SUBSCRIPTION AGREEMENT
THIS
SUBSCRIPTION AGREEMENT (this “Agreement”) made as of the date set forth on the
signature page hereof between Manhattan Pharmaceuticals, Inc., a Delaware
corporation having a place of business at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx
00000 (the “Company”), and the undersigned (the “Subscriber”).
W
I T N E
S S E T H:
WHEREAS,
the Company is offering (the “Offering”) Units (as defined below) to a limited
number of persons who qualify as “accredited investors” as defined in Rule 501
of Regulation D promulgated under the under the Securities Act of 1933, as
amended (the “Act”). Each “Unit” shall consist of (a) a number of shares (the
“Shares”) of common stock of the Company, par value $.001 per share (“Common
Stock”), determined by dividing one hundred thousand dollars ($100,000) (the
“Unit Price”) by the Per Share Price (as defined below) of the Common Stock, and
(b) warrants (the “Warrants” and collectively with the Shares, the “Securities”)
to purchase, at any time prior to the fifth anniversary of the date of issuance,
a number of shares of Common Stock equal to 20% of the number of Shares included
in such Unit, at an initial exercise price equal to 110% of the Market Price
(the “Warrant Exercise Price”). The “Per Share Price” of the Common Stock shall
equal eighty-five percent (85%) of the Market Price. For purposes hereof,
“Market Price” shall mean the average closing sale price of the Common Stock as
reported by the OTC Bulletin Board during the five (5) Business Days (as
defined
in Article 5) immediately preceding the Closing Date;
WHEREAS,
the sale of the Units is contingent upon the Company making sales of at least
100 Units which would provide the Company with aggregate gross proceeds of
$10,000,000 (the “Minimum Offering Amount”). The Company may sell up to a
maximum number of 140 Units which would provide the Company with aggregate
gross
proceeds of $14,000,000 (the “Maximum Offering Amount”), with an option in favor
of the Placement Agent (as defined below) to offer an additional 10 Units
with
aggregate gross proceeds of up to $1,000,000 to cover over-allotments (the
“Over
Allotment”);
WHEREAS,
Paramount BioCapital, Inc., is acting as exclusive placement agent (the
“Placement Agent”) for the Offering; and
WHEREAS,
on the terms and conditions hereinafter set forth, the Subscriber desires
to
purchase from the Company, and the Company desires to sell to the Subscriber,
a
number of Units.
NOW,
THEREFORE, in consideration of the promises and the mutual representations
and
covenants hereinafter set forth, the parties hereto do hereby agree as
follows:
1.
SUBSCRIPTION
FOR UNITS.
1.1 Offering.
The
Company is offering to a limited number of persons who qualify as “accredited
investors” as defined by Rule 501(a) of Regulation D of the Act, Units on terms
and conditions described in this Agreement. The Minimum Offering Amount will
be
offered on an “all or none, best efforts” basis. The Maximum Offering Amount and
the Over -Allotment, if exercised, will be offered on a “best efforts” basis.
The Subscriber understands, however, that this purchase of the Units is
contingent upon the Company making aggregate sales of Units equal to or
exceeding the Minimum Offering Amount. Each Unit shall consist of (a) a number
of Shares, determined by dividing the Unit Price by the Per
Share
Price, and (b) Warrants to purchase, at any time prior to the fifth anniversary
of the date of issuance, a number of shares of Common Stock equal to 20%
of the
number of Shares included in such Unit. In the event that the closing bid
price
for any 30 consecutive trading days is at least 200% of the Exercise Price,
the
Company shall be entitled to redeem not less than all of the Warrants at
a per
Warrant redemption price of $0.01, by providing 30 business days’ written notice
to the holder. In
the
event that the Company decides to redeem the Warrants pursuant to this Section
1.1, such
holders may
exercise this Warrant
during
such
30-day period. The Warrant shall be in substantially the
form
attached as an exhibit
to the
Memorandum (as defined below).
1.2 Closing.
At each
closing (each a “Closing,” and the date thereof, the “Closing Date”), provided
the Company has received the Minimum Offering Amount, the Company shall issue
and sell to the Subscriber and the Subscriber shall purchase from the Company
the Shares and Warrants included in the Units
1.3 Closing
Mechanics.
The
Closing shall be held at a date and time designated by the Company and Paramount
BioCapital, Inc. prior to 11:59 p.m. Eastern Standard Time on August 31,
2005
(subject to extension at the discretion of the Company and the Placement
Agent
without notice to the Subscriber of up to 60 days), which date shall be no
later
than five (5) Business Days after satisfaction or waiver of the closing
conditions set forth in Article 4 hereof. The Closing shall occur at the
offices
of Paramount BioCapital, Inc., located at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx
00000. Upon
satisfaction or waiver of all conditions to the Closing, the Placement Agent
and
the Company shall instruct an escrow agent (the “Escrow Agent”) to release the
proceeds of the Closing to the Company, less fees and expenses due to the
Placement Agent. Interest, if any, that has accrued with respect to the
Aggregate Purchase Price while in escrow shall also be distributed to the
Company at the Closing and the Subscriber will have no right to such interest,
even if there is no Closing.
1.4 Payment
of Aggregate Purchase Price.
Upon,
or prior to, the execution of this Agreement by the Subscriber, the Subscriber
shall deposit the amount of readily available funds equal to the Aggregate
Purchase Price in a segregated escrow account with the Escrow Agent by check
or
wire transfer of immediately available funds pursuant to the instructions
provided below. Subject to the terms and conditions of this Agreement
(including, without limitation, the Company’s and the Placement Agent’s option,
each at its sole discretion, to refuse to accept subscriptions, in whole
or in
part, from any Subscriber), the Subscriber hereby subscribes for and agrees
to
purchase from the Company such number of Units and the Company agrees to
sell
such number of Units to the Subscriber as is set forth upon the signature
page
hereof at the Aggregate Purchase Price as accepted by the Company and the
Placement Agent.
ABA
Routing Number: ______________
Account
Name: ______________
Account
Number: ______________
For
Further Credit: ______________
SEI
Number: ______________
Reference:
[Investor Name]
Attn:
______________
The
Subscriber must complete and return a duly executed, unaltered copy of this
Agreement (including the completed Confidential Subscriber Questionnaire
included in Article 7 hereof) to the Placement Agent at the Placement Agent’s
address indicated in the Memorandum on or before the date indicated to the
Subscriber by the Placement Agent to be eligible to participate in the Offering.
The Company and the Placement Agent retain complete discretion to accept
or
reject any subscription unless and until the Company executes a counterpart
to
this Agreement that includes such Subscriber’s signature.
1.5 Delivery
of Certificates.
The
Company shall deliver, or cause to be delivered, the certificates representing
the Securities purchased by the Subscriber hereunder as soon as practical
after
the Closing to the Subscriber’s residential or business address indicated on the
signature page hereto.
2. REPRESENTATIONS
AND WARRANTIES OF SUBSCRIBER.
The
Subscriber hereby represents and warrants to the Company as of the date hereof
and the Closing Date as follows:
2.1 The
Subscriber understands, acknowledges and agrees that the purchase of the
Units
involves a high degree of risk including, but not limited to, the following:
(i)
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; (ii) the Subscriber may not be able to liquidate its
investment; (iii) transferability of the Securities is extremely limited;
(iv)
in the event of a disposition of the Securities, the Subscriber could sustain
the loss of its entire investment; and (v) since the Company has been a
publicly-traded company, the Company has not paid any dividends on its Common
Stock since inception and does not anticipate the payment of dividends in
the
foreseeable future.
2.2 The
Subscriber is an “accredited investor” as such term is defined in Rule 501 of
Regulation D promulgated under the Act, as indicated by the Subscriber’s
responses to the questions contained in Article 7 hereof, which are true
and
correct as of the date hereof and shall be true and correct as of the Closing
Date, and that the Subscriber is able to bear the economic risk of an investment
in the Company. If the Subscriber is a natural person, the Subscriber has
reached the age of majority in the state or other jurisdiction in which the
Subscriber resides, has adequate means of providing for the Subscriber’s current
financial needs and contingencies, is able to bear the substantial economic
risks of an investment in the Securities for an indefinite period of time,
has
no need for liquidity in such investment and, at the present time, could
afford
a complete loss of such investment.
2.3 The
Subscriber understands, acknowledges and agrees that: (i) the Subscriber
is
knowledgeable, sophisticated and has experience in making, and is qualified
to
make, decisions with respect to investments representing an investment decision
like that involved in the purchase of the Units and has prior investment
experience, including investments in securities which are non-listed,
unregistered and/or not traded on the New York Stock Exchange, AMEX, the
National Market or SmallCap Market of the National Association of Securities
Dealers, Inc. (“NASD”) Automated Quotation System or any other national stock
exchange; (ii) the investment in the Securities is of a highly speculative
nature and involves a significant degree of risk, that the market price of
the
Common Stock has been and continues to be volatile and that Subscriber has
carefully evaluated the risks of an investment in the Securities; and (iii)
the
Subscriber is able to bear the economic risk of an investment in the Securities
and the potential loss of such investment, which risk the Subscriber hereby
assumes.
2.4 The
Subscriber has received and carefully reviewed this Agreement, the confidential
offering memorandum prepared by the Company and dated June 21, 2005, as may
be
amended or supplemented, including all documents attached thereto or
incorporated by reference therein, including the following documents filed
by
the Company with the Securities and Exchange Commission (the “SEC”, and such
documents, the “SEC Filings”): SEC Form 10-KSB for the year ended December 31,
2004, filed March 31, 2005; SEC Form 10-QSB for the three months ended March
31,
2005, filed May 16, 2005, and SEC Form 8-K filed April 7, 2005; and any future
filings that the Company makes with the SEC under Sections 13(a), 13(c),
14 or
15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
until the earlier of the Closing Date and the Termination Date (the confidential
offering memorandum, including the SEC Filings and all other exhibits and
information incorporated by reference therein is referred to herein as the
“Memorandum”). Any information that the Company subsequently files with the SEC
that is incorporated by reference into any SEC Report will automatically
update
and supersede any previous information that is part of the Memorandum. The
Subscriber further 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, its investment advisor, attorney and/or accountant
has requested or desired to know or which is otherwise relevant to an investment
decision, 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 or its advisors or agents has
requested.
2.5 (a) The
Subscriber has relied solely upon the information provided by the Company
in
making the decision to invest in the Securities. The Subscriber is familiar
with
and understands the terms of the Offering, including the rights to which
the
Subscriber is entitled under this Agreement. In evaluating the suitability
of an
investment in the Company, the Subscriber has not relied upon any representation
or other information (whether oral or written) from the Company, or any agent,
employee or Affiliate of the Company other than as set forth in the Memorandum,
in this Agreement or resulting from the results of the Subscriber’s own
independent investigation. The Subscriber understands and acknowledges that
nothing in this Agreement, the Memorandum or any other materials provided
to the
Subscriber in connection with the subscription for the Units or sale of the
Securities constitutes investment, tax or legal advice. To the extent deemed
necessary or advisable by the Subscriber in its sole discretion, the Subscriber
has retained, at its sole expense, and relied upon appropriate professional
advice regarding the investment, tax and legal merits and consequences of
this
Agreement and its purchase of the Units hereunder.
(b) No
Securities were offered or sold to the Subscriber 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.
2.6 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, has the capacity to protect the Subscriber’s own
interests in connection with the transaction contemplated hereby.
2.7 The
Subscriber understands, acknowledges and agrees that the Offering has not
been
reviewed, recommended or endorsed by the SEC or any state securities regulatory
authority or other governmental body or agency, since the Offering is intended
to be exempt from the registration requirements of Section 5 of the Act pursuant
to Regulation D promulgated under the Act. The Subscriber shall not sell
or
otherwise transfer the Securities unless such transfer is registered under
the
Act or unless an exemption from such registration is available. The Subscriber
understands that if required by the laws or regulations or any applicable
jurisdictions, the Offering contemplated hereby will be submitted to the
appropriate authorities of such state(s) for registration of exemption
therefrom.
2.8 The
Subscriber understands, acknowledges and agrees that the Securities have
not
been registered under the Act in reliance upon a claimed exemption under
the
provisions of the Act which depends, in part, upon the Subscriber’s investment
intention and the truth and accuracy of, and Subscriber’s compliance with, the
representations, warranties, acknowledgments and covenants of Subscriber
set
forth herein. In this connection, the Subscriber hereby represents that the
representations, warranties, acknowledgments and covenants of Subscriber
set
forth herein are true and correct, Subscriber will comply with the covenants
set
forth herein, and the Subscriber is purchasing the Units for the Subscriber’s
own account for investment purposes only and not with a view toward the resale
or distribution to others and has no contract, undertaking, agreement or
other
arrangement, in existence or contemplated, to sell, pledge, assign or otherwise
transfer the Securities to any other Person (as defined in Article 6). The
Subscriber, if an entity, also represents that it was not formed for the
purpose
of purchasing the Units. The Subscriber has no current plans to effect a
“change
of control” of the Company, as such term is understood in Rule 13d of the
Exchange Act.
2.9 The
Subscriber understands that the Securities will not be registered or available
for sale in the public markets except as specifically provided herein, and
Rule
144 promulgated under the Act (“Rule 144”) requires, among other conditions, a
one-year holding period prior to the resale (in limited amounts) of securities
acquired in a non-public offering (and a two-year holding period for unlimited
sales by non-Affiliates of the Company) 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 any of the
Securities under the Act or any state securities or “blue sky” laws or assist
the Subscriber in obtaining an exemption from various registration requirements,
other than as set forth in Article 5 herein. The Subscriber agrees to hold
the
Company and its directors, officers, employees, controlling Persons and agents
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 (i) any misrepresentation made by the Subscriber contained
in
this Agreement (including the Confidential Investor Questionnaire set forth
in
Article 7 hereof and the Registration Questionnaire attached hereto as
Appendix
A
(the
“Registration Questionnaire”), (ii) any sale or distribution by the Subscriber
in violation of the Act or any applicable state securities or “blue sky” laws or
(iii) any untrue statement of a material fact made by the Subscriber and
contained herein (including the Confidential Investor Questionnaire set forth
in
Article 7 hereof and the Registration Questionnaire) or omission of a material
fact asked for by such questionnaires necessary to make such statements made
by
the Subscriber and contained herein (including the Confidential Investor
Questionnaire set forth in Article 7 hereof and the Registration Questionnaire),
in light of the circumstances in which they are made, not misleading, provided,
however, that
the
aggregate amount of such indemnity shall
not
exceed the proceeds received by the Company at the Closing.
2.10 The
Subscriber consents to the placement of a legend on any certificate or other
document evidencing the Securities substantially as set forth below, that
such
Securities 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 the Securities.
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY
STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT AND
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS.
2.11 The
Subscriber agrees to supply the Company, within five (5) days after the
Subscriber receives the request therefor from the Company, with such additional
information concerning the Subscriber as the Company deems necessary or
advisable in order to establish or verify the Subscriber’s representations
contained herein.
2.12 The
address of the Subscriber furnished by Subscriber on the signature page hereof
is the Subscriber’s principal residence if Subscriber is an individual or its
principal business address if it is a corporation or other entity.
2.13 The
Subscriber has full power and authority (corporate or otherwise) to execute,
deliver, and perform this Agreement and to purchase the Units and has taken
all
action necessary to authorize the execution, delivery and performance of
this
Agreement. This Agreement constitutes the legal, valid and binding obligation
of
the Subscriber, enforceable against the Subscriber in accordance with its
terms,
subject to laws of general application relating to bankruptcy, insolvency
and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies, and to limitations of public
policy.
2.14 If
the
Subscriber is a corporation, partnership, limited liability company, trust,
employee benefit plan, individual retirement account, Xxxxx Plan, or other
entity (a) 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 and (b) it is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
2.15 The
Subscriber acknowledges that if he or she is a Registered Representative
of an
NASD member firm, he or she must give such firm the notice required by the
NASD
Rules of Fair Practice, receipt of which must be acknowledged by such firm
in
Section 8.4 below in accordance with such rules.
2.16 The
Subscriber understands, acknowledges and agrees that this subscription may
be
rejected, in whole or in part, by the Company or the Placement Agent, in
each of
their sole and absolute discretion, at any time before any Closing Date
notwithstanding prior receipt by the Subscriber of notice of acceptance of
the
Subscriber’s subscription. The Subscriber hereby authorizes and directs the
Company to return, without interest, any funds for unaccepted subscriptions
to
the same account from which the funds were drawn, including any customer
account
maintained by the Subscriber with the Placement Agent.
2.17 The
Subscriber understands, acknowledges and agrees with the Company that except
as
otherwise set forth herein, the subscription hereunder is irrevocable by
the
Subscriber, that, except as required by law, the Subscriber is not entitled
to
cancel, terminate or revoke this Agreement or any agreements of the Subscriber
hereunder and that this Agreement and such other agreements shall survive
the
death or disability of the Subscriber and shall be binding upon and inure
to the
benefit of the parties and their heirs, executors, administrators, successors,
legal representatives and permitted assigns. If the Subscriber is more than
one
Person, the obligations of the Subscriber hereunder shall be joint and several
and the agreements, representations, warranties and acknowledgments herein
contained shall be deemed to be made by and be binding upon each such Person
and
its heirs, executors, administrators, successors, legal representatives and
permitted assigns.
2.18 The
Subscriber understands, acknowledges and agrees with the Company that, the
Offering is intended to be exempt from registration under the Act by virtue
of
Section 4(2) of the Act and the provisions of Regulation D, and/or the
provisions of Regulation S which is in part dependent upon the truth,
completeness and accuracy of the statements made by the Subscriber.
2.19 The
Subscriber understands, acknowledges and agrees that there can be no assurance
that the Subscriber will be able to sell or dispose of the Securities. It
is
understood than in order not to jeopardize the Offering’s exempt status under
Section 4(2) of the Act and Regulation D, in addition to any other restrictions
on transfer set forth herein or in the Warrants, the Company may, at a minimum,
require any transferee to fulfill the Subscriber suitability requirements
thereunder and make the representations, warranties and covenants of Subscriber
hereunder.
2.20 The
Subscriber represents and warrants that during the period commencing upon
the
date that the Subscriber was first contacted with respect to the Offering
(the
“First Date”) the Subscriber has not, directly or indirectly, through related
parties, Affiliates or otherwise, sold “short” or “short against the box” (as
such terms are generally understood) and until the Registration Statement
(as
defined in Article 6) is declared effective, will not sell "short" or "short
against the box" any equity security of the Company or take any action with
respect to any equity security of the Company which would violate the Act
or the
rules and regulations promulgated thereunder and from the First Date through
the
Closing Date has not and will not take any action the intent or reasonably
foreseeable effect of which is to reduce the trading price of the Common
Stock.
2.21 The
Subscriber understands, acknowledges and agrees that the information contained
in this Agreement, the Memorandum or otherwise made available to the Subscriber
by the Company (collectively, the “Confidential Information”) is to be used
solely for the purpose of evaluating a possible investment in the Securities
and
is confidential and non-public and agrees that all such Confidential Information
shall be kept in confidence by the Subscriber and neither used by the Subscriber
for the Subscriber’s personal benefit (other than in connection with evaluating
a possible investment in the Securities) nor disclosed to any third party
for
any reason and in any manner, notwithstanding that a Subscriber’s subscription
may not be accepted by the Company; provided,
however,
that
this obligation shall not apply to any such Confidential Information that
(i) is
part of the public knowledge or literature and readily accessible at the
date
hereof (except as a result of a breach of this provision by any party) or
(ii)
becomes part of the public knowledge or literature and readily accessible
by
publication (except as a result of a breach of this provision by any
party).
2.22 If
the
Subscriber is purchasing the Units in a fiduciary capacity for another Person,
including without limitation a corporation, partnership, trust or any other
entity, the Subscriber has been duly authorized and empowered to execute
this
Agreement and all other subscription documents, and such other Person fulfills
all the requirements for purchase of the Units as such requirements are set
forth herein, concurs in the purchase of the Units and agrees to be bound
by the
obligations, representations, warranties and covenants contained herein.
Upon
request of the Company, the Subscriber will provide true, complete and correct
copies of all relevant documents creating the Subscriber, authorizing its
investment in the Company and/or evidencing the satisfaction of the
foregoing.
2.23 No
authorization, approval, consent or license of any Person (as defined in
Article
6) is required to be obtained for the purchase of the Units by the Subscriber,
other than as have been obtained and are in full force and effect. The execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, result in any violation of or
constitute a default under any material agreement or other instrument to
which
the Subscriber is a party or by which the Subscriber or any of its properties
are bound, or to the best of the Subscriber’s knowledge, any permit, franchise,
judgment, order, decree, statute, rule or regulation to which the Subscriber
or
any of its businesses or properties is subject.
2.24 The
Subscriber understands, acknowledges and agrees that the representations,
warranties and agreements of the Subscriber contained herein (including the
Confidential Investor Questionnaire set forth in Article 7 hereof), in the
Registration Questionnaire and in any other writing delivered in connection
with
the transactions contemplated hereby shall be true and correct on the date
hereof and as of the Closing Date as if made on and as of such date (except
for
representations, warranties and agreements as of a specific date, which shall
be
true and correct as of such date) and shall survive the execution and delivery
of this Agreement and the purchase of the Units. The Subscriber agrees that
the
Placement Agent shall be entitled to rely on the representations, warranties
and
agreements of the Subscriber contained herein as if such representations,
warranties and agreements were made or provided directly to the Placement
Agent.
2.25 The
Subscriber hereby covenants with the Company not to make any sale of the
Securities under the Registration Statement without effectively causing the
prospectus delivery requirements under the Act to be satisfied, and further
agrees to comply with reasonable requests of the Company or its transfer
agent
to provide additional information and representations concerning such
sale.
2.26 (a)
The
Subscriber agrees, acknowledges and understands that the Placement Agent
is
acting as placement agent for the Units being offered hereby and will be
compensated by the Company for acting in such capacity, including, but not
limited to, by: (i) placement fees in cash equal to up to seven percent (7%)
of
the proceeds received by the Company at the Closing; (ii) reimbursement of
its
reasonable, documented expenses (including reasonable legal fees) incurred
in
connection with the Offering (which reimbursement shall not exceed $75,000);
and
(iii) warrants (the “Placement Warrants”) to purchase a number of shares of
Common Stock (the “Placement Warrant Shares”) equal to 5% of the number of
shares of Common Stock actually sold by the Company in connection with the
Offering (not including shares of Common Stock issuable upon exercise or
conversion of warrants or other securities for which no cash consideration
was
received upon issuance). The Placement Warrants shall have an exercise price
per
share equal to 110% of the Market Price and have a cashless exercise feature.
The Placement Warrants shall have a purchase price equal to $0.02 per Placement
Warrant (payable by the Placement Agent to the Company upon issuance of each
such Placement Warrant) and shall be exercisable for five (5) years from
the
final Closing Date. The Subscriber shall not be entitled to reimbursement
of any
expenses incurred by the Subscriber in connection with the
Offering.
(b) The
Subscriber agrees, acknowledges and understands that the Placement Agent
may
engage other Persons, selected by it in its discretion, who are members of
the
NASD or who are located outside the United States, to assist the Placement
Agent
in connection with this Offering.
3. REPRESENTATIONS
BY AND COVENANTS OF THE COMPANY.
The
Company hereby represents and warrants to the Subscriber as of the date hereof
and the Closing Date that:
3.1 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 currently conducted. The Company is
duly
qualified as a foreign corporation to do business and is in good standing
in
every jurisdiction in which such qualification is necessary, except to the
extent that the failure to be so qualified or in good standing would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the business, operations, conditions (financial or otherwise),
assets or results of operations of the Company and its Subsidiaries (as defined
below) as a whole (a “Material Adverse Effect”).
3.2 Capitalization.
(a) The
authorized capital stock of the Company consists of 150,000,000 shares of
Common
Stock and 8,500,000 shares of undesignated preferred stock. As of June 16,
2005,
there were 40,768,958 shares of Common Stock issued and outstanding, all
of
which are duly authorized, validly issued, fully paid and non-assessable.
In
addition, there are 10,042,634 shares of Common Stock reserved for issuance
pursuant to outstanding options and warrants. There are 716,377 shares of
Series
A preferred stock (the “Series A Preferred Stock”) issued or outstanding, the
terms of which are described in the Memorandum. Upon closing of the Minimum
Offering Amount, the shares of Series A Preferred Stock will be automatically
converted into shares of Common Stock as further described in the Memorandum.
All of the securities issued by the Company have been issued in accordance
with
all applicable federal and state securities laws. Other than as set forth
above,
there are no other options, warrants, calls, rights, commitments or agreements
of any character to which the Company is a party or by which the Company
is
bound or obligating the Company to issue, deliver, sell, repurchase or redeem,
or cause to be issued, delivered, sold, repurchased or redeemed, any shares
of
the capital stock of the Company or obligating the Company to grant, extend
or
enter into any such option, warrant, call, right, commitment or agreement.
Except as set forth in Schedule
3.2
hereto
there are no preemptive rights or rights of first refusal or similar rights
which are binding on the Company permitting any Person to subscribe for or
purchase from the Company shares of its capital stock pursuant to any provision
of law, the Company’s Certificate of Incorporation as in effect on the date
hereof (the “Certificate of Incorporation”) or the Company’s By-laws, as in
effect on the date hereof (the “By-laws”) or by agreement or otherwise. Except
as set forth in Schedule
3.2
hereto
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities as described
in this Agreement. The Company has made available to the Placement Agent
true,
correct and complete copies of the Company’s Certificate of Incorporation and
By-laws.
(b) The
Securities have been duly authorized and, when issued, delivered and paid
for in
the manner set forth in this Agreement, will be duly authorized, validly
issued,
fully paid and non-assessable. Except for the selling stockholders listed
in the
Company’s currently effective registration statements on Form SB-2 (SEC File No.
333-111897 and Forms S-8 (SEC File Nos. 333-112888 and 333-112889), no
stockholder of the Company has any right to request or require the Company
to
register the sale of any shares owned by such stockholder under the Act.
No
further approval or authority of the stockholders or the Board of Directors
of
the Company will be required for the issuance and sale of the Securities
to be
sold by the Company as contemplated herein.
3.3 Authorization;
Enforceability.
The
Company has all power and authority (corporate or otherwise) to enter into
this
Agreement and to consummate the transactions contemplated hereby. Assuming
receipt of the consents, approvals, authorizations or other orders set forth
in
Section 4.1 hereof, all corporate action on the part of the Company, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement by the Company, the authorization, sale,
issuance and delivery of the Securities contemplated herein and the performance
of the Company’s obligations hereunder has been taken. This Agreement has been
duly executed and delivered by the Company and constitutes a legal, valid
and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and to limitations
of public policy. Except as set forth in Schedule
3.3,
the
issuance and sale of the Securities contemplated hereby will not give rise
to
any preemptive rights or rights of first refusal on behalf of any Person
pursuant to any agreement, contract or understanding to which the Company
is a
party.
3.4 No
Conflict; Governmental and Other Consents.
(a)
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 or any Subsidiary
thereof 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 or any Subsidiary thereof 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
or
any Subsidiary thereof where such violation, breach, default or imposition
would
reasonably be likely to result in a Material Adverse Effect.
(b) Other
than the consents, approvals, authorizations or other orders set forth in
Section 4.1 hereof, no material consent, approval, authorization or other
order
of any governmental authority or other third-party is required to be obtained
by
the Company or any Subsidiary thereof in connection with the authorization,
execution and delivery of this Agreement or with the authorization, issue
and
sale of the Securities, except such filings as may be required to be made
with
the SEC, the NASD, AMEX and with any state or foreign blue sky or securities
regulatory authority.
3.5 Litigation.
There
is no pending, or to the knowledge of the Company, threatened, legal or
governmental proceedings to which the Company is a party.
3.6 Accuracy
of Public Reports.
All
reports required to be filed by the Company within two years prior to the
date
of this Agreement under the Exchange Act (the “Public Reports”) 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 the rules and regulations
thereunder, except to the extent updated or superseded by any subsequently
filed
report, were complete and correct in all material respects as of the dates
at
which the information was furnished, and such reports did not contain (as
of
their respective dates) any untrue statements of a material fact nor omitted
to
state any material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading, or if amended, as so amended.
3.7 Investment
Company.
The
Company is not an “investment company” within the meaning of such term under the
Investment Company Act of 1940, as amended, and the rules and regulations
of the
SEC thereunder.
3.8
Proprietary
Rights.
To the
Company’s knowledge, the Company owns or possesses adequate and enforceable
rights to use all patents, patent applications, trademarks, trade names,
corporate names, copyrights, trade secrets, licenses, inventions, formulations,
technology and know-how and other intangible property used in the conduct
of its
business as described in the Memorandum (the “Proprietary Rights”). Except as
described in the Memorandum, to the Company’s knowledge, the Company has not
received any notice of, and there are no facts known to the Company that
reasonably indicate the existence of (i) any infringement or misappropriation
by
any third party of any of the Proprietary Rights or (ii) any claim by a third
party contesting the validity of any of the Proprietary Rights. The Company
has
not received any notice of any infringement, misappropriation or violation
by
the Company or any of its employees of any Proprietary Rights of third
parties
3.9 Taxes.
The
Company has filed all Federal, state, local and foreign tax returns that
are
required to have been filed by it and all such returns are true and correct
in
all material respects. The Company has paid all taxes pursuant to such returns
or pursuant to any assessments received by it or which they are obligated
to
withhold from amounts owing to any employee, creditor or third party. Except
as
set forth on Schedule
3.9
hereto,
the tax returns of the Company have never been audited by any state, local
or
Federal authorities.
3.10 No
Integration.
To the
Company’s knowledge, there exists no fact or set of facts which may cause the
Offering to be integrated with any other offering of the Company’s securities or
which would cause this Offering to lose its exemption under Regulation D.
3.11 Use
of
Proceeds.
The
Company intends to use the net proceeds in the Offering as described in the
Memorandum. Except as described in the Memorandum, the Company shall not
use any
proceeds it receives in the Offering for the satisfaction of the Company’s debt
(other than such debt it has incurred in the ordinary course of business).
3.12 Labor
Relations.
No
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company or any Subsidiary which
could reasonably be expected to result in a Material Adverse
Effect.
3.13. Compliance.
Neither
the Company nor any Subsidiary (i) is in default under or in violation of
(and
no event has occurred that has not been waived that, with notice or lapse
of
time or both, would result in a default by the Company or any Subsidiary
under),
nor has the Company or any Subsidiary received notice of a claim that it
is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or
by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of
any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
except in each case as could not have a Material Adverse Effect.
3.14 Regulatory
Permits.
The
Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct its business as described in the Memorandum,
except where the failure to possess such permits would not, individually
or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect (“Material
Permits”),
and
the Company has not received any notice of proceedings relating to the
revocation or modification of any Material Permit.
3.15 Title
to Assets.
The
Company and the Subsidiaries have good and marketable title in all real and
personal property owned by them that is material to the business of the Company
and the Subsidiaries, in each case free and clear of any liens, encumbrances
or
other restrictions. Any real property and facilities held under lease by
the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in
compliance.
3.16 Insurance.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries
are
engaged, including directors and officers insurance.
3.17 Transactions
with Affiliates and Employees.
Except
as set forth in the Memorandum, none of the officers or directors of the
Company
and, to the knowledge of the Company, none of the employees of the Company
is
presently a party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to
or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or,
to the
knowledge of the Company, any entity in which any officer, director, or any
such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $50,000 other than (i) for payment of
salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) for other employee benefits,
including stock option agreements under any stock option plan of the
Company.
3.18 Internal
Accounting Controls.
Each of
the Company and the Subsidiaries is in material compliance with all provisions
of the Sarbanes Oxley Act of 2002 which are presently applicable to it.
3.19 Application
of Takeover Protections.
The
Company and its Board of Directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Subscribers as a
result
of the Subscribers and the Company fulfilling their obligations or exercising
their rights under this Agreement, including without limitation as a result
of
the Company’s issuance of the Securities and the Subscriber’s ownership of the
Securities.
3.20 No
General Solicitation.
Neither
the Company nor any Person acting on behalf of the Company has offered or
sold
any of the Units by any form of general solicitation or general advertising.
The
Company has offered the Units for sale only to each Subscriber in the Offering
and certain other “accredited investors” within the meaning of Rule 501 under
the Act.
3.21 Foreign
Corrupt Practices.
Neither
the Company, nor to the knowledge of the Company, any agent or other Person
acting on behalf of the Company, has (i) directly or indirectly, used any
corrupt funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees
or to
any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or made
by
any Person acting on its behalf of which the Company is aware) which is in
violation of law, or (iv) violated in any material respect any provision
of the
Foreign Corrupt Practices Act of 1977, as amended.
3.22 Accountants.
The
Company’s accountants are set forth in the Public Reports. To the Company’s
knowledge, such accountants, who the Company expects will express their opinion
with respect to the financial statements to be included in the Company’s
upcoming annual report, are a registered public accounting firm as required
by
the Act.
3.23 Indebtedness.
As of
the date of the Memorandum, the Company has not materially increased its
indebtedness, except debt incurred in the ordinary course of
business.
3.24 Additional
Covenants of the Company.
Until
the earlier of the Closing Date and the Termination Date (as defined below),
the
Company will not issue or sell any securities to any party, other than (i)
the
issuances and sales contemplated by this Agreement; and (ii) pursuant to
the
terms of previously granted employee stock options and previously issued
warrants, options and convertible securities.
3.25 Environmental
Laws.
The Company (i) is in compliance with any and all Environmental Laws (as
hereinafter defined), (ii) has received all permits, licenses or other approvals
required of it under applicable Environmental Laws to conduct its business
and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval where, in each of the foregoing clauses (i), (ii) and
(iii),
the failure to so comply would reasonably be expected to have, individually
or
in the aggregate, a Material Adverse Effect. The term “Environmental Laws”
means all federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous
Materials”)
into
the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands
or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.
3.26 Employee
Relations; Employee Benefit Plans.
The
Company is not a party to any collective bargaining agreement or employs
any
member of a union. The Company believes that its relations with its
employees are good. No executive officer of the Company (as defined
in
Rule 501(f) of the Act) has notified the Company that such officer intends
to
leave the Company or otherwise terminate such officer's employment with the
Company. The Company is in compliance with all federal, state, local and
foreign
laws and regulations respecting employment and employment practices, terms
and
conditions of employment and wages and hours, except where failure to be
in
compliance would not, either individually or in the aggregate, reasonably
be
expected to result in a Material Adverse Effect. Except as disclosed
in
the Memorandum, the Company does not maintain any compensation plan, agreement,
arrangement or commitment (including, but not limited to, “employee benefit
plans”, as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”)) for any present or former employees, officers
or directors of the Company or with respect to which the Company has liability
or makes or has an obligation to make contributions, other than any such
plans,
agreements, arrangements or commitments made generally available to the
Company’s employees.
4. CONDITIONS
TO OBLIGATIONS OF EACH PARTY.
4.1 Conditions
to Obligations of the Company.
The
Company’s obligation to complete the sale of the Units and the issuance and
deliver the Securities to the Subscriber at the Closing is subject to the
fulfillment on or prior to the Closing of the following conditions, which
conditions may be waived at the option of the Company to the extent permitted
by
law:
(a) Representations
and Warranties Correct.
The
representations and warranties made by the Subscriber in Article 2 hereof
shall
be true and correct when made, and shall be true and correct on and as of
the
Closing Date (except for any representation or warranty that speaks as of
a
specific date, which shall be true and correct as of such date).
(b) Covenants.
All
covenants, agreements and conditions contained in this Agreement to be performed
by the Subscriber on or prior to such sale and issuance shall have been
performed or complied with in all material respects.
(c) 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.
(d) No
Law
Prohibiting or Restricting Such Sale.
There
shall not be in effect any law, rule or regulation prohibiting or restricting
the issuance and sale of the Units or requiring any consent or approval of
any
Person which shall not have been obtained to sell the Units or issue the
Securities, or in either case to otherwise consummate the transactions
contemplated hereby (except as otherwise provided in this
Agreement).
(e) Payment
of Consideration.
The
Company shall have received the full amount of the Aggregate Purchase Price
for
the Units being purchased hereunder at the Closing.
(f) Questionnaires.
The
Subscriber shall have completed, executed and delivered to the Company the
Confidential Investor Questionnaire and the Registration Questionnaire, which
questionnaires shall be true and correct as of the Closing and shall be
satisfactory to the Placement Agent and the Company, each in their sole
discretion.
(g) Minimum
Offering Amount.
The
Company shall have received duly executed subscriptions and corresponding
readily available funds in the Escrow Account from Subscribers equal to or
in
excess of the Minimum Offering Amount.
4.2 The
Subscriber’s obligation to purchase the Units at the Closing is subject to the
fulfillment on or prior to the Closing 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 Article 3 hereof shall
be
true and correct when made, and shall be true and correct on and as of the
Closing Date (except for any representation or warranty that speaks as of
a
specific date, which shall be true and correct as of such 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) 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.
(d) No
Law
Prohibiting or Restricting Such Sale.
There
shall not be in effect any law, rule or regulation prohibiting or restricting
the issuance and sale of the Units or requiring any consent or approval of
any
Person which shall not have been obtained to issue or sell the Units, or
in
either case to otherwise consummate the transactions contemplated hereby
(except
as otherwise provided in this Agreement).
(e) Minimum
Offering Amount.
The
Company shall have received duly executed subscriptions and corresponding
readily available funds in the Escrow Account from Subscribers equal to or
in
excess of the Minimum Offering Amount.
5. 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 (as defined below), 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, New York.
(c) “Holders”
shall mean the Subscribers and any Person holding Registrable Securities
or any
Person to whom the rights under Article 6 have been transferred in accordance
with Section 5.9 hereof.
(d) “Person”
shall mean any person, individual, corporation, limited liability company,
partnership, 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 Act,
and
the declaration or ordering of the effectiveness of such registration statement
under the Act.
(f) “Registrable
Securities” shall mean the Shares, the Warrant Shares (as defined below) and the
Placement Warrant Shares and any shares of Common Stock issued as a dividend
or
distribution with respect to or in replacement of the Common Stock issued,
directly or indirectly, in connection with this Offering; provided,
however,
that
securities shall only be treated as Registrable Securities if and only for
so
long as they (i) have not been sold (A) pursuant to a registration statement;
(B) to or through a broker, dealer or underwriter in a public distribution
or a
public securities transaction; and/or (C) in a transaction exempt from the
registration and prospectus delivery requirements of the Act under Section
4(1)
thereof so that all transfer restrictions and restrictive legends with respect
thereto, if any, are removed upon the consummation of such sale; (ii) are
not
held by a Holder or a permitted transferee; or (iii) are not eligible for
sale
pursuant to Rule 144(k) (or any successor thereto) under the Act. For purposes
of this Agreement, “Warrant Shares” shall mean the shares of Common Stock
issuable upon exercise of the Warrants included in the Units.
(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) “Selling
Expenses” shall mean all underwriting discounts and selling commissions
applicable to the sale of Registrable Securities and, except to the extent
set
forth in the definition of Registration Expenses, all fees and expenses of
legal
counsel for any Holder.
(i) “Subsidiary”
shall mean, with respect to any Person, any other Person of which more than
fifty percent (50%) of the shares of stock or other interests entitled to
vote
in the election of directors or comparable Persons performing similar functions
(excluding shares or other interests entitled to vote only upon the failure
to
pay dividends thereon or other contingencies) are at the time owned or
controlled directly or indirectly through one or more Subsidiaries, by such
Person.
5.2 (a)
Subject
to the terms, conditions and limitations set forth herein, the Company will
use
its best efforts to (i) file a registration statement with the SEC on the
appropriate form (the “Registration Statement”) within 30 days following the
final
Closing Date
(the
date such Registration Statement is actually filed, the “Filing Date”) to allow
the resale of the Registrable Securities under the Act, and use its best
efforts
to have such Registration Statement declared effective by the SEC prior to
the
date which is 120 days after the Filing Date; and (ii) cause such Registration
Statement to remain effective (the “Registration Period”) until the earlier of
(A) the second anniversary of the Closing Date; (B) the date on which the
Subscriber may sell the Shares and the shares of Common Stock issued upon
exercise of the Warrants then held by the Subscriber pursuant to Rule 144(k)
of
the Act; (C) such time as all Securities held by the Subscriber and registered
under the Registration Statement have been sold (x) pursuant to a registration
statement; (y) to or through a broker, dealer or underwriter in a public
distribution or a public securities transaction; and/or (z) in a transaction
exempt from the registration and prospectus delivery requirements of the
Act
under Section 4(1) thereof so that all transfer restrictions and restrictive
legends with respect thereto, if any, are removed upon the consummation of
such
sale. To the extent permissible, such Registration Statement also shall include,
or subsequently be amended to include, to the extent allowable under the
Act and
the rules promulgated thereunder (including Rule 416 under the Act), such
indeterminate number of additional shares of Common Stock resulting from
stock
splits, stock dividends or similar transactions with respect to the Registrable
Securities.
(b) If:
(i)
the Registration Statement is not filed on or prior to thirty (30) days
following the Closing Date or the Company fails to file with the SEC a request
for acceleration in accordance with Rule 461 promulgated under the Securities
Act, within five (5) trading days after the date that the Company is notified,
in writing, by the SEC that the Registration Statement will not be “reviewed,”
or will not be subject to further review, (ii) after the Registration Statement
is filed with and declared effective by the SEC, such Registration Statement
ceases to be effective as to all the Shares to which it is required to relate
for
more
than an aggregate of 90 days (whether consecutive or non-consecutive) during
any
twelve (12) month period during the Registration Period without
being succeeded within ten (10) trading days by an amendment to such
Registration Statement or by a subsequent Registration Statement filed with
and
declared effective by the Commission, (iii) the Common Stock is not listed
or
quoted, or is suspended from trading on, the Nasdaq National Market or the
facilities of any national securities exchange on which the Common Stock
is then
traded for a period of three (3) trading days (which need not be consecutive
trading days) (any such failure or breach being referred to as an “Default,” and
the date on which such Default occurs being referred to as “Default Date”),
then: (x) on each such Default Date the Company shall pay to each Subscriber
an
amount in cash, as liquidated damages and not as a penalty, equal to 1.5%
of the
Aggregate Purchase price paid by such Subscriber pursuant to this Agreement;
and
(y) on each monthly anniversary of each such Default Date thereof (if the
applicable Default shall not have been cured by such date) until the applicable
Default is cured, the Company shall pay to each Subscriber an amount in cash,
as
liquidated damages and not as a penalty, equal to 1.5% of the Aggregate Purchase
price paid by such Subscriber pursuant to this Agreement. Such payments shall
constitute the Purchaser’s exclusive remedy for such Defaults. If the Company
fails to pay any liquidated damages pursuant to this Section in full within
seven days after the date payable, the Company will pay interest thereon
at a
rate of 8% per annum to the Purchaser, accruing daily from the date such
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full. Notwithstanding anything to the contrary contained herein,
in
no event shall any amount owed by the Company to any Subscriber pursuant
to this
Section 5.2(b) exceed 10% of the Aggregate Purchase Price paid by such
Subscriber.
5.3 All
Registration Expenses incurred in connection with any registration,
qualification, exemption 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.
5.4 In
the
case of the registration, qualification, exemption or compliance effected
by the
Company pursuant to this Agreement, the Company shall, upon reasonable request,
inform each Holder as to the status of such registration, qualification,
exemption and compliance. At its expense the Company shall:
(a) use
best
efforts to keep such registration, and any qualification, exemption or
compliance under state or federal securities laws which the Company determines
to obtain, continuously effective until the termination of the Registration
Period;
(b) advise
the Holders promptly:
(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;
(iv) of
the
receipt by the Company of any notification with respect to the suspension
of the
qualification of the Registrable Securities 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 (which notice will be accompanied by an instruction
to
suspend the use of the prospectus until such changes have been
made);
(c) make
best
efforts 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.
(f) prior
to
any public offering of Registrable Securities pursuant to the Registration
Statement, register or qualify or obtain an exemption 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 reasonably necessary or advisable to enable the offer and
sale in
such jurisdictions of the Registrable Securities covered by such Registration
Statement in the sole discretion of the Company;
(g) to
the
extent permitted under applicable rules and regulations promulgated under
the
Act, 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 five (5) Business Days prior to sales of
Registrable Securities pursuant to such Registration Statement;
(h) 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 promptly 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
(i) use
commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC, and use commercially reasonable efforts to make
generally available to its security 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.
Notwithstanding
the foregoing, it shall be a condition precedent to the obligations of the
Company to take any action pursuant to paragraphs (a) through (i) of this
Section 5.4, that the Holder shall furnish to the Company such information
regarding itself, the Securities to be sold by the Holder and the intended
method of disposition of such Securities as shall be required to effect the
registration of the Securities, all of which information shall be furnished
to
the Company in writing specifically for use in the Registration
Statement.
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.
5.6 (a) To
the
extent permitted by law, the Company shall indemnify each Holder with respect
to
(i) any registration, qualification or compliance has been effected pursuant
to
this Agreement, 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 of a material fact contained
in
the Registration Statement, or any amendment or supplement thereof, incident
to
any such registration, qualification or compliance, or based on any 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, or (ii) any violation by the Company of the Act, the Exchange
Act, or any rule or regulation promulgated under the Act, or the Exchange
Act,
and will reimburse each Holder for reasonable legal and 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 such
claim, loss, damage, liability or action arises out of, relates to or is
based
upon: (i) any untrue statement or omission 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; or (ii) the failure
of
the Holder to comply with the covenants and agreements contained in this
Agreement respecting sales of Registrable Securities. Notwithstanding the
foregoing, the Company will not be liable in any such case where the claim,
loss, damage, liability or actions 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 primarily to any such untrue statement or 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 Commission pursuant to Rule 424(b)
or in
the prospectus subject to completion under Rule 434 promulgated under the
Act,
which together meet the requirements of Section 10(a) of the 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 furnished by the Company to the Holder for delivery
was not
furnished by the Holder to the Person or entity asserting the loss, liability,
claim, damage or at or prior to the time such furnishing is required by the
Act
and the Final Prospectus would have cured the defect giving rise to such
loss,
liability, claim, damage or action.
(b) Absent
any gross negligence or willful misconduct of the Company, 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 Registrable Securities and each Person who controls the
Company within the meaning of Section 15 of the 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
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 Registrable Securities 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. Notwithstanding
the
foregoing, in no event shall a Holder be liable for any such claims, losses,
damages or liabilities in excess of the net proceeds received by such Holder
in
the offering, except in the event of fraud or intentional misrepresentation
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 materially 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 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. The Company and the Holders agree that
it
would not be just and equitable if contribution pursuant to this Section
5.6(d)
was based solely upon the number of entities from whom contribution was
requested or by any other method of allocation which does not take account
of
the equitable considerations referred to above in this Section 5.6(d). The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages and liabilities (or actions in respect thereof) referred
to
above in this Section 5.6(d) shall be deemed to include any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim, subject to the provisions
of Section 5.6(d) hereof. The parties agree that it would not be just and
equitable if contributions pursuant to this Section 5.6 were determined by
pro
rata allocation or by any other method of allocation which does not take
account
of the equitable considerations as set forth in this Section 5.6.
Notwithstanding the provisions of this Section 5.6(d), in no event shall
a
Holder be required to contribute any amount or make any other payments under
this Agreement which in the aggregate exceed the net proceeds received by
such
Holder from the sale of Registrable Securities covered by such Registration
Statement. No Person guilty of fraudulent misrepresentation (within the meaning
of the Act) shall be entitled to contribution from any Person who was not
guilty
of such fraudulent misrepresentation.
5.7 (a) Each
Holder agrees that, upon receipt of any notice from the Company of (i) the
need
for an amendment or supplement to the Registration Statement or the prospectus
forming a part thereof, (ii) that the Board of Directors has determined in
good
faith that offers and sales pursuant to the prospectus forming part of the
Registration Statement 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 the Registration Statement would be premature or
would
have a Material Adverse Effect or (iii) in connection with a primary
underwritten offering of equity securities of the Company, 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 or confirmation
of
the filing of such report with the SEC by the Company, any such prospectus
to be
forwarded promptly to the Holder by 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; provided,
that
the Company, may suspend the disposition of Registrable Securities pursuant
to
the Registration Statement pursuant to clause (ii) above not more than one
time
(not to exceed 30 days) during any three month period, nor more than two
times
(not to exceed 30 days each) in any twelve-month period.
(b) 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 reasonably request
in
writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Article 6, including the
information required by the Registration Questionnaire attached hereto as
Appendix
A.
(c) Each
Holder hereby covenants with the Company not to make any sale of the Registrable
Securities without effectively causing the prospectus delivery requirements
under the Act to be satisfied.
(d) 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 Registrable Securities is accompanied by a certificate
reasonably satisfactory to the Company to the effect that (i) the
Registrable Securities have been sold in accordance with such Registration
Statement and (ii) the requirement of delivering a current prospectus
has
been satisfied.
(e) Each
Holder agrees not to take any action with respect to any distribution deemed
to
be made pursuant to such registration statement which would constitute a
violation of Regulation M under the Exchange Act or any other applicable
rule,
regulation or law.
(f) 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 that at any time permit the sale of the Registrable
Securities to the public without registration, the Company shall use
commercially reasonable efforts to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144 under the 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 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
right
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
in
connection with a transfer by such Holder of its Registrable Securities,
but
only if: (i) such transfer may otherwise be effected in accordance with
applicable securities laws; (ii) such Holder gives prior written notice of
the
proposed transfer to the Company including the name and address of such
transferee and a copy of the transfer documents and agreements; (iii) such
transferee agrees in writing with the Company to be bound by and comply with
the
terms and provisions of this Agreement; (iv) the transferee is an “accredited
investor” as that term is defined in Rule 501 of Regulation D; and (v) 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, the Company may impose stop transfer orders with respect to any such
transfer or attempted transfer, and any such transfer or attempted transfer
shall be null and void.
5.10 The
Company shall use best efforts to cause all Registrable Securities covered
by a
Registration Statement to be listed on each securities exchange, interdealer
quotation system or other market on which similar securities issued by the
Company are then listed.
5.11 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 6 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.
6. MISCELLANEOUS.
6.1 The
Company reserves the right to reject the subscription made hereby in whole
or in
part its sole discretion. Unless terminated earlier in the Placement Agent’s or
the Company’s sole discretion, the Offering will expire on July 31, 2005, (as
such date may be extended by agreement of the Placement and the Company in
their
sole discretion without notice to the Subscribers for an additional 60 days
(the
“Termination Date”), if the conditions to closing set forth in Article 4 have
not been satisfied or waived by such time.
6.2 The
Company’s agreement with each Subscriber is a separate agreement and each sale
of the Units to each Subscriber is a separate sale.
6.3 All
notices, requests and other communications under this Agreement shall be
in
writing, and shall be sufficiently given if delivered to the addressees in
person or by recognized overnight courier, mailed by certified or registered
mail, return receipt requested, or by facsimile or e-mail transmission, as
follows:
If
to the
Company: Manhattan
Pharmaceuticals, Inc.
000
Xxxxxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Facsimile:
(000) 000 0000
Attn:
Chief Executive Officer
Email:
xxxxx@xxxxxxxxxxxxxxx.xxx
With
a
copy to: Xxxxxx
Xxxxxxx Xxxxxx & Brand, LLP
3300 Xxxxx Fargo Center
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxxxxxx X. Xxxxxx, Esq.
Email: xxxxx.xxxxxx@xxxxxx.xxx
If
to a
Subscriber, at such address as such Subscriber shall have provided in writing
to
the Company or such other addresses as such Subscriber furnishes by notice
given
in accordance with this Section 7.1 or such other address as may be designated
in writing hereafter, in the same manner, by such Person.
6.4 Except
as
provided in Section 5.11 above, 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.
6.5 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.
6.6 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
the Units as herein provided; subject, however, to the right hereby reserved
to
the Company to reject this subscription in accordance with Section 2.16,
enter
into the same agreements with other subscribers and to add and/or delete
other
Persons as subscribers.
6.7 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.
6.8 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.
6.9 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.
6.10 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.
6.11 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.
6.12 (a) The
Subscriber agrees not to issue any public statement with respect to the
Subscriber’s 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 Subscriber, except as required by law or court order and to satisfy
its obligations under Article 5.
6.13 The
Subscriber represents and warrants that it has not engaged, consented to
nor
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 (other than the Placement Agent).
The Subscriber hereby agrees to indemnify and hold harmless the Company from
and
against all fees, commissions or other payments owing to any such Person
(other
than the Placement Agent) acting on behalf of the Subscriber
hereunder.
6.14 This
Agreement (including all exhibits, schedules and amendments hereto) (i)
constitutes the entire Agreement and understandings of the parties hereto
and
supersedes all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter hereof and
(ii) is
not intended to confer upon any other Person other than the parties hereto
any
rights or remedies hereunder (except for the holders of Registrable Securities
as set forth in Article 6).
[REMAINDER
OF PAGE LEFT BLANK - ARTICLE 7 FOLLOWS]
7. CONFIDENTIAL
INVESTOR QUESTIONNAIRE.
7.1 The
Subscriber represents and warrants that he, she or it comes within one category
marked below, and that for any category marked, he, she or it 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 except as otherwise required by law or as necessary for inclusion
in the Registration Statement. 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 losses 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 Securities.
|
|
|
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
(c) is a self
directed plan with investment decisions made solely by persons
that are
accredited investors. (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 Securities 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 Securities,
where the
purchase is directed by a “sophisticated investor“ as defined in
Regulation 506(b)(2)(ii) under the Act.
|
|
|
Category
H
|
The
undersigned is an entity (other than a trust) in which all
of the equity
owners 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)
|
|
|
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.
7.2 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 state whether you have you participated in other
private
placements
before:
YES_______ NO_______
(d)
If
your answer to question (d) above was “YES”, please indicate frequency of such
prior participation in private
placements
of:
Public
Private Public
or
Private
Companies Companies
Biopharmaceutical
Companies
Frequently -
-
-
Occasionally
- -
-
Never
(e)
For
individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:
YES_______ NO_______
(f)
For
trust, corporate, partnership and other institutional Subscribers, do you
expect
your total assets to significantly decrease in the foreseeable future:
YES_______ NO_______
(g)
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_______
(h)
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_______
(h) For
all
Subscribers, do you understand that there is no guarantee of financial return
on
this investment, that an investment in the Securities is highly speculative
and
risky and that you run the risk of losing your entire investment?
(i) For
all
Subscribers, will you have sufficient readily available cash to fund your
obligation to purchase Securities at the Closing pursuant to your subscription
if and when the Closing occurs?
YES_______ NO_______
7.3 MANNER
IN WHICH TITLE IS 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
Securities are being subscribed for by an entity, the attached Certificate
of
Signatory must also be completed.
7.4 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:
____________________________
7.5 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 7 and such answers have been provided under the
assumption that the Company will rely on them.
Signature: __________________________________
__________________________________
(If
purchased jointly)
Print: __________________________________
__________________________________
(If
purchased jointly)
Date: __________________________________
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE
PAGE TO FOLLOW]
[Signature
Page]
$_____________________
/ Unit Price = ______________________
Aggregate
Purchase Price Units
Purchased
_______________________
______________________
Signature Signature
(if purchasing jointly)
_______________________
______________________
Name
Typed or
Printed Name
Typed or Printed
_______________________
______________________
Entity
Name Entity
Name
_______________________
______________________
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
Facsimile-Residence Facsimile—Residence
_______________________
______________________
Email
Address
Email
Address
_______________________
______________________
Tax
ID #
or Social Security #
Tax
ID #
or Social Security #
Name
in
which securities should be issued:
Dated:
,
2005
INVESTORS:
PLEASE
COMPLETE THE REGISTRATION QUESTIONNAIRE ATTACHED HERETO AS APPENDIX
A.
This
Subscription Agreement is agreed to and accepted by the Company as of
_____________, 2005.
MANHATTAN
PHARMACEUTICALS, INC.
By:____________________________________
Name:
Xxxx
Xxxx
Title:
President
and Chief Executive Officer
