with the Commission), at its own
expense, a registration statement under the Securities Act (the "Registration
Statement") with the Commission within ten (10) days of the filing with the
Commission of its Annual Report on Form 10-K for the fiscal year ending December
31, 2006 (the "2006 Form 10-K") sufficient to permit the non-underwritten public
offering and resale of the Common Shares and the Warrant Shares (subject to
adjustment as set forth in the Warrant) (the "Registrable Securities") through
the facilities of all appropriate securities exchanges, if any, on which the
Company's Common Stock is being sold or on the over-the-counter market if the
Company's Common Stock is quoted thereon. Notwithstanding the foregoing, the
Company shall not be required to register more than that number of shares
permitted for a non-primary offering under SEC Rule 415, and the Investor agrees
that the number of Common Shares and Warrant Shares which the Company is
required to register may be reduced proportionately with all other Investors to
comply with Rule 415. All Common Shares and Warrant Shares excluded pursuant to
this reduction will be included as soon as practicable by the Company on its
next registration statement filed with the SEC on which such shares qualify for
inclusion. The Company shall not be subject to any penalties or adjustments if
the registration process is delayed for any reason as a result of Rule 415
issues.
(b) The Company will use its reasonable best efforts to cause such
Registration Statement to become effective. Subject to Section 5(a), the number
of shares designated in the Registration Statement to be registered shall
include all of the Registrable Securities and shall include appropriate language
regarding reliance upon Rule 416 to the extent permitted by the Commission. The
Company will notify the Investor of the date of effectiveness of the
Registration Statement.
(c) The Company will maintain the Registration Statement or
post-effective amendment filed under the terms of this Subscription Agreement
effective under the Securities Act until the earlier of (i) the date that all of
the Registrable Securities have been sold pursuant to such Registration
Statement, (ii) all Registrable Securities have been otherwise transferred to
Persons who may trade such shares without restriction under the Securities Act,
and the Company has delivered a new certificate or other evidence of ownership
for such securities not bearing a restrictive legend, (iii) all Registrable
Securities may be sold at any time, without volume or manner of sale limitations
pursuant to Rule 144(k) or any similar provision then in effect under the
Securities Act in the opinion of counsel to the Company, or (iv) two years from
the effective date of the Registration Statement (the "Effectiveness Period").
(d) All fees, disbursements and out-of-pocket expenses and costs
incurred by the Company in connection with the preparation and filing of the
Registration Statement, in making filings with NASD (including, without
limitation, pursuant to NASD Rule 2710), and in complying with applicable
federal securities and Blue Sky laws (including, without limitation, all
attorneys' fees of the Company) shall be borne by the Company. The Investor
shall bear any reasonable cost of underwriting and/or brokerage discounts, fees,
and commissions, if any, applicable to the Registrable Securities being
registered and sold by an underwriter for the Investor and the fees and expenses
of their counsel. The Company shall use its reasonable best efforts to qualify
the Common Shares and Warrant Shares in the State of residence of the Investor..
However, the Company shall not be required to qualify in any state which will
require an escrow or other restriction relating to the Company and/or the
sellers, or which will require the Company to qualify to do business in such
state or require the Company to file therein any general consent to service of
process. The Company at its expense will supply the Investor with copies of the
applicable Registration Statement and any prospectus included therein and other
related documents in such quantities as may be reasonably requested by the
Investor.
8
(e) Certificates evidencing the Registrable Securities shall not
contain any legend: (i) following any sale of Common Shares or Warrant Shares
pursuant to Rule 144, or (ii) if such Common Shares or Warrant Shares are
eligible for sale under Rule 144(k); or (iii) following any sale of Common
Shares or Warrant Shares pursuant to the Registration Statement; provided,
however, in connection with the sale or transfer of the Common Shares or Warrant
Shares, Investor hereby agrees to adhere to and abide by all prospectus delivery
requirements under the Securities Act and rules and regulations of the
Commission and provide the Company with customary documentation, as applicable.
The Company shall cause its counsel to issue a legal opinion to the Company's
transfer agent promptly upon request of the Investor if required by the
Company's transfer agent to effect the removal of the legend hereunder. The
Company agrees that at such time as such legend is no longer required under this
Section 5(e), it will, as soon as reasonably practicable following the delivery
by Investor to the Company's transfer agent of a certificate representing
Registrable Securities accompanied by appropriate stock power or other required
documentation, as applicable, issued with a restrictive legend (such date, the
"Legend Removal Date"), deliver or cause to be delivered to such Investor or
such Investor's transferee a certificate representing such shares that is free
from all restrictive and other legends, in each case without charge to the
Investor other than customary transfer fees which may be charged by the transfer
agent or broker-dealer. The Company may not make any notation on its records or
give instructions to any transfer agent of the Company that enlarge the
restrictions on transfer set forth in this Section 5(e).
(f) In the event that the Registration Statement is not filed within
ten (10) days of the filing with the Commission of the 2006 Form 10-K and the
Company does not use its reasonable best efforts to respond to any comments of
the SEC within fifteen (15) business days following receipt thereof, the Company
will issue to each Investor an additional one percent (1%) of Units sold to such
Investor in the Private Placement for no additional cost. Additionally, for
every thirty (30) days that the Company continues to be delayed from filing the
Registration Statement with the Commission or continues to fail to use its
reasonable best efforts to respond to any comments from the Commission, The
Company will issue to each Investor an additional 1% of the Units sold in the
Private Placement to such Investor for no additional cost. All additional
amounts that may be issued as provided herein shall not exceed 10% of the Units
sold in the Private Placement. Such amounts shall be as partial compensation for
such failure and not as a penalty.
(g) The Company will use its reasonable best efforts to prepare and
make publicly available in accordance with Rule 144(c) such information as is
required for Investor to sell the Registrable Securities under Rule 144 in the
event the Registration Statement is unavailable. The Company further covenants
that, in the event the Registration Statement is unavailable, it will take such
further action as any holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such Person to sell such
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
(h) In the case of each registration effected by the Company pursuant
to any section herein, the Company will:
(i) Prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to a disposition of
all securities covered by such registration statement;
(ii) Notify the Investor at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of
any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or incomplete in light of the circumstances
then existing, and at the request of the shareholders, prepare and
furnish to them a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the Investor, such prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in light of the
circumstances then existing; provided that, for not more than 60
consecutive business days (or a total of not more than 180 calendar
days in any 12-month period), the Company may delay the disclosure of
material non-public information concerning the Company the public
disclosure of which at the time is not, in the good faith opinion of
the Company in the best interests of the Company and which may, based
on advice of outside counsel, be delayed under applicable law or
regulation (an "Allowed Delay"); provided, further, that the Company
shall promptly (a) notify each Investor in writing of the existence of
(but in no event, without the prior written consent of such Investor,
shall the Company disclose to such Investor any of the facts or
circumstances regarding) material non-public information giving rise
to an Allowed Delay and (b) advise each Investor in writing to cease
all sales under such registration statement until the termination of
the Allowed Delay;
9
(iii) Use its reasonable best efforts to prevent the issuance of any stop
order or other suspension of effectiveness of a registration statement,
and, if such an order is issued, to obtain the withdrawal of such order
at the earliest possible moment and to notify Investor (and, in the
event of an underwritten offering, the managing underwriter) of the
issuance of such order and the resolution thereof;
(iv) If NASD Rule 2710 requires any broker-dealer to make a filing prior to
executing a sale of Registrable Securities by an Investor, make an
Issuer Filing with the NASD Corporate Financing Department pursuant to
NASD Rule 2710 and respond within five business days to any comments
received from NASD in connection therewith.
(v) Otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission.
(i) To the extent Investor includes any Common Shares or Warrant
Shares in a registration statement pursuant to the terms hereof, the Company
will indemnify and hold harmless Investor, its directors and officers, and each
Person, if any, who controls Investor within the meaning of the Securities Act,
from and against, and will reimburse Investor, its directors and officers and
each controlling Person with respect to, any and all loss, damage, liability,
cost, and expense to which Investor or such controlling Person may become
subject under the Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs, or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, damage, liability, cost or expense arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission so made in conformity with information furnished by
Investor or any such controlling Person in writing specifically for use in the
preparation thereof.
(j) To the extent Investor includes any Common Shares or Warrant
Shares in a registration statement pursuant to the terms hereof, Investor will
indemnify and hold harmless the Company, its directors and officers and any
controlling Person from and against, and will reimburse the Company, its
directors and officers and any controlling Person with respect to, any and all
loss, damage, liability, cost, or expense to which the Company, its directors
and officers or such controlling Person may become subject under the Securities
Act or otherwise, insofar as such losses, damages, liabilities, costs, or
expenses are caused by any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
conformity with written information furnished by or on behalf of the Investor
specifically for use in the preparation thereof and provided further, that the
maximum amount that may be recovered from Investor shall be limited to the
amount of proceeds received by Investor from the sale of such shares of Common
Stock.
10
(k) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
hereunder to the extent permitted by law, provided that (i) no contribution
shall be made under circumstances where the indemnifying party would not have
been liable for indemnification pursuant to the provisions hereof, (ii) no
seller of securities guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any seller of securities who was not guilty of such fraudulent
misrepresentation, and (iii) the amount of the contribution together with any
other payments made in respect of such loss, damage, liability, or expense, by
any seller of securities shall be limited to the net amount of proceeds received
by such seller from the sale of such securities.
(l) The Investor will cooperate with the Company in connection with
this Subscription Agreement, including timely supplying all information and
executing and returning the Selling Securityholder Notice and Questionnaire
attached hereto as Exhibit D, and any other documents requested by the Company
that are required to enable the Company to perform its obligations to register
the Common Shares and Warrant Shares.
6. Other Agreements of the Company and the Investor.
-------------------------------------------------
(a) Acknowledgment of Dilution. The Company and Investor acknowledge
that the issuance of the Common Shares and the Warrant Shares will result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial.
(b) Exercise Procedures. The form of Notice of Exercise included in
the Warrants sets forth the totality of the procedures required of the Investor
in order to exercise the Warrants.
(c) Use of Proceeds. The Company shall use the net proceeds from the
sale of the Units hereunder for general working capital purposes in accordance
with its plan for growth.
(d) Transfer and Tradability of the Common Shares and the Warrant
Shares. Should the Company's Common Stock become listed on a nationally
recognized exchange or marketplace, the Company shall cause all shares of Common
Stock which are registered in accordance with the provisions of Section 5 above
to be listed or included for quotation on each exchange or marketplace on which
the Company's shares of Common Stock are then listed or included for quotation
(or a superior marketplace as may be applicable in the future) at least until
the later of (i) two years from the date hereof and (ii) such time as all the
Warrant Shares have been sold.
(e) Press Releases. The Company shall issue a press release or file a
Current Report on Form 8-K reasonably acceptable to the Placement Agent
disclosing all material terms of the transactions contemplated hereby. The
Company and the Placement Agent shall consult with each other in issuing any
press release with respect to the transactions contemplated hereby, and the
Placement Agent shall have the right to review and comment on the contents of
any such press release prior to its release by the Company. Notwithstanding the
foregoing, the Company shall be entitled to make any filing and press release
that it determines is required in order to comply with any applicable law.
Notwithstanding the foregoing, other than in any registration statement filed
pursuant to the Registration Rights Agreement and filings related thereto, the
Company shall not publicly disclose the name of any Investor, or include the
name of any Investor in any filing with the Commission or any regulatory agency
without the prior written consent of such Investor, except to the extent such
disclosure is required by law or applicable regulations, in which case the
Company shall provide each Investor with prior notice of such disclosure.
11
(f) Confidentiality. Each Investor agrees that he, she or it will keep
confidential and will not disclose, divulge or use for any purpose other than to
monitor his, her or its investment in the Company any confidential, proprietary
or secret information which such Investor may obtain from the Company pursuant
to financial statements, reports and other materials or information submitted by
the Company to such Investor pursuant to this Agreement or otherwise (but not
including the SEC Reports) ("Confidential Information"), unless such
Confidential Information is known, or until such Confidential Information
becomes known, to the public (other than as a result of a breach of this section
by such Investor); provided, however, that an Investor may disclose Confidential
Information (i) to his, her or its attorneys, accountants, consultants, and
other professionals to the extent necessary to obtain their services in
connection with monitoring his, her or its investment in the Company, or (ii) as
may otherwise be required by law, provided that the Investor takes reasonable
steps to minimize the extent of any such required disclosure and promptly
notifies the Company when it becomes aware of such legal requirement.
7. Miscellaneous.
--------------
(a) Termination. The Investor agrees that he shall not cancel,
terminate, or revoke this Subscription Agreement or any agreement of the
Investor made hereunder other than as set forth herein, and that this
Subscription Agreement shall survive the death or disability of the Investor. If
the Company elects to cancel this Subscription Agreement, provided that it
returns to the Investor, without interest and without deduction, all sums paid
by the Investor, this Offer shall be null and void and of no further force and
effect, and no party shall have any rights against any other party hereunder.
(b) Entire Agreement. This Subscription Agreement, together with the
exhibits hereto, contains the entire understanding of the Company and the
Investor with respect to the subject matter hereof.
(c) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the second Business Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (b) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
to the Investor at his address set forth on the Investor Signature Page, and to
the Company at the addresses set forth in the SEC Reports.
(d) Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
or in the case of a waiver, by the Company and the Investors holding at least a
majority of the Registrable Securities then outstanding. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
(e) Construction. The headings herein are for convenience only, do not
constitute a part of this Subscription Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
(f) Successors and Assigns. This Subscription Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns. The Company may not assign this Subscription Agreement or any
rights or obligations hereunder without the prior written consent of each
Investor in the Offering. Investor may assign any or all of its rights under
this Agreement to any Person to whom Investor assigns or transfers any of the
Common Shares or Warrant Shares.
12
(g) No Third-Party Beneficiaries. This Subscription Agreement is
intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other Person.
(h) Governing Law. All questions concerning the construction,
validity, enforcement, and interpretation of this Subscription Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Subscription Agreement (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees, or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Subscription Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. The parties hereby waive
all rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of this Subscription Agreement, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys' fees and other costs and expenses incurred with the
investigation, preparation, and prosecution of such action or proceeding.
(i) Survival. The representations and warranties contained herein
shall survive the closing of the transaction hereunder.
(j) Execution. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof. This Agreement may be executed in two or more
counterparts each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
(k) Severability. If any provision of this Subscription Agreement is
held to be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Subscription
Agreement shall not in any way be affected or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefore, and upon so agreeing, shall incorporate such
substitute provision in this Subscription Agreement.
(l) Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of
Investor and the Company will be entitled to specific performance under this
Subscription Agreement. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
(m) Fees and Expenses. Except as provided in writing, the parties
hereto shall be responsible for their own legal and other expenses, if any, in
connection with this transaction.
13
INVESTOR SIGNATURE PAGE FOR NEOSTEM, INC. SUBSCRIPTION AGREEMENT
Please print or type, Use ink only. (All Parties Must Sign)
The undersigned Investor hereby certifies that he (i) has received and relied
solely upon the SEC Reports, this Subscription Agreement and their respective
exhibits and schedules, (ii) agrees to all the terms and conditions of this
Subscription Agreement, (iii) meets the suitability standards set forth herein
and (iv) is a resident of the state or foreign jurisdiction indicated below.
Dollar Amount of Units Subscribed for: $
----------------------
If other than individual check one and
-------------------------------------------------------------- indicate capacity of signatory under the
Name of Investor (Print) signature:
[] Trust
[] Estate
--------------------------------------------------------------
Name of Joint Investor (if any) (Print) [] Uniform Gifts to Minors Act
State of
---------------------
[] Attorney-in-fact
[] Corporation
[] Other
------------------------------------------------------------
Signature of Investor
If Joint Ownership, Check one:
[] Joint Tenants with Right of
Survivorship
[] Tenants in Common
--------------------------------------------------------------
Signature of Joint Investor (if any) [] Tenants by the Entirety
[] Community Property
--------------------------------------------------------------
Capacity of Signatory (if applicable) Backup Withholding Statement:
[] Please check this box only if the
investor is subject to backup
withholding
--------------------------------------------------------------
Social Security or Taxpayer Identification Number
Foreign Person:
Investor Address: [] Please check this box only if the
investor is A nonresident alien, foreign
corporation, foreign
partnership, foreign trust or
foreign estate
--------------------------------------------------------------
Street Address
Country
----------------------
Passport #
-------------------------------------------------------------- -------------------
City State Zip Code ID #
-------------------------
ID Type
----------------------
Telephone: ( )
----- ------------------------------------------
Fax: ( )
----------- ------------------------------------------
14
E-mail:
--------------------------------------------------------------
Address for Delivery of Units (if different from above):
--------------------------------------------------
City State Zip Code
15
THE SUBSCRIPTION FOR UNITS OF NEOSTEM, INC. BY THE ABOVE NAMED
INVESTOR(S) IS ACCEPTED THIS ________ DAY OF ______________________, 2007.
NEOSTEM, INC.
By:
---------------------------------
Name: Xxxxx X. Xxxxx
Title: Chairman and CEO
PLACEMENT AGENT:
EMERGING GROWTH EQUITIES, LTD.
By:
-----------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: President and CEO
16
