EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (together with all amendments, supplements,
changes, schedules and exhibits hereto, collectively, this "Agreement") is dated
as of June 2, 2006 by and among Phase III Medical, Inc., a Delaware corporation
(the "Company"), and each purchaser identified on the signature pages hereto
(each, including its successors and assigns, a "Purchaser" and collectively the
"Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement, on a $2,000,000 minimum (the "Minimum Amount") and
a $3,000,000 maximum (the "Maximum Amount") basis.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement
the following terms have the meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section 3.1(j).
"Affiliate" means any Person 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 under the
Securities Act. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such Purchaser.
"Board" shall mean the Company's Board of Directors.
"Business Day" means any day except Saturday, Sunday, any day which shall be a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.
"Closing" means each closing of the purchase and sale of the Securities pursuant
to Section 2.1.
"Closing Date" means the Business Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers' obligations to pay the Purchase
Price and (ii) the Company's obligations to deliver the Securities have been
satisfied or waived.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value $.001 per share,
and any other class of securities into which such securities may hereafter be
reclassified or changed into.
"Company Counsel" means Xxxxxxxxxx Xxxxxxx PC.
"DC" shall mean DCI Master LDC, together with any of its investment entities,
subsidiaries, affiliates, successors and other controlled units, either existing
or formed subsequent to the execution of this Agreement.
"Director" shall mean a member of the Company's Board of Directors.
"Disclosure Schedules" shall have the meaning ascribed to such term in Section
3.1.
"Effective Date" means the date that the initial Registration Statement filed by
the Company pursuant to the Registration Rights Agreement is first declared
effective by the Commission.
"Engagement Agreement" means the Engagement Agreement dated May 5, 2006 by and
among DC and the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"Exhibits" shall mean the following exhibits attached hereto and made a part of
this Agreement:
Exhibit A - Registration Rights Agreement
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Exhibit B - The Warrants
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Exhibit C - Legal Opinion of Company Counsel
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Exhibit D - Use of Proceeds
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Exhibit E - Executive Officer Compensation Plan
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Exhibit F - Officer and Director Lockup
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"GAAP" shall have the meaning ascribed to such term in Section 3.1(i).
"Independent Director" shall have the meaning ascribed to such term in the
Xxxxxxxx-Xxxxx Act of 2002.
"Intellectual Property Rights" shall have the meaning ascribed to such term in
Section 3.1(n).
"Initial Closing" shall have the meaning ascribed to such term in Section 2.1.
"Liens" means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
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"Material Adverse Effect" shall have the meaning assigned to such term in
Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such term in Section
3.1(l).
"Person" means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
"Purchase Price" means $.044 per share of Common Stock in United States dollars
and in immediately available funds.
"Registration Rights Agreement" means the Registration Rights Agreement, dated
the date hereof, among the Company and the Purchasers, in the form of Exhibit A
attached hereto.
"Registration Statement" means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale of the
Shares and Warrant Shares by each Purchaser as provided for in the Registration
Rights Agreement.
"Required Approvals" shall have the meaning ascribed to such term in Section
3.1(e).
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in Section 3.1(h).
"Securities" means the Common Stock, the Warrants and the Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated hereunder.
"Shares" means the shares of Common Stock which are being issued and sold by the
Company to the Purchasers at the Closing.
"Short Sales" shall include all "short sales" as defined in Rule 200 of
Regulation SHO under the Exchange Act (but shall not be deemed to include the
location and/or reservation of borrowable shares of Common Stock).
"Subsidiary" means NeoStem, Inc., a Delaware corporation.
"Termination Date" shall mean the earlier of (i) the sale of the Maximum Amount;
(ii) mutual written termination of this Agreement by the Company and each person
who signed this Agreement as a Purchaser, and (iii) May 15, 2006, subject to a
30-day extension.
"Transaction Documents" means this Agreement, the Engagement Agreement, the
Warrants and the Registration Rights Agreement.
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"Warrants" means the aggregate amount of Common Stock purchase warrants, in the
form of Exhibit B to this Agreement.
"Warrant Shares" means the shares of Common Stock issuable upon exercise of the
Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. At each Closing, upon the terms and subject to the
conditions set forth herein, Purchasers shall purchase, severally and not
jointly, and the Company shall issue and sell to the Purchasers such number of
shares of Common Stock and Warrants to purchase such number of shares of Common
Stock as set forth opposite such Purchaser's name on the signature page hereto
for the aggregate Purchase Price. The Company may hold a Closing at any time
after subscriptions for the $2,000,000 Minimum Amount have been received and
accepted by the Company and after the other conditions to Closing as specified
herein have been satisfied. The initial Closing (the "Initial Closing"), which
shall be for no less than the $2,000,000 Minimum Amount, shall occur on or
before May 15, 2006 (unless extended by up to 30 days) and each subsequent
Closing until the Termination Date, shall occur at the offices of Company's
counsel, Xxxxxxxxxx Xxxxxxx PC, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000 at 12:00 p.m. or such other time and/or location as the parties shall
mutually agree. If the Minimum Amount is not reached by May 15, 2006 (subject to
a 30 day extension), all funds will be returned without interest or deduction.
All amounts received from Purchasers for the Shares and Warrants will
be deposited in a special non-interest bearing escrow account (the "Escrow
Account") with Xxxxxx Valley Bank and will be released to the Company at the
Closing. Checks shall be made out to "Phase III Medical, Inc. Private Placement
Account.
2.2 Deliveries.
(a) At the Closing, the Company shall deliver or cause to be delivered to DC or
each Purchaser the following:
(i) this Agreement duly executed by the Company to DC;
(ii) a legal opinion of Company Counsel, in the form of Exhibit C attached
hereto to DC;
(iii) a stock certificate for each Purchaser's purchased Shares, registered in
the name of such Purchaser to each Purchaser;
(iv) a Warrant registered in the name of each Purchaser to purchase up to a
number of shares of Common Stock equal to 50% of the Shares purchased by such
Purchaser, to each Purchaser;
(v) the Registration Rights Agreement duly executed by the Company, to each
Purchaser;
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(vi) Officer's Certificate in a form reasonably acceptable to DC;
(vii) Secretary's Certificate in a form reasonably acceptable to DC, with good
standing certificates of the Company and the Subsidiary as of a recent date to
be delivered at the Initial Closing;
(vii) a Lock-Up in the form of Exhibit F hereto from each officer and director
of the Company and the Subsidiary as set forth in Section 4.5 hereto to DC; and
(viii) evidence, reasonably satisfactory to DC, that the Company has delivered
to holders of Series A Preferred notice of the exchange of Series A Preferred
for Common Stock.
(b) At each Closing, each Purchaser shall deliver or cause to be delivered to
the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) the aggregate Purchase Price allocable to the Shares being purchased by the
Purchaser and set forth below such Purchaser's signature block on the signature
page hereto, in United States dollars and in immediately available funds; and
(iii) the Registration Rights Agreement duly executed by such Purchaser.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with each Closing are
subject to the following conditions being met:
(i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Purchasers contained herein;
(ii) all obligations, covenants and agreements of the Purchasers required to be
performed at or prior to the Closing Date shall have been performed;
(iii) the delivery by the Purchasers of the items set forth in Section 2.2(b) of
this Agreement; and
(iv) the Initial Closing shall be for no less than the $2,000,000 Minimum
Amount;
(b) The respective obligations of the Purchasers hereunder in connection with
each Closing are subject to the following conditions being met:
(i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained herein;
(ii) Accrued Salary (as hereinafter defined) shall have been converted to shares
of the Company's Common Stock or forfeited in accordance with the provisions of
Section 3.1(s);
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(iii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;
(iv) the Initial Closing shall be for no less than the $2,000,000 Minimum
Amount;
(v) the delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;
(vi) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and
(vii) the Engagement Letter on terms and conditions satisfactory shall be in
effect and constitute a binding agreement on the parties thereto.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby makes the
representations and warranties set forth below to each Purchaser.
(a) Subsidiaries. The Company owns, directly or indirectly, all of the capital
stock or other equity interests of the Subsidiary free and clear of any Liens,
and all the issued and outstanding shares of capital stock of the Subsidiary are
validly issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities. The Company has no other
direct or indirect subsidiaries other than the Subsidiary.
(b) Organization and Qualification. Each of the Company and the Subsidiary is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiary is duly qualified to conduct business and is
in good standing as a foreign corporation or other entity in each jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not have a material adverse effect on the
results of operations, assets, business or condition (financial or otherwise) of
the Company and the Subsidiary (a "Material Adverse Effect").
(c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company, its Board or its stockholders in connection therewith. Each Transaction
Document has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof and thereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
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(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company do not and will not: (i) conflict with or violate any
provision of the Company's or the Subsidiary's certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or the Subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt or
otherwise) by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) conflict with or result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or the Subsidiary is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or the Subsidiary is bound or
affected; except in the case of each of clauses (ii) and (iii), such as would
not result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) the filing with the Commission of the Registration Statement, and (ii) the
filing of Form D with the Commission and such filings as are required to be made
under applicable state securities laws (collectively, the "Required Approvals").
(f) Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents (including restrictions under federal and state
securities laws). The Warrant Shares, when issued in accordance with the terms
of the Transaction Documents, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents (including
restrictions under federal and state securities laws).
(g) Capitalization. The capitalization (including warrants, options,
exchangeable and/or convertible securities) of the Company as of April 26, 2006
is as set forth on Schedule 3.1(g), and such schedule shall be updated so that
it remains true and correct as of the Initial Closing date. The Company has not
issued any capital stock since its most recently filed periodic report under the
Exchange Act except as set forth on such schedule. No Person has any right of
first refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents. All
of the outstanding shares of capital stock of the Company are validly issued,
fully paid and nonassessable.
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(h) SEC Reports. The Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the one
year preceding the date hereof (or such shorter period as the Company was
required by law or regulation to file such material) (the foregoing materials,
including the exhibits thereto and documents incorporated by reference therein,
being collectively referred to herein as the "SEC Reports"). As of their
respective dates, the SEC Reports (including the financial statements, exhibits
and schedules thereto) complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, as applicable and did not at the time they
were filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to made the statements therein, in light of the circumstances
they were made, not misleading.
Each of the financial statements (including, in each case, any related notes
thereto) contained in the SEC Reports (the "Company Financials"), including any
SEC Reports filed after the date hereof until the Closing, as of their
respective dates, (i) complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (iii) fairly presented the financial
position of the Company at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not, or are not expected to be,
material in amount. The balance sheet of the Company as of December 31, 2005 is
hereinafter referred to as the "Company Balance Sheet." Except as disclosed in
the Company Financials, the Company does not have any liabilities (absolute,
accrued, contingent or otherwise) of a nature required to be disclosed on a
balance sheet or in the related notes to the consolidated financial statements
prepared in accordance with GAAP which are, individually or in the aggregate,
material to the business, results of operations or financial condition of the
Company, except liabilities (i) provided for in the Company Balance Sheet, or
(ii) incurred since the date of the Company Balance Sheet in the ordinary course
of business consistent with past practices and which would not reasonably be
expected to have a Material Adverse Effect.
(i) Material Changes. Since the date of the Company Balance Sheet, except as
specifically disclosed in or contemplated by a subsequent SEC Report, (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 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 United States generally
accepted accounting principles applied on a consistent basis during the periods
involved ("GAAP") or disclosed in filings made with the Commission, (iii) 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, (iv) the Company has not
issued any equity securities to any officer, director or Affiliate except as set
forth on Schedule 3.1(i) and (v) the Company has not made any changes to its
accounting principals, practices or methods, its disclosure controls and
procedures or its internal control over financial reporting. The Company does
not have pending before the Commission any request for confidential treatment of
information.
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(j) Litigation. Except as set forth on Schedule 3.1(j), 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, the
Subsidiary or any of their respective 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 any
of the Transaction Documents or the Securities or (ii) would, if there were an
unfavorable decision, result in a Material Adverse Effect.
(k) Compliance. Neither the Company nor the Subsidiary (i) is in default under
or in violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), 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), (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is in violation of any statute, rule or
regulation of any governmental authority, except in each case as would not
result in a Material Adverse Effect.
(l) Regulatory Permits. Except as set forth in Schedule 3.1(l), the Company and
the Subsidiary possesses all certificates, authorizations and permits issued by
the appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the SEC
Reports, except where the failure to possess such permits would not result in a
Material Adverse Effect ("Material Permits").
(m) Title to Assets. The Company and the Subsidiary have good and marketable
title in fee simple to all real property (if any) owned by them that is material
to the business of the Company and the Subsidiary and good and marketable title
in all personal property owned by them that is material to the business of the
Company and the Subsidiary, in each case free and clear of all Liens, except for
Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company and the Subsidiary and Liens for the payment of federal, state or
other taxes, the payment of which is neither delinquent nor subject to
penalties.
(n) Patents and Trademarks. The Company and the Subsidiary have, or have rights
to use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights, licenses and
other intellectual property rights and similar rights necessary or material for
use in connection with their respective businesses as described in the SEC
Reports and which the failure to so would not result in a Material Adverse
Effect (collectively, the "Intellectual Property Rights"). Neither the Company
nor the Subsidiary has received a notice (written or otherwise) that the
Intellectual Property Rights used by the Company or the Subsidiary violates or
infringes upon the rights of any Person. To the best knowledge of the Company,
all such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights. The
Company and its Subsidiary have used their respective best efforts using
security measures to protect the secrecy, confidentiality and value of all of
their Intellectual Property Rights and Intellectual Property, except where
failure to do so would not have a Material Adverse Effect.
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(o) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as it believes are prudent and customary in the businesses in which the
Company and the Subsidiary are engaged, including, but not limited to, directors
and officers insurance coverage. Neither the Company nor the Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.
(p) Private Placement. Assuming the accuracy of the Purchasers representations
and warranties set forth in Section 3.2, no registration under the Securities
Act is required for the offer and sale of the Securities by the Company to the
Purchasers as contemplated hereby.
(q) 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 the Purchasers and certain other "accredited investors" within the
meaning of Rule 501 under the Securities Act.
(r) Series A $.07 Convertible Preferred Stock. The Company has received
requisite approval by the Board and the approval of its stockholders to amend
its Certificate of Incorporation, in compliance with all applicable laws to
provide for the mandatory exchange all of its outstanding shares of Series A
$.07 Preferred Stock for shares of Common Stock (the "Mandatory Exchange") on
the terms set forth in the Definitive Proxy Statement used in connection with
its March 17, 2006 Special Meeting of Stockholders. The Company has provided
notice of the Mandatory Exchange as required pursuant to the Company's
Certificate of Incorporation, as amended (the "Amended Certificate"), and
Delaware Law to the holders of the Company's Series A $.07 Preferred Stock, and
accordingly, the shares of Series A $.07 Convertible Preferred Stock are deemed
to have been exchanged for Common Stock and no further action of the Company or
the holders of the Series A $.07 Preferred Stock (but for mechanics, including
the submission of their stock certificate) is required to complete the Mandatory
Exchange. The Series A $.07 Convertible Preferred Stock has been delisted from
the OTC:BB. The balance sheet to be included in the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 2006 will reflect no shares of
Series A $.07 Preferred Stock outstanding.
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(s) Accrued Salaries. The unpaid and accrued salaries (the "Accrued Salary") of
the Company as of May 15, 2006 is expected to be approximately $404,000.
Effective as of the Initial Closing date, not less than $275,000 of the Accrued
Salary shall have been forfeited or converted into shares of Common Stock at a
price equal to the Purchase Price (with appropriate adjustment made to account
for applicable payroll and withholding taxes which shall be paid by the
Company).
3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby, for
itself and for no other Purchaser, represents and warrants as of the date hereof
and as of the Closing Date to the Company as follows:
(a) Organization; Authority. Such Purchaser if an entity is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution, delivery and performance by such Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate or similar action on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and
when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(b) Own Account. Such Purchaser understands that the Securities are "restricted
securities" and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Securities as principal for
its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
(this representation and warranty not limiting such Purchaser's right to sell
the Securities pursuant to the Registration Statement or otherwise in compliance
with applicable federal and state securities laws) in violation of the
Securities Act or any applicable state securities law. Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its business.
(c) Purchaser Status. At the time such Purchaser was offered the Securities, it
was, and at the date hereof it is, and on each date on which it exercises any
Warrants it will be either: (i) an "accredited investor" as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act. Such
Purchaser is not required to be registered as a broker-dealer under Section 15
of the Exchange Act.
(d) Experience of Such Purchaser. Such Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
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(e) General Solicitation. Such Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
(f) Short Sales and Confidentiality Prior To The Date Hereof. Such Purchaser has
not directly or indirectly, nor has any Person acting on behalf of or pursuant
to any understanding with such Purchaser, executed any Short Sales or granted
any option for the purchase of or entered into any hedging or similar
transaction with the same economic effect as a Short Sale, in the securities of
the Company since the time period beginning two weeks prior to the time that
such Purchaser was first contacted regarding an investment in the Company
through the date hereof. During such period, neither such Purchaser nor any
Person acting on behalf of or pursuant to any understanding with such Purchaser,
has taken, directly or indirectly, any actions to trade in the Company's
Securities that might reasonably be expected to cause or result, under the
Securities Act or Exchange Act, or otherwise, or that has constituted,
stabilization or manipulation of the price of the Common Stock. Additionally,
each Purchaser agrees to comply with Regulation M under the Exchange Act.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, to the Company or
to an affiliate of a Purchaser, the Company may require the transferor thereof
to provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company (the cost of which will be borne by the
Company), the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act. As a
condition of transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION NOR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.
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(c) Certificates evidencing the Shares and the Warrant Shares shall not be
required to bear any legend (including the legend set forth in Section 4.1(b)
hereof): (i) while a registration statement (including the Registration
Statement) covering the resale of such security is effective under the
Securities Act, or (ii) following any sale of such Shares or Warrant Shares
pursuant to Rule 144, or (iii) if such Shares or Warrant Shares are eligible for
sale under Rule 144(k). If requested by a Person holding the Shares, the
Warrants or the Warrant Shares, the Company shall take action reasonably
requested by a Purchaser (including, but not limited to, causing Company counsel
to issue a legal opinion to the Company's transfer agent) after the Effective
Date if required by the Company's transfer agent to effect the removal of the
legend hereunder provided that the Person requesting the removal of such legend
shall have provided to such counsel such documents as it may reasonably request
and are normally provided in accordance with industry standards.
(d) Each Purchaser, severally and not jointly with the other Purchasers, agrees
that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the Company's
reliance that the Purchaser will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom, and that if
Securities are sold pursuant to a Registration Statement, they will be sold in
compliance with the plan of distribution set forth therein.
4.2 Composition of the Board; Officers.
(a) Prior to or at the Initial Closing, the Company shall increase the size of
the Board from three persons to four persons and appoint Dr. Xxxxx Xxxxx to fill
such vacancy and to serve in such capacity until the Company's next annual
meeting of stockholders and otherwise pursuant to the Company's By-laws. Xx.
Xxxxx shall serve as Chairman. Thereafter, Xx. Xxxxx shall be included on the
slate of Directors presented to shareholders for election at each annual meeting
of stockholders of the Company. Xx. Xxxxx and the DC Designee (as defined below)
shall be entitled to payment of all reasonable costs and expenses to attend
Board meetings, including travel and hotel and to receive no less than the
highest amount of compensation as the directors of the Company receives and in
accordance with compensation otherwise set by the Board.
(b) Following the Closing, DC shall be entitled to designate one Board member
(the "DC Designee"), in addition to Xx. Xxxxx, reasonably acceptable to the
Company and the Company shall increase the size of the Board by one additional
member and appoint such designee to fill such vacancy and to serve in such
capacity until the Company's next annual meeting of stockholders and otherwise
pursuant to the Company's By-laws. Should such designee constitute an
Independent Director (an "Independent Director") such designee shall be entitled
to serve on the Company's Compensation Committee of the Board, should the
Company have one. Thereafter, such designee shall be included on the slate of
Directors presented to shareholders for election at each annual meeting of
stockholders of the Company.
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(c) Following the Closing, the Company will endeavor to add additional members
to its Board of Directors such that a majority of the Board is composed of
Independent Directors. For purposes hereof, Xx. Xxxxx shall in all events be
considered an Independent Director.
(d) Prior to or at the Initial Closing, the Board will appoint Xx. Xxxxx as the
Company's Chief Executive Officer and the Company's current Chief Executive
Officer and President shall retain the title of President.
(e) The rights provided for in this Section 4.2 shall cease immediately upon
Purchasers beneficially owning in the aggregate less than 20% of the Common
Stock on a fully-diluted basis. The Company shall be entitled to verify such
level of ownership by the Purchasers of the Common Stock as it may reasonably
request.
4.3 Board Meetings; Annual Stockholder's Meeting. The Company agrees that the
Board shall meet at least quarterly and it shall hold an annual meeting of its
stockholders on an annual basis.
4.4 SEC Filings. As long as the Purchasers own Securities, the Company covenants
to timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to the Exchange Act.
4.5 Lock-up. Without the express prior written consent of DC, none of the
Company's or the Subsidiary's current or future respective officers or directors
will offer, sell, contract to sell or grant any option to purchase or otherwise
dispose of, directly or indirectly, conduct or announce the offering of, any
shares of capital stock of the Company, or any securities convertible into, or
exchangeable for or containing rights to purchase, shares of capital stock of
the Company, during the period beginning on the date hereof and ending three
months after the Effective Date (the "Lock-up Period").
4.6 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder for marketing and other working capital purposes associated
with the establishment and expansion of the Company's adult stem cell collection
and storage business and other general corporate purposes. Such use of net
proceeds shall be as set forth on Exhibit D attached hereto.
4.7 Executive Officer Compensation Plan. On the Closing Date, the Company shall
adopt the Executive Officer Compensation Plan set forth as Exhibit E which shall
be effective as of the initial Closing Date.
4.8 Certain Actions. Without the approval of a majority of the Board the Company
shall not, directly and/or indirectly, take any of the following actions for so
long as the Purchasers beneficially own in the aggregate not less than 20 % of
the Common Stock on a fully-diluted basis:
(a) unless in the ordinary course of business, make any loan or advance, own any
stock or other securities of, any subsidiary or other corporation, partnership
or other entity unless it is wholly-owned by the Company;
14
(b) guaranty any indebtedness except for trade accounts of the Company or any
subsidiary arising in the ordinary course of business;
(c) incur any aggregate indebtedness in excess of $100,000 that is not already
included in a Board approved budget or otherwise already approved by the Board
on the date hereof (for clarity, this limitation shall not apply to indebtedness
associated with the Company's acquisition of the assets of NeoStem, nor other
trade credit incurred in the ordinary course of business);
(d) change the principal business of the Company;
(e) sell, transfer, license, pledge or encumber technology or intellectual
property, including, but not limited to any of the Intellectual Property Rights,
other than licenses granted in the ordinary course of business, including but
not limited to the establishment of adult stem cell collection sites;
(f) sell, merge or dispose of any key technology;
(g) sell, merge or dispose of any business unit; or
(h) Except as contemplated by Exhibit E or this Agreement, hire, fire or change
the compensation of executive officers or enter into any new employment
agreements with executive officers, including adding a senior management person
to the Company as CEO, President or as otherwise determined.
For purposes of this Section 4.8, the Company shall be entitled to verify such
level of ownership by the Purchasers of the Common Stock as it may reasonably
request.
4.9 Absence of Certain Debt. On the Initial Closing date, unless otherwise
agreed to by DC, there shall be no direct and/or indirect debt, quasi-debt or
preferred stock of the Company outstanding, other than (A) convertible notes in
an aggregate principal amount not to exceed $500,000 (the "Convertible Notes");
(B) other promissory notes in an aggregate principal amount not to exceed
$100,000; (C) the Company's Series A $.07 Convertible Preferred Stock and Series
B Convertible Preferred Stock and (D) an aggregate of $500,000 of trade payables
and other liabilities incurred in the ordinary course of business.
4.10 Non-Competition and Non-Disclosure. The Company will require each key
employee who has not already done so to enter into agreements containing the
Company's standard non-competition, inventions and confidentiality agreement.
4.11 Information Rights. For so long as the Purchasers own beneficially at least
20% of the Company's Common Stock, DC will be granted access to Company
facilities and personnel during normal business hours and with reasonable
advance notification. The Company will deliver to the Purchasers annual,
quarterly financial statements and copies of other financial and other documents
and/or information reasonably requested by DC to monitor the Company and its
investment in the Securities.
15
4.12 Reservation and Listing of Securities. The Company shall maintain a reserve
from its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents.
4.13 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of any Purchaser. The Company shall take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Securities for, sale to the Purchasers at
the Closing under applicable securities or "Blue Sky" laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of any Purchaser.
4.15. Public Disclosure. The Company shall not issue any press release or
otherwise make any public statement with respect to this Agreement and will not
issue any such press release or make any such public statement without the prior
consent of DC, which shall not be unreasonably withheld.
ARTICLE V.
MISCELLANEOUS
5.1 Termination. On the Termination Date, this Agreement shall be
automatically terminated.
5.2 Fees and Expenses. The parties acknowledge that the obligations relating to
the payment of certain fees and expenses relating to the negotiation,
preparation, execution, delivery and performance of the transactions
contemplated by the Transaction Documents are set forth in the Engagement
Agreement and further described in Exhibit D - Use of Proceeds. Except as
expressly set forth in the Engagement Agreement, each party to the Transaction
Documents shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the transactions contemplated by the Transaction Documents. The
Company shall pay all transfer agent fees, stamp taxes and other taxes and
duties levied in connection with the delivery of any Securities to the
Purchasers.
5.3 Entire Agreement. The Transaction Documents and the Engagement Agreement,
together with the exhibits and schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission (accompanied
by confirmation of receipt of transmission), if such notice or communication is
delivered via facsimile at the facsimile number or via e-mail at the e-mail
address respectively set forth on the signature pages attached hereto prior to
5:30 p.m. (New York City time) on a Business Day, (b) the next Business Day
after the date of transmission (accompanied by confirmation of receipt of
transmission), if such notice or communication is delivered via facsimile at the
facsimile number or via e-mail at the e-mail address respectively set forth on
the signature pages attached hereto on a day that is not a Business Day or later
than 5:30 p.m. (New York City time) on any Business Day, (c) the 2nd Business
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom such
notice is required to be given. The address for such notices and communications
shall be as set forth on the signature pages attached hereto.
16
5.5 Amendments; Waivers. No provision of this Agreement may be waived, modified,
supplemented or amended except in a written instrument signed, in the case of an
amendment, by the Company and each Purchaser or, in the case of a waiver, by the
party against whom enforcement of any such waived provision is sought. No waiver
of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right.
5.6 Headings. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof.
5.7 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser (other than by merger). Any
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such Purchaser assigns or transfers any Securities, provided such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to the
"Purchasers".
5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.
5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced exclusively in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by law. The
parties hereby waive all rights to a trial by jury. If either party shall
commence an action or proceeding to enforce any provisions of the Transaction
Documents, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys' fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.
17
5.10 Survival. The representations, warranties, covenants and other agreements
contained herein shall survive the Closing and the delivery, exercise and/or
conversion of the Securities, as applicable for the applicable statue of
limitations.
5.11 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a ".pdf" format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or ".pdf" signature page were an original thereof.
5.12 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
5.13 Independent Nature of Purchasers' Obligations and Rights. The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers 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 Purchaser 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 Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents.
18
5.14 Construction. The parties agree that each of them and/or their respective
counsel has reviewed and had an opportunity to revise the Transaction Documents
and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
(Signature Pages Follow)
19
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
PHASE III MEDICAL, INC. Address for Notice:
-------------------
By: 000 Xxxxx Xxxxxxx Xxxx
Xxxxx 000
------------------------------------ Melville, New York 11747
Name: Attention: CEO
Title:
With a copy to (which shall not constitute notice): 000 Xxxxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, Xxx Xxxx 00000
Attention: General Counsel
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of
Purchaser:_____________________________________________________________________
Signature of Authorized Signatory of
Purchaser:_____________________________________________________________________
Name of Authorized
Signatory:_____________________________________________________________________
Title of Authorized
Signatory:_____________________________________________________________________
Email Address of
Purchaser:_____________________________________________________________________
Facsimile Number of
Purchaser:_____________________________________________________________________
Home Address of Purchaser:_____________________________________________________
Business Address of Purchaser:_________________________________________________
Address for Delivery of Securities of Purchaser (if not same as above):
---------------------------------------------------------
---------------------------------------------------------
Social Security Number or Tax ID Number of Purchaser:_________________________
Aggregate Purchase Price:
-----------------------------------
Number of Shares:
-----------------------------------
Number of Warrants:
-----------------------------------
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