SUBSCRIPTION AGREEMENT
Exhibit
10.12
THIS
SUBSCRIPTION AGREEMENT (this “Agreement”) made as of the date set forth on the
signature page hereof between Hana Biosciences, Inc., a Delaware corporation
having a place of business at 000 Xxxxxx Xxxxx Xxxx., Xxxxx 000, Xxxxx Xxx
Xxxxxxxxx, XX 00000 (the “Company”), and the undersigned (the
“Subscriber”).
W I T N E
S S E T H:
WHEREAS,
the Company is offering (the “Offering”) to a limited number of “accredited
investors,” as that term is defined by Rule 501(a) of Regulation D of the
Securities Act of 1933, as amended (the “Securities Act”), shares (the “Shares”)
of its common stock, par value $.001 per share (“Common Stock”), at an aggregate
purchase price of $7,500,000, plus an additional number of Shares at an
aggregate purchase price of $2,500,000 to cover over-allotments;
WHEREAS,
the purchase price per share of the Shares sold in the Offering shall equal
ninety percent (90%) of the Market Price (as defined herein); and
WHEREAS,
in addition to the Shares, each investor in the Offering is entitled to receive
a 5-year warrant (the “Warrant” and together with the Shares, the “Securities”)
to purchase a number of additional shares of Common Stock (the “Warrant Shares”)
at an exercise price equal to 110 percent of the Market Price; and
WHEREAS,
the terms of the Offering are summarized in that certain Confidential Offering
Term Sheet dated March 31, 2005 (together with all amendments, supplements,
exhibits and appendices thereto, the “Term Sheet”); and
WHEREAS,
on the terms and conditions hereinafter set forth, the Subscriber desires to
purchase the maximum number of Shares and Warrants that may be purchased based
on an aggregate Offering Price equal to the amount set forth on the signature
page hereof under “Dollars Invested.”
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 At the
closing (the “Closing,” and the date thereof, the “Closing Date”) 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
(a) the total dollar amount of the Subscriber’s subscription as set forth on the
signature page hereof by (b) ninety percent (90%) of the Market Price. In
addition to the Shares, the Subscriber shall also be entitled to receive a
Warrant, in substantially the form attached to the Term Sheet, to purchase a
number of additional shares of Common Stock equal to thirty percent (30%) of the
number of Shares purchased hereunder. For purposes hereof, “Market Price” shall
mean the average closing sale price of the Common Stock as quoted on the OTC
Bulletin Board during the five business days immediately preceding the Closing
Date.
1.2 The
Closing shall be held at a date and time designated by the Company prior to
11:59 p.m. Eastern Standard Time May 31, 2005 (subject to extension at the
discretion of the Company without notice to the Subscriber of up to 30 days)
(the “Expiration Date”). The certificates representing the Shares and Warrants
will be delivered by the Company within 10 days following the Closing. The
Closing shall occur at the offices of Xxxxxx Xxxxxxx Xxxxxx & Brand, LLP,
counsel to the Company, located at 00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxxxxxx, Xxxxxxxxx 00000.
1.3 The
Offering Price is payable by personal or business check, or money order made
payable to “Private Bank Minnesota, (the “Escrow Agent,”) F/B/O Hana
Biosciences, Inc.” contemporaneously with the execution and delivery of this
Agreement and Appendix
A hereto
by the Subscriber. Subscribers may also pay by wire transfer of immediately
available funds to: Private Bank Minnesota, 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxxxxxx, XX 00000, ABA Routing Number: 000000000, Account Number: 0000000,
For: Hana Biosciences, Inc. Escrow Account.
| 2. | REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. |
2.1 The
Subscriber recognizes 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 his/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
his/its entire investment and (v) the Company has not paid any dividends on its
Common Stock since inception and does not anticipate the payment of dividends in
the foreseeable future.
2.2 The
Subscriber represents that the Subscriber is an “accredited investor” as such
term is defined in Rule 501 of Regulation D promulgated under the Securities
Act, as indicated by the Subscriber’s responses to the questions contained in
Article 8 hereof, and that the Subscriber is able to bear the economic risk of
an investment in the Company. If the Subscriber is a natural person, the
Subscriber has reached the age of majority in the state or other jurisdiction in
which the Subscriber resides, has adequate means of providing for the
Subscriber’s current financial needs and contingencies, is able to bear the
substantial economic risks of an investment in the Securities for an indefinite
period of time, has no need for liquidity in such investment and, at the present
time, could afford a complete loss of such investment.
2.3 The
Subscriber hereby acknowledges and represents that (i) the Subscriber has prior
investment experience, including investment in securities which are non-listed,
unregistered and/or not traded on the Nasdaq National or SmallCap Market or a
national stock exchange, or the Subscriber has employed the services of an
investment advisor, attorney and/or accountant to read all of the documents
furnished or made available by the Company to the Subscriber and to all other
prospective investors in the Securities and to evaluate the merits and risks of
such an investment on the Subscriber’s behalf; (ii) the Subscriber recognizes
the highly speculative nature of this investment; and (iii) the Subscriber is
able to bear the economic risk which the Subscriber hereby assumes.
2.4 The
Subscriber hereby acknowledges receipt and careful review of the Term Sheet,
including all exhibits and appendices thereto. 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,
has been afforded the opportunity to ask questions of and receive answers from
duly authorized officers or other representatives of the Company concerning the
terms and conditions of the Offering, and has received any additional
information which the Subscriber has requested.
2.5 (a) The
Subscriber has relied solely upon the information provided by the Company in
making the decision to invest in the Securities. The Subscriber is familiar with
and understands the terms of the Offering, including the rights to which the
Subscriber is entitled under this Agreement. The Subscriber has been furnished
with and has carefully read the Term Sheet. In evaluating the suitability of an
investment in the Company, the Subscriber has not relied upon any representation
or other information (whether oral or written) from the Company, or any agent,
employee or affiliate of the Company other than as set forth in the Offering
Documents and the results of Subscriber’s own independent investigation. To the
extent necessary, the Subscriber has retained, at his/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.
(b) The
Subscriber represents that no Securities were offered or sold to it by means of
any form of general solicitation or general advertising, and in connection
therewith the Subscriber did not: (A) receive or review any advertisement,
article, notice or other communication published in a newspaper or magazine or
similar media or broadcast over television or radio whether closed circuit, or
generally available; or (B) attend any seminar meeting or industry investor
conference whose attendees were invited by any general solicitation or general
advertising.
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2.6 The
Subscriber hereby represents that the Subscriber, either by reason of the
Subscriber’s business or financial experience or the business or financial
experience of the Subscriber’s professional advisors, has the capacity to
protect the Subscriber’s own interests in connection with the transaction
contemplated hereby.
2.7 The
Subscriber hereby acknowledges that the Offering has not been reviewed by the
Securities and Exchange Commission (“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 understands that if required by the laws or regulations or any
applicable jurisdictions, the Offering contemplated hereby will be submitted to
the appropriate authorities of such state(s) for registration of exemption
therefrom.
2.8 The
Subscriber understands that the Securities have not been registered under the
Securities Act by reason of a claimed exemption under the provisions of the
Securities Act which depends, in part, upon the Subscriber’s investment
intention. In this connection, the Subscriber hereby represents that the
Subscriber is purchasing the Securities for the Subscriber’s own account for
investment purposes only and not with a view toward the resale or distribution
to others and has no contract, undertaking, agreement or other arrangement, in
existence or contemplated, to sell, pledge, assign or otherwise transfer the
Securities to any other person. The Subscriber, if an entity, also represents
that it was not formed for the purpose of purchasing the Securities.
2.9 The
Subscriber understands that although there currently is a public market for the
Company’s Common Stock, 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
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 6 herein.
2.10 The
Subscriber consents to the placement of a legend on any certificate or other
document evidencing the Securities substantially as set forth below, that such
Securities have not been registered under the Securities Act or any state
securities or “blue sky” laws and setting forth or referring to the restrictions
on transferability and sale thereof contained in this Agreement. The Subscriber
is aware that the Company will make a notation in its appropriate records with
respect to the restrictions on the transferability of the Securities.
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
2.11 The
Subscriber agrees to supply
the Company, within five (5) days after the Subscriber receives the request
therefor from the Company, with such additional information concerning the
Subscriber as the Company deems necessary or advisable in order to establish or
verify the Subscriber’s representations contained herein.
2.12 The
Subscriber hereby represents that the address of the Subscriber furnished by
Subscriber on the signature page hereof is the Subscriber’s principal residence
if Subscriber is an individual or its principal business address if it is a
corporation or other entity.
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2.13 The
Subscriber represents that the Subscriber has full power and authority
(corporate, statutory and otherwise) to execute, deliver, and perform this
Agreement and to purchase the Securities. This Agreement constitutes the legal,
valid and binding obligation of the Subscriber, enforceable against the
Subscriber in accordance with its terms.
2.14 If the
Subscriber is a corporation, partnership, limited liability company, trust,
employee benefit plan, individual retirement account, Xxxxx Plan, or other
entity (a) it is authorized and qualified to become an investor in the Company
and the person signing this Agreement on behalf of such entity has been duly
authorized by such entity to do so and (b) it is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
2.15 The
Subscriber acknowledges that if he or she is a Registered Representative of an
NASD member firm, he or she must give such firm the notice required by the NASD
Rules of Fair Practice, receipt of which must be acknowledged by such firm in
Section 8.4 below.
2.16 The
Subscriber understands, acknowledges and agrees with the Company that this
Subscription may be rejected, in whole or in part, by the Company, in the sole
and absolute discretion of the Company, at any time before any Closing Date
notwithstanding prior receipt by the Subscriber of notice of acceptance of the
Subscriber’s Subscription.
2.17
The
Subscriber understands, acknowledges and agrees with the Company that, except as
otherwise set forth herein, the subscription hereunder is irrevocable by the
Subscriber, that, except as required by law, the Subscriber is not entitled to
cancel, terminate or revoke this Agreement or any agreements of the Subscriber
hereunder and that this Agreement and such other agreements shall survive the
death or disability of the Subscriber and shall be binding upon and inure to the
benefit of the parties and their heirs, executors, administrators, successors,
legal representatives and permitted assigns. If the Subscriber is more than one
person, the obligations of the Subscriber hereunder shall be joint and several
and the agreements, representations, warranties and acknowledgments herein
contained shall be deemed to be made by and be binding upon each such person and
his/her 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
thereunder, and/or the provisions of Regulation S which is in part dependent
upon the truth, completeness and accuracy of the statements made by the
Subscriber.
2.19 The
Subscriber agrees that during the period from the date that Subscriber was first
contacted with respect to the Offering through the Closing Date, the Subscriber
has not and will not directly or indirectly, through related parties, affiliates
or otherwise sell "short" or "short against the box" (as those terms are
generally understood) any equity security of the Company.
2.20 The
Subscriber acknowledges that the information contained in the Term Sheet and
this Agreement or otherwise made available to the Subscriber is confidential and
non-public and agrees that all such 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 this Subscription) nor disclosed to any
third party for any reason, notwithstanding that a Subscriber’s subscription may
not be accepted by the Company; provided,
however, that
this obligation shall not apply to any such information that (i) is part of the
public knowledge or literature and readily accessible at the date hereof, (ii)
becomes part of the public knowledge or literature and readily accessible by
publication (except as a result of a breach of this provision) or (iii) is
received from third parties (except third parties who disclose such information
in violation of any confidentiality agreements or obligations, including,
without limitation, any subscription or other similar agreement entered into
with the Company).
2.21 If the
Subscriber is purchasing the Securities in a fiduciary capacity for another
person or entity, 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 shares 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. Upon request of the Company, the Subscriber will provide true,
complete and current copies of all relevant documents creating the Subscriber,
authorizing its investment in the Company and/or evidencing the satisfaction of
the foregoing.
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2.22 The
Subscriber represents that 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.
2.23 The
Subscriber represents that the representations, warranties and agreements of the
Subscriber contained herein, 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 in all respects on the date hereof and as of the Closing Date as if
made on and 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 to the Placement
Agents.
| 3. | REPRESENTATIONS BY AND COVENANTS OF THE COMPANY. |
The
Company hereby represents and warrants to the Subscriber that:
3.1 Organization,
Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate power and
authority to conduct its business as currently conducted. The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the property owned or leased by it or the nature of
the business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or in good standing would not have,
individually or in the aggregate, a material adverse effect on the business,
operations, conditions (financial or otherwise), assets, results of operations
or prospects of that entity individually or of the Company and its Subsidiaries
(as defined below) as a whole.
3.2 Capitalization. (a) The
authorized capital stock of the Company consists of 100,000,000 shares of Common
Stock and 10,000,000 shares of undesignated preferred stock. As of March 31,
2005, there are 14,172,143 shares of Common Stock issued and outstanding, all of
which are duly authorized, validly issued, fully paid and non-assessable. In
addition, there are 2,646,686 shares of Common Stock reserved for issuance
pursuant to outstanding options and warrants. There are no shares of any class
or series of preferred stock issued or outstanding. 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 by agreement or otherwise. 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 and
the Term Sheet. True and correct copies of the Company’s Certificate of
Incorporation and By-laws are contained or incorporated into the exhibits to the
Term Sheet.
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(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. Other than as described in the Term Sheet and
except for the investors in the Company’s July 2004 private placement, whose
shares are covered by the Company’s currently effective Registration Statement
on Form SB-2 (SEC File No. 333-118426), 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.
3.3 Authorization;
Enforceability. The
Company has all corporate right, power and authority 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 has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy. The issuance and sale
of the Securities contemplated hereby will not give rise to any preemptive
rights or rights of first refusal on behalf of any person.
3.4 No
Conflict; Governmental and Other Consents.
(a) The
execution and delivery by the Company of this Agreement and the consummation of
the transactions contemplated hereby will not result in the violation of any
law, statute, rule, regulation, order, writ, injunction, judgment or decree of
any court or governmental authority to or by which the Company or any Subsidiary
is bound, or of any provision of the Certificate of Incorporation or By-Laws of
the Company, and will not conflict with, or result in a breach or violation of,
any of the terms or provisions of, or constitute (with due notice or lapse of
time or both) a default under, any lease, loan agreement, mortgage, security
agreement, trust indenture or other agreement or instrument to which the Company
or any Subsidiary is a party or by which it is bound or to which any of its
properties or assets is subject, nor result in the creation or imposition of any
lien upon any of the properties or assets of the Company or any
Subsidiary.
(b) No
consent, approval, authorization or other order of any governmental authority or
other third-party is required to be obtained by the Company or any Subsidiary 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.
3.5 Accuracy
of Offering Documents. All
reports required to be filed by the Company since July 21, 2004 under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), have been duly
filed with the SEC, complied at the time of filing in all material respects with
the requirements of their respective forms and 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.
3.6 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.
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3.7
Proprietary
Rights. 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 or proposed to be used in the conduct of its business
(the “Proprietary Rights”). The Company or the entities from whom the Company
has acquired rights have taken all action necessary to protect all of the
Company’s Proprietary Rights. The Company has not received any notice of, and
there are no facts known to the Company that indicate the existence of (i) any
infringement or misappropriation by any third party of any of the Proprietary
Rights or (ii) any claim by a third party contesting the validity of any of the
Proprietary Rights. The Company has not received any notice of any infringement,
misappropriation or violation by the Company or any of its employees of any
Proprietary Rights of third parties, and, to the best of the Company's
knowledge, neither the Company nor any of its employees has infringed,
misappropriated or otherwise violated any Proprietary Rights of any third
parties. To the best of the Company’s knowledge, no infringement, illicit
copying, misappropriation or violation of any intellectual property rights of
any third party has occurred or will occur with respect to any products
currently being sold by the Company or with respect to any products currently
under development by the Company or with respect to the conduct of the Company’s
business as currently contemplated. The Company is not aware that any of its
employees are obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of the employee's best efforts to promote the interests of the Company
or that would conflict with the Company’s business as presently conducted or as
proposed to be conducted. To the Company’s knowledge, neither the execution nor
delivery of this Agreement, nor the carrying on of the Company’s business by the
employees of the Company, nor the conduct of the Company’s business, as
presently conducted or as proposed to be conducted, conflicts with or will
conflict with or result in a material breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any such employee is now obligated. In addition, all
employees are required to assign, and have assigned, all intellectual property
rights to the Company.
3.8 Taxes. The
Company has filed all Federal, state, local and foreign tax returns that are
required to have been filed by it and all such returns are true and correct in
all respects. The Company has paid all taxes pursuant to such returns or
pursuant to any assessments received by it or which they are obligated to
withhold from amounts owing to any employee, creditor or third party. The
Company has properly accrued all taxes required to be accrued. The tax returns
of the Company have never been audited by any state, local or Federal
authorities. The Company has not waived any statute of limitations with respect
to taxes or agreed to any extension of time with respect to any tax assessment
or deficiency.
3.9 Filings
under the Exchange Act. The
Company has filed all reports required to be filed by it under the Exchange Act,
including the Annual Report on Form 10-KSB for the period ended December 31,
2004 attached to the Term Sheet (collectively the “SEC Reports”); the SEC
Reports are true and correct in all material respects and 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 not misleading; the
Company has not disclosed to the Subscriber any material non-public information
regarding the Company; and since the date of the Company’s last SEC Report there
has occurred no event likely to have a material adverse effect on the business
or financial condition of the Company.
3.10 Material
Changes. Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in the SEC Reports, (i) there has been
no event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade
payables, accrued expenses and other liabilities 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 generally accepted
accounting principles in the United States (“GAAP”) or
required to be disclosed in filings made with the SEC, (iii) the Company has not
altered its method of accounting or the identity of its auditors, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders 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 (as defined
in Section 6.1(a)), except pursuant to existing Company stock option plans. The
Company does not have pending before the SEC any request for confidential
treatment of information. “Material
Adverse Effect” means
any of (i) a material and adverse effect on the legality, validity or
enforceability of this Agreement, (ii) a material and adverse effect on the
results of operations, assets, condition (financial or otherwise), business or
prospects of the Company, or (iii) a material and adverse impairment to the
Company's ability to perform on a timely basis its obligations under this
Agreement. “Affiliate” means
any person (including any individual or entity) that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with a person, as such terms are used in and construed under Rule
144.
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3.11 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) to the Company’s knowledge,
is not in violation of any order of any court, arbitrator or governmental body,
or (iii) to the Company’s knowledge, 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 relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.
3.12 Litigation. Except
as set forth in the SEC Reports, there is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company or its properties before or
by any court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an “Action”)
which: (i) adversely affects or challenges the legality, validity or
enforceability of this Agreement or the offering described in the Term Sheet or
(ii) would, if there were an unfavorable decision, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any director or officer thereof (in his or her
capacity as such), is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty, except as specifically disclosed in the SEC Reports.
There has not been, and to the Company’s knowledge, there is not pending any
investigation by the SEC involving the Company or any current or former director
or officer of the Company (in his or her capacity as such). The Company is not
nor has it ever been the subject of any Action involving a claim of violation of
or liability under federal or state securities laws. There has not been, and to
the knowledge of the Company, there is not pending or contemplated, any
investigation by the SEC involving the Company. The SEC has not issued any stop
order or other order suspending the effectiveness of any registration statement
filed by the Company under the Exchange Act or the Securities Act.
3.13 Transactions
With Affiliates and Employees. Except
as set forth in the Term Sheet or the SEC Reports, none of the officers or
directors of the Company and, to the Company’s knowledge, 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
Company’s knowledge, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
3.14 Questionable
Payments.
Neither
the Company nor, to the Company’s knowledge, any of its respective current or
former stockholders, directors, officers, employees, agents or other persons
acting on behalf of the Company, has on behalf of the Company or in connection
with its business: (i) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity;
(ii) made any direct or indirect unlawful payments to any governmental officials
or employees from corporate funds; (iii) established or maintained any unlawful
or unrecorded fund of corporate monies or other assets; (iv) made any false or
fictitious entries on the books and records of the Company; or (v) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment of any nature.
3.15 Internal
Controls. The
Company is in
material compliance with the provisions of the Xxxxxxxx-Xxxxx Act of 2002
currently applicable to the Company. The Company maintains
a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and designed
such disclosure controls and procedures to ensure that material information
relating to the Company is made known to the certifying officers by others
within those entities, particularly during the period in which the Company’s
most recently filed period report under the Exchange Act, as the case may be, is
being prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures as of a date within 90
days prior to the filing date of the most recently filed 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 certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no significant changes in the Company's
internal controls (as such term is defined in Item 308 of Regulation S-B) 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 standard system of accounting established and administered in accordance with
GAAP and the applicable requirements of the Exchange Act.
8
| 4. | TERMS OF SUBSCRIPTION. |
4.1 The
Company reserves the right to reject the subscription made hereby, in whole or
in part, in its sole discretion.
4.2 Pending
the sale of the Securities, all funds paid hereunder shall be deposited by the
Company in escrow with the Escrow Agent, having a branch at 000 Xxxxx Xxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxxxxxx, XX 00000.
4.3 The
Subscriber hereby authorizes and directs the Company to deliver the Shares and
Warrants to be issued to the Subscriber pursuant to this Agreement to the
residential or business address indicated on the signature page
hereto.
4.4 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 with the
Placement Agents.
4.5 The
Company’s agreement with each Subscriber is a separate agreement and the sale of
the Securities to each Subscriber is a separate sale.
| 5. | CLOSING CONDITIONS. |
5.1 The
Subscribers’ obligation to purchase the Securities at the Closing is subject to
the fulfillment on or prior to the Closing of the following conditions, which
conditions may be waived at the option of each Subscriber to the extent
permitted by law:
(a) Representations
and Warranties Correct. The
representations and warranties made by the Company in Article III hereof shall
be true and correct in all material respects when made, and shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of said date.
(b) Covenants. All
covenants, agreements and conditions contained in this Agreement to be performed
by the Company on or prior to such purchase shall have been performed or
complied with in all material respects.
(c) 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.
9
(d) No Law
Prohibiting or Restricting Such Sale. There
shall not be in effect any law, rule or regulation prohibiting or restricting
such sale or requiring any consent or approval of any person which shall not
have been obtained to issue the Securities (except as otherwise provided in this
Agreement).
(e) Legal
Opinion.
Subscriber shall received an opinion of counsel to the Company covering the
legal matters set forth on Appendix B attached hereto.
| 6. | REGISTRATION RIGHTS. |
6.1 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.
(c) “Holders” shall
mean the Subscribers and any person holding Registrable Securities or any person
to whom the rights under Article 6 have been transferred in accordance with
Section 6.9 hereof.
(d) “Person” shall
mean any person, individual, corporation, limited liability company,
partnership, trust or other nongovernmental entity or any governmental agency,
court, authority or other body (whether foreign, federal, state, local or
otherwise).
(e) The terms
“register,”
“registered” and
“registration” refer
to the registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(f) “Registrable
Securities” shall
mean the Shares and the Warrant Shares; provided,
however, that
securities shall only be treated as Registrable Securities if and only for so
long as they (A) have not been disposed of pursuant to a registration statement
declared effective by the SEC; (B) have not been sold in a transaction exempt
from the registration and prospectus delivery requirements of the Securities Act
so that all transfer restrictions and restrictive legends with respect thereto
are removed upon the consummation of such sale; (C) are held by a Holder or a
permitted transferee pursuant to Section 6.9; or (D) are not eligible for
sale 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 6.2
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.
(h) “Registration
Statement” shall
have the meaning ascribed to such term in Section 6.2.
(i) “Registration
Period” shall
have the meaning ascribed to such term in Section 6.2.
10
(j) “Selling
Expenses” shall
mean all underwriting discounts and selling commissions applicable to the sale
of Registrable Securities and, except to the extent set forth in the definition
of Registration Expenses, all fees and expenses of legal counsel for any
Holder.
6.2 (a)
Subject to the terms herein, the Company will, as soon as practicable but not
later than 30 days following the Closing Date (the “Outside Filing Date”),
(i) file a registration statement with the SEC on the appropriate form (the
“Registration Statement”) to allow the resale of the Registrable Securities
under the Securities Act, and use its reasonable best efforts to have such
Registration Statement declared effective by the SEC prior to the date which is
90 days after the Outside Filing Date (the “Registration Effective Date”); and
(ii) cause such Registration Statement to remain effective (the “Registration
Period”) until the earlier of (A) such date as the holders of the securities
have completed the distribution described in the Registration Statement or (B)
at such time that such shares have become eligible for sale pursuant to Rule
144(k) (or any successor thereto) under the Securities Act. To the extent
permissible, such Registration Statement also shall cover, 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.
(b) In the
event (i) the Company has not filed the Registration Statement required by
Section 6.2(a)(i) by the Outside Filing Date, or (ii) such Registration
Statement has not been declared effective by the Registration Effective Date,
then in either case the Company
shall make
compensatory payments to the Subscriber in an amount equal to 2 percent of the
aggregate Offering Price paid by the Holder for the Shares for each 30-day
period (or prorated portion thereof) in which the Company is in default of its
obligations under clauses (i) and (ii) of Section 6.2(a). The Company shall make
any such payment to the Holder by check or wire transfer within five (5)
business days after the earlier of (A) the end of each 30-day period following
the Outside Filing Date or Registration Effective Date, as applicable, or (ii)
the effective date of the Registration Statement.
6.3 All
Registration Expenses incurred in connection with any registration,
qualification, exemption or compliance pursuant to Section 6.2 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.
6.4 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 its
best efforts to keep such registration, and any qualification, exemption or
compliance under state or federal securities laws which the Company determines
to obtain, continuously effective until the termination of the Registration
Period; and
(b) advise
the Holders as soon as 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 any
request by the SEC for amendments or supplements to the Registration Statement
or the prospectus included therein or for additional information;
(iii) of the
issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for such
purpose;
(iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities included therein for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and
11
(v) of the
happening of any event that requires the making of any changes in the
Registration Statement or the prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the prospectus, in the light of the circumstances under which they
were made) not misleading (which notice will be accompanied by an instruction to
suspend the use of the prospectus until such changes have been
made);
(c) make
every reasonable effort to obtain the withdrawal of any order suspending the
effectiveness of any Registration Statement at the earliest possible
time;
(d) furnish
to each Holder, without charge, at least one copy of such Registration Statement
and any post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits (including
those incorporated by reference) in the form filed with the SEC;
(e) during
the Registration Period, deliver to each Holder, without charge, as many copies
of the prospectus included in such Registration Statement and any amendment or
supplement thereto as such Holder may reasonably request; and the Company
consents to the use, consistent with the provisions hereof, of the prospectus or
any amendment or supplement thereto by each of the selling Holders of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the prospectus or any amendment or supplement
thereto. In addition, upon the reasonable request of the Holder and subject in
all cases to confidentiality protections reasonably acceptable to the Company,
the Company will meet with a Holder or a representative thereof at the Company’s
headquarters to discuss all information relevant for disclosure in the
Registration Statement covering the Registrable Securities, and will otherwise
cooperate with any Holder conducting an investigation for the purpose of
reducing or eliminating such Holder’s exposure to liability under the Securities
Act, including the reasonable production of information at the Company’s
headquarters;
(f) prior to
any public offering of Registrable Securities pursuant to any 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;
(g) cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold pursuant to any
Registration Statement free of any restrictive legends to the extent not
required at such time and in such denominations and registered in such names as
Holders may request at least five (5) business days prior to sales of
Registrable Securities pursuant to such Registration Statement;
(h) upon the
occurrence of any event contemplated by Section 6.4(b)(v) above, the Company
shall promptly prepare a post-effective amendment to the Registration Statement
or a supplement to the related prospectus, or file any other required document
so that, as thereafter promptly delivered to purchasers of the Registrable
Securities included therein, the prospectus will not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; and
(i) use its
best efforts to comply with all applicable rules and regulations of the SEC, and
use its best 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.
12
6.5 The
Holders shall have no right to take any action to restrain, enjoin or otherwise
delay any registration pursuant to Section 6.2 hereof as a result of any
controversy that may arise with respect to the interpretation or implementation
of this Agreement.
6.6 (a) To the
extent permitted by law, the Company shall indemnify each Holder, each
underwriter of the Registrable Securities and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, with respect to
which any registration, qualification or compliance has been effected pursuant
to this Agreement, against all claims, losses, damages and liabilities (or
action in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened (subject to Section 6.6(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 prospectus relating thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in light of the circumstances in which
they were made, and will reimburse each Holder, each underwriter of the
Registrable Securities and each person controlling such Holder, for reasonable
legal and other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action as incurred;
provided that the Company will not be liable in any such case to the extent that
any untrue statement or omission or allegation thereof is made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such Holder and stated to be specifically for use in preparation of
such registration statement or prospectus; provided, further, that the Company
will not be liable in any such case where the claim, loss, damage or liability
arises out of or is related to the failure of the Holder to comply with the
covenants and agreements contained in this Agreement respecting sales of
Registrable Securities.
(b) Each
Holder will severally, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter of the 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 6.6(c) below), arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, or any amendment or
prospectus relating thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances in which they were made,
and will reimburse the Company, such directors and officers, each underwriter of
the Registrable Securities and each person controlling the Company for
reasonable legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action as
incurred, in each case to the extent, but only to the extent, that such untrue
statement or omission or allegation thereof is made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Holder and stated to be specifically for use in preparation of such
registration statement or prospectus; provided that the indemnity shall not
apply to the extent that such claim, loss, damage or liability results from the
fact that a current copy of the prospectus was not made available to the Holder
and such current copy of the prospectus would have cured the defect giving rise
to such loss, claim, damage or liability. Notwithstanding the foregoing, in no
event shall a Holder be liable for any such claims, losses, damages or
liabilities in excess of the net proceeds received by such Holder in the
offering, except in the event of fraud by such Holder.
(c) Each
party entitled to indemnification under this Section 6.6 (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).
13
(d) If the
indemnification provided for in this Section 6.6 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. Notwithstanding the foregoing, in no event
shall a Holder be liable for any such claims, losses, damages or liabilities
pursuant to this paragraph 6.6(d) in excess of the net proceeds received by such
Holder in the Offering, except in the event of fraud by such
Holder.
6.7 (a) Each
Holder agrees that, upon receipt of any notice from the Company of the happening
of any event requiring the preparation of a supplement or amendment to a
prospectus relating to Registrable Securities so that, as thereafter delivered
to the Holders, such prospectus shall not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, each Holder will
forthwith discontinue disposition of Registrable Securities pursuant to the
registration statement contemplated by Section 6.2 until its receipt of copies
of the supplemented or amended prospectus from the Company, 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.
(b) Each
Holder shall suspend, upon request of the Company, any disposition of
Registrable Securities pursuant to the Registration Statement and prospectus
contemplated by Section 6.2 during (i) any period, not to exceed two
30-day periods within any one 12-month period, the Company requires in
connection with a primary underwritten offering of equity securities and
(ii) any period, not to exceed one 45-day period within any one 12-month
period, when the Company determines in good faith that offers and sales pursuant
thereto should not be made by reason of the presence of material undisclosed
circumstances or developments with respect to which the disclosure that would be
required in such a prospectus is premature, would have an adverse effect on the
Company or is otherwise inadvisable.
(c) As a
condition to the inclusion of its Registrable Securities, each Holder shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Article 6, including the
information required by the Registration Questionnaire attached hereto as
Appendix A.
14
(d) 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.
(e) Each
Holder acknowledges and agrees that the Registrable Securities sold pursuant to
the Registration Statement described in this Section are not transferable on the
books of the Company unless the stock certificate submitted to the transfer
agent evidencing such 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.
(f) 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.
(g) At the
end of the period during which the Company is obligated to keep the Registration
Statement current and effective as described above, the Holders of Registrable
Securities included in the Registration Statement shall discontinue sales of
shares pursuant to such Registration Statement upon receipt of notice from the
Company of its intention to remove from registration the shares covered by such
Registration Statement which remain unsold, and such Holders shall notify the
Company of the number of shares registered which remain unsold immediately upon
receipt of such notice from the Company.
6.8 With a
view to making available to the Holders the benefits of certain rules and
regulations of the SEC which at any time permit the sale of the Registrable
Securities to the public without registration, the Company shall use its
reasonable best efforts to:
(a) make and
keep public information available, as those terms are understood and defined in
Rule 144 under the Securities Act, at all times;
(b) file with
the SEC in a timely manner all reports and other documents required of the
Company under the Exchange Act; and
(c) so long
as a Holder owns any unregistered Registrable Securities, furnish to such
Holder, upon any reasonable request, a written statement by the Company as to
its compliance with Rule 144 under the Securities Act, and of the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents of the Company as such Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing a
Holder to sell any such securities without registration.
6.9 The
rights to cause the Company to register Registrable Securities granted to the
Holders by the Company under Section 6.2 may be assigned in full or in part
by a Holder in connection with a transfer by such Holder of its Registrable
Securities, provided, however, that (i) such transfer may otherwise be
effected in accordance with applicable securities laws; (ii) such Holder
gives prior written notice to the Company; and (iii) such transferee agrees to
comply with the terms and provisions of this Agreement, and such transfer
is otherwise in compliance with this Agreement. Except as specifically permitted
by this Section 6.9, the rights of a Holder with respect to Registrable
Securities as set out herein shall not be transferable to any other Person, and
any attempted transfer shall cause all rights of such Holder therein to be
forfeited.
6.10 The
Company shall use best efforts to cause all Registrable Securities covered by a
Registration Statement to be listed on each securities exchange, interdealer
quotation system or other market on which similar securities issued by the
Company are then listed.
15
6.11 With the
written consent of the Company and the Holders holding at least a majority of
the Registrable Securities that are then outstanding, any provision of this
Article 6 may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely) or amended. Upon the effectuation of each such waiver or
amendment, the Company shall promptly give written notice thereof to the
Holders, if any, who have not previously received notice thereof or consented
thereto in writing.
6A. INDEMNIFICATION
OF PURCHASERS. Subject
to the provisions of this Article 6A, the Company will indemnify and hold the
Subscriber and its directors, officers, shareholders, partners, employees and
agents (each, a “Subscriber
Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Subscriber Party may suffer or incur as a result of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or (b) any action
instituted against Subscriber, or any of its Affiliates, by any stockholder of
the Company who is not an Affiliate of such Subscriber, with respect to any of
the transactions contemplated by this Agreement (unless such action is based
upon a breach of Subscriber’s representation, warranties or covenants under this
Agreement or any agreements or understandings that Subscriber may have with any
such stockholder or any violations by Subscriber of state or federal securities
laws). If any action shall be brought against any Subscriber Party in respect of
which indemnity may be sought pursuant to this Agreement, such Subscriber Party
shall promptly notify the Company in writing, and the Company shall have the
right to assume the defense thereof with counsel of its own choosing. Any
Subscriber Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Subscriber Party except to the extent
that (i) the employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of such separate counsel, a material conflict on any
material issue between the position of the Company and the position of such
Subscriber Party. The Company will not be liable to any Subscriber Party under
this Agreement (i) for any settlement by a Subscriber Party effected without the
Company’s prior written consent, which shall not be unreasonably withheld,
conditioned or delayed; or (ii) to the extent, but only to the extent that a
loss, claim, damage or liability is attributable to any Subscriber Party’s
breach of any of the representations, warranties, covenants or agreements made
by the Subscriber in this Agreement.
| 7. | MISCELLANEOUS. |
7.1 All
notices, requests and other communications under this Agreement shall be in
writing, and shall be sufficiently given if delivered to the addressees in
person or by recognized overnight courier, mailed by certified or registered
mail, return receipt requested, or by facsimile or e-mail transmission, as
follows:
If to the
Company: Hana
Biosciences, Inc.
|
000
Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000 |
|
Xxxxx
Xxx Xxxxxxxxx, XX 00000 |
|
Facsimile:
(000) 000-0000 |
|
Attn:
Chief Financial Officer |
Email:
xxxxxxx.xxxxxxxx@xxxxxxxxxxxxxxx.xxx
If to a
Subscriber, at such address as such Subscriber shall have provided in writing to
the Company or such other addresses as such Subscriber furnishes by notice given
in accordance with this Section 7.1 or such
other address as may be designated in writing hereafter, in the same manner, by
such person.
7.2 Except as
provided in Section 6.11 above, this Agreement shall not be changed, modified or
amended except by a writing signed by the parties to be charged, and this
Agreement may not be discharged except by performance in accordance with its
terms or by a writing signed by the party to be charged.
16
7.3 Subject
to the provisions of Section 6.9, this Agreement shall be binding upon and inure
to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
7.4 Upon the
execution and delivery of this Agreement by the Subscriber, this Agreement shall
become a binding obligation of the Subscriber with respect to the purchase of
the Securities as herein provided; subject, however, to the right hereby
reserved to the Company to reject this subscription in accordance with Section
2.16, enter into the same agreements with other subscribers and to add and/or
delete other persons as subscribers.
7.5 Notwithstanding
the place where this Agreement may be executed by any of the parties hereto, the
parties expressly agree that all the terms and provisions hereof shall be
construed in accordance with and governed by the laws of the State of New York
without regard to principles of conflicts of law.
7.6 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.
7.7 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.
7.8 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.
7.9 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.
7.10 (a) The
Subscribers severally agree not to issue any public statement with respect to
the Subscribers’ investment or proposed investment in the Company or the terms
of any agreement or covenant between them and the Company without the Company’s
prior written consent, except such disclosures as may be required under
applicable law or under any applicable order, rule or regulation.
(b) The
Company agrees not to disclose the names, addresses or any other information
about the Subscribers, except as required by law and to satisfy its obligations
under Article 6.
7.11 The
Subscriber represents and warrants that it has not engaged, consented to nor
authorized any broker, finder or intermediary to act on its behalf, directly or
indirectly, as a broker, finder or intermediary in connection with the
transactions contemplated by this Agreement. Subscriber hereby severally agrees
to indemnify and hold harmless the Company from and against all fees,
commissions or other payments owing to any such person or firm acting on behalf
of such Subscriber hereunder.
7.12 Nothing
in this Agreement shall create or be deemed to create any rights in any person
or entity not a party to this Agreement, except for the holders of Registrable
Securities.
| 8. | CONFIDENTIAL INVESTOR QUESTIONNAIRE. |
8.1 The
Subscriber represents and warrants that he, she or it comes within one category
marked below, and that for any category marked, he, 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. The undersigned agrees to
furnish any additional information which the Company deems necessary in order to
verify the answers set forth below.
17
Category
A __ The
undersigned is an individual (not a partnership, corporation, etc.) whose
individual net worth, or joint net worth with his or her spouse, presently
exceeds $1,000,000.
Explanation:
In calculating net worth you may include equity in personal property and real
estate, including your principal residence, cash, short-term investments, stock
and securities. Equity in personal property and real estate should be based on
the fair market value of such property less debt secured by such
property.
Category
B __ The
undersigned is an individual (not a partnership, corporation, etc.) who had an
income in excess of $200,000 in each of the two most recent years, or joint
income with his or her spouse in excess of $300,000 in each of those years (in
each case including foreign income, tax exempt income and full amount of capital
gains and losses but excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable expectation of reaching
the same income level in the current year.
Category
C __ The
undersigned is a director or executive officer of the Company which is issuing
and selling the Securities.
Category
D __ The
undersigned is a bank; a savings and loan association; insurance company;
registered investment company; registered business development company; licensed
small business investment company (“SBIC”); or employee benefit plan within the
meaning of Title 1 of ERISA and (a) the investment decision is made by a plan
fiduciary which is either a bank, savings and loan association, insurance
company or registered investment advisor, or (b) the plan has total assets in
excess of $5,000,000 or (c) is a self directed plan with investment decisions
made solely by persons that are accredited investors. (describe
entity)
_____________________________________________________________________________________________
____________________________________________________________
Category
E __ The
undersigned is a private business development company as defined in section
202(a)(22) of the Investment Advisors Act of 1940. (describe entity)
____________________________________________________________
____________________________________________________________
Category
F __ The
undersigned is either a corporation, partnership, Massachusetts business trust,
or non-profit organization within the meaning of Section 501(c)(3) of the
Internal Revenue Code, in each case not formed for the specific purpose of
acquiring the Securities and with total assets in excess of $5,000,000.(describe
entity)
______________________________________________________________________________________________
____________________________________________________________
Category
G __ The
undersigned is a trust with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the Securities, where the purchase is directed
by a “sophisticated investor“ as defined in Regulation 506(b)(2)(ii) under the
Securities Act.
18
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.
8.2 SUITABILITY (please
answer each question)
(a) For
an individual Subscriber, please describe your current employment, including the
company by which you are employed and its principal business:
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
____________________________________________________________
(b) For
an individual Subscriber, please describe any college or graduate degrees held
by you:
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
____________________________________________________________
(c) For
all Subscribers, please state whether you have you participated in other
private
placements
before:
YES_______ NO_______
(d) If
your answer to question (d) above was “YES”, please indicate frequency of such
prior participation in private
placements
of:
Public
Private
Public or
Private
Companies Companies
Biopharmaceutical
Companies
Frequently
_________
_________
_________________
Occasionally
_________
_________
_________________
Never
_________
_________
_________________
(e) For
individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:
YES_______ NO_______
(f) For
trust, corporate, partnership and other institutional Subscribers, do you expect
your total assets to significantly decrease in the foreseeable future:
YES_______ NO_______
19
(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_______
(i) For
all Subscribers, do you understand that there is no guarantee of financial
return on this investment and that you run the risk of losing your entire
investment?
YES_______ NO_______
8.3 MANNER
IN WHICH TITLE IS TO BE HELD. (circle
one)
(a) Individual
Ownership
(b) Community
Property
(c) Joint
Tenant with Right of
Survivorship
(both parties
must
sign)
(d) Partnership*
(e) Tenants
in Common
(f) Company*
(g) Trust*
(h) Other
*If
Securities are being subscribed for by an entity, the attached Certificate of
Signatory must also be completed.
8.4 NASD
AFFILIATION.
Are you
affiliated or associated with an NASD member firm (please check
one):
Yes
_________ No
__________
If Yes,
please describe:
_________________________________________________________
_________________________________________________________
_________________________________________________________
*If
Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
The
undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
_________________________________
Name of
NASD Member Firm
By:
______________________________
Authorized
Officer
Date:
____________________________
8.5 The
undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in the Confidential Investor Questionnaire
contained in this Section 7 and such answers have been provided under the
assumption that the Company will rely on them.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE TO FOLLOW]
20
[Signature
Page]
$_____________________
/ Purchase Price Per Share = _____________ Shares
Dollars
Invested
_________________________
_______________________________
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:
___________________,
2005
INVESTORS:
PLEASE
COMPLETE THE REGISTRATION QUESTIONNAIRE ATTACHED HERETO AS APPENDIX
A.
This
Subscription Agreement is agreed to and accepted by the Company as of
_____________, 2005.
HANA
BIOSCIENCES, INC.
By:____________________________________
Name:
Title:
21
