Exhibit 4.2
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") made as of the date set forth on the
signature page hereof between Zonagen, Inc., a Delaware corporation with its
principal offices at 0000 Xxxxxxxxxx Xxxxx, Xxxxx X-0, Xxx Xxxxxxxxx, Xxxxx
00000 (the "Company") and the undersigned (the "Subscriber").
W I T N E S S E T H:
WHEREAS, the Company desires to issue a minimum (the "Minimum Offering") of
thirty-five (35) units (the "Units") and a maximum (the "Maximum Offering") of
seventy-five (75) Units, with an option in favor of the Placement Agent to offer
up to an additional seventy (70) Units to cover over-allotments, in a private
placement offering (the "Offering"), each Unit consisting of 10,000 shares of
Series B Convertible Preferred Stock of the Company, stated value of $10.00 per
share, (the "Preferred Stock"), initially convertible into shares of common
stock of the Company, par value $.001 per share (the "Common Stock" and
collectively with the Preferred Stock, the "Shares"), and the Subscriber desires
to purchase that number of Units set forth on the signature page hereof on the
terms and conditions hereinafter set forth;
WHEREAS, the Company has engaged Paramount Capital, Inc. (the "Placement Agent")
as Placement Agent for the Offering on a "best-efforts" basis.
NOW, THEREFORE, in consideration of the premises and the mutual representations
and covenants hereinafter set forth, the parties hereto do hereby agree as
follows:
I SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY SUBSCRIBER
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1.1 Subject to the terms and conditions hereinafter set forth, the Subscriber
hereby subscribes for and agrees to purchase from the Company such number of
Units or fractions thereof and the Company agrees to sell such Units to the
Subscriber as is set forth upon the signature page hereof. The Units will be
offered at $100,000 per Unit (the "Initial Offering Price"). The purchase price
is payable by personal or business check, wire transfer of immediately available
funds or money order made payable to "Fleet Bank N.A., Escrow Agent, F/B/O
Zonagen, Inc." contemporaneously with the execution and delivery of this
Agreement. The Units will be delivered by the Company within ten (10) days
following the consummation of the Offering as set forth in Article III hereof.
1.2 The Subscriber recognizes that the purchase of Units involves a high degree
of risk in that (i) the Company remains a development stage business with
limited operating history and requires substantial funds in addition to the
proceeds of the Offering; (ii) an investment in the Company is highly
speculative, and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Units; (iii) the
Subscriber may not be able to liquidate his investment; (iv) transferability of
the Shares is extremely limited; and (v) in the event of a disposition, the
Subscriber could sustain the loss of his entire investment. Such risks are more
fully set forth in the Memorandum (as defined below) furnished by the Company to
the Subscriber.
1.3 The Subscriber represents that the Subscriber is an "accredited investor"
as such term is defined in Rule 501 of Regulation D promulgated under the
Securities Act of 1933, as amended (the "Act"), as indicated by his responses to
the questions contained in Article VIII hereof, and that the Subscriber is able
to bear the economic risk of an investment in the Units.
1.4 The Subscriber hereby acknowledges and represents that (i) the Subscriber
has prior investment experience, including investment in non-listed and
unregistered securities, or the Subscriber has employed the services of an
investment advisor, attorney and/or accountant to read all of the documents
furnished or made available by the Company both to the Subscriber and to all
other prospective investors in the Units and to evaluate the merits and risks of
such an investment on the Subscriber's behalf; (ii) the Subscriber recognizes
the highly speculative nature of this investment; and (iii) the Subscriber is
able to bear the economic risk which the Subscriber hereby assumes.
1.5 The Subscriber hereby acknowledges receipt and careful review of the
Confidential Private Placement Memorandum dated July 23, 1996, as supplemented
and amended (including Supplement and Amendment No. 1 to the Confidential
Offering Memorandum dated July 23, 1996, hereinafter referred to as the
"Supplement"), and the attachments and exhibits thereto (including the
Certificate of Designations of the Series B Convertible Preferred Stock, the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 and
Definitive Proxy Statement for its June 19, 1996 Annual Meeting of Stockholders,
all of which constitute an integral part of the Memorandum) (the "Memorandum")
and hereby represents that the Subscriber has been furnished by the Company
during the course of this transaction with all information regarding the Company
which the Subscriber has requested or desired to know, has been afforded the
opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the terms and
conditions of the Offering and has received any additional information which the
Subscriber has requested.
1.6 (a) The Subscriber has relied solely upon the information provided by the
Company in the Memorandum in making the decision to invest in the Units. To the
extent necessary, the Subscriber has retained, at the expense of the Subscriber,
and relied upon
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appropriate professional advice regarding the investment, tax and legal merits
and consequences of this Agreement and its purchase of the Units hereunder. The
Subscriber acknowledges and agrees that the Placement Agent has not supplied any
information for inclusion in the Memorandum other than information furnished in
writing to the Company by the Placement Agent specifically for inclusion in the
Memorandum relating to the Placement Agent, that the Placement Agent has no
responsibility for the accuracy or completeness of the Memorandum and that the
Subscriber has not relied upon the independent investigation or verification, if
any, which may have been undertaken by the Placement Agent.
(b) To the best of its knowledge, (i) the Subscriber was contacted regarding
the sale of the Units by the Placement Agent (or an authorized agent or
representative thereof), with whom the Subscriber had a prior substantial
pre-existing relationship and (ii) no Units were offered or sold to it by
means of any form of general solicitation or general advertising, and in
connection therewith the Subscriber: did not (A) receive or review any
advertisement, article, notice or other communication published in a
newspaper or magazine or similar media or broadcast over television or
radio whether closed circuit, or generally available; or (B) attend any
seminar meeting or industry investor conference whose attendees were
invited by any general solicitation or general advertising.
1.7 The Subscriber hereby represents that the Subscriber either by reason of
the Subscriber's business or financial experience or the business or financial
experience of the Subscriber's professional advisors (who are unaffiliated with
and who are not compensated by the Company or any affiliate or selling agent of
the Company, including the Placement Agent, directly or indirectly) has the
capacity to protect the Subscriber's own interests in connection with the
transaction contemplated hereby. The Subscriber hereby acknowledges that the
Offering has not been reviewed by the United States Securities and Exchange
Commission (the "SEC") because of the Company's representations that the
Offering is intended to be exempt from the registration requirements of Section
5 of the Act pursuant to Section 4(2) of the Act and Regulation D promulgated
thereunder. The Subscriber agrees that the Subscriber will not sell or
otherwise transfer the Shares unless they are registered under the Act or unless
an exemption from such registration is available.
1.8 The Subscriber understands that the Shares comprising the Units have not
been registered under the Act by reason of a claimed exemption under the
provisions of the Act which depends, in part, upon the Subscriber's investment
intention. In this connection, the Subscriber hereby represents that the
Subscriber is purchasing the Shares comprising the Units for the Subscriber's
own account for investment and not with a view toward the resale or distribution
of such shares to others. The Subscriber, if an entity, was not formed for the
purpose of purchasing the Shares.
1.9 The Subscriber understands that although there currently is a public market
for the Common Stock, Rule 144 promulgated under the Act requires, among other
conditions, a two-year holding period prior to the resale (in limited amounts)
of securities
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acquired in a non-public offering without having to satisfy the registration
requirements under the Act. The Subscriber understands and hereby acknowledges
that the Company is under no obligation to register the Units or any of the
Shares comprising the Units under the Act or any state securities or "blue sky"
laws other than as set forth in Article V. The Subscriber consents that the
Company may, if it desires, permit the transfer of the Shares comprising the
Units out of the Subscriber's name only when the Subscriber's request for
transfer is accompanied by an opinion of counsel reasonably satisfactory to the
Company that neither the sale nor the proposed transfer results in a violation
of the Act or any applicable state "blue sky" laws (collectively, "Securities
Laws"). The Subscriber agrees to hold the Company and its directors, officers,
employees, controlling persons and agents (including the Placement Agent and its
officers, directors, employees, counsel, agents and controlling persons) and
controlling persons and their respective heirs, representatives, successors and
assigns harmless and to indemnify them against all liabilities, costs and
expenses incurred by them as a result of any misrepresentation made by the
Subscriber contained in this Agreement (including the Confidential Investor
Questionnaire contained in Article VIII herein) or any sale or distribution by
the Subscriber in violation of the Securities Laws.
1.10 The Subscriber consents to the placement of a legend on any certificate or
other document evidencing the Shares that such Shares have not been registered
under the Act or any state securities or "blue sky" laws and setting forth or
referring to the restrictions on transferability and sale thereof contained in
this Agreement. The Subscriber is aware that the Company will make a notation
in its appropriate records with respect to the restrictions on the
transferability of such Shares.
1.11 The Subscriber understands that the Company will review this Agreement and
is hereby given authority by the Subscriber to call Subscriber's bank or place
of employment or otherwise review the financial standing of the Subscriber; and
it is further agreed that the Company reserves the unrestricted right to reject
or limit any subscription, to accept subscriptions for fractional Units and to
close the Offering to the Subscriber at any time.
1.12 The Subscriber hereby represents that the address of the Subscriber
furnished by the Subscriber on the signature page hereof is the Subscriber's
principal residence if the Subscriber is an individual or its principal business
address if it is a corporation or other entity.
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1.13 The Subscriber represents that he or it has full power and authority
(corporate, statutory and otherwise) to execute and deliver this Agreement and
to purchase the Units. This Agreement constitutes the legal, valid and binding
obligation of the Subscriber, enforceable against the Subscriber in accordance
with its terms.
1.14 If the Subscriber is a corporation, company, trust, employee benefit plan,
individual retirement account, Xxxxx Plan, or other tax-exempt entity, it is
authorized and qualified to become an investor in the Company and the person
signing this Agreement on behalf of such entity has been duly authorized by such
entity to do so.
1.15 The Subscriber acknowledges that if he is a Registered Representative of
an NASD member firm, he must give such firm the notice required by the NASD's
Rules of Fair Practice, receipt of which must be acknowledged by such firm in
Section 8.4 below.
1.16 The Subscriber acknowledges that at such time, if ever, as the Shares are
registered, sales of the Shares will be subject to state securities laws,
including those of the State of New Jersey which requires any securities sold in
New Jersey to be sold through a registered broker-dealer or in reliance upon an
exemption from registration.
II REPRESENTATIONS BY AND COVENANTS OF THE COMPANY
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Except as set forth on the Schedule of Exceptions attached hereto as Exhibit A,
the Company hereby represents and warrants to the Subscriber that:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and authority to conduct
its business as described in the Memorandum. The Company is duly qualified to
do business as a foreign corporation and is in good standing in the State of
Texas.
2.2 Capitalization and Voting Rights. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Memorandum under the heading
"Capitalization"; all issued and outstanding shares of the Company are validly
issued, fully paid and nonassessable. The Shares comprising the Units have been
duly and validly authorized and, when issued and paid for pursuant to this
Agreement, will be validly issued, fully paid and nonassessable. Except as set
forth in the Memorandum, there are no outstanding options, warrants, agreements,
convertible securities, preemptive rights or other rights to subscribe for or to
purchase any shares of capital stock of the Company. Except as set forth in the
Memorandum and in this Agreement and as otherwise required by law, there are no
restrictions upon the voting or transfer of the Shares pursuant to the Company's
Certificate of Incorporation, By-Laws or
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other governing documents or any agreement or other instruments to which the
Company is a party or by which the Company is bound.
2.3 Authorization; Enforceability. This Agreement has been duly and validly
authorized by the Company and is enforceable against the Company in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law). The Company has full power and lawful authority to authorize, issue and
sell the Units to be sold by it hereunder on the terms and conditions set forth
herein.
2.4 Certificate of Designations of Preferred Stock. The Preferred Stock has
the rights, preferences and privileges substantially as set forth in the Form of
Certificate of Designations attached as Exhibit A to the Memorandum with the
initial conversion price equal to the lesser of (i) $9.00 and (ii) 90% of the
average closing bid price of the Common Stock, on the Nasdaq Small-Cap Market
("Nasdaq") for the twenty consecutive trading days immediately preceding the (a)
the initial closing date (the "Initial Closing Date"), (b) any interim closing
date (each an "Interim Closing Date") or (c) the final closing date (the "Final
Closing Date") of this Offering, whichever is lowest. The initial conversion
rate shall be the number determined by dividing $10.00 by the initial conversion
rate.
2.5 No Conflict; Governmental Consents.
(i) The execution and delivery by the Company of this Agreement and the
consummation of the transactions contemplated hereby will not result in the
violation of any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority to or by which
the Company is bound, or of any provision of the Certificate of
Incorporation or By-Laws of the Company, 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 Company is a party or by which
it is bound or to which any of its properties or assets is subject, nor
result in the creation or imposition of any lien upon any of the properties
or assets of the Company.
(ii) No consent, approval, authorization or other order of any governmental
authority is required to be obtained by the Company in connection with the
authorization, execution and delivery of this Agreement or with the
authorization, issue and sale of the Units or the Shares comprising the
Units, except such filings as may be required to be made with the SEC and
Nasdaq and with any state or foreign blue sky or securities regulatory
authority.
2.6 Licenses. Except as set forth in the Memorandum, the Company has
sufficient licenses, permits and other governmental authorizations currently
required for the
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conduct of its business or ownership of properties and is in all material
respects complying therewith.
2.7 Litigation. Except as set forth in the Memorandum, the Company knows of no
pending or threatened legal or governmental proceedings against the Company
which could materially adversely affect the business, property, financial
condition or operations of the Company.
2.8 Accuracy of Reports. All material reports required to be filed by the
Company within the two years prior to the date of this Agreement under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), have been duly
filed with the SEC, complied at the time of filing in all material respects with
the requirements of their respective forms and, except to the extent updated or
superseded by the Memorandum or any subsequently filed report, were complete and
correct in all material respects as of the dates at which the information was
furnished, and contained (as of such dates) no untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
2.9 Memorandum; Disclosure. No information set forth in the Memorandum
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
2.10 Investment Company
The Company is not an "investment company" within the meaning of such term
under the Investment Company Act of 1940 and the rules and regulations of the
SEC thereunder.
III TERMS OF SUBSCRIPTION
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3.1 The Company shall issue a minimum of thirty-five (35) Units and a maximum
of seventy-five (75) Units. The Placement Agent, at its sole option, may offer
and sell up to an additional seventy (70) Units to cover over-allotments. The
Offering Period shall begin on the date that the Company delivers the final
Memorandum to the Placement Agent. Upon receipt of the Minimum Offering amount,
the Placement Agent may conduct a closing (the "Initial Closing Date") and may
conduct subsequent closings on an interim basis (each a "Closing") until the
Maximum Offering amount (including any over-allotment amount) has been reached
(the "Final Closing Date"). The Offering Period is expected to terminate on
August 23, 1996, subject to an extension, at the sole option of the Placement
Agent, for an additional thirty (30) days. The Units will be offered on a "best
efforts" basis. The purchase price is payable by personal or business check,
wire transfer of immediately available funds or money order made payable to
"Fleet Bank, N.A., Escrow Agent, F/B/O Zonagen, Inc."
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3.2 Placement of the Units will be made by the Placement Agent, who will
receive certain compensation as described in the Term Sheet and the Supplement.
In addition, Cruttenden Xxxx Incorporated ("Cruttenden") has been named as a
Sub-Placement Agent for the Offering and will receive certain compensation as
described in the Term Sheet and Supplement.
3.3 Pending the sale of the Units, all funds paid hereunder shall be deposited
by the Company in escrow with the Fleet Bank, N.A., a national banking
association with a branch at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. If the
Company shall not have obtained subscriptions (including this subscription) for
purchases of 35 Units on or before the Final Closing Date, then this
subscription shall be void and all funds paid hereunder by the Subscriber shall
be promptly returned to the Subscriber, without interest, subject to paragraph
3.5 hereof.
3.4 The Subscriber hereby authorizes and directs the Company to deliver the
Shares comprising the Units to be issued to the Subscriber pursuant to this
Agreement directly to the Subscriber's account maintained by the Placement
Agent, if any, or, if no such account exists to the residential or business
address indicated on the signature page hereto.
3.5 The Subscriber hereby authorizes and directs the Company to return any
funds for unaccepted subscriptions to the same account from which the funds were
drawn, including any customer account maintained with the Placement Agent.
IV Conditions to Obligations of the Subscribers
4.1 The Subscribers' obligation to purchase the Units at the Closing is subject
to the fulfillment on or prior to each Closing Date of the following conditions,
which conditions may be waived at the option of each Subscriber to the extent
permitted by law:
(a) Representations and Warranties Correct. The representations and warranties
made by the Company in Section 2 hereof shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on each Closing Date with the same force and effect as if they had
been made on and as of said date.
(b) Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to such purchase shall
have been performed or complied with in all material respects.
(c) Listing. The Company will promptly file an Application for Listing of
Additional Shares with the Nasdaq SmallCap Market in accordance with Rule
10b-7 under the Securities Exchange Act of 1934 and hereby represents and
warrants to the Placement Agent and to the Subscribers that it will take
all action reasonably necessary to list the Common Stock into which the
Preferred Stock is convertible and the Common Stock underlying the
Placement Warrants in accordance with the rules of the Nasdaq SmallCap
Market.
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(d) No Legal Order Pending. There shall not then be in effect any legal or
other order enjoining or restraining the transactions contemplated by this
Agreement.
(e) No Law Prohibiting or Restricting Such Sale. There shall not be in effect
any law, rule or regulation prohibiting or restricting such sale or
requiring any consent or approval of any person which shall not have been
obtained to issue the Shares (except as otherwise provided in this
Agreement).
(f) Minimum Subscriptions. The Company shall have received binding
subscriptions for at least 35 Units.
(g) Legal Opinion. On each Closing Date, Counsel to the Company shall have
delivered to the Placement Agent for the benefit of the Placement Agent and
the Subscribers, legal opinions (including legal opinions as to patent and
regulatory matters) to such effect with respect to legal matters relating
to this Agreement and the Memorandum as the Placement Agent may require.
(h) Comfort Letter. On each Closing Date, to the extent requested by the
Placement Agent, the Company's auditors shall have delivered to the
Placement Agent for the benefit of the Placement Agent and the Subscribers,
a comfort letter to such effect as the Placement Agent may require.
V Registration Rights
5.1 As used in this Agreement, the following terms shall have the following
meanings:
(a) "Affiliate" shall mean, with respect to any person, any other person
controlling, controlled by or under direct or indirect common control with
such person (for the purposes of this definition "control," when used with
respect to any specified person, shall mean the power to direct the
management and policies of such person, directly or indirectly, whether
through ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" shall have meanings correlative to the
foregoing).
(b) "Business Day" shall mean a day Monday through Friday on which banks are
generally open for business in New York.
(c) "Holders" shall mean the Subscribers and any person holding Registrable
Securities to whom the rights under Section 5 have been transferred in
accordance with Section 5.9 hereof.
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(d) "Person" shall mean any person, individual, corporation, partnership,
limited liability company, trust or other nongovernmental entity or any
governmental agency, court, authority or other body (whether foreign,
federal, state, local or otherwise).
(e) The terms "register," "registered" and "registration" refer to the
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(f) "Registrable Securities" shall mean (A) the Shares of Common Stock issuable
upon the conversion of the Preferred Stock, (B) the shares of Common Stock
underlying the Placement Warrants and (C) any shares of Common Stock issued
as (or issuable upon the conversion of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to or in
replacement of the Shares; provided, however, that securities shall only be
treated as Registrable Securities if and only for so long as they (I) have
not been disposed of pursuant to a registration statement declared
effective by the SEC, (II) have not been sold in a transaction exempt from
the registration and prospectus delivery requirements of the Securities Act
so that all transfer restrictions and restrictive legends with respect
thereto are removed upon the consummation of such sale or (III) are held by
a Holder or a permitted transferee pursuant to subsection 5.9.
(g) "Registration Expenses" shall mean all expenses incurred by the Company in
complying with Section 5.2 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow
fees, fees and expenses of counsel for the Company, blue sky fees and
expenses and the expense of any special audits incident to or required by
any such registration (but excluding the fees of legal counsel for any
Holder).
(h) "Registration Statement" shall have the meaning ascribed to such term in
Section 5.2.
(i) "Registration Period" shall have the meaning ascribed to such term in
Section 5.4.
(j) "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees
and expenses of legal counsel for any Holder.
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5.2 As soon as practicable but not later than the earlier of (a) 60 days after
the Initial Closing Date and (b) 30 days after the Final Closing Date, (the
"Filing Date"), the Company will file a shelf registration statement (the
"Registration Statement") with the SEC and use its reasonable best efforts to
effect the registration, qualifications or compliances (including, without
limitation, the execution of any required undertaking to file post-effective
amendments, appropriate qualifications under applicable blue sky or other state
securities laws and appropriate compliance with applicable securities laws,
requirements or regulations) as may be so reasonably requested and as would
permit or facilitate the sale and distribution of all Registrable Securities.
5.3 All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 5.2 shall be borne by the
Company. All Selling Expenses relating to the sale of securities registered by
or on behalf of Holders shall be borne by such Holders pro rata on the basis of
the number of securities so registered.
5.4 In the case of the registration, qualification or compliance effected by
the Company pursuant to this Agreement, the Company will, upon reasonable
request, inform each Holder as to the status of such registration, qualification
and compliance. At its expense the Company will:
(a) use its reasonable best efforts to keep such registration, and any
qualification or compliance under state securities laws which the Company
determines to obtain, continuously effective until at least the third
anniversary of the Closing Date or until the Holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs. The period of time during which the Company is
required hereunder to keep the Registration Statement effective is referred
to herein as "the Registration Period." Notwithstanding the foregoing at
the Company's election, the Company may cease to keep such registration,
qualification or compliance effective with respect to any Registrable
Securities, and the registration rights of a Holder shall expire, at such
time as the Holder may sell under Rule 144(k) under the Securities Act (or
other exemption from registration acceptable to the Company) all
Registrable Securities then held by such Holder; and
(b) advise the Holders:
(i) when the Registration Statement or any amendment thereto has been filed
with the SEC and when the registration statement or any post-effective
amendment thereto has become effective;
(ii) of any request by the SEC for amendments or supplements to the Registration
Statement or the prospectus included therein or for additional
information;
(iii) of the issuance by the SEC of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for
such purpose;
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(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares included therein for sale in
any jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
(v) of the happening of any event that requires the making of any changes in
the Registration Statement or the prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state a material
fact required to be stated therein or necessary to make the statements
therein (in the case of the prospectus, in the light of the circumstances
under which they were made) not misleading;
(c) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of any Registration Statement at the earliest
possible time;
(d) furnish to each Holder, without charge, at least one copy of such
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in
writing, all exhibits (including those incorporated by reference) in the
form filed with the SEC;
(e) during the Registration Period, deliver to each Holder, without charge, as
many copies of the prospectus included in such Registration Statement and
any amendment or supplement thereto as such Holder may reasonably request;
and the Company consents to the use, consistent with the provisions hereof,
of the prospectus or any amendment or supplement thereto by each of the
selling Holders of Registrable Securities in connection with the offering
and sale of the Registrable Securities covered by the prospectus or any
amendment or supplement thereto. In addition, upon the reasonable request
of the Subscriber and subject in all cases to confidentiality protections
reasonably acceptable to the Company, the Company will meet with a
Subscriber or a representative thereof at the Company's headquarters to
discuss all information relevant for disclosure in the Registration
Statement covering the Registrable Securities, and will otherwise cooperate
with any Subscriber conducting an investigation for the purpose of reducing
or eliminating such Subscriber's exposure to liability under the Securities
Act, including the reasonable production of information at the Company's
headquarters;
(f) during the Registration Period, deliver to each Holder, without charge, (i)
as soon as practicable (but in the case of the annual report of the Company
to its stockholders, within 120 days after the end of each fiscal year of
the Company) one copy of: (A) its annual report to its stockholders (which
annual report shall contain financial statements audited in accordance with
generally accepted accounting principles in the United States of America by
a firm of certified public accountants of recognized standing); (B) if not
included in substance in its annual report to stockholders, its annual
report on Form 10-K (or similar form); (C) each of its quarterly reports to
its stockholders, and, if not included in substance in its quarterly
reports to stockholders, its quarterly report on Form 10-Q (or similar
form), and (D) a copy of the full Registration Statement (the foregoing, in
each case, excluding exhibits); and (ii)
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upon reasonable request, all exhibits excluded by the parenthetical to the
immediately preceding clause (D), and all other information that is
generally available to the public;
(g) prior to any public offering of Registrable Securities pursuant to any
Registration Statement, register or qualify for offer and sale under the
securities or blue sky laws of such jurisdictions as any such Holders
reasonably request in writing, provided that the Company shall not for any
such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction, and do any
and all other acts or things necessary or advisable to enable the offer and
sale in such jurisdictions of the Registrable Securities covered by such
Registration Statement;
(h) cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold
pursuant to any Registration Statement free of any restrictive legends to
the extent not required at such time and in such denominations and
registered in such names as Holders may request at least three business
days prior to sales of Registrable Securities pursuant to such Registration
Statement;
(i) upon the occurrence of any event contemplated by Section 5.4(b)(v) above,
the Company shall promptly prepare a post-effective amendment to the
Registration Statement or a supplement to the related prospectus, or file
any other required document so that, as thereafter delivered to purchasers
of the Registrable Securities included therein, the prospectus will not
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
(j) use its reasonable efforts to comply with all applicable rules and
regulations of the SEC, and will make generally available to the Holders
not later than 45 days (or 90 days if the fiscal quarter is the fourth
fiscal quarter) after the end of its fiscal quarter in which the first
anniversary date of the effective date of the Registration Statement
occurs, an earnings statement satisfying the provisions of Section 11(a) of
the Act.
(k) take all action reasonably necessary to cause the Common Stock into which
the Preferred Stock is convertible and the Common Stock underlying the
Placement Warrants to be listed on the Nasdaq SmallCap Market.
5.5 The Holders shall have no right to take any action to restrain, enjoin or
otherwise delay any registration pursuant to Section 5.2 hereof as a result of
any controversy that may arise with respect to the interpretation or
implementation of this Agreement.
13
5.6 (a) To the extent permitted by law, the Company will indemnify each
Holder, each underwriter of the Shares and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
any registration, qualification or compliance has been effected pursuant to this
Agreement, against all claims, losses, damages and liabilities (or action in
respect thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened (subject to Section 5.6(c) below), arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus or offering
circular, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances in which they were made, and will reimburse each Holder, each
underwriter of the Shares and each person controlling such Holder, for
reasonable legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action as
incurred, provided that the Company will not be liable in any such case to the
extent that any untrue statement or omission or allegation thereof is made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Holder and stated to be specifically for use in
preparation of such registration statement, prospectus or offering circular;
provided that the Company will not be liable in any such case where the claim,
loss, damage or liability arises out of or is related to the failure of the
Holder to comply with the covenants and agreements contained in this Agreement
respecting sales of Registrable Securities, and except that the foregoing
indemnity agreement is subject to the condition that, insofar as it relates to
any such untrue statement or alleged untrue statement or omission or alleged
omission made in the preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the SEC at the time the registration statement
becomes effective or in the amended prospectus filed with the SEC pursuant to
Rule 424(b) of the Securities Act or in the prospectus subject to completion and
term sheet under Rule 434 of the Securities Act, which together meet the
requirements of Section 10(a) of the Securities Act (the "Final Prospectus"),
such indemnity agreement shall not inure to the benefit of any such Holder, any
such underwriter or any such controlling person, if a copy of the Final
Prospectus was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is required
by the Securities Act.
(b) Each Holder will severally, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter of the Shares and each person who controls the
Company within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened (subject to Section 5.6(c) below), arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus or offering circular, or any
amendment or supplement thereof, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a
14
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances in which they were made,
and will reimburse the Company, such directors and officers, each underwriter of
the Shares and each person controlling the Company for reasonable legal and any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action as incurred, in each case to
the extent, but only to the extent, that such untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Holder and stated to
be specifically for use in preparation of such registration statement,
prospectus or offering circular; provided that the indemnity shall not apply to
the extent that such claim, loss, damage or liability results from the fact that
a current copy of the prospectus that was made available to the Holder was not
sent or given to the person asserting any such claim, loss, damage or liability
at or prior to the written confirmation of the sale of the Registrable
Securities confirmed to such person if such current copy of the prospectus would
have cured the defect giving rise to such loss, claim, damage or liability.
Notwithstanding the foregoing, in no event shall a Holder be liable for any such
claims, losses, damages or liabilities in excess of the proceeds received by
such Holder in the offering, except in the event of fraud by such Holder.
(c) Each party entitled to indemnification under this Section 5.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
Indemnified Party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless such failure
is prejudicial to the Indemnifying Party in defending such claim or litigation.
An Indemnifying Party shall not be liable for any settlement of an action or
claim effected without its written consent (which consent will not be
unreasonably withheld).
(d) If the indemnification provided for in this Section 5.6 is held by a court
of competent jurisdiction to be unavailable to an Indemnified Party with respect
to any loss, liability, claim, damage or expense referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions which resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied
15
by the Indemnifying Party or by the Indemnified Party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
5.7 (a) Each Holder agrees that, upon receipt of any notice from the Company
of the happening of any event requiring the preparation of a supplement or
amendment to a prospectus relating to Registrable Securities so that, as
thereafter delivered to the Holders, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, each
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to the registration statement contemplated by Section 5.2 until its receipt of
copies of the supplemented or amended prospectus from the Company and, if so
directed by the Company, each Holder shall deliver to the Company all copies,
other than permanent file copies then in such Holder's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
(b) Each Holder agrees to suspend, upon request of the Company, any disposition
of Registrable Securities pursuant to the registration statement and prospectus
contemplated by Section 5.2 during (A) any period not to exceed two 40-day
periods within any one 12-month period the Company requires in connection with a
primary underwritten offering of equity securities and (B) any period, not to
exceed one 30-day period per circumstance or development, when the Company
determines in good faith that offers and sales pursuant thereto should not be
made by reason of the presence of material undisclosed circumstances or
developments with respect to which the disclosure that would be required in such
a prospectus is premature, would have an adverse effect on the Company or is
otherwise inadvisable.
(c) As a condition to the inclusion of its Registrable Securities, each Holder
shall furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may request in writing or as
shall be required in connection with any registration, qualification or
compliance referred to in this Article V.
(d) Each Holder hereby covenants with the Company (1) not to make any sale of
the Registrable Securities without effectively causing the prospectus delivery
requirements under the Securities Act to be satisfied, and (2) if such
Registrable Securities are to be sold by any method or in any transaction other
than on Nasdaq (or other national securities exchange), in the over-the-counter
market, in privately negotiated transactions, or in a combination of such
methods, to notify the Company at least five business days prior to the date on
which the Holder first offers to sell any such Shares.
(e) Each Holder acknowledges and agrees that the Registrable Securities sold
pursuant to the registration statement described in this Section are not
transferable on the books of the Company unless the stock certificate submitted
to the transfer agent evidencing such Shares is accompanied by a certificate
reasonably satisfactory to the Company to
16
the effect that (A) the Registrable Securities have been sold in accordance with
such registration statement and (B) the requirement of delivering a current
prospectus has been satisfied.
(f) Each Holder agrees not to take any action with respect to any distribution
deemed to be made pursuant to such registration statement, that constitutes a
violation of Rule 10(b)-6 under the Exchange Act or any other applicable rule,
regulation or law.
(g) At the end of the period during which the Company is obligated to keep the
registration statement current and effective as described above, the Holders of
Registrable Securities included in the registration statement shall discontinue
sales of shares pursuant to such registration statement upon receipt of notice
from the Company of its intention to remove from registration the shares covered
by such registration statement which remain unsold, and such Holders shall
notify the Company of the number of shares registered which remain unsold
immediately upon receipt of such notice from the Company.
5.8 With a view to making available to the Holders the benefits of certain
rules and regulations of the SEC which at any time permit the sale of the
Registrable Securities to the public without registration, the Company agrees to
use its reasonable best efforts to:
(a) make and keep public information available, as those terms are understood
and defined in Rule 144 under the Securities Act, at all times;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Exchange Act; and
(c) so long as a Holder owns any unregistered Registrable Securities, furnish to
such Holder upon any reasonable request a written statement by the Company as to
its compliance with Rule 144 under the Securities Act, and of the Exchange Act,
a copy of the most recent annual or quarterly report of the Company, and such
other reports and documents of the Company as such Holder may reasonably request
in availing itself of any rule or regulation of the SEC allowing a Holder to
sell any such securities without registration.
5.9 The rights to cause the Company to register Registrable Securities granted
to the Holders by the Company under Section 5.2 may be assigned in full by a
Holder, provided, that: (i) such transfer may otherwise be effected in
accordance with applicable securities laws; (ii) such transfer involves not less
than the lesser of all of such Holder's Shares or 100,000 Shares; (iii) such
Holder gives prior written notice to the Company; and (iv) such transferee
agrees to comply with the terms and provisions of this Agreement, and such
transfer is otherwise in compliance with this Agreement. Except as specifically
permitted by this Section 5.9, the rights of a Holder with respect to
Registrable Securities as set out herein shall not be transferable to any other
Person, and any attempted transfer shall cause all rights of such Holder therein
to be forfeited.
17
5.10 With the written consent of the Company and the Holders holding at least a
majority of the Registrable Securities that are then outstanding, any provision
of this Article V may be waived (either generally or in a particular instance,
either retroactively or prospectively and either for a specified period of time
or indefinitely) or amended. Upon the effectuation of each such waiver or
amendment, the Company shall promptly give written notice thereof to the
Holders, if any, who have not previously received notice thereof or consented
thereto in writing.
VI MISCELLANEOUS
6.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, or delivered by hand against written receipt therefor,
addressed to Zonagen, Inc., 0000 Xxxxxxxxxx Xxxxx, Xxxxx X-0, Xxx Xxxxxxxxx,
Xxxxx 00000, Attn: President, and to the Subscriber at his address indicated on
the signature page of this Agreement. Notices shall be deemed to have been
given or delivered on the date of mailing, except notices of change of address,
which shall be deemed to have been given or delivered when received.
6.2 Except as provided for in Section 5.10, this Agreement shall not be
changed, modified or amended except by a writing signed by the parties to be
charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
6.3 Subject to the provisions of Section 5.9, this Agreement shall be binding
upon and inure to the benefit of the parties hereto and to their respective
heirs, legal representatives, successors and assigns. 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.
6.4 Upon the execution and delivery of this Agreement by the Subscriber, this
Agreement shall become a binding obligation of the Subscriber with respect to
the purchase of Units as herein provided; subject, however, to the right hereby
reserved to the Company to enter into the same agreements with other subscribers
and to add and/or delete other persons as subscribers.
6.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF
THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
6.6 In order to discourage frivolous claims the parties agree that unless a
claimant in any proceeding arising out of this Agreement succeeds in
establishing his claim and recovering a judgment against another party
(regardless of whether such claimant succeeds
18
against one of the other parties to the action), then the other party shall be
entitled to recover from such claimant all of its/their reasonable legal costs
and expenses relating to such proceeding and/or incurred in preparation
therefor.
6.7 The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If
any provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.
6.8 It is agreed that a waiver by either party of a breach of any provision of
this Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
6.9 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
6.10 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.
6.11 (a) The Subscribers severally agree not to issue any public statement
with respect to the Subscribers' investment or proposed investment in the
Company or the terms of any agreement or covenant between them and the Company
without the Company's prior written consent, except such disclosures as may be
required under applicable law or under any applicable order, rule or regulation.
(b) The Company agrees not to disclose the names, addresses or any other
information about the Subscribers, except as required by law; provided, that the
Company may use the name (but not the address) of the Subscriber in the
Registration Statement.
6.12 (a) Each Subscriber severally represents and warrants that it has not
engaged, consented to or authorized any broker, finder or intermediary to act on
its behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. Each
Subscriber hereby severally agrees to indemnify and hold harmless the Company
and the Placement Agent from and against all fees, commissions or other payments
owing to any such person or firm acting on behalf of such Subscriber hereunder.
19
(b) The Company has engaged, consented to and authorized the Placement Agent in
connection with the transactions contemplated by this Agreement. The Company
hereby agrees to pay the Placement Agent a commission and to reimburse expenses
in accordance with the Placement Agency Agreement dated July 17, 1996 (the
"Placement Agency Agreement"), and the Company agrees to indemnify and hold
harmless the Subscribers from and against all fees, commissions or other
payments owing by the Company to any other person or firm acting on behalf of
the Company hereunder.
6.13 Nothing in this Agreement shall create or be deemed to create any rights
in any person or entity not a party to this Agreement, except (a) for the
holders of Registrable Securities and (b) for the Placement Agent pursuant to
Article I and 6.12 hereof.
VII NOTICE TO, AND REPRESENTATIONS AND COVENANTS OF, CERTAIN STATE RESIDENTS
7.1 Connecticut Residents: The undersigned acknowledges that the Securities
have not been registered under the Connecticut Uniform Securities Act, as
amended, and are subject to restrictions on transferability and sale of
securities as set forth herein. The undersigned hereby agrees that such
Securities will not be transferred or sold without registration under the
Connecticut Uniform Securities Act, as amended, or exemption therefrom.
7.2 Missouri Residents: The Subscriber acknowledges that the Securities have
not been registered under the Missouri Uniform Securities Act, as amended, and
are subject to restrictions on transferability and the sale of securities as
forth herein. The Subscriber hereby acknowledges that such Securities may be
disposed of only through a licensed broker-dealer. It is a felony to sell
securities in violation of the Missouri Uniform Securities Act.
7.3 Pennsylvania Residents: The Subscriber hereby acknowledges that the
Company is relying upon the exemption from registration of securities set forth
in Section 203(d) of the Pennsylvania Act of 1972, as amended (the "Pennsylvania
Act") in connection with the sale of the Securities to the Subscriber.
In accordance with the requirements of Section 203(d) of the Pennsylvania Act,
the Subscriber hereby agrees not to sell the securities within twelve months
from the date of purchase except pursuant to Section 204.01 of the Blue Sky
Regulations of the Pennsylvania Act. Additionally, the Subscriber is aware of
the right of withdrawal under Section 207(m) of the Pennsylvania Act described
in the cover pages of the Memorandum.
7.4 Texas Residents: The Subscriber hereby acknowledges that the Securities
cannot be sold unless they are subsequently registered under the Securities Act
of 1933, as amended, and the Texas Securities Act, or an exemption from
registration is available. The Subscriber further acknowledges that because the
Securities are not readily transferable, they must bear the entire risk of the
investment for an indefinite period of time.
20
7.5 Alabama Residents: The undersigned represents that he or she, either alone
or with the undersigned's representative, has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of investment in the Units.
7.6 Massachusetts Residents: If the undersigned is a natural person, he or she
represents that his or her investment in these Units does not exceed 25% of his
or her net worth or joint net worth with spouse (excluding principal residence
and its furnishings).
7.7 Maryland Residents: The undersigned acknowledges and agrees that these
Units will not be sold without registration under the Maryland Securities Act or
exemption therefrom.
7.8 Wisconsin Residents: The undersigned represents that he or she, either
alone or with his or her representative, has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of investment in the Units.
7.9 California Residents: If the undersigned is a natural person, he or she
represents that his or her investment in these Units does not exceed 10% of his
or her net worth or joint net worth with spouse (excluding principal residence
and its furnishings).
7.10 Florida Residents: The undersigned acknowledges that the Units have not
been registered under the Florida Securities and Investor Protection Act (the
"Florida Act")in reliance upon exemption provisions contained therein. Section
517.061 (11)(a)(5) of the Florida Act provides that any Purchaser of securities
in Florida which are exempted from registration under Section 517.061(11) of the
Florida Act may withdraw his subscription agreement and receive a full refund of
all monies paid, within three business days after he tenders consideration for
such securities. Therefore, any Florida resident who purchases securities is
entitled to exercise the foregoing statutory rescission right within three
business days after tendering consideration for the investment packages by
telephone, telegram or letter notice to the Company. Any telegram or letter
should be sent or postmarked prior to the end of the third business day. A
letter should be mailed by certified mail, return receipt requested, to ensure
its receipt and to evidence the time of mailing. Any oral requests should be
confirmed in writing.
7.11 North Carolina Residents: The undersigned acknowledges that these Units
are subject to restriction on transferability and resale and may not be
transferred or resold except as permitted under the Securities and Exchange Act
of 1933, as amended, and the applicable state securities laws, pursuant to the
registration or exemption therefrom. Investors should be aware that that they
will be required to bear the financial risks of this investment for an
indefinite period of time.
21
VIII CONFIDENTIAL INVESTOR QUESTIONNAIRE
8.1 The Subscriber represents and warrants that he, she or it comes within one
category marked below, and that for any category marked, he or she has
truthfully set forth, where applicable, the factual basis or reason the
Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish
any additional information which the Company deems necessary in order to verify
the answers set forth below.
Category A The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or joint net
worth with his or her spouse, presently exceeds $1,000,000.
Explanation. In calculating net worth you may include
equity in personal property and real estate, including your
principal residence, cash, short-term investments, stock and
securities. Equity in personal property and real estate
should be based on the fair market value of such property
less debt secured by such property.
Category B The undersigned is an individual (not a partnership,
corporation, etc.) who had an income in excess of $200,000
in each of the two most recent years, or joint income with
his or her spouse in excess of $300,000 in each of those
years (in each case including foreign income, tax exempt
income and full amount of capital gains and loses but
excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable
expectation of reaching the same income level in the current
year.
Category C The undersigned is a director or executive officer of the
Company which is issuing and selling the Units.
Category D The undersigned is a bank; a savings and loan association;
insurance company; registered investment company; registered
business development company; licensed small business
investment company ("SBIC"); or employee benefit plan within
the meaning of Title 1 of ERISA and (a) the investment
decision is made by a plan fiduciary which is either a bank,
savings and loan association, insurance company or
registered investment advisor, or (b) the plan has total
assets in excess of $5,000,000 or is a self directed plan
with investment decisions made solely by persons that are
accredited investors.
22
----------------------
----------------------
(describe entity)
Category E The undersigned is a private business development company
as defined in section 202(a)(22) of the Investment Advisors
Act of 1940.
----------------------
----------------------
(describe entity)
Category F The undersigned is either a corporation, partnership,
Massachusetts business trust, or non-profit organization
within the meaning of Section 501(c)(3) of the Internal
Revenue Code, in each case not formed for the specific
purpose of acquiring the Units and with total assets in
excess of $5,000,000.
----------------------
----------------------
(describe entity)
Category G The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Units, where the purchase is directed by a
"sophisticated person" as defined in Regulation
506(b)(2)(ii).
Category H The undersigned is an entity (other than a trust) all the
equity owners of which are "accredited investors" within one
or more of the above categories. If relying upon this
Category alone, each equity owner must complete a separate
copy of this Agreement.
----------------------
----------------------
(describe entity)
23
Category I The undersigned is not within any of the categories above
and is therefore not an accredited investor.
The undersigned agrees that the undersigned will notify the Company at any time
on or prior to the Closing Date in the event that the representations and
warranties in this Agreement shall cease to be true, accurate and complete.
8.2 SUITABILITY (please answer each question)
(a) For an individual Subscriber, please describe your current employment,
including the company by which you are employed and its principal business:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(b) For an individual Subscriber, please describe any college or graduate
degrees held by you:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(c) For all Subscribers, please list types of prior investments:
______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(d) For all Subscribers, please state whether you have you participated in
other private placements before:
YES_______ NO_______
(e) For all Subscribers, please indicate frequency of such prior participation
in private placements of:
Public Private Public or Private
Companies Companies Biotechnology Companies
--------- ----------- -----------------------
Frequently
----------- ------------ ---------------
Occasionally
----------- ------------ ---------------
Never
----------- ------------ ---------------
24
(f) For individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future?
YES_______ NO_______
(g) For trust, corporate, partnership and other institutional Subscribers, do
you expect your total assets to significantly decrease in the foreseeable
future?
YES_______ NO_______
(h) For all Subscribers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need sudden cash
requirements in excess of cash readily available to you?
YES_______ NO_______
(i) For all Subscribers, are you familiar with the risk aspects and the non-
liquidity of investments such as the securities for which you seek to subscribe?
YES_______ NO_______
(j) For all Subscribers, do you understand that there is no guarantee of
financial return on this investment and that you run the risk of losing your
entire investment?
YES_______ NO_______
8.3 Manner In Which Title to be Held. (circle one)
----------------------------------------------
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of
Survivorship (both parties
must sign)
(d) Partnership*
(e) Tenants in Common
(f) Company*
(g) Trust*
(h) Other
*If Units are being subscribed for by an entity, the attached
Certificate of Signatory must also be completed.
25
8.4 NASD Affiliation.
Are you affiliated or associated with an NASD member firm (please
check one):
Yes _________ No __________
If Yes, please describe:
_________________________________________________________
_________________________________________________________
_________________________________________________________
*If Subscriber is a Registered Representative with an NASD member
firm, have the following acknowledgment signed by the appropriate party:
The undersigned NASD member firm acknowledges receipt of the notice
required by Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
_________________________________
Name of NASD Member Firm
By: ______________________________
Authorized Officer
Date: ____________________________
8.5 The undersigned is informed of the significance to the Company of
the foregoing representations and answers contained in the Confidential Investor
Questionnaire contained in this Section 8 and such answers have been provided
under the assumption that the Company will rely on them.
26
[SIGNATURE PAGE]
NUMBER OF UNITS X $100,000 = (THE "PURCHASE PRICE")
__________________________ _____________________________________
Signature Signature (if purchasing jointly)
__________________________ _____________________________________
Name Typed or Printed Name Typed or Printed
__________________________ _____________________________________
Address Address
__________________________ _____________________________________
City, State and Zip Code City, State and Zip Code
__________________________ _____________________________________
Telephone-Business Telephone--Business
__________________________ _____________________________________
Telephone-Residence Telephone--Residence
__________________________ _____________________________________
Facsimile-Business Facsimile--Business
__________________________ _____________________________________
Facsimile-Residence Facsimile--Residence
__________________________ _____________________________________
Tax ID # or Social Security # Tax ID # or Social Security #
Name in which securities should be issued:
Dated: , 1996
This Subscription Agreement is agreed to and accepted as of
, 1996.
ZONAGEN, INC.
By: __________________________________________
Name: Xxx Xxxxxxxx
Title: Chief Executive Officer and President
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CERTIFICATE OF SIGNATORY
(To be completed if Units are
being subscribed for by an entity)
I, ________________________________, am the _____________________of
_____________________________________________ (the "Entity").
I certify that I am empowered and duly authorized by the Entity to
execute and carry out the terms of the Subscription Agreement and to purchase
and hold the Units, and certify further that the Subscription Agreement has been
duly and validly executed on behalf of the Entity and constitutes a legal and
binding obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this ____ day of ____ , 1996.
_________________________________
(Signature)
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