SUBSCRIPTION AGREEMENT
THIS
SUBSCRIPTION AGREEMENT (this “Agreement”)
made
as of the date set forth on the signature page hereof between ZIOPHARM Oncology,
Inc., a Delaware corporation having a place of business at 1180 Avenue of the
Xxxxxxxx, 00xx
Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000 (the “Company”),
and
the undersigned (the “Subscriber”).
WITNESSETH:
WHEREAS,
the
Company is offering (the “Offering”)
to a
limited number of persons who qualify as “accredited investors” as defined in
Rule 501(a) of Regulation D (“Regulation
D”)
promulgated under the Securities Act of 1933, as amended (the “Securities
Act”),
shares (the “Shares”)
of its
common stock, par value $0.001 per share (“Common
Stock”),
and
warrants to purchase shares of Common Stock (the “Warrants”
and
collectively with the Shares, the “Securities”)
on the
terms and conditions described in this Agreement;
WHEREAS,
the
Offering is contingent upon the Company making sales of a number of shares
of
Common Stock which would provide
the Company with aggregate gross proceeds of at least $15,000,000
(the
“Minimum
Offering Amount”).
The
Company
will sell a maximum number
of
shares of Common Stock which would provide the Company with aggregate gross
proceeds of $37,000,000 (the “Maximum
Offering Amount”).
WHEREAS,
Paramount
BioCapital, Inc. (“Paramount”)
and
Xxxxxxx Securities, Inc. (“Xxxxxxx”),
are
acting as co-exclusive placement agents (the “Placement
Agents”)
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
Securities.
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. |
PURCHASE
AND SALE OF SECURITIES.
|
1.1 Offering.
The
Company is offering the Securities to a limited number of persons who qualify
as
“accredited investors,” as defined in Rule 501(a) of Regulation D of the
Securities Act, on the terms and conditions described in this Agreement. The
Minimum Offering Amount will be offered on an “all or none, best efforts" basis.
Amounts in excess of the Minimum Offering Amount up to the Maximum Offering
Amount will be offered on a “best efforts” basis. The Subscriber understands,
however, that this purchase and sale of the Securities is contingent upon the
Company making aggregate sales equal to or exceeding the Minimum Offering
Amount. The per Share price shall be equal to the lesser of (i) $4.63; and
(ii)
the volume weighted average price of the Company’s Common Stock as reported on
the OTC Bulletin Board® (or, if applicable, the national securities exchange on
which such Common Stock is listed, the Nasdaq National Market, the Nasdaq
Capital Market, or other nationally recognized trading system) for the five
(5)
trading days immediately prior to the applicable Closing Date (as defined below)
(the
“Purchase
Price”).
The
minimum number of Shares purchasable by any single investor shall be equal
to
$100,000 divided by the Purchase Price, subject to the discretion of the Company
and the Placement Agents to accept subscriptions for lesser amounts.
1.2 Closing.
At the
closing (the “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, a number of Shares equal to the quotient resulting from dividing (i)
the total dollar amount of the Subscriber’s subscription as set forth on the
signature page hereof that is accepted by the Company and the Placement Agents
(the “Aggregate
Purchase Price,”
as
further defined below) by (ii) the Purchase Price, rounded to the nearest whole
Share (the “Subscription
Amount”).
In
addition to the Shares, each Subscriber shall receive a number of Warrants
equal
to 30% of the number of Shares purchased in the Offering by such Subscriber,
rounded to the nearest whole share. The Warrants shall be in substantially
the
form attached to the Memorandum (as defined below) and shall have an exercise
price equal to 120% of the Purchase Price (the “Warrant
Exercise Price”)
and
shall be exercisable at any time prior to the fifth anniversary of the date
of
issuance.
1.3 Closing
Mechanics.
The
Closing shall be held at a date and time designated by the Company and the
Placement Agents prior to 11:59 p.m. Eastern Standard Time on April 30, 2006
(subject to extension at the discretion of the Company and the Placement Agents
without notice to the Subscriber of up to 30 days), which date shall be no
later
than five (5) Business Days (as defined in Article 5) after satisfaction or
waiver of the closing conditions set forth in Article 4 hereof. The Closing
shall occur at the offices of Paramount, located at 000 Xxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000. Upon
satisfaction or waiver of all conditions to the Closing, the Placement Agents
and the Company shall instruct an escrow agent (the “Escrow
Agent”)
to
release the proceeds of the Offering to the Company, less fees and expenses
due
to the Placement Agents. 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 (the
“Escrow
Account”)
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
Agents’ 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 Securities and the
Company agrees to sell such number of Securities 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 Agents.
2
US
Bank Trust National Association
ABA
Routing Number: 000000000
US
Bank and Trust Corp. Account Number: 180121167365
For:
Paramount –
ZIOPHARM & Xxxxxxx Escrow
SEI
Number: 791749000
Reference:
[Investor Name]
Attn:
Xxxxxx Xxxxxx
The
Subscriber must complete and return a duly executed, unaltered copy of this
Agreement (including the completed Confidential Investor Questionnaire included
in Article 7 hereof (the “Confidential
Investor Questionnaire”))
to
either Placement Agent at such Placement Agent’s address indicated in the
Memorandum on or before the date indicated to the Subscriber by the Placement
Agents to be eligible to participate in the Offering. The Company and the
Placement Agents 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, and in any event within five business days, 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 relevant Closing Date as follows:
2.1
The
Subscriber understands, acknowledges and agrees that the purchase of the
Securities 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 Securities; (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 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(a) of
Regulation D promulgated under the Securities Act, as indicated by the
Subscriber’s responses to the questions contained in the Confidential Investor
Questionnaire, which are true and correct as of the date hereof and shall be
true and correct as of the relevant 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.
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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 Securities 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 Capital 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, including without limitation those
set
forth in the Memorandum; 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 Company’s
Confidential Offering Memorandum dated March 21, 2006 (together with all
exhibits, appendices, supplements or amendments thereto, the “Memorandum”)
(exhibits and appendices to the Memorandum, including any supplements or
amendments thereto, that have been filed with the Securities and Exchange
Commission (the “SEC”)
are
collectively referred to herein as the “SEC
Filings”).
For
purposes of this representation, the parties agree that any information that
that Company subsequently files 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”)
that
is delivered to the Subscriber prior to the Closing 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 its own due diligence investigations and
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 (as
defined in Article 5) of the Company other than as set forth in the Memorandum,
in this Agreement or resulting from 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 Securities 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 Securities hereunder.
4
(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: (i) 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 (ii) 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 Securities
Act pursuant to Regulation D promulgated under the Securities Act. The
Subscriber shall not sell or otherwise transfer the Securities unless such
transfer is registered under the Securities 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 or exemption therefrom.
2.8
The
Subscriber understands, acknowledges and agrees that the Securities have not
been registered under the Securities Act in reliance upon a claimed exemption
under the provisions of the Securities 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, the Subscriber
will comply with the covenants set forth herein, and the Subscriber is
purchasing the Securities for the Subscriber’s own account for investment
purposes only and not with a present 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 5). The Subscriber, if
an
entity, also represents that it was not formed for the purpose of purchasing
the
Securities. As of the date of this Agreement, 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.
5
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 Securities 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 Securities
Act. The Subscriber understands and hereby acknowledges that the Company is
under no obligation to register any of the Securities under the Securities
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.
2.10
The
Subscriber acknowledges that the certificates representing the Shares, the
Warrants and, upon the exercise of the Warrants, the shares of Common Stock
issuable upon exercise of the Warrants (the “Warrant
Shares”),
be
stamped or otherwise imprinted with a legend substantially in the following
form:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES
NOR
ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT OR
AN
EXEMPTION FROM REGISTRATION, WHICH, IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THIS CORPORATION, IS AVAILABLE.
Certificates
evidencing the Shares and the Warrant Shares shall not be required to contain
such legend or any other legend (i) following any sale of such Shares or Warrant
Shares pursuant to Rule 144, or (ii) if such Shares or Warrant Shares are
eligible for sale under Rule 144(k) or have been sold pursuant to the
Registration Statement (as hereafter defined) and in compliance with the
obligations set forth in Section 5.7, below, or (iii) such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Securities and
Exchange Commission), in each such case of (iii) to the extent reasonably
determined by the Company’s legal counsel. Notwithstanding the foregoing,
following the effective date of the Registration Statement, the legend set
forth
above shall, at the request of the Subscriber, be removed from the certificates
evidencing such Shares and Warrant Shares prior to the resale thereof and the
Company will rescind any stop transfer orders with respect to such shares given
to the Company’s transfer agent, provided that such Subscriber represents and
covenants to the Company in writing (in a form reasonably acceptable to the
Company and its counsel) that (1) the Subscriber will sell such shares only
pursuant to and in the manner contemplated by the Registration Statement,
including the Plan of Distribution section contained therein, and otherwise
in
compliance with the Securities Act, including the prospectus delivery
requirements of such act, (2) the Subscriber will indemnify the Company for
any
damages or losses resulting to the Company for the Subscriber’s breach of its
representation and covenant described in the foregoing clause (1), and (3)
such
other agreements or covenants as the Company or its counsel may reasonably
request. Subject to the foregoing, at such time and to the extent a legend
is no
longer required for the Shares or Warrant Shares, the Company will use its
best
efforts to no later than three (3) trading days following the delivery by a
Subscriber to the Company or the Company’s transfer agent of a legended
certificate representing such Shares or Warrant Shares (together with such
accompanying documentation or representations as reasonably required by counsel
to the Company), to cause the transfer agent of the Company to credit the
account of the holder’s prime broker with Depositary Trust Company System with,
or at the request of such holder, to deliver or cause to be delivered a
certificate representing such Shares or Warrant Shares that is free from the
foregoing legend.
6
2.11
The
Subscriber agrees to supply
the Company, within a reasonable period after receiving a request therefor
from
the Company, with such additional information concerning the Subscriber as
the
Company reasonably 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 the 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 Securities 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 (i) 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 (ii) 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 7.4 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 Agents, 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 Agents.
7
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 or as otherwise set forth herein,
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 Securities Act
by
virtue of Section 4(2) of the Securities Act and the provisions of Regulation
D,
and/or the provisions of Regulation S which are 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 that in order not to jeopardize the Offering’s exempt status under
Section 4(2) of the Securities 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
(a)
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 from the First Date through the relevant Closing
Date
or termination of this Agreement has not and will not take any action the intent
of which is to reduce the trading price of the Common Stock. Notwithstanding
the
foregoing, in the case of a Subscriber that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such
Subscriber’s assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions
of
such Subscriber’s assets, the representation set forth above shall only apply
with respect to the portion of assets managed by the portfolio manager that
made
the investment decision to purchase the securities covered by this Agreement.
8
(b)
If
the Subscriber has previously entered into a subscription agreement with
ZIOPHARM, Inc., the Company’s predecessor, governing ZIOPHARM, Inc.’s offering
of Series A Convertible Preferred Stock (the “Series
A Agreement”),
which
Series A Agreement prohibits the Subscriber from directly or indirectly, through
related parties, affiliates or otherwise, selling “short” or “short against the
box” (as those terms are generally understood) any equity security of the
Company during the period in which the Subscriber holds any Securities or
Registrable Securities (each as defined in the Series A Agreement), then,
subject to compliance with applicable securities laws, the Company agrees that
nothing contained in the Series A Agreement, including Section 1.18 thereof,
shall prohibit the Subscriber from directly or indirectly, through related
parties, affiliates or otherwise, selling “short” or “short against the box” (as
those terms are generally understood) equity securities of the Company to the
extent that the Subscriber’s “short” position does not exceed the sum of the
number of Shares and Warrant Shares then held by the Subscriber.
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), (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),
or
(iii) is required to be disclosed by the Subscriber pursuant to applicable
law
or legal process.
2.22
If
the
Subscriber is purchasing the Securities 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 Securities as such
requirements are set forth herein, concurs in the purchase of the Securities
and
agrees to be bound by the obligations, representations, warranties and covenants
contained herein. The Subscriber will provide true, complete and correct copies
of all organizational documents of the Subscriber reasonably requested by the
Company, the Placement Agents or their respective legal counsel 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 is required to be
obtained for the purchase of the Securities
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.
9
2.24
The
Subscriber understands, acknowledges and agrees that the representations,
warranties and agreements of the Subscriber contained herein (including the
Confidential Investor Questionnaire), in the Registration Questionnaire attached
hereto as Appendix
A
(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 relevant
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 Securities. The Subscriber agrees that the Placement
Agents 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
Agents.
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 Securities Act to be satisfied or,
if
relying on Rule 172 of the Securities Act, without confirming that the
Subscriber is exempt from such prospectus delivery requirements in reliance
on
Rule 172, and further agrees to comply with reasonable requests of the Company
or its transfer agent to provide all necessary additional information and
representations concerning such sale.
2.26
(a)
The
Subscriber agrees, acknowledges and understands that the Placement Agents are
acting as co-exclusive placement agent for the Securities 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 each Closing; and (ii) warrants
(the “Placement
Warrants”)
to
purchase a number of shares of Common Stock (the “Placement
Warrant Shares”)
equal
to ten percent (10%) of the number of Shares 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); and (iii) reimbursement of its
reasonable, documented expenses (including reasonable legal fees) incurred
in
connection with the Offering (which reimbursement shall not exceed $100,000
in
the aggregate). The Placement Warrants shall have an exercise price per share
equal to 110% of the Purchase Price per Share. 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 Paramount 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 Agents in
connection with this Offering.
10
| 3. |
REPRESENTATIONS
BY AND COVENANTS OF THE COMPANY.
|
The
Company hereby represents and warrants to, and covenants with, the Subscriber
as
of the date hereof and each 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 its jurisdiction of organization 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, either a
material adverse effect on the business, operations, conditions (financial
or
otherwise), assets or results of operations of the Company as a whole, or
prevent the Company from consummating the Offering and the other transactions
contemplated by this Agreement (a “Material
Adverse Effect”).
3.2 Capitalization.
(a) The
authorized capital stock of the Company consists of 280,000,000 shares of
capital stock. As of the date of the Memorandum, there were 7,272,992 shares
of
Common Stock issued and outstanding, all of which are duly authorized, validly
issued, fully paid and non-assessable. In addition, there are 1,576,980 shares
of Common Stock reserved for issuance pursuant to outstanding options and
warrants. 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. 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
pursuant to any agreement, contract or understanding to which the Company is
a
party. 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 does not own, directly or indirectly,
any stock, partnership interest, joint venture interest or any other equity
interest in, or security issued by, any Person.
(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 subscribers in the Offering and
selling stockholders listed in the Company’s currently effective registration
statements on Form SB-2 (SEC File Nos. 333-129020 and 333-129680), 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 Securities
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.
11
3.3
Authorization;
Enforceability.
The
Company has full power and authority (corporate or otherwise) to enter into
this
Agreement and to consummate the transactions contemplated hereby. 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 and the Warrants have been duly executed and
delivered by the Company and constitute a legal, valid and binding obligation
of
the Company, enforceable against the Company in accordance with their respective
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.
3.4
No
Conflict; Governmental and Other Consents.
(a)
The
execution and delivery by the Company of this Agreement and the Warrants and
the
consummation of the transactions contemplated hereby and thereby will not result
in the violation of any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority to or by which the
Company is bound, or of any provision of the Certificate of Incorporation or
By-Laws of the Company, and will not conflict with, or result in a breach or
violation of, any of the terms or provisions of, or constitute (with due notice
or lapse of time or both) a default under, any lease, loan agreement, mortgage,
security agreement, trust indenture or other agreement or instrument to which
the Company is a party or by which it is bound or to which any of its properties
or assets is subject, nor result in the creation or imposition of any lien
upon
any of the properties or assets of the Company where such violation, breach,
default or imposition would reasonably be likely to result in a Material Adverse
Effect.
(b) No
material consent, approval, authorization or other order of any governmental
authority or other third-party is required to be obtained by the Company 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 and with any state or
foreign blue sky or securities regulatory authority, which will be timely made
by the Company.
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 which is reasonably
expected to result in a Material Adverse Effect.
3.6 Accuracy
of Public Reports.
All
reports required to be filed by the Company within three years prior to the
date
of this Agreement under the Exchange Act (collectively, 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. The financial statements of the
Company included in the Public Reports complied in all material respects with
applicable accounting requirements and the rules and regulations of applicable
securities laws with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in
the
case of unaudited statements, to normal, immaterial, year-end audit
adjustments.
12
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 presently conducted and described in the Memorandum (the
“Proprietary
Rights”).
Except as described in the Memorandum, 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 and there are no facts known to the Company that indicate any
infringement, misappropriation or violation by the Company or any of its
employees of any Proprietary Rights of third parties. To the Company’s
knowledge, all Proprietary Rights used by the Company are
enforceable.
3.9
Taxes.
The
Company has timely filed (subject to available extensions) 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 it is obligated to withhold from amounts owing to any employee,
creditor or third party. The tax returns of the Company have never been audited
by any state, local or federal authorities. The Company has no knowledge of
a
material tax deficiency that has been asserted or threatened by the
Company.
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 trade debt it has incurred in the ordinary course of business).
13
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 which could reasonably
be
expected to result in a Material Adverse Effect.
3.13.
Compliance.
The
Company (i) is not 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 under), nor has the Company 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 not in violation of
any
order of any court, arbitrator or governmental body, or (iii) is not or has
not
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 possesses 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 has good and marketable title to all real and personal property owned
by
them that is material to the business of the Company, in each case free and
clear of any liens, encumbrances or other restrictions. Any real property and
facilities held under lease by the Company is held by it under valid, subsisting
and enforceable leases with which the Company are in compliance.
3.16
Insurance.
The
Company is 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 is 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 (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.
14
3.18
Xxxxxxxx-Xxxxx;
Internal Controls.
Except
as expressly set forth in the Memorandum and the Public Reports, the Company
is
in material compliance with all provisions of the Xxxxxxxx-Xxxxx Act of 2002
which are applicable to it as of each Closing Date. The Company has established
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and l5d-15(e)) for the Company and designed such disclosure controls and
procedures to ensure that information required to be disclosed by the Company
in
its periodic reports under the Exchange Act is accumulated and communicated
to
the Company’s management, including the Company’s certifying officers, as
appropriate to allow timely decisions regarding required disclosure. The
Company’s management has evaluated, under the supervision and with the
participation of the Company’s Chief Executive Officer and Treasurer, the
effectiveness of the Company’s disclosure controls and procedures as of the end
of the Company’s last fiscal quarter with respect to which the Company has
filed, or was required to have filed, as of the date hereof, its periodic report
under the Exchange Act (such date, the “Evaluation
Date”).
The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the Company’s Chief Executive Officer and Treasurer about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Except as set forth in the Memorandum
and
the Public Reports, since the Evaluation Date, there have been no significant
changes in the Company’s internal controls (as such term is defined in Item
307(b) of Regulation S-K under the Exchange Act) or, to the Company’s knowledge,
in other factors that could significantly affect the Company’s internal
controls. The Company maintains and will continue to maintain a system of
accounting established and administered in accordance with GAAP and the
applicable requirements of the Exchange Act.
3.19
Application
of Takeover Protections.
The
Company and its Board of Directors have taken, or will take prior to the initial
Closing, all action, if any, necessary 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 otherwise is or would become applicable to the
consummation of the transactions contemplated by this Agreement, including
without limitation 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 Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only to each
Subscriber in the Offering and certain other “accredited investors” within the
meaning of Rule 501(a) under the Securities Act.
15
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. Neither the issuance of
the
Shares and Warrants to the Subscriber, nor the use of the respective proceeds
thereof, shall cause the Subscribers to violate the U.S. Bank Secrecy Act,
as
amended, and any applicable regulations thereunder or any of the sanctions
programs administered by the U.S. Department of the Treasury’s Office of Foreign
Assets Control (“OFAC”)
of the
United States Department of Treasury, any regulations promulgated thereunder
by
OFAC or under any affiliated or successor governmental or quasi-governmental
office, bureau or agency and any enabling legislation or executive order
relating thereto. Without limiting the foregoing, the Company (i) is not a
person whose property or interests in property are blocked or subject to
blocking pursuant to Section 1 of Executive Order 13224 of September 23, 200l
Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten
to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) does not
engage in any dealings or transactions prohibited by Section 2 of such executive
order, or is otherwise associated with any such person in any manner violative
of Section 2, or (iii) is not a person on the list of Specially Designated
Nationals and Blocked Persons or subject to the limitations or prohibitions
under any other OFAC regulation or executive order. The Company is in
compliance, in all material respects, with the Uniting and Strengthening of
America by Providing the Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001.
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 Securities Act. There are no disagreements of any kind presently existing,
or currently reasonably anticipated by the Company to arise, between the Company
and the accountants formerly or presently employed by the Company that would
cause the Company to be required to file a Current Report on Form 8-K under
Items 4.01 or 4.02.
3.23 Indebtedness.
The
Company has not materially increased its indebtedness from that described in
the
Memorandum, except in the ordinary course of business.
3.24 Additional
Covenants of the Company.
(a)
Until the earlier of the final 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; (ii) pursuant
to the terms of previously granted employee stock options and previously issued
warrants, options and convertible securities; and (iii) additional issuances
of
equity incentives that are currently reserved for issuance under the Company’s
2003 Stock Option Plan or are reserved in the future based on any amendment
to
the 2003 Stock Option Plan that has been approved by the Company’s
stockholders.
16
(b)
So
long
as the Subscriber continues to hold Shares or Warrant Shares, the Company
covenants and agrees that neither it nor any other Person acting on its behalf
will provide the Subscriber or, the Subscriber’s agents or counsel on the
Subscriber’s behalf, with information that the Company believes constitutes
material non-public information at the time it is provided, unless prior thereto
the Subscriber shall have entered into an agreement regarding the
confidentiality and use of such information. The Company understands and
acknowledges that the Subscriber will rely on the foregoing covenant in
effecting transactions in securities of the Company.
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) is 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 and does not
employ any member of a union. The Company believes that its relations with
its employees are satisfactory. No executive officer of the Company (as
defined in Rule 501(f) of the Securities 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 or benefit 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.
17
3.27 Form
of Subscription Agreement.
Each
Subscriber purchasing Shares and Warrants in the Offering has or will execute
a
Subscription Agreement substantially similar to this Agreement;
provided, however,
that
Warrants to be issued to certain Subscribers may contain, at the request of
such
Subscribers, a provision limiting the number of shares of Common Stock issuable
upon exercise of such Warrants to prevent such Subscribers from acquiring more
than a specific percentage (e.g., 4.99% or 9.99%) of the Company’s Common Stock
outstanding immediately after giving effect to such exercise.
3.28 No
Material Adverse Change.
Since
the date of the latest audited financial statements included within the current
or periodic reports of the Company filed with the SEC, the “Securities
s Law Reports”),
except as specifically disclosed in the Securities Law Reports or the
Memorandum: (i) there has been no event, occurrence or development that has
had
a Material Adverse Effect; (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or required to be disclosed in filings made with
the
regulatory authorities; (iii) the Company has not altered its method of
accounting; (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholder or purchased, redeemed
or made any agreements to purchase or redeem any shares of its capital stock;
and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company equity incentive
plans. The Company does not have pending before any regulatory authorities
any
request for confidential treatment of information.
3.29 Disclosure.
All
disclosure provided to the Subscriber regarding the Company, its business and
the transactions contemplated hereby, or furnished by or on behalf of the
Company with respect to the representations and warranties made herein, are
true
and correct in all material respects with respect to such representations and
warranties and do not contain any untrue statement of a material fact or omit
to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, and when taken as
a
whole, not misleading. The Company acknowledges and agrees that the Subscriber
makes no representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this
Agreement.
| 4. |
CONDITIONS
TO OBLIGATIONS OF EACH PARTY.
|
4.1
Conditions
to Obligations of the Company.
The
Company’s obligation to complete the sale and issuance of the Securities and
deliver the Shares and Warrants to the Subscriber at a Closing is subject to
the
fulfillment on or prior to such 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 as if made 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).
18
(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 Securities or requiring any consent or approval
of
any Person which shall not have been obtained to issue or sell 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 Securities being purchased hereunder at such 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 such Closing and shall be
satisfactory to the Placement Agents 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 concurrently with this Closing from Subscribers
executing Subscription Agreements substantially similar to this Agreement
(except as otherwise contemplated by Section 3.27) equal to or in excess of
the
Minimum Offering Amount.
4.2 The
Subscriber’s obligation to purchase the Securities at a Closing is subject to
the fulfillment on or prior to such 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.
19
(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 Securities or requiring any consent or approval
of
any Person which shall not have been obtained to issue or sell the Securities,
or in either case to otherwise consummate the transactions contemplated hereby
(except as otherwise provided in this Agreement).
(e) Minimum
Offering.
The
Company shall have received duly executed subscriptions and corresponding
readily available funds concurrently with this Closing from Subscribers
executing Subscription Agreements substantially similar to this Agreement
(except as otherwise contemplated by Section 3.27) equal to or in excess of
the
Minimum Offering Amount.
(f) Legal
Opinion.
The
Placement Agent shall have received, on behalf of the Subscribers, an opinion
of
counsel to the Company, in substantially the form attached hereto as
Appendix
B.
| 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 5 have been transferred in accordance with
Section 5.10 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 Securities Act, and the declaration or ordering of the
effectiveness of such registration statement under the Securities
Act.
20
(f) “Registrable
Securities”
shall
mean the Shares, the Warrant Shares 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
such securities shall only be treated as Registrable Securities if and only
for
so long as (i) they have not been sold (A) pursuant to a registration statement;
and/or (B) in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof, including without
limitation pursuant to Rule 144 (or any successor thereto) under the Securities
Act, so that all transfer restrictions and restrictive legends with respect
thereto, if any, are removed upon the consummation of such sale; (ii) they
are
held by a Holder or a permitted transferee; or (iii) all such securities held
by
a Holder (or permitted transferee) may not be sold by such Holder (or permitted
transferee) without regard to volume limitations pursuant to Rule 144(k) (or
any
successor thereto) under the Securities Act.
(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, if any, and, except to the extent set forth in the
definition of Registration Expenses, all fees and expenses of legal counsel
for
any Holder.
5.2 (a)
Subject to the terms, conditions and limitations set forth herein, the Company
will use its best efforts to (a) file a registration statement with the SEC
on
the
appropriate form (the
“Registration
Statement”)
within
30 days following the Closing Date (the end of such 30-day period, the
“Outside
Filing Date”;
and
the date such Registration Statement is filed, the “Filing
Date”)
to
allow the resale of the Registrable Securities under the Securities Act, and
use
its reasonable commercial efforts to have such Registration Statement declared
effective by the SEC prior to the date which is 120 days after the Closing
Date
(the “Registration
Effective Date”);
and
(b) use its reasonable commercial efforts to cause such Registration Statement
to remain effective (the “Registration
Period”)
until
the earliest of (i) the date on which the Subscriber may sell all of the Shares
and the Warrant Shares then held by the Subscriber pursuant to Rule 144(k)
of
the Securities Act without regard to volume restrictions; and (ii) such time
as
all Securities held by the Subscriber and registered under the Registration
Statement have been sold (A) pursuant to a registration statement; and/or (B)
in
a transaction exempt from the registration and prospectus delivery requirements
of the Securities Act under Section 4(1) thereof, including without limitation
pursuant to Rule 144 (or any successor thereto) under the Securities Act, 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 Securities Act and the rules
promulgated thereunder (including Rule 416 under the Securities 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.
21
(b) In
the
event the Company has not filed the Registration Statement by the Filing Date,
then the Company shall make compensatory payments to the Holder in an amount
equal to one percent (1%) of the aggregate Offering Price paid by the Holder
for
the Shares for each monthly period thereafter (or prorated portion thereof)
in
which the Registration Statement remains unfiled. The Company shall make any
such payment to the Holder by check or wire transfer within five (5) business
days after the earlier of the end of each monthly period following the Outside
Filing Date or Filing Date, as applicable. 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 ten percent (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
commercially reasonable 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 as soon as reasonably practicable:
(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
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);
22
(c) make
every reasonable effort to obtain the withdrawal of any order suspending the
effectiveness of any Registration Statement at the earliest possible
time;
(d) notify
each Holder promptly of a pending proceeding against the Company under Section
8A of the Securities Act in connection with the offering of the Registrable
Securities.
(e) 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;
(f) 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;
(g) 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;
(h) to
the
extent permitted under applicable rules and regulations promulgated under the
Securities 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;
23
(i) upon
the
occurrence of any event contemplated by Section 5.4(b)(v) above, the Company
shall promptly prepare a post-effective amendment to the Registration Statement
or a supplement to the related prospectus, or file any other required document
so that, as thereafter 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;
(j) 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 Securities Act; and
(k) file
each
Registration Statement and any amendments and/or supplements thereto
electronically on XXXXX.
Notwithstanding
the foregoing, it shall be a condition precedent to the obligations of the
Company to take any action pursuant to paragraphs (a) through (k) 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 (or alleged 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 (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,
(ii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, or any rule or regulation promulgated under the Securities
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, or
(iii) 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 a breach by the Company of its obligations under Section 5.4(b) or
5.4(d) of this Agreement; 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 or allegation thereof is made in
reliance upon and in strict 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 action 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 alleged untrue
statement or omission or alleged omission made in the preliminary prospectus
but
eliminated or remedied in the amended prospectus on file with the SEC at the
time the Registration Statement becomes effective or in the amended prospectus
filed with the Commission pursuant to Rule 424(b) or in the prospectus subject
to completion under Rule 434 promulgated under the Securities Act, which
together meet the requirements of Section 10(a) of the Securities Act (the
“Final
Prospectus”),
such
indemnity agreement shall not inure to the benefit of any such Holder, any
such
underwriter or any such controlling Person, if a copy of the Final Prospectus
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 Securities Act and
the Final Prospectus would have cured the defect giving rise to such loss,
liability, claim, damage or action.
24
(b) Each
Holder will severally, and not jointly, 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
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof), including any of the foregoing incurred in settlement
of
any litigation, commenced or threatened (subject to Section 5.6(c) below)
(“Losses”),
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 strict 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, (i) 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, and (ii)
there shall be no indemnity obligation hereunder to the extent that Losses
are
the result of the fraud, bad faith, willful misconduct or gross negligence
of
the Company.
25
(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 Securities Act) shall be entitled to contribution from any Person who
was
not guilty of such fraudulent misrepresentation.
26
5.7 Each
Subscriber agrees that it will comply with the prospectus delivery requirements
of the Securities Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement. Each Subscriber
further agrees that, upon receipt of a notice from the Company of the occurrence
of any event of the kind described in Section 5.4(b), such Subscriber will
discontinue disposition of such Registrable Securities under the Registration
Statement until such Subscriber’s receipt of the copies of the supplemented
prospectus and/or amended Registration Statement contemplated by Section 5.4(i),
or until it is advised in writing by the Company that the use of the applicable
prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.
5.8
(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 5, including the
information required by the Registration Questionnaire.
27
(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 Securities 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, or, if relying on Rule 172 of the Securities Act, that the
Holder has confirmed the availability of the exemption from the prospectus
delivery requirement provided by Rule 172 of the Securities Act.
(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.
5.9
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 Securities Act, at all times;
(b) file
with
the SEC in a timely manner all reports and other documents required of the
Company under the Exchange Act; and
(c) so
long
as a Holder owns any unregistered Registrable Securities, furnish to such
Holder, upon any reasonable request, a written statement by the Company as
to
its compliance with Rule 144 under the Securities Act, and of the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents of the Company as such Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing a
Holder to sell any such securities without registration.
28
5.10 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
(including, without limitation, an assignment in connection with the
distribution of Registrable Securities to a Holder’s partners, members and other
beneficial owners), 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(a) of Regulation D; and (v) such
transfer is otherwise in compliance with this Agreement. Except as specifically
permitted by this Section 5.10, 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.
5.11 The
Company shall 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.
5.12 With
the
written consent of the Company and the Holders holding at least two-thirds
of
the Registrable Securities that are then outstanding, any provision of this
Article 5 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 and the Placement Agents reserve the right to reject the subscription
made hereby in whole or in part in each of their sole discretion. Unless
terminated earlier in the Placement Agents’ or the Company’s sole discretion,
the Offering will expire on April 30, 2006, (as such date may be extended by
agreement of the Placement Agents and the Company in their sole discretion
without notice to the Subscribers for an additional 30 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 Securities 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:
29
|
If
to the Company:
|
ZIOPHARM
Oncology, Inc.
1180
Avenue of the Xxxxxxxx
00xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Facsimile:
(000) 000-0000
Attn:
Chief Executive Officer
|
|
With
a copy to:
|
Xxxxxx
Xxxxxxx Xxxxxx & Brand, LLP
3300
Xxxxx Fargo Center
00
Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx,
Xxxxxxxxx 00000
Facsimile:
(000) 000-0000
Attn:
Xxxx X. Xxxxxxx, Esq.
|
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 5.12 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 5.10, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and permitted 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 between 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 Securities as herein provided; subject, however, to the right hereby
reserved to the Company and the Placement Agents 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.
30
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 neither 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 Agents).
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 Agents) 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 5).
31
6.15 The
obligations of each Subscriber under any Transaction Document are several and
not joint with the obligations of any other Subscriber, and no Subscriber shall
be responsible in any way for the performance of the obligations of any other
Subscriber under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Subscriber pursuant thereto,
shall be deemed to constitute the Subscribers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the
Subscribers are in any way acting in concert or as a group with respect to
such
obligations or the transactions contemplated by the Transaction Documents.
Each
Subscriber shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out
of
the other Transaction Documents, and it shall not be necessary for any other
Subscriber to be joined as an additional party in any Proceeding for such
purpose. Each Subscriber has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents.
[REMAINDER
OF PAGE LEFT BLANK - ARTICLE 7 FOLLOWS]
32
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)
|
|
33
|
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 Securities 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:
34
(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
Companies
|
Private
Companies
|
Public
or Private
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_______
35
(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?
YES_______ NO_______
(j)
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)
|
Corporation*
|
|
(g)
|
Limited
Liability Company*
|
|
(h)
|
Trust*
|
|
(i)
|
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.
36
_________________________________
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]
37
[Signature
Page]
$_____________________
/ Purchase Price = ______________________ Shares
|
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
|
|
Email
Address
|
Email
Address
|
|
Tax
ID # or Social Security #
|
Tax
ID # or Social Security #
|
|
Name
in which securities should be issued:
|
|
Dated:
|
,
2006
|
This
Subscription Agreement is agreed to and accepted by the Company as of May 2,
2006.
| ZIOPHARM ONCOLOGY, INC. | ||
| |
|
|
| By: | ||
|
Name: _____________________________ |
||
| Title: _____________________________ | ||
39
CERTIFICATE
OF SIGNATORY
(To
be
completed if Securities are
being
subscribed for by an entity)
I,____________________________,
am the____________________________ of __________________________________________
(the “Entity”).
I
certify
that I am empowered and duly authorized by the Entity to execute and carry
out
the terms of the Subscription Agreement and to purchase and hold the Securities,
and certify further that the Subscription Agreement has been duly and validly
executed on behalf of the Entity and constitutes a legal and binding obligation
of the Entity.
IN
WITNESS WHEREOF, I have set my hand this ______ day of _________________,
2006.
|
(Signature) |
||
