EXHIBIT 10.7
NAME OF SUBSCRIBER: __________________________________
To: BOSTON LIFE SCIENCES, INC.
c/o Josephthal & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
BOSTON LIFE SCIENCES, INC.
SUBSCRIPTION AGREEMENT AND INVESTMENT REPRESENTATION
SECTION 1.
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1.1. Subscription. The undersigned, intending to be legally bound, hereby
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irrevocably subscribes for and agrees to purchase, as indicated on page 17
hereof, the amount of shares ("Shares") of convertible preferred stock, par
value $0.01 per share ("Series B Convertible Preferred Stock") and common stock
purchase warrants ("Warrants", and collectively the Shares and Warrants are
sometimes hereinafter referred to as the "Securities") of Boston Life Sciences,
Inc., a Delaware corporation (the "Company"), on the terms and conditions
described herein and in the Confidential Private Placement Memorandum, dated
January 1999 (such memorandum, together with all amendments thereof and
supplements and exhibits thereto, the "Memorandum"), a copy of which has been
received by the undersigned. The undersigned herewith tenders to the Company
the entire subscription amount by wire transfer of immediately available funds
or by check made payable to the order of Continental Stock Transfer & Trust
Company F/B/O Boston Life Sciences, Inc., to be delivered to Continental Stock
Transfer & Trust Company at 0 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
The undersigned shall have the right, at its option, to convert any
shares of Series B Convertible Preferred Stock into fully paid and nonassessable
whole shares of common stock of the Company ("Common Stock") in accordance with
the Certificate of Designations, the form of which is attached hereto as Exhibit
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A ("Certificate of Designations"). The description of the terms and conditions
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of the Series B Convertible Preferred Stock as set forth herein are subject in
all respects to the terms and conditions set forth in the Certificate of
Designations. In addition, the holders of the Series B Convertible Preferred
Stock will be provided certain "mandatory" registration rights, as set out more
fully in Section 4 herein.
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Each Warrant shall entitle the holder thereof to purchase one share of
Common Stock at an initial exercise price equal to the sum of (a) the closing
bid price for the Common Stock on the NASDAQ Stock Market on the trading day (as
defined in the Warrant) that is the trading day prior to the Closing Date (as
defined below), plus (b) $.25. The Warrants shall be exercisable for a period
of thirty-six (36) months from the date of issuance and shall not be redeemable
by the Company at any time. Each Warrant also provides to its holder certain
"mandatory" registration rights, as set out more fully in the Warrant, the form
of which is attached hereto as Exhibit B.
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Josephthal & Co. Inc. (the "Placement Agent") has been retained by the
Company as exclusive placement agent for the offer and sale of up to $8,000,000
in Securities (with an additional $500,000 solely to cover over-allotments) to
"accredited investors" as that term is defined pursuant to Regulation D
promulgated under the Securities Act of 1933, as amended (the
1
"Securities Act"). The minimum purchase price is $100,000. Lesser subscription
amounts may be accepted at the discretion of the Placement Agent or the Company.
Unless otherwise indicated all capitalized terms not defined herein shall have
the same meanings and definitions as set forth in the Memorandum.
1.2 Purchase of Securities.
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Payment for the Securities shall be by wire transfer or check, in
accordance with the instructions on page 1 of this Subscription Agreement,
together with an executed copy of this Agreement and any other required
documents.
SECTION 2.
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2.1. Acceptance or Rejection.
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(a) The undersigned understands and agrees that the Company reserves
the right to reject this subscription for the Securities in whole or part, if,
in its reasonable judgment, it deems such action in the best interest of the
Company, at any time prior to Closing, notwithstanding prior receipt by the
undersigned of notice of acceptance of the undersigned's subscription.
(b) The undersigned understands and agrees that subscriptions may be
revoked by the undersigned provided that written notice of revocation is sent by
certified or registered mail, return receipt requested, and is received by the
Placement Agent at least two (2) business days prior to the applicable closing.
(c) In the event of rejection of this subscription, or in the event
the sale of the Securities subscribed for by the undersigned is not consummated
by the Company for any reason (in which event this Subscription Agreement shall
be deemed to be rejected), this Subscription Agreement and any other agreement
entered into between the undersigned and the Company relating to this
subscription shall thereafter have no force or effect and the Company shall
promptly return or cause to be returned to the undersigned the purchase price
remitted to the Company by the undersigned, without interest thereon or
deduction therefrom.
2.2. Closing; Closing Date.
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Each closing (the "Closing") of the purchase and sale of the
Securities following the acceptance by the Company of the undersigned's
subscription, as evidenced by the Company's execution of this Subscription
Agreement, shall take place at the offices of Josephthal & Co. Inc. at 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other place as determined by the
Placement Agent, on such date or dates as is mutually agreed to by the Company
and the Placement Agent. At each Closing of the purchase and sale of the
Securities subscribed to by the undersigned, the Company shall prepare for
delivery to the undersigned the certificates for the Series B Convertible
Preferred Stock and Warrants to be issued and sold to the undersigned, duly
registered in the undersigned's name against payment in full by the undersigned
of the aggregate purchase price of the Securities.
SECTION 3.
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3.1. Investor Representations and Warranties.
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The undersigned hereby acknowledges, represents and warrants to, and
agrees with, the Company and its affiliates as follows:
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(a) The undersigned is acquiring the Securities for his own account
as principal, not as a nominee or agent, for investment purposes only, and not
with a view to, or for, resale, distribution or fractionalization thereof in
whole or in part and no other person has a direct or indirect beneficial
interest in such Securities. Further, the undersigned does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities for which the undersigned is subscribing.
(b) The undersigned has full power and authority to enter into this
Agreement, the execution and delivery of this Agreement has been duly
authorized, if applicable, and this Agreement constitutes a valid and legally
binding obligation of the undersigned.
(c) The undersigned acknowledges his understanding that the offering
and sale of the Securities 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 promulgated thereunder ("Regulation D"). In
furtherance thereof, the undersigned represents and warrants to and agrees with
the Company and its affiliates as follows:
(i) The undersigned realizes that the basis for the exemption
may not be present if, notwithstanding such
representations, the undersigned has in mind merely
acquiring Securities for a fixed or determinable period in
the future, or for a market rise, or for sale if the market
does not rise. The undersigned does not have any such
intention.
(ii) The undersigned is an "accredited investor" as that term is
defined pursuant to Regulation D promulgated under the
Securities Act and has the financial ability to bear the
economic risk of his investment, has adequate means for
providing for his current needs and personal contingencies
and has no need for liquidity with respect to his
investment in the Company;
(iii) _________________ (insert name of Purchaser Representative:
if none, leave blank) has acted as the undersigned's
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Purchaser Representative for purposes of the private
placement exemption under the Securities Act. If the
undersigned has appointed a Purchaser Representative (which
term is used herein with the same meaning as given in Rule
501(h) of Regulation D), the undersigned has been advised
by his Purchaser Representative as to the merits and risks
of an investment in the Company in general and the
suitability of an investment in the Securities for the
undersigned in particular; and
(iv) The undersigned (together with his Purchaser
Representative(s), if any) has such knowledge and
experience in financial and business matters as to be
capable of evaluating the merits and risks of the
prospective investment in the Securities. If other than an
individual, the undersigned also represents it has not been
organized for the purpose of acquiring the Securities.
(d) The information in the Accredited Investor Questionnaire
completed and executed by the undersigned is substantially in the form of the
Accredited Investor Questionnaire
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included as an exhibit to the Memorandum (the "Accredited Investor
Questionnaire") and is accurate and true in all respects and the undersigned is
an "accredited investor," as that term is defined in Rule 501 of Regulation D.
(e) The undersigned and his Purchaser Representative, if any:
(i) Have been furnished with the Memorandum, including all
exhibits thereto and any documents which may have been made
available upon request for a reasonable time prior to the
date hereof and the undersigned or his Purchaser
Representative(s) have carefully read the Memorandum and
understands and have evaluated the risks set forth under
"Risk Factors" and the considerations described in the
Memorandum and have relied solely (except as indicated in
subsections (ii) and (iii) below) on the information
contained in the Memorandum (including all exhibits
thereto);
(ii) Have been provided an opportunity for a reasonable time
prior to the date hereof to obtain additional information
concerning the offering of the Securities, the Company and
all other information to the extent the Company possesses
such information or can acquire it without unreasonable
effort or expense;
(iii) Have been given the opportunity for a reasonable time prior
to the date hereof to ask questions of, and receive answers
from, the Company or its representatives concerning the
terms and conditions of the offering of the Securities and
other matters pertaining to this investment, and have been
given the opportunity for a reasonable time prior to the
date hereof to obtain such additional information necessary
to verify the accuracy of the information contained in the
Memorandum or that which was otherwise provided in order
for him to evaluate the merits and risks of purchase of the
Securities to the extent the Company possesses such
information or can acquire it without unreasonable effort
or expense;
(iv) Have not been furnished with any oral representation or
oral information in connection with the offering of the
Securities which is not contained in the Memorandum; and
(v) Have determined that the Securities are a suitable
investment for the undersigned and that at this time the
undersigned could bear a complete loss of such investment.
(f) The undersigned is not relying on the Company, or its affiliates
with respect to economic considerations involved in this investment. The
Undersigned has relied on the advice of, or has consulted with only those
persons, if any, named as Purchaser Representative(s) herein and in the
Accredited Investor Questionnaire and such other advisors and counsel as the
undersigned may have chosen. The undersigned and each Purchaser Representative
is capable of evaluating the merits and risks of an investment in the Securities
on the terms and conditions set forth in the Memorandum and each Purchaser
Representative has disclosed to the undersigned in writing (a copy of which is
annexed to this Agreement) the
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specific details of any and all past, present or future relationships, actual or
contemplated, between himself and the Company or any affiliate or subsidiary
thereof.
(g) The undersigned represents, warrants and agrees that he will not
sell or otherwise transfer the Securities without registration under the
Securities Act or an exemption therefrom and fully understands and agrees that
he must bear the economic risk of his purchase because, among other reasons, the
Securities have not been registered under the Securities Act or under the
securities laws of any state and, therefore, cannot be resold, pledged, assigned
or otherwise disposed of unless they are subsequently registered under the
Securities Act and under the applicable securities laws of such states or an
exemption from such registration is available. In particular, the undersigned is
aware that the Securities are "restricted securities," as such term is defined
in Rule 144 promulgated under the Securities Act ("Rule 144"), and they may not
be sold pursuant to Rule 144 unless all of the conditions of Rule 144 are met.
The undersigned also understands that, except as otherwise provided herein and
in the certificates for the Warrants, the Company is under no obligation to
register the Securities on his behalf or to assist him in complying with any
exemption from registration under the Securities Act or applicable state
securities laws. The undersigned further understands that sales or transfers of
the Securities are further restricted by state securities laws and the
provisions of this Agreement.
(h) No representations or warranties have been made to the
undersigned by the Company, or any officer, employee, agent, affiliate or
subsidiary of the Company, other than the representations of the Company
contained herein and in the Memorandum, and in subscribing for Securities the
undersigned is not relying upon any representations other than those contained
herein or in the Memorandum.
(i) Any information which the undersigned has heretofore furnished to
the Company with respect to his financial position and business experience is
correct and complete as of the date of this Agreement and if there should be any
material change in such information he will immediately furnish such revised or
corrected information to the Company.
(j) The undersigned understands and agrees that the certificates for
the Securities shall bear the following legend until (i) such securities shall
have been registered under the Securities Act and effectively been disposed of
in accordance with the registration statement; or (ii) in the opinion of counsel
for the Company or other counsel reasonably acceptable to the Company, such
securities may be sold without registration under the Securities Act as well as
any applicable "Blue Sky" or state securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT
WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING
OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE CORPORATION, OR OTHER COUNSEL
REASONABLY ACCEPTABLE TO THE CORPORATION, THAT THE PROPOSED DISPOSITION IS
CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY
APPLICABLE "BLUE SKY" OR SIMILAR SECURITIES LAW."
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(k) The undersigned understands that an investment in the Securities
is a speculative investment which involves a high degree of risk and could
result in the loss of his entire investment.
(l) The undersigned's overall commitment to investments which are not
readily marketable is not disproportionate to the undersigned's net worth, and
an investment in the Securities will not cause such overall commitment to become
excessive.
(m) The undersigned understands that no federal or state agency has
made any finding or determination regarding the fairness of the offering of the
Securities or any recommendation or endorsement of the offering of the
Securities.
(n) The undersigned is not subscribing for the Securities as a result
of or subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine, or similar media or broadcast over
television or radio, any seminar or meeting, or any solicitation of a
subscription by a person or entity not previously known to the undersigned in
connection with investments in securities generally.
(o) The undersigned has not engaged any broker or other person or
entity that is entitled to a commission, fee or other remuneration as a result
of the execution, delivery or performance of this Agreement or any other
required documents.
(p) Neither the execution, delivery nor performance of this Agreement
or any other required documents by the undersigned violates or conflicts with or
creates (with or without the giving of notice or the lapse of time, or both) a
default under, or a lien or encumbrance upon, any of the undersigned's assets or
properties pursuant to or requires the consent, approval, or order of any
government or governmental agency or other person or entity under (x) any note,
indenture, lease, license or other material agreement to which the undersigned
is a party or by which it or any of its assets or properties is bound or (y) any
statute, law, rule, regulation or court decree binding upon or applicable to the
undersigned or its assets or properties. If the undersigned is not a person, the
execution and delivery by the undersigned of this Agreement or any other
required documents have been duly authorized by all necessary corporate or other
action on behalf of the undersigned and such investment will not constitute a
breach or violation of, or default under, the charter or by-laws or equivalent
governing documents of the undersigned.
(q) The undersigned has no knowledge that the statements of the
Company contained in the Memorandum are not true and correct in all material
respects. The undersigned has consulted its own financial, legal and tax
advisors with respect to the economic, legal and tax consequences of an
investment in the Securities and has not relied on the Memorandum, this
Agreement, the Company or the Company's officers, directors, affiliates or
professional advisors for advice as to such consequences.
(r) The undersigned, if an individual, is at least 21 years of age
and has full legal capacity to enter into and perform his obligations under this
Agreement and any other required documents.
(s) THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT, FRAUD OR OTHERWISE) IN ANY WAY ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT AND ANY OTHER
6
REQUIRED DOCUMENTS OR THE UNDERSIGNED'S PURCHASE OF THE SECURITIES.
(t) The undersigned acknowledges and agrees that all information,
written and oral, concerning the Company furnished from time to time to the
undersigned, including this Agreement and any other required documents, is
provided on a confidential basis. The undersigned further acknowledges and
agrees that it shall not disclose such information, other than where such
disclosure is required by law or where such information is already available to
the public other than as a result of disclosure by the undersigned, to anyone
other than the undersigned's officers, directors, employees, legal counsel,
accountants, or authorized agents or advisors, who shall agree in writing to be
bound by the provisions of this paragraph.
(u) The undersigned consents to the placing of legends and stop-
transfer orders with the transfer agent of the Company's securities with respect
to any of such securities registered in the name of the undersigned or
beneficially owned by the undersigned.
(v) The foregoing representations, warranties and agreements shall
survive the execution and delivery of this Agreement and each Closing.
SECTION 4.
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4.1. Mandatory Registration.
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Within twenty-one (21) days following the issuance of the Series B
Convertible Preferred Stock, the Company shall prepare and file with the
Securities and Exchange Commission ("Commission"), a registration statement and
such other documents, including a prospectus, as may be necessary in the opinion
of both counsel for the Company and counsel for the Placement Agent in order to
comply with the provisions of the Securities Act so as to permit a resale of the
shares of Common Stock underlying the Series B Convertible Preferred Stock
("Registrable Shares") by the holders ("Holders") for a consecutive period of
two years or until the distribution described in the registration statement has
been completed, whichever is shorter, provided that, for not more than thirty
(30) consecutive Trading Days (or not more than sixty (60) consecutive Trading
Days if the event giving rise thereto is an acquisition required to be reported
in a Current Report on Form 8-K pursuant to Item 2 thereof) or for a total of
not more than ninety (90) trading days in any twelve (12) month period, the
Company may delay the disclosure of material non-public information concerning
the Company (as well as prospectus or registration statement updating) the
disclosure of which at the time is not, in the good faith opinion of the
Company, in the best interests of the Company (an "Allowed Delay"); provided,
further, that the Company shall promptly (i) notify the undersigned in writing
of the existence of (but in no event, without the prior written consent of the
undersigned, shall the Company disclose to such undersigned any of the facts or
circumstances regarding) material non-public information giving rise to an
Allowed Delay and (ii) advise the undersigned in writing to cease all sales
under such registration statement until the end of the Allowed Delay. The
Company shall use its best efforts to cause the registration statement to become
effective at the earliest possible time. In the event the registration statement
for the shares of Common Stock underlying the Series B Convertible Preferred
Stock is not effective by the date that is one hundred and twenty (120) days
from the date of issuance of the Series B Convertible Preferred Stock, the
Company shall issue shares of Common Stock ("Penalty Shares") to each Holder,
for the consecutive thirty (30) day period following the one hundred and twenty
(120) days, equal to the number obtained by multiplying three percent (3%) by
the Holder's initial subscription amount divided by the Initial Conversion Price
(as defined in the Certificate of Designations) (such shares to be reduced pro
rata for any period less than a full thirty (30) day period). In addition,
7
for each consecutive thirty (30) day period beyond the initial one hundred and
fifty (150) day period that the Registrable Shares are not the subject of an
effective registration statement, the Company agrees to issue additional shares
of Common Stock (also "Penalty Shares") to each Holder equal to the number
obtained by multiplying five percent (5%) by the Holder's initial subscription
amount divided by the Initial Conversion Price (such additional shares to be
reduced pro rata for any period less than a full thirty (30) day period).
In addition to the registration rights detailed above, within 270 days
after the issuance of the Series B Convertible Preferred Stock, the Company
shall prepare and file with the Commission a registration statement and such
other documents, including a prospectus, as may be necessary in the opinion of
both counsel for the Company and counsel for the Placement Agent in order to
comply with the provisions of the Securities Act so as to permit a resale of any
shares of Common Stock issued to produce the Guaranteed Return specified in the
Certificate of Designations and any Penalty Shares, such registration to be on
the same terms as the Registrable Shares (except no Penalty Shares shall be
issued).
4.2. Covenants of the Company With Respect to Registration.
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In connection with any registration under Section 4.1 hereof, the
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Company covenants and agrees as follows:
(a) The Company shall furnish each Holder desiring to sell its
securities such number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s)' counsel and any underwriting or selling commissions or other charges
of any broker-dealer acting on behalf of Holder(s)), fees and expenses in
connection with all registration statements filed pursuant to Section 4.1 hereof
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including, without limitation, the Company's legal and accounting fees, printing
expenses and blue sky fees and expenses.
(c) The Company will take all necessary action which may be required
in qualifying or registering the securities included in the registration
statement for resale under the securities or blue sky laws of such states as are
requested by the Placement Agent or Holder(s), provided that the Company shall
not be obligated to qualify as a foreign corporation to do business under the
laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the securities to be
sold pursuant to any registration statement and each person, if any, who
controls such Holders within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the
Securities Act, the Exchange Act or any other statute, common law or otherwise,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained (x) in such registration statement (as from time to
time amended and supplemented); (y) in any post-effective amendment or
amendments; or (z) in any application or other document or written communication
(in this Section 4 collectively called an "application") executed by the Company
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or based upon written information furnished by the Company filed in any
jurisdiction in order to qualify the securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
the American Stock Exchange, the National Association of Securities Dealers,
Inc., The Nasdaq Stock Market or any securities exchange, or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make
8
the statements contained therein not misleading, unless such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company by the undersigned or the Placement Agent on behalf of
the Holders expressly for use in such registration statement, any amendment or
supplement thereto or any application, as the case may be. If any action is
brought against the undersigned or any controlling person of the undersigned in
respect of which indemnity may be sought against the Company pursuant to this
Section 4, the undersigned or such controlling person shall within thirty (30)
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days after the receipt thereby of a summons or complaint notify the Company in
writing of the institution of such action and the Company shall assume the
defense of such action, including the employment and payment of reasonable fees
and expenses of counsel (which counsel shall be reasonably satisfactory to the
undersigned or such controlling person), but the failure to give such notice
shall not affect such indemnified person's right to indemnification hereunder
except to the extent that the Company's defense of such action was materially
adversely affected thereby. The undersigned or such controlling person shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of the undersigned or such
controlling person unless the employment of such counsel shall have been
authorized in writing by the Company in connection with the defense of such
action, the Company shall not have employed counsel to have charge of the
defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to the Company (in which
case the Company shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events the fees
and expenses of not more than one additional firm of attorneys for the
undersigned and/or such controlling person shall be borne by the Company. Except
as expressly provided in the previous sentence, in the event that the Company
shall not previously have assumed the defense of any such action or claim, the
Company shall not thereafter be liable to the undersigned or such controlling
person in investigating, preparing or defending any such action or claim. The
Company agrees promptly to notify the undersigned of the commencement of any
litigation or proceedings against the Company or any of its officers, directors
or controlling persons in connection with the offering and sale of the
securities or in connection with such registration statement.
(e) The Holder(s) of the securities to be sold pursuant to a
registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify the Company, its officers and directors and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, against all loss, claim,
damage or expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Securities Act, the Exchange Act or otherwise,
arising from written information furnished by or on behalf of such Holders or
the Placement Agent on behalf of the Holders, or their successors or assigns,
for specific inclusion in such registration statement. The Holder(s) further
agree(s) that upon demand by an indemnified person, at any time or from time to
time, they will promptly reimburse such indemnified person for any loss, claim,
damage, liability, cost or expense actually and reasonably paid by the
indemnified person as to which the Holder(s) have indemnified such person
pursuant hereto. Notwithstanding the foregoing provisions of this Section
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4.2(e), any such payment or reimbursement by the Holder(s) of fees, expenses or
disbursements incurred by an indemnified person in any proceeding in which a
final judgment by a court of competent jurisdiction (after all appeals or the
expiration of time to appeal) is entered against the Company or such indemnified
person as a direct result of the Company or such person's gross negligence or
willful misfeasance will be promptly repaid to the Holder(s).
9
(f) If the offering described herein is an underwritten public
offering and the underwriter so requests, the Company shall furnish to each
Holder participating in the offering and to each underwriter, if any, and the
Placement Agent, a signed counterpart, addressed to such Holder or underwriter,
if any, and the Placement Agent, of (i) an opinion of counsel to the Company,
dated the dated the date of the closing under the underwriting agreement, and
(ii) a "cold comfort" letter dated the date of the closing under the
underwriting agreement signed by the independent public accountants who have
issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(g) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to convert any securities for Common Stock prior to the
initial filing of any registration statement or the effectiveness thereof.
SECTION 5.
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5.1 Certain Covenants and Agreements of the Holder(s). Holder(s) of
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the securities hereby covenant that they will conduct all purchases or sales of
Common Stock in compliance with all existing agreements with the Company, and
all relevant securities laws and regulations. Holder(s) further covenant that
they will not engage in any short sales, option transaction, or other hedging
transactions relating to the Common Stock; provided, however, that such holders
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may engage in any short sales at any time prior to two hundred and seventy (270)
days after the date of Closing by converting shares of the Series B Convertible
Preferred Stock, so long as a registration statement covering the underlying
Common Stock has been declared effective and remains in effect, and thereafter
may engage in such sales, with the prior consent of the Company.
SECTION 6
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6.1 Representations and Warranties of the Company. The Company
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represents and warrants, as of the date hereof and as of the date of Closing,
the following:
(i) The execution, delivery and performance of each of this
Subscription Agreement, the placement agent's warrant agreement ("Placement
Agent's Warrant Agreement") and the escrow agreement ("Escrow Agreement") has
been or will be duly and validly authorized by the Company and is, or with
respect to the Subscription Agreement and Placement Agent's Warrant Agreement
will be, a valid and binding agreement of the Company, enforceable in accordance
with their respective terms, except to the extent that (a) the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws from time to time in effect and affecting the rights of creditors
generally, (b) the enforceability thereof is subject to general principles of
equity or (c) the indemnification provisions thereof may be held to be violative
of public policy. The warrants issued to the Placement Agent ("Placement Agent's
Warrants") and the Warrants constitute valid and binding obligations of the
Company to issue and sell, upon exercise thereof and payment therefor in
accordance with their respective terms, the number and type of securities of the
Company called for thereby. The Securities have been duly authorized and, when
issued and paid for in accordance with the Memorandum, the Escrow Agreement, the
Placement Agent's Warrant Agreement and this Subscription Agreement, the
certificates representing each of such securities, will be valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except to the
10
extent that (a) the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to time in
effect and affecting the rights of creditors generally, and (b) the
enforceability thereof is subject to general principles of equity. All corporate
action required to be taken for the authorization, issuance and sale of the
Securities has been duly and validly taken by the Company.
(ii) The Securities have been duly authorized and, when issued, will
be validly issued, fully-paid and non-assessable; the holders thereof will not
be subject to personal liability solely by reason of being such holders; such
securities are not and will not be subject to the preemptive rights of any
holder of any security of the Company.
(iii) To the best of the Company's knowledge, all issued and
outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable. The Company has 25,000,000 shares
of authorized Common Stock. Immediately prior to the Closing there were
approximately 13,300,000 shares of Common Stock issued and outstanding.
(iv) There is no litigation or governmental proceeding pending or,
to the best of the Company's knowledge, threatened against, or involving the
properties or business of the Company, except as set forth in the Memorandum.
(v) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware. The
Company does not own or control, directly or indirectly, an interest in any
other corporation, partnership, trust, joint venture or other business entity,
except for its wholly owned subsidiaries as reflected in the Company's SEC
filing. The Company is duly qualified or licensed and in good standing as a
foreign corporation in each jurisdiction in which the Company presently conducts
its business and where failure to so qualify would have a material adverse
effect on the Company. The Company has all requisite corporate power and
authority, and all material and necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies (domestic and foreign) to conduct its businesses (and
proposed business) as described in the Memorandum, and the Company is doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates and permits and all foreign, federal, state and local
laws, rules and regulations concerning the business in which it is engaged. Any
disclosures in the Memorandum concerning the effects of foreign, federal, state
and local regulation on the Company's businesses as currently conducted and as
contemplated are correct in all material respects and do not omit to state a
material fact. The Company has all corporate power and authority to enter into
the Escrow Agreement, the Placement Agent's Warrant Agreement and this
Subscription Agreement and to carry out the provisions and conditions hereof,
and all consents, authorizations, approvals and orders required in connection
therewith have been obtained or will have been obtained prior to the date of
Closing. No consent, authorization or order of, and no filing with, any court,
government agency or other body is required by the Company for the issuance of
the Securities pursuant to the Memorandum, the Placement Agent's Warrant
Agreement or this Subscription Agreement, except for applicable federal and
state securities laws. The Company, since its inception, has not incurred any
penalty for violation of the application of any of the provisions of the
Securities Act, the Exchange Act, or the respective rules and regulations
promulgated thereunder ("Rules and Regulations").
(vi) There has been no material adverse change in the condition or
prospects of the Company, financial or otherwise, from that on the latest dates
as of which such condition or prospects, respectively, are set forth in the
Memorandum, and the outstanding debt, the property
11
and the business of the Company conforms in all material respects to the
descriptions thereof contained in the Memorandum.
(vii) Except as set forth in the Memorandum, the Company is not in
breach of, or in default under, any term or provision of any material indenture,
mortgage, deed of trust, lease, note, loan or credit agreement or any other
material agreement or instrument evidencing an obligation for borrowed money, or
to the Company's knowledge, any other material agreement or instrument to which
it is a party or by which it or any of its properties may be bound or affected.
The Company is not in violation of any provision of its charter or Bylaws or in
violation of any franchise, license, permit, judgment, decree or order, or in
violation of any statute, rule or regulation. Neither the execution and delivery
of the Escrow Agreement, this Subscription Agreement or the Placement Agent's
Warrant Agreement nor the issuance and sale or delivery of the Securities nor
the consummation of any of the transactions contemplated in this Subscription
Agreement, the Escrow Agreement or the Placement Agent's Warrant Agreement, nor
the compliance by the Company with the terms and provisions thereof, has
conflicted with or will conflict with, or has resulted in or will result in a
breach of, any of the terms and provisions of, or has constituted or will
constitute a default under, or has resulted in or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or pursuant to the terms of any indenture, mortgage, deed of trust,
note, loan or credit agreement or any other agreement or instrument evidencing
an obligation for borrowed money, or any other agreement or instrument to which
the Company may be bound or to which any of the property or assets of the
Company is subject except (a) where such default, lien, charge or encumbrance
would not have a material adverse effect on the Company and (b) as described in
the Memorandum; nor will such action result in any violation of the provisions
of the charter or the Bylaws of the Company or, assuming the due performance by
the Placement Agent of its obligations hereunder, any statute or any order, rule
or regulation applicable to the Company of any court or of any foreign, federal,
state or other regulatory authority or other government body having jurisdiction
over the Company.
(viii) Except for sponsored research and license agreements between
the Company and Harvard Medical School and its affiliated institutions (the
"Sponsored Agreements"), the Company owns or possesses, free and clear of all
liens or encumbrances and rights thereto or therein by third parties, the
requisite licenses or other rights to use all trademarks, service marks,
copyrights, service names, trade names, patents, patent applications and
licenses necessary to conduct its business (including, without limitation, any
such licenses or rights described in the Memorandum as being owned or possessed
by the Company) and there is no claim or action by any person pertaining to, or
proceeding, pending or to the Company's knowledge threatened, which challenges
the exclusive rights of the Company with respect to any trademarks, service
marks, copyrights, service names, trade names, patents, patent applications and
licenses used in the conduct of the Company's businesses (including, without
limitation, any such licenses or rights described in the Memorandum as being
owned or possessed by the Company) except any claim or action that would not
have a material adverse effect on the Company; the Company's current products,
services or processes do not infringe or will not infringe on the patents
currently held by any third party.
(ix) Except as described in the Memorandum, pursuant to the
Sponsored Agreements and to its professional and scientific consultants, the
Company is not under any obligation to pay royalties or fees of any kind
whatsoever to any third party with respect to any trademarks, service marks,
copyrights, service names, trade names, patents, patent applications, licenses
or technology it has developed, uses, employs or intends to use or employ, other
than to their respective licensors.
12
(x) To the Company's knowledge, subject to the performance by the
Placement Agent of its obligations hereunder, the Memorandum and the offer and
sale of the Securities comply, and will continue to comply, up to the date of
Closing in all material respects with the requirements of Rule 506 of Regulation
D promulgated by the Commission pursuant to the Securities Act and any other
applicable federal and state laws, rules, regulations and executive orders.
Neither the Memorandum nor any amendment or supplement thereto nor any documents
prepared by the Company in connection with the purchase and sale of the
Securities will contain any 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, in light of the circumstances under which they were made,
not misleading. All statements of material facts in the Memorandum are true and
correct as of the date of the Memorandum and will be true and correct on the
date of Closing.
(xi) All taxes which are due and payable from the Company have been
paid in full and the Company does not have any tax deficiency or claim
outstanding assessed or proposed against it.
(xii) The financial statements of the Company included or
incorporated by reference in the Memorandum fairly present the financial
position of the Company at the respective dates of such financial statements;
and such financial statements have been prepared in conformity with generally
accepted accounting principles, consistently applied throughout the periods
involved.
(xiii) The Common Stock of the Company is registered pursuant to
Section 12(g) of the Exchange Act and the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the Commission pursuant to the reporting requirements of the Exchange Act,
including material filed pursuant to Section 13(a) or 15(d) (all of the
foregoing including filings incorporated by reference therein being referred to
herein as the "SEC Documents"). The Company has not provided to any purchaser
any information which, according to applicable law, rule or regulation, should
have been disclosed publicly by the Company but which has not been so disclosed.
To the best of the Company's knowledge, as of their respective dates, the SEC
Documents (as amended by any amendments filed prior to the date hereof and the
date of Closing and provided to each purchaser) complied in all material
respects with the requirements of the Exchange Act and the Rules and Regulations
and other federal, state and local laws, rules and regulations applicable to
such SEC Documents, and none of the SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. To the best of the
Company's knowledge, the financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial
statements have be prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
13
SECTION 7
---------
7.1 Conditions of each Closing. At each Closing, the purchasers
--------------------------
shall receive the opinion of Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP, counsel to
the Company, dated as of the date of Closing, which opinion shall be in form and
substance reasonably satisfactory to counsel for the Placement Agent.
SECTION 8.
---------
8.1 Indemnity. In addition to the indemnification set forth in
---------
Section 4.2, the undersigned agrees to indemnify and hold harmless the Company,
its officers and directors, employees and its affiliates and each other person,
if any, who controls any thereof, against any loss, liability, claim, damage and
expense whatsoever (including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation commenced or threatened or any claim whatsoever) arising out of
or based upon any false representation or warranty or breach or failure by the
undersigned to comply with any covenant or agreement made by the undersigned
herein or in any other document furnished by the undersigned to any of the
foregoing in connection with this transaction.
8.2 Modification. Neither this Agreement nor any provisions hereof
------------
shall be modified, discharged or terminated except by an instrument in writing
signed by the party against whom any waiver, change, discharge or termination is
sought.
8.3 Notices. Any notice, demand or other communication which any
-------
party hereto may be required, or may elect, to give to anyone interested
hereunder shall be sufficiently given if (a) deposited, postage prepaid, in a
United States mail letter box, registered or certified mail, return receipt
requested, addressed to such address as may be given herein, or (b) delivered
personally at such address.
8.4 Counterparts. This Agreement may be executed through the use of
------------
separate signature pages or in any number of counterparts, and each of such
counterparts shall, for all purposes, constitute one agreement binding on all
parties, notwithstanding that all parties are not signatories to the same
counterpart.
8.5 Binding Effect. Except as otherwise provided herein, this
--------------
Agreement shall be binding upon and inure to the benefit of the parties and
their heirs, executors, administrators, successors, legal representatives and
assigns. If the undersigned is more than one person, the obligation of the
undersigned 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 heirs, executors, administrators
and successors.
8.6 Entire Agreement. This Agreement and the documents referenced
----------------
herein contain the entire agreement of the parties and there are no
representations, covenants or other agreements except as stated or referred to
herein and therein.
8.7 Assignability. This Agreement is not transferable or assignable
-------------
by the undersigned.
8.8 Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of New York, without giving
effect to conflicts of law principles.
14
8.9 Pronouns. The use herein of the masculine pronouns "him" or
--------
"his" or similar terms shall be deemed to include the feminine and neuter
genders as well and the use herein of the singular pronoun shall be deemed to
include the plural as well.
15
ALL SUBSCRIBERS MUST COMPLETE THIS PAGE
IN WITNESS WHEREOF, the undersigned has executed this Agreement on the ______
day of , 199_.
____________________________ X $____ PER SECURITY = $___________________________
Securities Subscribed for Purchase Price
Manner in which Title is to be held (Please Check One):
---
1. [_] Individual 7. [_] Trust/Estate/Pension or Profit
Sharing Plan
Date
Opened: ______________________
2. [_] Joint Tenants with Right of 8. [_] As a Custodian for
Survivorship
-------------------------------------
Under the Uniform Gift to
Minors Act of the State of
-------------------------------------
3. [_] Community Property 9. [_] Married with Separate
Property
4. [_] Tenants in Common 10. [_] Xxxxx
5. [_] Corporation/Partnership/ 11. [_] Tenants by the Entirety
Limited Liability Company
6. [_] XXX
________________________________________________________________________________
IF MORE THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN.
INDIVIDUAL SUBSCRIBERS MUST COMPLETE PAGE 18 AND 20
SUBSCRIBERS WHICH ARE ENTITIES MUST COMPLETE PAGES 19 AND 21
16
EXECUTION BY NATURAL PERSONS
----------------------------
________________________________________________________________________________
EXACT NAME IN WHICH TITLE IS TO BE HELD
________________________________ ____________________________________
Name (Please Print) Name of Additional Purchaser
________________________________ ____________________________________
Residence: Number and Street Address of Additional Purchaser
________________________________ ____________________________________
City, State and Zip Code City, State and Zip Code
________________________________ ____________________________________
Social Security Number Social Security Number
________________________________ ____________________________________
(Signature) (Signature of Additional Purchaser)
ACCEPTED this _____ day of _________, 199_ on behalf of the Company.
BY:__________________________________
Name:
Title:
17
EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY
------------------------------------------
(Corporation, Partnership, Trust, Etc.)
________________________________________________________________________________
Name of Entity (Please Print)
Date of Incorporation or Organization:__________________________________________
State of Principal Offices:_____________________________________________________
Federal Taxpayer Identification_________________________________________________
BY:_____________________________________
Name:
Title:
[seal]
____________________________________ _____________________________________
(If Entity is a Corporation)
_____________________________________
Address
_____________________________________
Taxpayer Identification Number
ACCEPTED this ____ day of _________, 199_ on behalf of the Company.
BY:_____________________________________
Name:
Title:
18
ACKNOWLEDGMENT FOR INDIVIDUAL
STATE OF____________________)
) ss.:
COUNTY OF___________________)
The foregoing instrument was acknowledged before me this __ day of _____,
199_, by _____________.
_____________________________________
(SEAL) Notary Public
My Commission expires: Residing at:
___________________________ _____________________________________
*IF SUBSCRIBER IS A REGISTERED REPRESENTATIVE
WITH AN NASD MEMBER FIRM, HAVE THE FOLLOWING
ACKNOWLEDGEMENT SIGNED BY THE APPROPRIATE PARTY:
The undersigned NASD member firm
acknowledges receipt of the notice
required by Section 3050 of the NASD's
Rules of Conduct (or any successor rules
or regulations)
______________________________
Name of NASD Member Firm
By: _________________________
Authorized Officer
19
ACKNOWLEDGMENT FOR CORPORATION OR OTHER ENTITY
STATE OF__________________)
) ss.:
COUNTY OF_________________)
The foregoing instrument was acknowledged before me this ______ day of
________, 199_, by ___________________________, a ______________________ of
_____________________, a ______________________.
_______________________________
(SEAL) Notary Public
My Commission expires: Residing at:
___________________________ _______________________________
20
