Exhibit 10.1
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Phase III Medical, Inc.
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SUBSCRIPTION AGREEMENT
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This SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of September 13,
2004, is by and between Phase III Medical, Inc., a Delaware corporation (the
"Company"), and Xxxxx Jr. Family Trust dated 2/17/97 (the "Investor").
WHEREAS, the Company desires to issue and sell to the Investor, and the
Investor desires to purchase from the Company, shares of common stock, $0.001
par value per share, of the Company (the "Common Stock"), upon and subject to
the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements of the parties set forth in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties agree as follows:
1. Purchase and Sale of the Shares.
1.1. Agreement to Sell and Purchase Shares. Subject to the terms and
conditions hereof, the Company agrees to issue and sell to the Investor and the
Investor agrees to purchase from the Company, at the Closing (as defined below),
an aggregate of 7,282,9131 shares of Common Stock (the "Shares"), for an
aggregate purchase price of $650,000 (the "Purchase Price"), payable in
immediately available funds at the Closing.
1.2. Delivery of Shares; Legend.
(a) As soon as reasonably practicable after the Closing, the Company shall
deliver to the Investor one or more certificates, registered in the name of the
Investor, representing the Shares. Delivery of certificates representing the
Shares shall be made against receipt by the Company of a check payable to the
order of the Company or a wire transfer of U.S. funds to an account designated
by the Company in the full amount of the Purchase Price.
(b) The certificates representing the Shares delivered pursuant to Section
1.2(a), and any securities issued in exchange for or in respect thereof, shall
bear a legend to the following effect.
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1 The aggregate number of shares shall be equal to the quotient of $650,000
divided by the Per Share Purchase Price. The Per Share Purchase Price shall be
equal to 85% of the average of the closing price of one share of Common Stock on
the NASD Over-The-Counter Bulletin Board for the five (5) days immediately
preceding the date of this Agreement. Notwithstanding the foregoing, the Per
Share Purchase Price shall not be more than $0.10 per share nor less than $0.085
per share.
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND SUCH STATE SECURITIES LAWS."
1.3. Closing. The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place on the date hereof at the offices of the
Company.
1.4 Additional Purchase/Conversion of Note. The Investor has also loaned to
the Company on or about August 30, 2004 the sum of $100,000 pursuant to a six
month promissory note bearing interest at 20% per annum (the "Note"). The
Investor and the Company hereby irrevocably agree that upon the Maturity of that
Note, the Company shall repay the Note in shares of its Common Stock, at a
conversion price equal to a per share purchase price equal to 85% of the average
of the closing price of one share of Common Stock on the NASD Over-the-Counter
Bulletin Board for the five (5) days immediately preceding the Maturity Date of
the Note, or, if the Company's Common Stock is not then traded on the OTC
Bulletin Board, at 85% of fair market value as determined by the Board of
Directors of the Company.
2. Representations, Warranties and Covenants of the Investor.
2.1. Authorization; Enforceability. The Investor is (i) a bona fide
resident of the state contained in the address set forth on the signature page
as the Investor's home address, (ii) at least 21 years of age and (iii) legally
competent to execute this Agreement. This Agreement has been duly executed and
delivered by the Investor and, assuming the due authorization, execution and
delivery of this Agreement by the other party hereto, constitutes the legal,
valid and binding obligation of the Investor, enforceable against the Investor
in accordance with its terms, subject to the effects of any applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
general laws of applicability affecting creditors' rights generally and to
general equitable principles.
2.2. No Conflict. The execution, delivery and performance by the Investor
of this Agreement will not result in the violation by the Investor of any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority to or by which the Investor is bound, and will
not conflict with, or result in a breach or violation of, any of the terms or
provisions of, or constitute (with due notice or lapse of time or both) a
default under, any lease, loan agreement, mortgage, security agreement, trust
indenture or other agreement or instrument to which the Investor is a party or
by which he is bound or to which any of his properties or assets is subject.
2.3. Governmental Consents. No consent, approval, authorization or other
order of any governmental authority or other third party is required to be
obtained by the Investor in connection with the authorization, execution,
delivery and performance by the Investor of this Agreement.
2.4. Investment Representations.
(a) The Investor hereby represents and warrants to the Company that the
Investor is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). Specifically, the Investor certifies that (initial all
appropriate spaces on the following pages):
/s/ RA (1) The Investor is an accredited investor because he has an individual
------------- net worth, or with his spouse has a joint net worth, in excess of
(Initial) $1,000,000. For purposes of this Agreement, "net worth" means the
excess of total assets at fair market value, including home, home
furnishings and automobiles, over total liabilities.
/s/ RA (2) The Investor is an accredited investor because he has individual
-------------- income (exclusive of any income attributable to his spouse) of more
(Initial) than $200,000 in each of the past two years, or joint income with
his spouse in excess of $300,000 in each of those years, and such
investor reasonably expects to reach the same income level in the
current year.
/s/ RA (3) The Investor is an accredited investor because he is a director,
------------- executive officer or managing member of the Company.
(Initial)
(b) The Investor hereby certifies that he is not a non-resident alien for
purposes of income taxation (as such term is defined in the Internal Revenue
Code of 1986, as amended, and Income Tax Regulations). The Investor hereby
agrees that if any of the information in this Section 2.4(b) changes, the
Investor will notify the Company within 60 days thereof. The Investor
understands that the information contained in this Section 2.4(b) may be
disclosed to the Internal Revenue Service by the Company and that any false
statement contained in this Section 2.4(b) could be punished by fine,
imprisonment or both.
(c) The Investor will not sell or otherwise transfer the Shares without
registration under the Securities Act or an exemption therefrom, and fully
understands and agrees that he must bear the economic risk of his investment for
an indefinite period of time because, among other reasons, the Shares have not
been registered under the Securities Act or under the securities laws of certain
states and, therefore, cannot be resold, pledged, assigned or otherwise disposed
of unless they are subsequently registered under the Securities Act and under
applicable securities laws of such states or an exemption from such registration
is available. The Investor understands that the Company is under no obligation
to register the Shares on his behalf or to assist him in complying with any
exemption from such registration under the Securities Act, except that if any
sale proposed by the Investor is exempt from registration, the Company will
cause its counsel, at the Company's expense, to provide an appropriate opinion
to that effect to the Company's transfer agent. It also understands that sales
or transfers of the Shares are further restricted by state securities laws. The
Investor further understands that the Company is not registered as an investment
company under the Investment Company Act of 1940, as amended.
(d) The Investor acknowledges that in making a decision to subscribe for
the Shares, the Investor has relied solely upon independent investigations made
by the Investor. The Investor understands the business objectives and policies
of, and the strategies which may be pursued by, the Company. The Investor's
investment in the Shares is consistent with the investment purposes and
objectives and cash flow requirements of the Investor and will not adversely
affect the Investor's overall need for diversification and liquidity. The
Investor acknowledges that he is not subscribing pursuant hereto for any Shares
as a result of or subsequent to (a) any advertisement, article, notice or other
communications published on-line, in any newspaper, magazine or similar media or
broadcast over television or radio, or (b) any seminar or meeting whose
attendees, including the Investor, had been invited as a result of, subsequent
to or pursuant to any of the foregoing.
(e) The Investor has not reproduced, duplicated or delivered this Agreement
to any other person, except professional advisors to the Investor or as
instructed by the Company.
(f) The Investor has such knowledge and experience in financial and
business matters that the Investor is capable of evaluating the merits and risks
of the Investor's investment in the Shares and is able to bear such risks, and
has obtained, in the Investor's judgment, sufficient information from the
Company or its authorized representatives to evaluate the merits and risks of
such investment. The Investor has evaluated the risks of investing in the Shares
and has determined that the Shares is a suitable investment for the Investor.
(g) The Investor can afford a complete loss of the investment in the
Shares, can afford to hold the investment in the Shares for an indefinite period
of time, and acknowledges that distributions may be paid in cash or in kind.
(h) The Investor's overall commitment to investments that are not readily
marketable is not disproportionate to his net worth, and his investment in the
Shares will not cause such overall commitment to become excessive.
(i) The Investor has adequate means of providing for his current needs and
contingencies and has no need for liquidity in its investment in the Shares.
(j) The Investor is acquiring the Shares subscribed for herein for his own
account, for investment purposes only and not with a view to distribute or
resell such Shares in whole or in part.
(k) The Investor agrees and is aware that:
(1) the Company has a limited operating history under its
current business plan;
(2) no federal or state agency has passed upon the Shares
or made any findings or determination as to the
fairness of this investment;
(3) there are substantial risks of loss of investment
incidental to the purchase of the Shares; and
(4) the Shares cannot be resold readily because the Shares
have not been registered by the Securities and Exchange
Commission and the Shares cannot be resold without (A)
the Company's consent, which may require an effective
registration statement, or (B) an opinion of counsel
that an exemption of registration is available, and the
Investor may have to bear the risk of this investment
for an indefinite period of time.
(l) The Investor and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Shares, which have been
requested by the Investor. The Investor and his advisors, if any, have been
afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. The Investor has had
access to all additional information necessary to verify the accuracy of the
information set forth in this Agreement and any other materials furnished
herewith, and has taken all the steps necessary to evaluate the merits and risks
of an investment as proposed hereunder. Except as set forth in this Agreement,
the Company has made no representation or warranty on which the Investor has
relied to enter into this Agreement and acquire the Shares.
(m) The Investor does not have a present intention to sell the Shares nor a
present arrangement or intention to effect any distribution of any of the Shares
to or through any person or entity for purposes of selling, offering,
distributing or otherwise disposing of any of the Shares.
(n) The Investor understands that the legend set forth in Section 1.2(b),
to the effect that the Shares have not been registered under the Securities Act
or applicable state securities laws, shall be placed on the certificate
evidencing the Shares and appropriate notations to such effect will be made in
the Company's stock books.
(o) The Investor understands that the net proceeds to the Company from this
subscription will be used by the Company for general operating expenses.
2.5. Brokers. There is no broker, investment banker, financial advisor,
finder or other person which has been retained by or is authorized to act on
behalf of the Investor who is entitled to any fee or commission in connection
with the execution of this Agreement.
3. Indemnification. The Investor agrees to indemnify and hold harmless the
Company, and its managers, officers, directors, employees, agents and
shareholders, and each other person, if any, who controls or is controlled by,
within the meaning of Section 15 of the Securities Act, any thereof, against any
and all loss, liability, claim, damage, cost and expense whatsoever (including,
but not limited to, legal fees and disbursements and any and all other expenses
whatsoever incurred in investigating, preparing for or defending against any
litigation, arbitration proceeding, or other action or proceeding, commenced or
threatened, or any claim whatsoever) arising out of or in connection with, or
based upon or resulting from, (a) any false representation or warranty or breach
or failure by the Investor to comply with any covenant or agreement made by the
Investor in this Agreement or in any other document furnished by the Investor to
any of the foregoing in connection with this transaction or (b) any action for
securities law violations instituted by the Investor which is finally resolved
by judgment against the Investor.
4. Power of Attorney. The Investor, as a shareholder of the Company, hereby
appoints the Company as its true and lawful representative and attorney-in-fact,
in its name, place and stead to make, execute, sign, acknowledge, swear to and
file:
(a) any Company certificate, business certificate,
fictitious name certificate, amendment thereto, or
other instrument or document of any kind necessary or
desirable to accomplish the business, purpose and
objectives of the Company, or required by any
applicable federal, state, or local or foreign law; and
(b) any and all instruments, certificates and other
documents which may be deemed necessary or desirable to
effect the winding-up and termination of the Company
(including, but not limited to, a notice of dissolution
of the Shareholder).
This power of attorney is coupled with an interest, is irrevocable, and
shall survive and shall not be affected by the subsequent death, disability,
incompetency, termination, bankruptcy, insolvency or dissolution of the
Investor; provided, however, that this power of attorney will terminate upon the
substitution of another shareholder of the Company for the Investor, upon the
withdrawal of the Investor from the Company or upon the redemption of all of the
Shares owned by the Investor.
5. Miscellaneous.
5.1. Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or when
mailed by certified or registered mail, return receipt requested and postage
prepaid, and addressed to the address of such party set forth below or to such
changed address as such party may have fixed by written notice to the other
given in accordance with this Section 5.1; provided, however, that any notice of
change of address shall be effective only upon receipt:
If to the Company:
Phase III Medical, Inc.
000 Xxxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx, President and CEO
If to the Investor:
the same address as indicated on the signature page
hereto.
5.2. Entire Agreement; Amendment. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them. This Agreement may be amended only by mutual
written agreement of the Company and the Investor. No course of dealing between
or among any persons having any interest in this Agreement will be deemed
effective to modify, amend or discharge any part of this Agreement or any rights
or obligations of any person under or by reason of this Agreement.
5.3. Successors and Assigns. This Agreement shall be binding upon the
Investor and his heirs, legal representatives, successors, and permitted assigns
and shall inure to the benefit of the Company and its successors and assigns.
The Investor shall not assign any of its obligations hereunder without the prior
written consent of the Company.
5.4. Governing Law. This Agreement shall be governed by and construed under
the laws of the State of New York without regard to its choice of law
provisions.
5.5. Jurisdiction. The Investor hereby irrevocably agrees that any suit,
action or proceeding with respect to this Agreement and any or all transactions
relating hereto and thereto may be brought in U.S. federal and state courts in
the State of New York. The Investor hereby irrevocably submits to the
jurisdiction of such courts with respect to any such suit, action or proceeding
and agrees and consents that service of process as provided by U.S. federal and
New York law may be made upon the Investor in any such suit, action or
proceeding brought in any of said courts, and may not claim that any such suit,
action or proceeding has been brought in an inconvenient forum. The Investor
hereby further irrevocably consents to the service of process out of any of the
aforesaid courts, in any such suit, action or proceeding, by the mailing of
copies thereof, by certified or registered mail, return receipt requested,
addressed to the Investor at the address of the Investor then appearing on the
records of the Company. Nothing contained herein shall affect the right of the
Company to commence any action, suit or proceeding or otherwise to proceed
against the Investor in any other jurisdiction or to serve process upon the
Investor in any manner permitted by any applicable law in any relevant
jurisdiction.
5.6. Additional Information and Subsequent Changes to Representations.
(a) The Company may request from time to time such information as it may
deem necessary to determine the eligibility of the Investor to hold Stock or to
enable the Company's compliance with applicable regulatory requirements or tax
status, and the Investor shall provide such information as may reasonably be
requested.
(b) The Investor agrees to notify the Company promptly if there is any
change with respect to any of the information or representations given or made
by the Company pursuant to this Agreement and to provide the Company with such
further information as the Company may reasonably require. In addition, the
Investor agrees that at any time in the future at which the Investor may acquire
additional shares of Common Stock, the Investor shall be deemed to have
reaffirmed, as of the date of such acquisition of additional shares of Common
Stock, each and every representation made by the Investor in this Agreement,
except to the extent modified in writing by the Investor and consented to by the
Company.
5.7. Severability. In the event that any provision of this Agreement or the
application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected except to the extent necessary to delete
such illegal, invalid or unenforceable provision unless the provision held
invalid shall substantially impair the benefit of the remaining portion of this
Agreement.
5.8. Headings. The headings of the sections hereof are inserted as a matter
of convenience and for reference only and in no way define, limit or describe
the scope of this Agreement or the meaning of any provision hereof.
5.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement. A facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto to the same extent as if delivered personally.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above under penalties of perjury.
COMPANY:
PHASE III MEDICAL, INC.
By: /s/ Xxxx Xxxxxxx
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Name: Xxxx Xxxxxxx
Title: President
INVESTOR:
/s/ Xxxxx Xxxxx, Xx.
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Xxxxxx Xxxxx, Xx. Trustee
Xxxxx Jr. Family Trust dated 2/17/97
Address: 00000 Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Tax I.D. Number:
