EXHIBIT 10.42
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") made as of the date set
forth on the signature page hereof between B-G Development Corporation ("BGDC")
Pacific Pharmaceuticals, Inc. ("Pacific" and collectively with BGDC sometimes
referred to as the "Companies"), and the undersigned (the "Subscriber").
W I T N E S S E T H:
WHEREAS, the Companies have retained Paramount Capital, Inc. (the
"Placement Agent") to act as Placement Agent, on a "best efforts" basis, in a
private offering (the "Offering") of units (the "Units") of BGDC and Pacific;
WHEREAS, the Companies desire to issue a minimum of 10 Units (the
"Minimum Offering") and a maximum of 60 Units (the "Maximum Offering") with an
option in favor of the Placement Agent to offer up to an additional 40 Units to
cover over-allotments (the "Over-allotment"), each Unit consisting of 50,000
shares of Series A Convertible Preferred Stock (the "Preferred Stock") of BGDC,
par value $.001 per share, stated value $2.00 per share as more fully described
in the Term Sheet (terms used herein but not defined herein shall have the
meanings set forth in the Term Sheet). Each share of Preferred Stock is
convertible at the option of the holder thereof into one share of common stock
of BGDC, par value $.001 per share (the "BGDC Common Stock"), initially at a
conversion price (the "Conversion Price") equal to $2.00 per share of Common
Stock. In addition, the Preferred Stock will automatically convert into BGDC
Common Stock upon the occurrence of a Qualified IPO or a Trading Event (each as
defined below). To the extent that any shares of Preferred Stock are outstanding
on the date that is two years following the Final Closing Date (the "Exchange
Date"), then, for the 60-day period thereafter, the holders of Preferred Stock
will have the right (the "Exchange Right") to put their shares of Preferred
Stock, if any, to Pacific for $3.99 per share (the "Exchange Purchase Price").
The Exchange Purchase Price may be paid in cash, shares of common stock of
Pacific, par value $.02 per share ("Pacific Common Stock") or any combination
thereof, at Pacific's sole discretion, within 60 days after the exercise of the
Exchange Right (the Preferred Stock, BGDC Common Stock issuable upon conversion
of the Preferred Stock and the Pacific Common Stock receivable upon exercise of
the Exchange Right are sometimes hereinafter referred to as the "Securities").
The Companies expect the closing of the Offering to occur on or before June 1,
1998 subject to subject to an extension of this Offering for up to an additional
60 days at the option of BGDC, with the consent of the Placement Agent and the
Placement Agent, in its sole discretion (such date, as may be extended, the
"Final Closing Date");
WHEREAS, the Subscriber desires to purchase that number of Units set
forth on the signature page hereof on the terms and conditions hereinafter set
forth;
1
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Companies such
number of Units, or fractions thereof, and the Companies agree to sell such
Units to the Subscriber as is set forth on the signature page hereof at a price
equal to $100,000 per Unit (the "Initial Offering Price"). The purchase price
is payable by personal or business check, wire transfer of immediately available
funds or money order made payable to "Fleet Bank, N.A., Escrow Agent, F/B/O B-G
Development Corp. and Pacific Pharmaceuticals, Inc." contemporaneously with the
execution and delivery of this Agreement by the Subscriber. The certificates
representing the shares of Preferred Stock shall be delivered by the BGDC within
10 business days following the consummation of the Offering. The Subscriber
understands, however, that this purchase of Units is contingent upon the
Companies making sales of the Minimum Offering amount prior to the Final Closing
Date of the Offering.
1.2 The Subscriber recognizes that the purchase of Units involves a
high degree of risk including, but not limited to, the following: (a) each of
the Companies remains a development stage business with limited operating
history and requires substantial funds in addition to the proceeds of the
Offering; (b) an investment, each of in the Companies is highly speculative, and
only investors who can afford the loss of their entire investment should
consider purchasing Units; (c) the Subscriber may not be able to liquidate its
investment; (d) transferability of the Securities is extremely limited; (e) in
the event of a disposition, the Subscriber could sustain the loss of its entire
investment; and (f) neither of the Companies have paid any dividends since their
respective inceptions and neither of the Companies anticipates paying any
dividends, even if declared by the Companies' respective Board of Directors.
Such risks are more fully set forth in the Confidential Term Sheet dated April
22, 1998 as supplemented and amended, and the attachments and exhibits thereto,
all of which constitute an integral part thereof furnished by the Company to the
Subscriber (the "Term Sheet").
1.3 The Subscriber represents that the Subscriber is an "accredited
investor" as such term is defined in Rule 501 of Regulation D ("Regulation D")
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
as indicated by the Subscriber's responses to the questions contained in Article
VIII hereof, and that the Subscriber is able to bear the economic risk of an
investment in the Units.
1.4 The Subscriber hereby acknowledges and represents that (a) the
Subscriber has knowledge and experience in business and financial matters, prior
investment experience, including investment in securities that are non-listed,
unregistered and/or not traded on a national securities exchange nor on the
National Association of Securities Dealers (the "NASD") automated quotation
system, or the Subscriber has employed the services of a "purchaser
representative" (as defined in Rule 501 of Regulation D) to read all of the
documents furnished or made available by each of the Companies both to the
Subscriber and to all other prospective investors in the Units and to evaluate
the merits and risks of such an investment on the Subscriber's behalf; (b) the
Subscriber recognizes the highly speculative nature of this investment; and (c)
the Subscriber is able to bear the economic risk that the Subscriber hereby
assumes.
1.5 The Subscriber hereby acknowledges receipt and careful review of
the Term Sheet and all attachments thereto, including, without limitation,
Exhibit A entitled "Risk Factors" and this Agreement, (collectively referred to
as the "Offering Materials") and hereby represents that it has been furnished by
each of BGDC and Pacific during the course of the Offering with all information
regarding the respective Companies that the Subscriber has requested or desired
to know, has been afforded the opportunity to ask questions of and receive
answers from duly authorized officers or other representatives of each of BGDC
and Pacific, respectively, concerning the terms and conditions of the Offering
and has received any additional information that the Subscriber has requested.
1.6 (a) In making the decision to invest in the Units the Subscriber
has relied solely upon the information provided by the Companies in the Term
Sheet and all attachments thereto and in this Agreement. To the extent
necessary, the Subscriber has retained, at its own expense, and relied upon
appropriate professional advice regarding the investment, tax and legal merits
and consequences of this Agreement and its purchase of the Units hereunder. The
Subscriber disclaims reliance on any statements made or information provided by
any person or entity in the course of Subscriber's consideration of an
investment in the Units other than the Offering Materials. The Subscriber
acknowledges and agrees that (i) the Companies have prepared the Term Sheet and
that no other person, including without limitation, the Placement Agent, has
supplied any information for inclusion in the Term Sheet other than information
furnished in writing to the Companies by the Placement Agent specifically for
inclusion in the Term Sheet relating to the Placement Agent, (ii) the Placement
Agent has no responsibility for the accuracy or completeness of the Term Sheet
and (iii) the Subscriber has not relied upon the independent investigation or
verification, if any, that may have been undertaken by the Placement Agent.
(b) The Subscriber represents that (i) the Subscriber was
contacted regarding the sale of the Units by the Placement Agent (or an
authorized agent or representative thereof) with whom the Subscriber had a
prior substantial pre-existing relationship and (ii) no Units were offered or
sold to it by means of any form of general solicitation or general
advertising, and in connection therewith the Subscriber did not (A) receive
or review any advertisement, article, notice or other communication
published in a newspaper or magazine or similar media or broadcast over
television or radio, whether closed circuit, or generally available; or (B)
attend any seminar meeting or industry investor conference whose attendees
were invited by any general solicitation or general advertising.
1.7 The Subscriber hereby represents that the Subscriber, either by
reason of the Subscriber's business or financial experience or the business or
financial experience of the Subscriber's professional advisors (who are
unaffiliated with and not compensated by BGDC, Pacific or any affiliate or
selling agent of BGDC or Pacific, including the Placement Agent, directly or
indirectly), has the capacity to protect the Subscriber's own interests in
connection with the transaction contemplated hereby.
1.8 The Subscriber hereby acknowledges that the Offering has not been
reviewed by the United States Securities and Exchange Commission (the "SEC") nor
any state regulatory authority since the Offering is intended to be exempt from
the registration requirements of Section 5 of the Securities Act pursuant to
Regulation D promulgated thereunder. The Subscriber understands that the
Securities have not been registered under the Securities Act and agrees not to
sell or otherwise transfer the Securities unless they are registered under the
Securities Act or unless an exemption from such registration is available.
1.9 The Subscriber understands that the Securities comprising the
Units have not been registered under the Securities Act by reason of a claimed
exemption thereunder that depends, in part, upon the Subscriber's investment
intention. In this connection, the Subscriber hereby represents that the
Subscriber is purchasing the Securities comprising the Units for the
Subscriber's own account for investment and not with a view toward the resale or
distribution to others. The Subscriber, if an entity, further represents that
it was not formed for the purpose of purchasing the Securities.
1.10 The Subscriber understands that there is no public market for the
Units or the Securities comprising the Units and that no market may develop for
any of such Securities. The Subscriber understands that even if a public market
develops for such securities Rule 144 ("Rule 144") promulgated under the
Securities Act requires for non-affiliates, among other conditions, a one-year
holding period prior to the resale (in limited amounts) of securities acquired
in a non-public offering without having to satisfy the registration requirements
under the Securities Act. The Subscriber understands and hereby acknowledges
that neither BGDC nor Pacific is under any obligation to register any of the
Units or any of the Securities comprising the Units under the Securities Act or
any state securities or "blue sky" laws other than as set forth in Article V
hereof. The Subscriber agrees to hold BGDC, Pacific and their respective
directors, officers, employees, affiliates, controlling persons and agents
(including the Placement Agent and its officers, directors, employees, counsel,
controlling persons and agents) and their respective heirs, representatives,
successors and assigns harmless and to indemnify them against all liabilities,
costs and expenses incurred by them as a result of, (a) any misrepresentation
made by the Subscriber contained in this Agreement
(including the Confidential Investor Questionnaire contained in Article VIII
herein), (b) any sale or distribution by the Subscriber in violation of the
Securities Act or any applicable state securities or "blue sky" laws or (c)
any untrue statement of a material fact made by the Subscriber and contained
herein.
1.11 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Securities that such Securities
have not been registered under the Securities Act or any state securities or
"blue sky" laws and setting forth or referring to the restrictions on
transferability and sale thereof contained in this Agreement. The Subscriber is
aware that BGDC will make a notation in its appropriate records with respect to
the restrictions on the transferability of the Preferred Stock and BGDC Common
Stock issued or issuable upon conversion of the Preferred Stock (the "Conversion
Shares") and that Pacific will make a notation in its appropriate records with
respect to the restrictions on the transferability of the Pacific Common Stock
issuable upon exercise of the Exchange Right (the "Exchange Shares").
1.12 The Subscriber understands that each of the Companies will review
this Agreement and are hereby given authority by the Subscriber to call
Subscriber's bank or place of employment or otherwise review the financial
standing of the Subscriber; and it is further agreed that each of the Companies
(with the consent of the Placement Agent) and the Placement Agent, at its sole
discretion, reserves the unrestricted right, without further documentation or
agreement on the part of the Subscriber, to reject or limit any subscription, to
accept subscriptions for fractional Units and to close the Offering to the
Subscriber at any time and will issue stop transfer instructions to its transfer
agent with respect to such Securities.
1.13 The Subscriber hereby represents that the address of the
Subscriber furnished by Subscriber on the signature page hereof is the
Subscriber's principal residence if Subscriber is an individual or its principal
business address if it is a corporation or other entity.
1.14 The Subscriber represents that the Subscriber has full power and
authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchase the Units and the Securities underlying the Units.
This Agreement constitutes the legal, valid and binding obligation of the
Subscriber, enforceable against the Subscriber in accordance with its terms.
1.15 If the Subscriber is a corporation, partnership, limited
liability company, trust, employee benefit plan, individual retirement account,
Xxxxx Plan, or other tax-exempt entity, it is authorized and qualified to become
an investor in each of the Companies and the person signing this Agreement on
behalf of such entity has been duly authorized by such entity to do so.
1.16 The Subscriber acknowledges that if he or she is a Registered
Representative of an NASD member firm, he or she must give such firm the notice
required by the NASDs Rules of Fair Practice, receipt of which must be
acknowledged by such firm in Section 8.4 below.
1.17 The Subscriber acknowledges that at such time, if ever, as the
Securities are registered, sales of the Securities will be subject to state
securities laws.
1.18 The Subscriber acknowledges that it has received all reports
filed by Pacific with the SEC under the Exchange Act of 1934 during the 1998
fiscal year or which are incorporated by reference in the Term Sheet.
1.19 (a) Subscriber agrees that:
(i) from the earlier to occur of (A) the initial public
offering of BGDC Common Stock (the "IPO") and (B) the first date (the "Trading
Date") on which BGDC Common Stock (or securities received by all holders of BGDC
Common Stock in exchange for BGDC Common Stock) trades a national securities
exchange or on the National Association of Securities Dealers, Inc. Automated
Quotation System (collectively "NASDAQ") (a "Trading Event"), and continuing for
a period of nine months thereafter, Subscriber will not, without the prior
written consent of the Placement Agent, offer, pledge, sell, contract to sell,
grant any option for the sale of, or otherwise dispose of, directly or
indirectly, 75% of the Conversion Shares held by each Subscriber; provided,
however, that, following each three month period after the Trading Date, an
amount of Conversion Shares equal to 25% of the number of Conversion Shares held
by the Subscriber shall become exempt from the lock-up provisions contained in
this sentence. For the sake of clarity, 25% of the Conversion Shares will not
be subject to any lock-up. In addition, the Subscriber agrees that while it
holds any Preferred Stock, Conversion Shares or Exchange Shares, it will not
directly or indirectly, through related parties, affiliates or otherwise sell
any of the Companies' securities "short" or "short against the box" (as those
terms are generally understood). In addition, in connection with the IPO, the
Subscriber agrees to be subject to a lock-up for a period of 180 days following
the IPO or such longer period as may be required by the underwriter or
underwriters of such IPO.
(ii) in the event that the Initial Exchange Right (as
defined below) is exercised by Subscriber, 50% of Subscriber's Initial Exchange
Shares shall be subject to a "lock-up" for the first 90 days following the
effective date of a Pacific Registration Statement that includes such Initial
Exchange Shares. For the sake of clarity, 50% percent of Subscriber's Initial
Exchange Shares will not be subject to any contractual lock-up.
(iii) in the event that the Exchange Right is exercised by
Subscriber, 50% of each Subscriber's Exchange Shares, shall be subject to a
"lock-up" for the first 90 days following the Effective Date (as defined below)
of a Pacific Registration Statement (as defined below) that includes such
Exchange Shares of
the Subscriber. For the sake of clarity, 50% percent of the Exchange
Shares will not be subject to any contractual lock-up.
(iv) in connection with any public offering of Pacific
Common Stock, Subscriber, if a holder of Exchange Shares at such time, agrees to
be subject to a lock-up for a period of 60 days following such public offering
or such longer period as may be required by the underwriter or underwriters of
such public offering.
(b) In order to enforce the foregoing covenant, the Companies
may impose stop-transfer instructions with respect to the Registrable Securities
(as defined below) of each Holder (as defined below) (and the shares or
securities of every other person subject to the foregoing restriction) until the
end of such period.
1.20 (a) The Subscriber agrees not to issue any public statement with
respect to the Subscriber's investment or proposed investment in the Companies
or the terms of any agreement or covenant between them and each of the Companies
without each of the Companies' prior written consent, except such disclosures as
may be required under applicable law or under any applicable order, rule or
regulation.
(b) The Companies agree not to disclose the names, addresses or
any other information about the Subscribers, except as required by law;
provided, that the Companies may use the name (but not the address) of the
Subscriber in any registration statement filed pursuant to Article V in which
the Subscriber's shares are included and may disclose the names on a
confidential basis to the American Stock Exchange ("AMEX"), if requested.
1.21 The Subscriber represents and warrants that it has not engaged,
consented to or authorized any broker, finder or intermediary to act on its
behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. The Subscriber
hereby agrees to indemnify and hold harmless BGDC and Pacific from and against
all fees, commissions or other payments owing to any such person or firm acting
on behalf of such Subscriber hereunder.
II. REPRESENTATIONS BY AND COVENANTS OF THE COMPANY
Each of BGDC and Pacific hereby represents, warrants and covenants to the
Subscriber that:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION.
(a) Pacific is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full
corporate
power and authority to conduct its business as described in the Exhibits to
the Term Sheet. Pacific is duly qualified to do business as a foreign
corporation and is in good standing in the State of California and Pacific
and its subsidiaries are duly qualified and authorized to do business as a
foreign corporation and are in good standing in each jurisdiction in which
the laws require the Pacific or its subsidiaries to be so qualified and/or
authorized to do business. If required, prior to the any closing, BGDC will
be duly qualified to and authorized to do business as a foreign corporation
in California.
(b) BGDC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has full corporate
power and authority to conduct its business as described in the Term Sheet.
2.2 CAPITALIZATION AND VOTING RIGHTS. The authorized, issued and
outstanding capital stock of BGDC is as set forth in the Term Sheet; all issued
and outstanding shares of BGDC are validly issued, fully paid and nonassessable.
The authorized, issued and outstanding capital stock of Pacific is as set forth
in the Exhibits to the Term Sheet; all issued and outstanding shares of Pacific
are validly issued, fully paid and nonassessable. The Preferred Stock underlying
the Units (including the Preferred Stock issuable upon exercise of the Placement
and Advisory Warrants (as defined in the Term Sheet)), when issued and paid for
in accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable. BGDC shall at all times during the period that any of
the shares of Preferred Stock remain outstanding and unexercised have authorized
and reserved for issuance a sufficient number of shares of BGDC Common Stock to
provide for conversion of the Preferred Stock. Pacific shall at all times
during the period that any of the shares of Preferred Stock remain outstanding
and unexercised have authorized and reserved for issuance a sufficient number of
shares of Pacific Common Stock to provide for the Exchange Right. Except as set
forth in the Term Sheet, there are no outstanding options, warrants, agreements,
convertible securities, preemptive rights or other rights to subscribe for or to
purchase any shares of capital stock of BGDC. Except as set forth in the Term
Sheet, in this Agreement and as otherwise required by law, there are no
restrictions upon the voting or transfer of any of the shares of capital stock
of BGDC pursuant to BGDC's Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), By-Laws or other governing documents or any
agreement or other instruments to which BGDC is a party or by which BGDC is
bound.
2.3 AUTHORIZATION; ENFORCEABILITY. BGDC and Pacific each have
corporate right, power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. All corporate action on the
part of BGDC or Pacific and their respective directors and stockholders that is
necessary for the authorization, execution, delivery and performance of this
Agreement by the Companies, the authorization, sale, issuance and delivery of
the Securities contemplated hereby and the performance of the Companies'
respective obligations hereunder has been taken. This Agreement has been duly
executed and delivered by each of the Companies and constitutes a legal, valid
and binding obligation of both BGDC and
Pacific, enforceable against each Company in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies, and to limitations of public
policy. Upon the issuance and delivery of the Preferred Stock as
contemplated by this Agreement, such Securities will be validly issued, fully
paid and nonassessable. Upon the issuance and delivery of the Conversion
Shares or Exchange Shares, if applicable (including the Conversion Shares or
Exchange Shares issuable upon conversion of the Preferred Stock underlying
the Placement and Advisory Warrants (as defined in the Term Sheet)), and upon
compliance by the Subscriber with the terms hereof, the Conversion Shares or
Exchange Shares will be validly issued, fully paid and nonassessable. The
issuance and sale of the Preferred Stock contemplated hereby and the issuance
and sale of the Conversion Shares or Exchange Shares (including the Preferred
Stock issuable upon exercise of the Placement and Advisory Warrants and the
Conversion Shares or Exchange Shares issuable upon conversion or exchange of
the Preferred Stock underlying the Placement and Advisory Warrants), will not
give rise to any preemptive rights or rights of first refusal on behalf of
any person.
2.4 CERTIFICATE OF DESIGNATIONS OF PREFERRED STOCK. The Preferred
Stock shall have all of the rights, preferences and privileges substantially as
set forth in the Form of Certificate of Designations attached as Exhibit B to
the Term Sheet.
2.5 NO CONFLICT; GOVERNMENTAL CONSENTS.
(a) The execution and delivery by the Companies of this Agreement
and the consummation of the transactions contemplated hereby will not result
in the violation of any law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any court or governmental authority to or
by which BGDC or Pacific is bound, or of any provision of the Certificate of
Incorporation or By-Laws of BGDC or Pacific, and will not conflict with, or
result in a breach or violation of, any of the terms or provisions of, or
constitute (with due notice or lapse of time or both) a default under, any
lease, loan agreement, mortgage, security agreement, trust indenture or other
agreement or instrument to which BGDC or Pacific is a party or by which it is
bound or to which any of its properties or assets is subject, nor result in
the creation or imposition of any lien upon any of the properties or assets
of BGDC or Pacific.
(b) No consent, approval, authorization or other order of any
governmental authority is required to be obtained by the Companies in connection
with the authorization, execution and delivery of this Agreement or with the
authorization, issue and sale of the Units or the Securities comprising the
Units, except such filings as may be required to be made with the SEC, the AMEX,
the NASD and/or NASDAQ and with any state or foreign blue sky or securities
regulatory authority.
2.6 LICENSES. Except as otherwise set forth in the Term Sheet, each
of the Companies has sufficient licenses, permits and other governmental
authorizations
currently required for the conduct of its business or ownership of properties
and is in all material respects complying therewith.
2.7 EXCHANGE RIGHT. (a) If necessary, Pacific covenants and
agrees to use its best efforts in all respects to cause the approval of the
Exchange Right described in Article VI hereof.
(b) Pacific covenants and agrees not to enter into any agreement
that would interfere with or otherwise adversely affect the rights granted to
the Subscriber in Article VI.
2.8 LITIGATION. BGDC knows of no pending or threatened legal or
governmental proceedings against BGDC that would materially adversely affect the
business, property, financial condition or operations of BGDC. Similarly,
Pacific knows of no pending or threatened legal or governmental proceedings
against Pacific that would materially adversely affect the business, property,
financial condition or operations of Pacific.
2.9 TERM SHEET; DISCLOSURE. The information set forth in the Term
Sheet contains no untrue statement of a material fact nor omits to state a
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
2.10 INVESTMENT COMPANY. Neither of the Companies is an "investment
company" within the meaning of such term under the Investment Company Act of
1940, as amended, and the rules and regulations of the SEC thereunder.
2.11 PLACEMENT AGENT. The Companies have engaged, consented to and
authorized the Placement Agent to act as placement agent in connection with the
transactions contemplated by this Agreement. The Companies hereby agree to pay
the Placement Agent a commission as set forth in the Term Sheet and to reimburse
expenses, and the Companies agree to indemnify and hold harmless the Subscribers
from and against all fees, commissions or other payments owing by the Companies
to the Placement Agent or any other person or firm acting on behalf of the
Companies hereunder.
III. TERMS OF SUBSCRIPTION
3.1 The Companies shall issue a minimum of 10 Units (the "Minimum
Offering") and a maximum of 60 Units (the "Maximum Offering") with an option in
favor of the Placement Agent to offer up to an additional 40 Units to cover
over-allotments (the "Over-allotment"), each Unit consisting of 50,000 shares of
Preferred Stock. Each share of Preferred Stock is convertible at the option of
the holder thereof into one share of BGDC Common Stock, initially at a
Conversion Price
equal to $2.00 per share of Preferred Stock and is exchangeable for Pacific
Common Stock as provided in Article VI. The Units will be offered on a "best
efforts" basis. The purchase price is payable by personal or business check,
wire transfer of immediately available funds or money order made payable to
"Fleet Bank, N.A., Escrow Agent, F/B/O B-G Development Corporation and
Pacific Pharmaceuticals, Inc." as set forth in section 1.1 hereof.
3.2 Placement of the Units will be made by the Placement Agent, who
will receive certain compensation as described in the Term Sheet.
3.3 Pending the sale of the Units, all funds paid hereunder shall be
deposited in escrow with Fleet Bank, N.A., having a branch at 000 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx, 00000. If the Companies shall not have obtained
subscriptions (including this subscription) for purchases of the Minimum
Offering amount on or before the Final Closing Date, then this subscription
shall be void and all funds paid hereunder by the Subscriber shall be promptly
returned to the Subscriber, with interest, subject to Section 3.5 hereof.
3.4 The Subscriber hereby authorizes and directs BGDC to deliver the
certificates representing the shares of Preferred Stock to be issued to the
Subscriber pursuant to this Agreement directly to the Subscriber's account
maintained by the Placement Agent, if any, or, if no such account exists, to the
residential or business address indicated on the signature page hereto.
3.5 The Subscriber hereby authorizes and directs the Companies to
return any funds for unaccepted subscriptions to the same account from which the
funds were drawn, including any customer account maintained with the Placement
Agent.
IV. CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBERS
4.1 The Subscriber's obligation to purchase the Units at the closings
(each, a "Closing") is subject to the fulfillment on or prior to each Closing of
the following conditions, which conditions may be waived at the option of each
Subscriber to the extent permitted by law:
(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by each of the Companies in Article II hereof shall be true
and correct in all material respects when made, and shall be true and correct in
all material respects on each Closing with the same force and effect as if they
had been made on and as of said date.
(b) COVENANTS. All covenants, agreements and conditions
contained in this Agreement to be performed by each of the Companies on or prior
to such purchase shall have been performed or complied with in all material
respects.
(c) NO LEGAL ORDER PENDING. There shall not then be in
effect any legal or other order enjoining or restraining the transactions
contemplated by this Agreement.
(d) NO LAW PROHIBITING OR RESTRICTING SUCH SALE. There shall
not be in effect any law, rule or regulation prohibiting or restricting such
sale or requiring any consent or approval of any person, which shall not have
been obtained, to issue the Securities (except as otherwise provided in this
Agreement).
(e) MINIMUM SUBSCRIPTIONS. The Companies shall have received
binding subscriptions for at least the Minimum Offering amount.
V. REGISTRATION RIGHTS
5.1 As used in this Agreement, the following terms shall have the
following meanings:
(a) The term "Holder" shall mean any person owning or having the
right to acquire Registrable Securities or any permitted transferee of a
Holder.
(b) The terms "register", "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act, and the
declaration or order of effectiveness of such registration statement or
document.
(c) The term "REGISTRABLE SECURITIES" shall mean (i) the
Conversion Shares (including the Conversion Shares issuable upon conversion
of the Preferred Stock underlying the Placement and Advisory Warrants), (ii)
any Exchange Shares and (iii) any shares of BGDC or Pacific Common Stock
issued as (or issuable upon the conversion or exercise of any warrant, right
or other security that is issued as) a dividend or other distribution with
respect to or in replacement of the Preferred Stock or BGDC Common Stock;
provided, however, that securities shall only be treated as Registrable
Securities if and only for so long as they (A) have not been disposed of
pursuant to a registration statement declared effective by the SEC, (B) have
not been sold in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act so that all transfer restrictions
and restrictive legends with respect thereto are removed upon the
consummation of such sale and (C) are held by a Holder or a permitted
transferee of a Holder pursuant to Section 5.10.
5.2 "PIGGY-BACK" REGISTRATION RIGHTS. Subject to Section 5.7 hereof,
BGDC agrees that if, at any time, and from time to time, after the earliest
to occur of (i) the IPO and (ii) a Trading Event, and ending on the date that
is five (5) years from the Final Closing Date, the Board of Directors of BGDC
shall authorize the filing of a
registration statement (a "BGDC Registration Statement") under the Securities
Act (other than the initial public offering of the BGDC Common Stock, or
other than a registration statement on Form X-0, Xxxx X-0 or any other form
that does not include substantially the same information as would be required
in a form for the general registration of securities) in connection with the
proposed offer of any of its securities by it or any of its stockholders,
BGDC will (A) promptly notify each holder of Preferred Stock and/or
Conversion Shares that such registration statement will be filed and that the
Conversion Shares then held by such holder of Preferred Stock will be
included in such registration statement at such holder's request, (B) cause
such BGDC Registration Statement to cover all of such Conversion Shares owned
by the holder requesting inclusion, (C) use its reasonable best efforts to
cause such BGDC Registration Statement to become effective as soon as
practicable and (D) take all other action necessary under any Federal or
state law or regulation of any governmental authority to permit all such
Conversion Shares owned by the Holder to be sold or otherwise disposed of,
and will maintain such compliance with each such Federal and state law and
regulation of any governmental authority for the period necessary for the
Holder to effect the proposed sale or other disposition.
Notwithstanding the foregoing, BGDC may at any time, abandon or
delay any BGDC Registration Statement commenced by BGDC. In the event of
such an abandonment by BGDC, BGDC shall not be required to continue
registration of shares requested by the Holder for inclusion and the Holder
shall retain the right to request inclusion of shares as set forth above.
Each Subscriber shall have the right to request inclusion of any of
their Conversion Shares in a registration statement pursuant to this section
5.2(a) up to three times. In the event any BGDC Registration Statement is
stopped or delayed prior to the completion of the distribution contemplated
by said BGDC Registration Statement, then the Holder shall retain the right
to request inclusion of shares as set forth above in subsequent BGDC
Registration Statements.
5.3 PACIFIC REGISTRATION STATEMENT. (a) Pacific agrees that in
the event that the Initial Exchange Right is exercised by holders of more
than 20% of the Preferred Stock then outstanding and elects to pay all or a
portion of the Initial Exchange Price through the issuance of shares of
Initial Exchange Shares, then within 15 days from the expiration of the
Initial Exchange Period, Pacific shall file a shelf-registration statement (a
"Pacific Registration Statement") including the Initial Exchange Shares and
use its best efforts to effect the registration, qualifications or
compliances (including, without limitation, the execution of any required
undertaking to file post-effective amendments, appropriate qualifications or
exemptions under applicable blue sky or other state securities laws and
appropriate compliance with applicable securities laws, requirements or
regulations) as may be so reasonably requested and as would permit or
facilitate the sale and distribution of all of the Initial Exchange Shares
and will maintain such compliance with each such Federal and state law and
regulation of any governmental authority for the period necessary for the
holder to effect the proposed sale or other disposition. Notwithstanding the
foregoing, the Company will not be obligated to enter into any underwriting
agreement for the sale of any of the Initial Exchange Shares.
(b) Pacific agrees that in the event that the Exchange Right
is exercised, Pacific receives shareholder approval, if necessary, and elects
to pay all or a portion of the Exchange Purchase Price (as defined below)
through the issuance of shares of Pacific Common Stock, Pacific shall file a
Pacific Registration Statement within 15 days from the expiration of the
Exchange Period (as defined below) of the Exchange Date (as defined below)
including the Exchange Shares then held by the Holder and use its best
efforts to effect the registration, qualifications or compliances (including,
without limitation, the execution of any required undertaking to file
post-effective amendments, appropriate qualifications or exemptions under
applicable blue sky or other state securities laws and appropriate compliance
with applicable securities laws, requirements or regulations) as may be so
reasonably requested and as would permit or facilitate the sale and
distribution of all Exchange Shares and will maintain such compliance with
each such Federal and state law and regulation of any governmental authority
for the period necessary for the holder to effect the proposed sale or other
disposition. Notwithstanding the foregoing, Pacific will not be obligated to
enter into any underwriting agreement for the sale of any of the Exchange
Shares.
5.4 OBLIGATIONS OF THE COMPANIES. Whenever required under this Article
V to include Registrable Securities in a registration statement, BGDC or
Pacific, as the case may be, shall, as expeditiously as reasonably possible:
(a) Use its reasonable best efforts to cause any such BGDC
Registration Statement or Pacific Registration Statement to become effective,
and, upon the request of the Holders of a majority of the Registrable
Securities registered thereunder, keep such BGDC Registration Statement or
Pacific Registration Statement effective for a period necessary for the
Subscriber to effect the proposed sale or other distribution contemplated in
the respective registration statement, during the period that such
registration statement is required to be maintained hereunder, file such
post-effective amendments and supplements thereto as may be required by the
Securities Act and the rules and regulations thereunder or otherwise to
ensure that the prospectus included therein does not contain any untrue
statement of material fact or omit to state a fact required to be stated
therein or necessary in order to make the statements contained therein, in
light of the circumstances under which they are made, not misleading;
provided, however, that such period shall be extended for a period of time
equal to the period that the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common
Stock (or other securities) of BGDC or Pacific, respectively, and provided
further that if applicable rules under the Securities Act governing the
obligation to file a post-effective amendment permits, in lieu of filing a
post-effective amendment that (i) includes any prospectus required by Section
10(a)(3) of the Securities Act or (ii) reflects facts or events representing
a material or fundamental change in the information set forth in the
respective registration statement,
BGDC or Pacific, as the case may be, may incorporate by reference information
required to be included in (i) and (ii) above to the extent such information
is contained in periodic reports filed pursuant to Section 13 or 15(d) of the
Exchange Act in the registration statement.
(b) Prepare and file with the SEC such amendments and supplements
to such BGDC Registration Statement or Pacific Registration Statement, and
the respective prospectus used in connection with such registration
statement, as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus as amended or supplemented from time to
time, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such BGDC Registration Statement or Pacific
Registration Statement, as applicable, under such other federal or state
securities laws of such jurisdictions as shall be reasonably requested by the
Holders; provided, however, that BGDC or Pacific, as the case may be, shall
not be required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in any such
states or jurisdictions, unless BGDC or Pacific, as applicable, is already
subject to service in such jurisdiction and except as may be required by the
Securities Act.
(e) In the event of any underwritten public offering by BGDC,
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such offering.
Each Holder participating in such underwriting shall also enter into and
perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
BGDC Registration Statement or Pacific Registration Statement, as applicable,
at any time when a prospectus relating thereto is required to be delivered
under the Securities Act, (i) when the registration statement or any
post-effective amendment and supplement thereto has become effective; (ii) of
the issuance by the SEC of any stop order or the initiation of proceedings
for that purpose (in which event BGDC or Pacific, as the case may be, shall
make every effort to obtain the withdrawal of any order suspending
effectiveness of the registration statement at the earliest possible time or
prevent the entry thereof); of the receipt by BGDC or Pacific, as applicable,
of any notification with respect to the suspension of the qualification of
the Registrable Securities for sale in any jurisdiction or the initiation of
any proceeding for such purpose; and (iv) of the happening of any event as a
result of which the prospectus
included in such BGDC Registration Statement or Pacific Registration
Statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances then existing.
(g) Cause all such Registrable Securities registered pursuant to
section 5.2 and/or 5.3 hereof to be listed on each securities exchange or
quotation service on which similar securities issued by BGDC or Pacific are
then listed or quoted.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and CUSIP number for all such
Registrable Securities, in each case not later than the effective date of
such registration.
5.5 FURNISH INFORMATION. It shall be a condition precedent to the
obligation of each of the Companies to take any action pursuant to this
Article V with respect to the Registrable Securities of any selling Holder
that such Holder shall furnish to each of the Companies such information
regarding the Holder, the Registrable Securities held by the Holder, and the
intended method of disposition of such securities as shall be reasonably
required by each of the Companies to effect the registration of such Holder's
Registrable Securities.
5.6 EXPENSES OF REGISTRATION. BGDC and Pacific shall bear and pay all
expenses incurred in connection with any respective registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Article 5.2 and/or 5.3 for each Holder, including (without
limitation) all registration, filing, and qualification fees, printers and
accounting fees relating or apportionable thereto, but excluding underwriting
discounts and commissions relating to Registrable Securities; provided,
however, that neither of the Companies shall bear the cost of any
professional fees or costs of accounting, financial or legal advisors to any
of the Holders. Notwithstanding the foregoing, each Holder shall pay all
registration expenses that such Holder is required to pay under applicable
law.
5.7 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the capital stock of BGDC, BGDC shall
not be required under Section 5.2 to include any of the Holders' Registrable
Securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between BGDC and the underwriters selected (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by BGDC. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities that, when added
to the amount of securities to be sold on the issuer's behalf, the
underwriters determine in their sole discretion is compatible with the
success of the offering then BGDC shall be required to include in the
offering only that number of such securities, including Registrable
Securities, which the underwriters determine in their sole discretion will
not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling stockholders according to the total amount of
securities entitled to be included therein owned by each selling stockholder
or in such other proportions as shall mutually be agreed to by such selling
stockholders, it being understood that BGDC will be entitled to include all
shares it desires to sell on its own behalf in a primary registration without
cutback). For purposes of the preceding parenthetical concerning
apportionment, for any selling stockholder who is a holder of Registrable
Securities and is a partnership or corporation, the partners, retired
partners and stockholders of such holder, or the estates and family members
of any such partners and retired partners and any trusts for the benefit of
any of the foregoing persons shall be deemed to be a single "selling
stockholder", and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder", as defined in this sentence.
5.8 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Article V.
5.9 INDEMNIFICATION. In the event that any Registrable Securities are
included in a registration statement under this Article V:
(a) To the extent permitted by law, BGDC or Pacific, as
applicable, will indemnify and hold harmless each Holder, any underwriter (as
defined in the Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act
or the Exchange Act, against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the Securities Act,
or the Exchange Act, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein not misleading, or (iii) any violation or alleged
violation by BGDC or Pacific, as the case may be, of the Securities Act, the
Exchange Act, or any rule or regulation promulgated under the Securities Act,
or the Exchange Act, and BGDC or Pacific, as the case may be, will pay to
each such Holder, underwriter or controlling person, as incurred, any legal
or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
Section 5.9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected
without the consent of BGDC or Pacific, as applicable, (which consent shall
not be unreasonably withheld),
nor shall BGDC or Pacific, as applicable, be liable in any such case for any
such loss, claim, damage, liability, or action to the extent that it arises
out of or is based upon a Violation that occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person;
and provided further, that the indemnity contained in this Section 5.9(a)
with respect to any prospectus that shall be subsequently amended prior to
the written confirmation of the sale of any such Registrable Securities shall
not inure to the benefit of any Holder or underwriter or other person from
whom the person asserting any such loss, claim damage or liability purchased
the Registrable Securities that are the subject thereof, if such Holder or
underwriter or other person failed to provide a copy of the prospectus as
amended to such person at or prior to the written confirmation of the sale.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless BGDC or Pacific, as the case may be, each of its
directors, each of its officers who has signed the registration statement,
each person, if any, who controls BGDC or Pacific, as the case may be, within
the meaning of the Securities Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any
such underwriter or other Holder, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may
become subject, under the Securities Act, or the Exchange Act, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this Section 5.9(b), in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
Section 5.9(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this Section
5.9(b) exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 5.9 of notice of the commencement of any action (including any
governmental action), such indemnified party shall, if a claim in respect
thereof is to be made against any indemnifying party under this Article 5.9,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly notified, to assume the defense thereof with
counsel selected by the indemnifying party and approved by the indemnified
party (whose approval shall not be unreasonably withheld); provided, however,
that an indemnified party (together with all other indemnified parties which
may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Article 5.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
5.9.
(d) If the indemnification provided for in this Section 5.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred
to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, claim, damage,
or expense in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and
of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering
are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
(f) The obligations of BGDC or Pacific, as applicable, and Holders
under this Section 5.9 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Article V, and
otherwise.
5.10 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view towards
making available to the Holders the benefits of Rule 144 and any other rule
or regulation of the SEC that may at any time permit a Holder to sell
securities of BGDC or Pacific, as the case may be, to the public without
registration, each of the Companies agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times in the case of Pacific and
at all times
from the effective date of the registration statement filed in connection
with an IPO of BGDC Common Stock;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a copy of the most recent
annual or quarterly report of the BGDC or Pacific, as the case may be, and
such other reports and documents so filed by the BGDC or Pacific, as the case
may be, and (ii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
5.11 PERMITTED TRANSFEREES. The rights to cause BGDC and Pacific to
register Registrable Securities granted to the Holders by BGDC and Pacific
under this Article V may be assigned in full by a Holder in connection with a
transfer by such Holder of its Registrable Securities if: (a) such Holder
gives prior written notice to BGDC or Pacific, as applicable; (b) such
transferee agrees to comply with the terms and provisions of this Agreement;
(c) such transfer is otherwise in compliance with this Agreement and (d) such
transfer is otherwise effected in accordance with applicable securities laws.
Except as specifically permitted by this Section 5.11, the rights of a Holder
with respect to Registrable Securities as set out herein shall not be
transferable to any other person, and any attempted transfer shall cause all
rights of such Holder therein to be forfeited.
5.12 TERMINATION OF REGISTRATION RIGHTS. In addition, the right of any
Holder to request inclusion in any registration pursuant to Section 5.2
and/or 5.3 shall terminate if all shares of Registrable Securities held by
such Holder may immediately be sold under Rule 144.
VI. ADDITIONAL CONTRACTUAL RIGHT
6.1 INITIAL EXCHANGE RIGHT. (a) To the extent that any shares of
Preferred Stock are outstanding on the date that is one year following the
Final Closing Date (the "Initial Exchange Date"), then for the 60-day period
thereafter (the "Initial Exchange Period"), the holders of Preferred Stock
will have the right (the "Initial Exchange Right") to put their shares of
Preferred Stock, if any, to Pacific for $2.00 per share (subject to
adjustments for stock splits dividends and other similar adjustments) (the
"Initial Exchange Price").
(b) The Initial Exchange Price may be paid in cash, Pacific Common
Stock or any combination thereof, at Pacific's sole discretion, within 60
days after the exercise of the Initial Exchange Right. If necessary, Pacific
will seek shareholder
approval for the use of Pacific Common Stock at its next annual meeting of
stockholders.
(c) In the event that Pacific elects to pay the Initial Exchange
Price in shares of Pacific Common Stock (the "Initial Exchange Shares"), the
number of shares of Pacific Common Stock to be delivered will be determined
by dividing (a) that portion of the Initial Exchange Price to be paid in
Pacific Common Stock by (b) the average closing price of the Pacific Common
Stock for the 30 consecutive trading days immediately preceding the Initial
Exchange Date on the principal national securities exchange on which the
Pacific Common Stock is admitted to trading or listed, or if not listed or
admitted to trading on any such exchange, the closing bid price of the
Pacific Common Stock as reported by the NASDAQ, or other similar organization
if NASDAQ is no longer reporting such information, or, if the Pacific Common
Stock is not reported on NASDAQ, the closing bid price for the Pacific Common
Stock in the over-the-counter market as reported by the National Quotation
Bureau or similar organization, or if not so available, the fair market value
of the Pacific Common Stock as determined in good faith between the Board of
Directors of Pacific and the holders of a majority of the Preferred Stock
then outstanding.
(d) In addition, in order for the holders of Preferred Stock to
exercise the Initial Exchange Right, each such holder will be required to
represent to Pacific that, at the time of such exercise, it is an "accredited
investor" as that term is defined in Regulation D under the Securities Act.
6.2 EXCHANGE RIGHT. (a) To the extent that any shares of Preferred
Stock are outstanding on the date that is two years following the Final
Closing Date (the "Exchange Date"), then for the 60-day period thereafter
(the "Exchange Period"), the holders of Preferred Stock will have the right
(the "Exchange Right") to put their shares of Preferred Stock, if any, to
Pacific for $3.99 per share (subject to adjustments for stock splits,
dividends and other similar adjustments) (the "Exchange Purchase Price").
(b) The Exchange Purchase Price may be paid in cash, Pacific
Common Stock (subject to shareholder approval, if necessary) or any
combination thereof, at Pacific's sole discretion, generally within 60 days
after the exercise of the Exchange Right.
(c) In the event that Pacific elects to pay the Exchange Purchase
Price in shares of Pacific Common Stock ("Exchange Shares"), the number of
Exchange Shares to be delivered will be determined by dividing (a) that
portion of the Exchange Purchase Price to be paid in Exchange Shares by (b)
the average closing price of the Pacific Common Stock for the 30 consecutive
trading days immediately preceding the Exchange Date on the principal
national securities exchange on which the Pacific Common Stock is admitted to
trading or listed, or if not listed or admitted to trading on any such
exchange, the closing bid price of the Pacific Common Stock as
reported by the NASDAQ, or other similar organization if NASDAQ is no longer
reporting such information, or, if the Pacific Common Stock is not reported
on NASDAQ, the closing bid price for the Pacific Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or
similar organization, or if not so available, the fair market value of the
Pacific Common Stock as determined in good faith between the Board of
Directors of Pacific and the holders of a majority of the Preferred Stock
then outstanding.
(d) In addition, in order for the holders of Preferred Stock to
exercise the Exchange Right, each such holder will be required to represent
to Pacific that, at the time of such exercise, it is an "accredited investor"
as that term is defined in Regulation D under the Securities Act.
VII. MISCELLANEOUS
7.1 Any notice or other communication given hereunder shall be
deemed sufficient if in writing and sent by registered or certified mail,
return receipt requested, or delivered by hand against written receipt
therefor, addressed to: B-G Development Corporation and/or Pacific
Pharmaceuticals, Inc., 0000 Xxxx Xxxxx Xxxx, Xxx Xxxxx, XX, 00000, Attn: Dr.
H. Xxxxxxxx Xxxx, with a copy to x/x Xxxxxxxxx Xxxxxxx, Xxx., 000 Xxxxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attn: Xxxxxxx X. Xxxxx, and to
the Subscriber at the Subscriber's address indicated on the signature page of
this Agreement. Notices shall be deemed to have been given or delivered on
the date of mailing, except notices of change of address, which shall be
deemed to have been given or delivered when received.
7.2 Except as otherwise provided herein, this Agreement shall not
be changed, modified or amended except by a writing signed by the parties to
be charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
7.3 Subject to the provisions of Section 5.11, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and to
their respective heirs, legal representatives, successors and assigns. This
Agreement sets forth the entire agreement and understanding between the
parties as to the subject matter hereof and merges and supersedes all prior
discussions, agreements and understandings of any and every nature among them.
7.4 Upon the execution and delivery of this Agreement by the
Subscriber, this Agreement shall become a binding obligation of the
Subscriber with respect to the purchase of Units as herein provided, subject,
however, to the right hereby reserved by BGDC and Pacific to enter into the
same agreements with other subscribers and to add and/or delete other persons
as subscribers.
7.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED
BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS
AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW. IN THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM
FOR RESOLVING DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE
SUPREME COURT OF THE STATE OF NEW YORK IN AND FOR THE COUNTY OF NEW YORK OR
THE FEDERAL COURTS FOR SUCH STATE AND COUNTY, AND ALL RELATED APPELLATE
COURTS, THE PARTIES HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH
COURTS AND AGREE TO SAID VENUE.
7.6 In order to discourage frivolous claims the parties agree that
unless a claimant in any proceeding arising out of this Agreement succeeds in
establishing his claim and recovering a judgment against another party
(regardless of whether such claimant succeeds against one of the other
parties to the action), then the other party shall be entitled to recover
from such claimant all of its/their reasonable legal costs and expenses
relating to such proceeding and/or incurred in preparation therefor.
7.7 The holding of any provision of this Agreement to be invalid
or unenforceable by a court of competent jurisdiction shall not affect any
other provision of this Agreement, which shall remain in full force and
effect. If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced
in whole or in part, such provision shall be interpreted so as to remain
enforceable to the maximum extent permissible consistent with applicable law
and the remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the extent
they are valid, legal and enforceable, and no provisions shall be deemed
dependent upon any other covenant or provision unless so expressed herein.
7.8 It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver
of any subsequent breach by that same party.
7.9 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action
as may be necessary or appropriate to carry out the purposes and intent of
this Agreement.
7.10 This Agreement may be executed in two or more counterparts
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
7.12 Nothing in this Agreement shall create or be deemed to create
any rights in any person or entity not a party to this Agreement, except (a)
for the holders of Registrable Securities and (b) for the Placement Agent
pursuant to Sections 1.6(a) and 2.11 hereof.
EXHIBIT 10.42
VIII CONFIDENTIAL INVESTOR QUESTIONNAIRE
8.1 The Subscriber represents and warrants that he, she or it
comes within one category marked below, and that for any category marked, he,
she or it has truthfully set forth, where applicable, the factual basis or
reason the Subscriber comes within that category. ALL INFORMATION IN
RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned
agrees to furnish any additional information which the Company deems
necessary in order to verify the answers set forth below.
Category A _____ The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or joint net
worth with his or her spouse, presently exceeds $1,000,000.
Explanation. In calculating net worth you may
include equity in personal property and real
estate, including your principal residence, cash,
short-term investments, stock and securities.
Equity in personal property and real estate should
be based on the fair market value of such property
less debt secured by such property.
Category B _____ The undersigned is an individual (not a partnership,
corporation, etc.) who had an individual income in excess of
$200,000 in each of the two most recent years, or joint
income with his or her spouse in excess of $300,000 in each
of those years (in each case including foreign income, tax
exempt income and full amount of capital gains and losses
but excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable
expectation of reaching the same income level in the current
year.
Category C _____ The undersigned is a director or executive officer of the
Company which is issuing and selling the Units.
Category D _____ The undersigned is a bank; a savings and loan association;
insurance company; registered investment company; registered
business development company; licensed small business
investment company ("SBIC"); or employee benefit plan within
the meaning of Title 1 of ERISA and (a) the investment
decision is made by a plan fiduciary which is either a bank,
savings and loan association, insurance company or
registered investment advisor, or (b) the plan has total
assets in excess of $5,000,000 or is a self
25
directed plan with investment decisions made solely by
persons that are accredited investors.
---------------------------------
(describe entity)
Category E _____ The undersigned is a private business development company as
defined in section 202(a)(22) of the Investment Advisors Act
of 1940.
---------------------------------
(describe entity)
Category F _____ The undersigned is either a corporation, partnership,
Massachusetts business trust, or non-profit organization
within the meaning of Section 501(c)(3) of the Internal
Revenue Code, in each case not formed for the specific
purpose of acquiring the Units and with total assets in
excess of $5,000,000.
---------------------------------
(describe entity)
Category G _____ The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Units, where the purchase is directed by a
"sophisticated person" as defined in Regulation
506(b)(2)(ii) under the Securities Act.
Category H _____ The undersigned is an entity (other than a trust) all the
equity owners of which are "accredited investors" within one
or more of the above categories. If relying upon this
Category alone, each equity owner must complete a separate
copy of this Agreement.
---------------------------------
(describe entity)
Category I _____ The undersigned is not within any of the categories above
and is therefore not an accredited investor.
The undersigned agrees that the undersigned will notify the Company at any time
on or prior to the Final Closing Date in the event that the representations and
warranties in this Agreement shall cease to be true, accurate and complete.
8.2 SUITABILITY (please answer each question)
(a) For an individual Subscriber, please describe your current employment,
including the company by which you are employed and its principal business:
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(b) For an individual Subscriber, please describe any college or graduate
degrees held by you:
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(c) For all Subscribers, please list types of prior investments:
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(d) For all Subscribers, please state whether you have participated in other
PRIVATE PLACEMENTS before:
YES_______ NO_______
(e) If your answer to question (d) above was "YES", please indicate frequency of
such prior participation in PRIVATE PLACEMENTS of:
Public Private Public or Private
Companies Companies Biotechnology Companies
--------- --------- -----------------------
Frequently _________________________________
Occasionally _________________________________
Never _________________________________
(f) For individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:
YES_______ NO_______
(g) For trust, corporate, partnership and other institutional Subscribers,
do you expect your total assets to significantly decrease in the foreseeable
future:
YES_______ NO_______
(h) For all Subscribers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need sudden
cash requirements in excess of cash readily available to you:
YES_______ NO_______
(i) For all Subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?
YES_______ NO_______
(j) For all Subscribers, do you understand that there is no guarantee of
financial return on this investment and that you run the risk of losing your
entire investment?
YES_______ NO_______
8.3 MANNER IN WHICH TITLE IS TO BE HELD. (circle one)
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of
Survivorship (both parties
must sign)
(d) Partnership*
(e) Tenants in Common
(f) Company*
(g) Trust*
(h) Other
*If Units are being subscribed for by an entity, the attached
Certificate of Signatory must also be completed.
8.4 NASD AFFILIATION.
Are you affiliated or associated with an NASD member firm (please check one):
Yes _________ No __________
If Yes, please describe:
_________________________________________________________
_________________________________________________________
_________________________________________________________
*If Subscriber is a Registered Representative with an NASD member firm, have
the following acknowledgment signed by the appropriate party:
The undersigned NASD member firm acknowledges receipt of the notice required
by Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
_________________________________
Name of NASD Member Firm
By: ______________________________
Authorized Officer
Date: ____________________________
8.5 The undersigned is informed of the significance to the
Companies of the foregoing representations and answers contained in the
Confidential Investor Questionnaire contained in this Section 8 and such
answers have been provided under the assumption that the Companies will rely
on them.
EXHIBIT 10.42
[SIGNATURE PAGE]
NUMBER OF UNITS _________ X $100,000 = __________ (THE "PURCHASE PRICE")
Signature Signature (if purchasing jointly)
Name Typed or Printed Name Typed or Printed
Entity Name Entity Name
Address Address
City, State and Zip Code City, State and Zip Code
Telephone-Business Telephone--Business
Telephone-Residence Telephone--Residence
Facsimile-Business Facsimile--Business
Facsimile-Residence Facsimile--Residence
Tax ID # or Social Security # Tax ID # or Social Security #
Name in which securities should be issued:
CHECK THE BOX MARKED YES IF YOU WOULD LIKE THE SECURITIES
TO BE DELIVERED TO YOUR ACCOUNT WITH PARAMOUNT CAPITAL, INC. YES ___ NO ___
(IF YOU CHECK "NO", SECURITIES WILL BE DELIVERED TO YOU AT THE ADDRESS
PROVIDED ABOVE)
Dated: , 1998
This Subscription Agreement is agreed to and accepted as of
___________________________ , 1998.
B-G DEVELOPMENT CORPORATION PACIFIC PHARMACEUTICALS, INC.
By: /s/ Dr. H. Xxxxxxxx Xxxx By: /s/ Dr. H. Xxxxxxxx Xxxx
------------------------------ ------------------------------
Name: Dr. H. Xxxxxxxx Xxxx Name: Dr. H. Xxxxxxxx Xxxx
Title: Chief Executive Officer Title: Chief Executive Officer
31
CERTIFICATE OF SIGNATORY
(To be completed if Units are
being subscribed for by an entity)
I,______________________________, am the______________________________
of _____________________________________________ (the "Entity").
I certify that I am empowered and duly authorized by the Entity to
execute and carry out the terms of the Subscription Agreement and to purchase
and hold the Units, and certify further that the Subscription Agreement has
been duly and validly executed on behalf of the Entity and constitutes a
legal and binding obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this________day of
_________________, 1998.
_______________________________________
(Signature)
