FORM OF SUBSCRIPTION AGREEMENT
Exhibit 10.1
FORM OF SUBSCRIPTION AGREEMENT
0000 Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Gentlemen:
The undersigned (the “Investor”) hereby confirms its agreement with Oxygen Biotherapeutics, Inc., a Delaware corporation (the “Company”), as follows:
1. This Subscription Agreement, including the Terms and Conditions For Purchase of Units attached hereto as Annex I (collectively, (this “Agreement”) is made as of the date set forth below between the Company and the Investor.
2. The Company has authorized the sale and issuance to certain investors (the “Investors”) of up to an aggregate of 1,724,138 units (the “Units”), each consisting of (i) one share (each a “Share,” collectively, the “Shares”) of its common stock, par value $0.0001 per share (the “Common Stock”) and (ii) a warrant (each, a “Warrant,” collectively, the “Warrants”) to purchase 0.425 of one share of Common Stock and exercisable for a period of five (5) years, in substantially the form attached hereto as Exhibit B, for a purchase price of $2.90 per Unit (the “Purchase Price”). Units will not be issued or certificated. The Shares and Warrants are immediately separable and will be issued separately. The shares of Common Stock issuable upon exercise of the Warrants are referred to herein as the “Warrant Shares” and, together with the Units, the Shares and the Warrants, are referred to herein as the “Securities”).
3. The offering and sale of the Units (the “Offering”) are being made pursuant to (1) an effective Registration Statement on Form S-3, File No. 333-165733, as amended (the “Registration Statement”) filed by the Company with the Securities and Exchange Commission (the “Commission”) (including the prospectus contained therein (the “Base Prospectus”)), (2) if applicable, certain “free writing prospectuses” (as that term is defined in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”)), that have been or will be filed with the Commission and delivered to the Investor on or prior to the date hereof (the “Issuer Free Writing Prospectus”), containing certain supplemental information regarding the Units, the terms of the Offering and the Company and (3) a Prospectus Supplement (the “Prospectus Supplement” and together with the Base Prospectus, the “Prospectus”) containing certain supplemental information regarding the Securities and terms of the Offering that has been or will be filed with the Commission and delivered to the Investor (or made available to the Investor by the filing by the Company of an electronic version thereof with the Commission).
4. The Company and the Investor agree that the Investor will purchase from the Company and the Company will issue and sell to the Investor the Units set forth below for the aggregate purchase price set forth below, less up to Fifteen Thousand Dollars ($15,000) in the aggregate (for all Investors) to be used to pay the legal fees of the Investors in the Offering to Xxxxxxxxxx Xxxxxxx Syracuse & Hischtritt LLP. The Units shall be purchased pursuant to the
Terms and Conditions for Purchase of Units attached hereto as Annex I and incorporated herein by this reference as if fully set forth herein. The Investor acknowledges that the Offering is not being underwritten by the placement agent (the “Placement Agent”) named in the Prospectus Supplement and that there is no minimum offering amount.
5. The manner of settlement of the Shares included in the Units purchased by the Investor shall be determined by such Investor as follows (check one):
| [ ] | A. Delivery by crediting the account of the Investor’s prime broker (as specified by such Investor on Exhibit A annexed hereto) with the Depository Trust Company (“DTC”) through its Deposit/Withdrawal At Custodian (“DWAC”) system, whereby Investor’s prime broker shall initiate a DWAC transaction on the Closing Date using its DTC participant identification number, and released by Interwest Transfer Company, the Company’s transfer agent (the “Transfer Agent”), at the Company’s direction. NO LATER THAN ONE (1) BUSINESS DAY AFTER THE EXECUTION OF THIS AGREEMENT BY THE INVESTOR AND THE COMPANY, THE INVESTOR SHALL: |
| (I) | DIRECT THE BROKER-DEALER AT WHICH THE ACCOUNT OR ACCOUNTS TO BE CREDITED WITH THE SHARES ARE MAINTAINED TO SET UP A DWAC INSTRUCTING THE TRANSFER AGENT TO CREDIT SUCH ACCOUNT OR ACCOUNTS WITH THE SHARES, AND |
| (II) | REMIT BY WIRE TRANSFER THE AMOUNT OF FUNDS EQUAL TO THE AGGREGATE PURCHASE PRICE FOR THE UNITS BEING PURCHASED BY THE INVESTOR TO THE FOLLOWING ACCOUNT: |
Citibank NA
ABA No. 000000000
Account No. 0202705034
Attention: Xxxxxxx Xxxxxx
Phone: 0-000-000-0000
—OR—
| [ ] | B. Delivery versus payment (“DVP”) through DTC (i.e., on the Closing Date, the Company shall issue Shares registered in the Investor’s name and address as set forth below and released by the Transfer Agent directly to the account(s) at Xxxx Capital Partners, LLC (“Xxxx”) identified by the Investor; upon receipt of such Shares, Xxxx shall promptly electronically deliver such Shares to the Investor, and simultaneously therewith payment shall be made by Xxxx by wire transfer to the Company). NO LATER THAN ONE (1) BUSINESS DAY AFTER THE EXECUTION OF THIS AGREEMENT BY THE INVESTOR AND THE COMPANY, THE INVESTOR SHALL: |
| (I) | NOTIFY XXXX OF THE ACCOUNT OR ACCOUNTS AT XXXX TO BE CREDITED WITH THE SHARES BEING PURCHASED BY SUCH INVESTOR, AND |
| (II) | CONFIRM THAT THE ACCOUNT OR ACCOUNTS AT XXXX TO BE CREDITED WITH THE SHARES BEING PURCHASED BY THE INVESTOR HAVE A MINIMUM BALANCE EQUAL TO THE AGGREGATE PURCHASE PRICE FOR THE UNITS BEING PURCHASED BY THE INVESTOR. |
IT IS THE INVESTOR’S RESPONSIBILITY TO (A) MAKE THE NECESSARY WIRE TRANSFER OR CONFIRM THE PROPER ACCOUNT BALANCE IN A TIMELY MANNER AND (B) ARRANGE FOR SETTLEMENT BY WAY OF DWAC OR DVP IN A TIMELY MANNER. IF THE INVESTOR DOES NOT DELIVER THE AGGREGATE PURCHASE PRICE FOR THE UNITS OR DOES NOT MAKE PROPER ARRANGEMENTS FOR SETTLEMENT IN A TIMELY MANNER, THE SHARES AND WARRANTS MAY NOT BE DELIVERED AT CLOSING TO THE INVESTOR OR THE INVESTOR MAY BE EXCLUDED FROM THE CLOSING ALTOGETHER.
6. The executed Warrants shall be delivered in accordance with the terms thereof.
7. The Investor represents that, except as set forth below, (a) it has had no position, office or other material relationship within the past three years with the Company or persons known to it to be affiliates of the Company, (b) it is not a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) or an Associated Person (as such term is defined under the FINRA’s NASD Membership and Registration Rules Section 1011) as of the Closing, and (c) neither the Investor nor any group of Investors (as identified in a public filing made with the Commission) of which the Investor is a part in connection with the Offering, acquired, or obtained the right to acquire, 20% or more of the Common Stock (or securities convertible into or exercisable for Common Stock) or the voting power of the Company on a post-transaction basis. Exceptions:
(If no exceptions, write “none.” If left blank, response will be deemed to be “none.”)
8. The Investor represents that it has received (or otherwise had made available to it by the filing by the Company of an electronic version thereof with the Commission) the Base Prospectus, dated April 14, 2010, as amended, which is a part of the Company’s Registration Statement, the documents incorporated by reference therein and any free writing prospectus (collectively, the “Disclosure Package”), prior to or in connection with the receipt of this Agreement. The Investor acknowledges that, prior to the delivery of this Agreement to the Company, the Investor will receive certain additional information regarding the Offering, including pricing information and risk factors (the “Offering Information”). Such information may be provided to the Investor by any means permitted under the Securities Act, including the Prospectus Supplement, a free writing prospectus and oral communications.
9. No offer by the Investor to buy Units will be accepted and no part of the Purchase Price will be delivered to the Company until the Investor has received the Offering Information and the Company has accepted such offer by countersigning a copy of this Agreement, and any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time prior to the Company (or Xxxx on behalf of the Company) sending (orally, in writing or by electronic mail) notice of its acceptance of such offer. An indication of interest will involve no obligation or commitment of any kind until the Investor has been delivered the Offering Information and this Agreement is accepted and countersigned by or on behalf of the Company.
10. The Company acknowledges that the only material, non-public information relating to the Company or its subsidiaries that the Company, its employees or agents has provided to the Investor in connection with the Offering prior to the date hereof is the existence of the Offering.
11. For a period of thirty (30) months from the date of this Agreement, the Company shall not, in any manner, (a) issue or sell any rights, warrants or options to subscribe for or purchase Common Stock that are directly or indirectly convertible into or exchangeable for Common Stock at a price which resets as a function of market price of the Common Stock at the time of such exercise, exchange or conversion, or (b) issue or sell any rights, warrants or options to subscribe for or purchase Common Stock or directly or indirectly convertible into or exchangeable or exercisable for Common Stock at a conversion, exchange or exercise price which varies or may vary after issuance with the market price of the Common Stock, including by way of one or more reset(s) to any fixed price, including any “at the market offerings” as such term is defined in Rule 415(a)(4) of the Securities Act.
Number of Units:
Purchase Price Per Unit: $2.90
Aggregate Purchase Price: $
Number of Warrant Shares (Equal to Number of Units multiplied by .425 and rounded down to the nearest whole number):
Please confirm that the foregoing correctly sets forth the agreement between us by signing in the space provided below for that purpose.
| Dated as of: May [—], 2010 | ||
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| INVESTOR | ||
| By: |
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| Print Name: |
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| Title: |
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| Address: |
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Agreed and Accepted this day of May, 2010:
| OXYGEN BIOTHERAPEUTICS, INC. | ||
| By: |
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| Name: Xxxxxxx X. Xxxxxx | ||
| Title: Chief Financial Officer | ||
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF UNITS
1. Authorization and Sale of the Units. Subject to the terms and conditions of this Agreement, the Company has authorized the sale of the Units.
2. Agreement to Sell and Purchase the Units; Placement Agent.
2.1 At the Closing (as defined in Section 3.1), the Company will sell to the Investor, and the Investor will purchase from the Company, upon the terms and conditions set forth herein, the number of Units set forth on the last page of the Agreement to which these Terms and Conditions for Purchase of Units are attached as Annex I (the “Signature Page”) for the aggregate purchase price therefor set forth on the Signature Page.
2.2 The Company proposes to enter into substantially this same form of Subscription Agreement with certain other investors (the “Other Investors”) and expects to complete sales of Units to them. The Investor and the Other Investors are hereinafter sometimes collectively referred to as the “Investors,” and this Agreement and the Subscription Agreements executed by the Other Investors are hereinafter sometimes collectively referred to as the “Agreements.”
2.3 Investor acknowledges that the Company has agreed to pay Xxxx Capital Partners, LLC (the “Placement Agent”) a fee (the “Placement Fee”) and certain expenses in respect of the sale of Units to the Investor.
2.4 The Company has entered into a Placement Agency Agreement, dated the date hereof, (the “Placement Agreement”), with the Placement Agent that contains certain representations, warranties, covenants and agreements of the Company that may be relied upon by the Investor, which shall be a third party beneficiary thereof. The Company hereby incorporates such representations, warranties, covenants and agreements herein, as if made on (a) the date hereof and (b) the Closing Date. The Company confirms that neither it nor any other Person acting on its behalf has provided the Investor or their agents or counsel with any information that constitutes or could reasonably be expected to constitute material, nonpublic information, except as will be disclosed in the Prospectus and/or in the Company’s Form 8-K to be filed with the Commission in connection with the Offering. The Company understands and confirms that the Investor will rely on the foregoing representations in effecting transactions in securities of the Company.
3. Closings and Delivery of the Units and Funds.
3.1 Closing. The completion of the purchase and sale of the Units (the “Closing”) shall occur at 10:00 A.M., New York City time, on the third full business day following the date of this Agreement or at such other date as shall be determined by the Investor and the Company (the “Closing Date”). At the Closing, (a) the Company shall cause Interwest Transfer Company, the Company’s “Transfer Agent”, to deliver to the Investor the number of Shares set forth on the Signature Page registered in the name of the Investor or, if so indicated on the Investor Questionnaire attached hereto as Exhibit A, in the name of a nominee designated by the Investor, (b) the Company shall cause to be delivered to the Investor one Warrant for the number of Warrant Shares set forth on the Signature Page and (c) the aggregate purchase price for the Units
being purchased by the Investor will be delivered by or on behalf of the Investor to the Company.
3.2 Conditions to the Obligations of the Parties.
3.3 Conditions to the Company’s Obligations. The Company’s obligation to issue and sell the Units to the Investor shall be subject to: (i) the receipt by the Company of the purchase price for the Units being purchased hereunder as set forth on the Signature Page and (ii) the accuracy of the representations and warranties made by the Investor and the fulfillment of those undertakings of the Investor to be fulfilled prior to the Closing Date. Notwithstanding any additional listing application with Nasdaq Capital Market, or any other listing requirements, the Company shall be unconditionally obligated to issue and sell the Units to the Investor.
3.4 Conditions to the Investor’s Obligations. The Investor’s obligation to purchase the Units will be subject to the accuracy of the representations and warranties made by the Company and the fulfillment of those undertakings of the Company to be fulfilled prior to the Closing Date, including without limitation, those contained in the Placement Agreement, and to the condition that the Placement Agent shall not have: (a) terminated the Placement Agreement pursuant to the terms thereof or (b) determined that the conditions to the closing in the Placement Agreement have not been satisfied. The Investor’s obligations are expressly not conditioned on the purchase by any or all of the Other Investors of the Units that they have agreed to purchase from the Company. The Investor understands and agrees that, in the event that the Placement Agent in its sole discretion determines that the conditions to closing in the Placement Agreement have not been satisfied or if the Placement Agreement may be terminated for any other reason permitted by such Placement Agreement, then the Placement Agent may, but shall not be obligated to, terminate such Agreement, which shall have the effect of terminating this Subscription Agreement pursuant to Section 14 below.
3.5 Delivery of Funds.
(a) DWAC Delivery. If the Investor elects to settle the Shares purchased by such Investor through DTC’s Deposit/Withdrawal at Custodian (“DWAC”) delivery system, no later than one (1) business day after the execution of this Agreement by the Investor and the Company, the Investor shall remit by wire transfer the amount of funds equal to the aggregate purchase price for the Units being purchased by the Investor to the following account designated by the Company:
Citibank NA
ABA No. 000000000
Account No. 0202705034
Attention: Xxxxxxx Xxxxxx
Phone: 0-000-000-0000
(b) Delivery Versus Payment through The Depository Trust Company. If the Investor elects to settle the Shares purchased by such Investor by delivery versus
payment through DTC, no later than one (1) business day after the execution of this Agreement by the Investor and the Company, the Investor shall confirm that the account or accounts at the Placement Agent to be credited with the Units being purchased by the Investor have a minimum balance equal to the aggregate purchase price for the Units being purchased by the Investor.
3.6 Delivery of Shares.
(a) DWAC Delivery. If the Investor elects to settle the Shares purchased by such Investor through DTC’s DWAC delivery system, no later than one (1) business day after the execution of this Agreement by the Investor and the Company, the Investor shall direct the broker-dealer at which the account or accounts to be credited with the Shares being purchased by such Investor are maintained, which broker/dealer shall be a DTC participant, to set up a DWAC instructing the Transfer Agent to credit such account or accounts with the Shares. Such DWAC instruction shall indicate the settlement date for the deposit of the Shares, which date shall be provided to the Investor by the Placement Agent. Upon the closing of the Offering, the Company shall direct the Transfer Agent to credit the Investor’s account or accounts with the Shares pursuant to the information contained in the DWAC.
(b) Delivery Versus Payment through The Depository Trust Company. If the Investor elects to settle the Shares purchased by such Investor by delivery versus payment through DTC, no later than one (1) business day after the execution of this Agreement by the Investor and the Company, the Investor shall notify the Placement Agent of the account or accounts at the Placement Agent to be credited with the Shares being purchased by such Investor. On the Closing Date, the Company shall deliver the Shares to the Investor through DTC directly to the account(s) at the Placement identified by Investor and simultaneously therewith payment shall be made by the Placement Agent by wire transfer to the Company.
4. Representations, Warranties and Covenants of the Investor.
The Investor acknowledges, represents and warrants to, and agrees with, the Company and the Placement Agent that:
4.1 The Investor (a) is knowledgeable, sophisticated and experienced in making, and is qualified to make decisions with respect to, investments in securities presenting an investment decision like that involved in the purchase of the Units, including investments in securities issued by the Company and investments in comparable companies, (b) has answered all questions on the Signature Page and the Investor Questionnaire and the answers thereto are true and correct as of the date hereof and will be true and correct as of the Closing Date and (c) in connection with its decision to purchase the number of Units set forth on the Signature Page, has received and is relying only upon the Disclosure Package and the documents incorporated by reference therein and the Offering Information.
4.2 (a) If the Investor is outside the United States, it will comply with all applicable laws and regulations in each foreign jurisdiction in which it purchases, offers, sells or delivers Securities or has in its possession or distributes any offering material, in all cases at its own expense.
4.3 (a) The Investor has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement, and (b) this Agreement constitutes a valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as to the enforceability of any rights to indemnification or contribution that may be violative of the public policy underlying any law, rule or regulation (including any federal or state securities law, rule or regulation).
4.4 The Investor understands that nothing in this Agreement, the Prospectus, the Disclosure Package, the Offering Information or any other materials presented to the Investor in connection with the purchase and sale of the Units constitutes legal, tax or investment advice. The Investor has consulted such legal, tax and investment advisors and made such investigation as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of Units. The Investor also understands that there is no established public trading market for the Warrants being offered in the Offering, and that the Company does not expect such a market to develop. In addition, the Company does not intend to apply for listing of the Warrants on any securities exchange. The Investor understands that without an active market, the liquidity of the Warrants will be limited.
4.5 The Investor will maintain the confidentiality of all information acquired as a result of the transactions contemplated hereby prior to the public disclosure of that information by the Company in accordance with Section 13 of this Annex.
4.6 Since the time at which the Placement Agent first contacted such Investor about the Offering, the Investor has not disclosed any information regarding the Offering to any third parties (other than its legal, accounting and other advisors) and has not engaged in any purchases or sales of the securities of the Company (including, without limitation, any Short Sales (as defined herein) involving the Company’s securities). The Investor covenants that it will not engage in any purchases or sales of the securities of the Company (including Short Sales) prior to the time that the transactions contemplated by this Agreement are publicly disclosed. The Investor agrees that it will not use any of the Securities acquired pursuant to this Agreement to cover any short position in the Common Stock if doing so would be in violation of applicable securities laws. For purposes hereof, “Short Sales” include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Securities Exchange Act of 1934 (the “Exchange Act”), whether or not against the box, and all types of direct and indirect stock pledges, forward sales contracts, options, puts, calls, short sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker dealers or foreign regulated brokers.
5. Survival of Representations, Warranties and Agreements; Third Party Beneficiary. Notwithstanding any investigation made by any party to this Agreement or by the Placement Agent, all covenants, agreements, representations and warranties made by the Company and the
Investor herein, including any representations and warranties incorporated herein by reference from the Placement Agency Agreement, will survive the execution of this Agreement, the delivery to the Investor of the Shares and Warrants being purchased and the payment therefor. The Placement Agent shall be a third party beneficiary with respect to the representations, warranties and agreements of the Investor in Section 4 hereof.
6. Notices. All notices, requests, consents and other communications hereunder will be in writing, will be mailed (a) if within the domestic United States by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, or by facsimile or (b) if delivered from outside the United States, by International Federal Express or facsimile, and will be deemed given (i) if delivered by first-class registered or certified mail domestic, three business days after so mailed, (ii) if delivered by nationally recognized overnight carrier, one business day after so mailed, (iii) if delivered by International Federal Express, two business days after so mailed and (iv) if delivered by facsimile, upon electronic confirmation of receipt and will be delivered and addressed as follows:
(a) if to the Company, to:
0000 Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Smith, Anderson, Blount, Dorsett, Xxxxxxxx & Xxxxxxxx, L.L.P.
X.X. Xxx 0000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
(b) if to the Investor, at its address on the Signature Page hereto, or at such other address or addresses as may have been furnished to the Company in writing.
7. Changes. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and the Investor.
8. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and will not be deemed to be part of this Agreement.
9. Severability. In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein will not in any way be affected or impaired thereby.
10. Governing Law. This Agreement will be governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to the principles of conflicts of law that would require the application of the laws of any other jurisdiction.
11. Counterparts. This Agreement may be executed in two or more counterparts, each of which will constitute an original, but all of which, when taken together, will constitute but one instrument, and will become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties. The Company and the Investor acknowledge and agree that the Company shall deliver its counterpart to the Investor along with the Prospectus Supplement (or the filing by the Company of an electronic version thereof with the Commission).
12. Confirmation of Sale. The Investor acknowledges and agrees that such Investor’s receipt of the Company’s signed counterpart to this Agreement, together with the Prospectus Supplement (or the filing by the Company of an electronic version thereof with the Commission), shall constitute written confirmation of the Company’s sale of Units to such Investor.
13. Press Release. The Company and the Investor agree that the Company shall prior to the opening of the financial markets in New York City on May 4, 2010 (a) issue a press release announcing the Offering and disclosing all material information regarding the Offering and (b) file a current report on Form 8-K with the Securities and Exchange Commission including, but not limited to, a form of this Agreement and forms of Warrant as exhibits thereto. The Company shall not identify the Investor by name in any press release or public filing, or otherwise publicly disclose the Investor’s name, without the Investor’s prior written consent, unless required by applicable laws, rules and regulations.
14. Termination. In the event that the Placement Agreement is terminated by the Placement Agent pursuant to the terms thereof, this Agreement shall terminate without any further action on the part of the parties hereto.
15. Lock-Up. Until the earlier to occur of (a) the date that is one hundred and eighty (180) days after the date hereof and (b) beginning on the ninety-first (91st) day after the date hereof, any day when the aggregate trading volume of the Company’s Common Stock equals or has exceeded five million (5,000,000) shares traded, in the aggregate, since the date hereof and the closing price of the Company’s Common Stock, as reported by the Nasdaq Capital Market, exceeds $5.00 per share (the “Lock-Up Period”), the Company will not directly or indirectly, (1) offer to sell, hypothecate, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase (to the extent such option or contract to purchase is exercisable within one year from the Closing Date), purchase any option or contract to sell, grant any option, right or warrant to purchase, any shares of Common Stock or any securities convertible or exchangeable for Common Stock, or otherwise transfer or dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, with respect to, any shares of Common Stock, or any securities convertible into or exercisable or exchangeable for shares of Common Stock, (2) file or cause to become effective a registration statement under the Securities Act relating to the offer and sale of any shares of Common Stock or securities convertible into or
exercisable or exchangeable for shares of Common Stock, or (3) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clauses (1), (2) or (3) above is to be settled by delivery of shares of Common Stock or such other securities, in cash or otherwise, without the prior written consent of the Placement Agent (which consent may be withheld in its sole discretion), other than (i) the Securities to be sold hereunder, (ii) the issuance of stock options or shares of restricted stock to employees, directors and consultants pursuant to the Company’s 1999 Amended Stock Plan, as amended, (iii) issuances of shares of Common Stock upon the exercise of options or warrants disclosed as outstanding in the Disclosure Package and the Prospectus or upon the conversion or exchange of convertible or exchangeable securities disclosed as outstanding in the Disclosure Package and the Prospectus, (iv) the issuance by the Company of any shares of Common Stock as consideration for mergers, acquisitions, other business combinations, or strategic alliances, occurring after the date of this Agreement; provided that each recipient of shares pursuant to this clause, (iv) agrees that all such shares remain subject to restrictions substantially similar to those contained in this Section 15, (v) the issuance by the Company of shares of Common Stock as consideration under Amendment No. 2 to the Securities Purchase Agreement between the Company and Vatea Fund entered into prior to the execution of this Agreement; provided, that the number of shares issued during the Lock-Up Period under such agreement shall not exceed 2,420,400, (vi) the purchase or sale of the Company’s securities pursuant to a plan, contract or instruction that satisfies all of the requirements of Rule 10b5-1(c)(1)(i)(B) that was in effect prior to the date hereof or (vii) the issuance of shares of Common Stock in connection with a stock split, stock dividend or other similar recapitalization or reorganization. Notwithstanding the foregoing, for the purpose of allowing the Placement Agent to comply with FINRA Rule 2711(f)(4), if (1) during the last seventeen (17) days of the Lock-Up Period, the Company releases earnings results or publicly announces other material news or a material event relating to the Company occurs or (2) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results during the sixteen (16)-day period beginning on the last day of the Lock-Up Period, then in each case the Lock-Up Period will be extended until the expiration of the eighteen (18)-day period beginning on the date of release of the earnings results or the public announcement regarding the material news or the occurrence of the material event, as applicable, unless the Placement Agent waives, in writing, such extension. The Placement Agent agrees to waive such extension if the provisions of FINRA Rule 2711(f)(4) are not applicable to the Offering. The Company agrees not to accelerate the vesting of any option or warrant or the lapse of any repurchase right prior to the expiration of the Lock-Up Period.
16. Participation In Future Financing
16.1 For purposes of this Section 16, the following definitions shall apply:
(a) “Common Stock Equivalents” means, collectively, Options and Convertible Securities.
(b) “Convertible Securities” means any stock or securities (other than Options) convertible into or exercisable or exchangeable for Common Stock.
(c) “Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.
16.2 From the date hereof until November 1, 2011 (the “Trigger Date”), the Company will not, directly or indirectly, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its or its subsidiaries’ equity or equity equivalent securities, including without limitation any debt, preferred stock or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable or exercisable for Common Stock or Common Stock Equivalents (any such offer, sale, grant, disposition or announcement being referred to as a “Subsequent Placement”) unless the Company shall have first complied with this Section 16; provided, that this Section 16, and any restriction contained in Section 15, shall not apply to (a) Securities to be sold hereunder, (b) stock options or shares of restricted stock granted or issued to employees, directors and consultants pursuant to the Company’s 1999 Amended Stock Plan, as amended, (c) shares of Common Stock issued upon the exercise of any Common Stock Equivalents disclosed as outstanding in the Disclosure Package or the Prospectus or upon the conversion or exchange of any Common Stock Equivalents disclosed as outstanding in the Disclosure Package or the Prospectus, (d) any shares of Common Stock issued as consideration for mergers, acquisitions, other business combinations, or strategic alliances, occurring after the date of this Agreement; provided that each recipient of shares pursuant to this clause (d) agrees that all such shares remain subject to lock-up restrictions substantially similar to those contained in this Section 16; (e) the issuance by the Company of shares of Common Stock as consideration under Amendment No. 2 to the Securities Purchase Agreement between the Company and Vatea Fund entered into prior to the execution of this Agreement; (f) the purchase or sale of the Company’s securities pursuant to a plan, contract or instruction that satisfies all of the requirements of Rule 10b5-1(c)(1)(i)(B) that was in effect prior to the date hereof; or (g) any shares issued pursuant to a stock split, stock dividend or other similar recapitalization or reorganization.
(a) The Company shall deliver to Investor a written notice stating that the Company may have information to share with Investor and requesting Investor to inform the Company if it is willing to receive a notice of such information. If Investor indicates its willingness to receive such information, then the Company shall deliver promptly, but in any event no later than one (1) business day after being informed by Investor of its willingness to receive the information, a written notice (the “Offer Notice”) of any proposed or intended issuance or sale or exchange (the “Offer”) of the securities being offered (the “Offered Securities”) in a Subsequent Placement, which Offer Notice shall (w) identify and describe the Offered Securities, (x) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (y) identify the persons or entities (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to or exchange with Investor fifty percent (50%) of the Offered Securities, allocated among all investors in the Offering (a) based on each such investor’s pro rata portion of the aggregate principal amount of Units purchased hereunder (the “Basic Amount”), and (b) to the extent that Investor elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of other investors that Investor shall indicate it will purchase
or acquire should the other investors subscribe for less than their Basic Amounts (the “Undersubscription Amount”), which process shall be repeated no more than one time so that the investors in the Offering shall have an opportunity to subscribe for any remaining Undersubscription Amount.
(b) To accept an Offer, in whole or in part, Investor must deliver a written notice to the Company prior to the end of twenty-four (24) hours after Investor’s receipt of the Offer Notice (the “Offer Period”), setting forth the portion of such Investor’s Basic Amount that Investor elects to purchase and, if Investor shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if any, that Investor elects to purchase (in either case, the “Notice of Acceptance”). If the Basic Amounts subscribed for by all investors in the Offering are less than the total of all of the Basic Amounts, then each investor in the Offering who has set forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, that if the Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the “Available Undersubscription Amount”), each investor in the Offering who has subscribed for any Undersubscription Amount shall be entitled to purchase only that portion of the Available Undersubscription Amount as the Basic Amount of such investor bears to the total Basic Amounts of all investors in the Offering that have subscribed for Undersubscription Amounts, subject to rounding by the Company to the extent its deems reasonably necessary. Notwithstanding anything to the contrary contained herein, if the Company desires to modify or amend the terms and conditions of the Offer prior to the expiration of the Offer Period, the Company may deliver to Investor a new Offer Notice and the Offer Period shall expire on the tenth (10th) Business Day after Investor’s receipt of such new Offer Notice.
(c) The Company shall have ten (10) business days from the expiration of the Offer Period above to offer, issue, sell or exchange all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by the investors to the Offering (the “Refused Securities”) pursuant to a definitive agreement (the “Subsequent Placement Agreement”) but only to the offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring person or persons or less favorable to the Company than those set forth in the Offer Notice and (ii) to publicly announce (a) the execution of such Subsequent Placement Agreement, and (b) either (x) the consummation of the transactions contemplated by such Subsequent Placement Agreement or (y) the termination of such Subsequent Placement Agreement, which shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement and any documents contemplated therein filed as exhibits thereto.
(d) In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in Section 16.2(c) above), then Investor may, at its sole option and in its sole discretion, reduce the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that Investor elected to purchase pursuant to Section 16.2(b) above multiplied by a fraction, (i) the numerator of which shall be
the number or amount of Offered Securities the Company actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold to investors pursuant to Section 16.2(c) above prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities. In the event that any investor to the Offering so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities have again been offered to Investor in accordance with Section 16.2(a) above.
(e) Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, or if there are no Refused Securities, then within ten (10) business days from the expiration of the Offer Period, the investors in the Offering shall acquire from the Company, and the Company shall issue to the investors, the number or amount of Offered Securities specified in the Notices of Acceptance, as reduced pursuant to Section 16.2(d) above if the investors have so elected, upon the terms and conditions specified in the Offer. The purchase by the investors of any Offered Securities is subject in all cases to the preparation, execution and delivery by the Company and the investors of a purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to the Investor and its counsel. The Investor and the Company shall each use their reasonable best efforts to consummate such offering as promptly as commercially practicable.
(f) Any Offered Securities not acquired by the investors or other persons in accordance with Section 16.2(c) above may not be issued, sold or exchanged until they are again offered to the investors under the procedures specified in this Agreement.
(g) The Company and Investor agree that if any investor elects to participate in the Offer, neither the Subsequent Placement Agreement with respect to such Offer nor any other transaction documents related thereto (collectively, the “Subsequent Placement Documents”) shall include any term or provisions whereby any investor shall be required to agree to any restrictions in trading as to any securities of the Company owned by such investor prior to such Subsequent Placement.
(h) Notwithstanding anything to the contrary in this Section 16 and unless otherwise agreed to by Investor, the Company shall either confirm in writing to Investor that the transaction with respect to the Subsequent Placement has been abandoned or shall publicly disclose its intention to issue the Offered Securities, in either case in such a manner such that the Investor will not be in possession of material non-public information, by the sixteenth (16th ) business day following delivery of the Offer Notice. If by the sixteenth (16th) business day following delivery of the Offer Notice no public disclosure regarding a transaction with respect to the Offered Securities has been made, and no notice regarding the abandonment of such transaction has been received by Investor, such transaction shall be deemed to have been abandoned and Investor shall not be deemed to be in possession of any material, non-public information with respect to the Company. Should the Company decide to pursue such transaction with respect to the Offered Securities, the Company shall provide Investor with another Offer Notice and Investor will again have the right of participation set forth in this
Section 16. The Company shall not be permitted to deliver more than one such Offer Notice to Investor in any 60 day period.
EXHIBIT A
INVESTOR QUESTIONNAIRE
Pursuant to Section 3 of Annex I to the Agreement, please provide us with the following information:
| 1. | The exact name that your Shares and Warrants are to be registered in. You may use a nominee name if appropriate: |
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| 2. | The relationship between the Investor and the registered holder listed in response to item 1 above: |
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| 3. | The mailing address of the registered holder listed in response to item 1 above: |
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| 4. | The Social Security Number or Tax Identification Number of the registered holder listed in the response to item 1 above: |
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| 5. | Name of DTC Participant (broker-dealer at which the account or accounts to be credited with the Shares are maintained): |
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| 6. | DTC Participant Number: |
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| 7. | Name of Account at DTC Participant being credited with the Shares: |
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| 8. | Account Number at DTC Participant being credited with the Shares: |
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EXHIBIT B
FORM OF WARRANT
