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TECHNICLONE INTERNATIONAL CORPORATION
A CALIFORNIA CORPORATION
REGULATION S SECURITIES SUBSCRIPTION AGREEMENT
THE PREFERRED STOCK BEING SUBSCRIBED FOR HEREIN AND THE COMMON STOCK
ISSUABLE UPON CONVERSION OF THE PREFERRED STOCK (COLLECTIVELY THE "SECURITIES")
HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES A CT OF 193 3, A S AMENDED, (THE "ACT') OR THE
SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES LAW THEY ARE BEING
OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
("REGULATION S') PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS (AS SUCH
TERM IS DEFINED IN REGULATION S) UNLESS THE SECURITIES ARE REGISTERED UNDER THE
ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS
ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THOSE LAWS.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. INVESTMENT IN SUCH SECURITIES INVOLVES A HIGH DEGREE OF RISK IN MAKING
AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE
COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED, APPROVED OR DISAPPROVED BY
ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE,
THE FOREGOING AUTHORITIES HAVE NOT REVIEWED, PASSED UPON, CONFIRMED OR
DETERMINED THE ACCURACY OR ADEQUACY OF THIS DOCUMENT OR A NY INFORMATION
PROVIDED BY THE COMPANY TO POTENTIAL INVESTORS ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Regulation S Securities Subscription Agreement (the "Agreement")
is executed by the undersigned (the "Subscriber") in connection with the offer
and subscription by the undersigned for 10% Class B Convertible Preferred Stock
$ 1. 00 par value per share (the "Preferred Stock") of Techniclone International
Corporation, a California corporation (the "Company"). The Preferred Stock is
being offered in increments of at least 50 shares, at a purchase price of $1,000
per Preferred Share or $50,000 up to a maximum amount of 10,000 shares of
Preferred Stock or $10.0 million (the "Offering"). The terms of the Preferred
Stock, including the terms on which the Preferred Stock may be converted into
common stock, no par value of the Company (the "Common Stock"), are set forth in
the Certificate of Determination of Class B Convertible Preferred Stock (the
"Certificate of Determination"), in substantially the form attached hereto as
Exhibit A. The solicitation of this Subscription and, if accepted by the
Company, the offer and sale of Preferred Stock, are being made in reliance upon
the provisions of Regulation S ("Regulation S") promulgated under the United
States Securities Act of 1933, as amended (the "Act"). The Preferred Stock, and
the Common Stock issuable upon conversion thereof (the "Shares"), are sometimes
referred to herein collectively as the "Securities." The
EXHIBIT 4.1 34
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Subscriber wishes to subscribe for Preferred Stock in the amount set forth in
Section 17 in accordance with the terms and conditions of the form of Preferred
Shares and this Agreement. It is agreed as follows:
1. Offer to Subscribe; Purchase Price and Closing; and Placement Fees
The Subscriber hereby offers to subscribe for and purchase Preferred
Stock, for the aggregate purchase price set out in Section 17 of this
Agreement. Subscriber agrees that Company may reduce the aggregate
amount of Preferred Stock subscribed for pursuant hereto if, in the
Company's discretion, the Offering is over-subscribed. Assuming that
the minimum placement amount of $5 million (or less, if accepted by the
Company) and corresponding subscription agreements accepted by the
Company are received into the Company's designated escrow account for
this Offering (the "Escrow Account") no later than December 22, 1995
(the "Offering Termination Date"), the closing as to each Subscriber
(the"Closing") shall be deemed to occur when this Agreement has been
executed by both the Subscriber and the Company and payment shall have
been made by the Subscriber, by wire transfer, as directed in writing
by the Company, to the Company's designated escrow account, for payment
in consideration for the Company's delivery of certificates
representing the Preferred Stock subscribed for. If the Closing does
not occur on or prior to December 22, 1995, the Escrow Agent will be
instructed to release to Subscriber its subscription payment, with
interest accrued from receipt of such payment into the Escrow Account
under the terms of the Escrow Account, as soon as practicable
thereafter in accordance with wire instructions provided by Subscriber.
The parties hereto acknowledge that ▇▇▇▇▇▇ Investments, Inc, is acting
as placement agent (the "Placement Agent") for this Offering, and will
be compensated by the Company.
2. Representations; Access to Information; Independent Information;
Independent Investigation
2.1 Offshore Transaction. The Subscriber represents and warrants to
the Company that (i) the Subscriber is not a "U.S. person" as
that term is defined in Rule 902(o) of Regulation S (a copy of
which definition is attached as Exhibit B) including, without
limitation if a business organization, such as a corporation or
partnership, (a) it is organized under the laws of a
jurisdiction other than the United States and (b) if organized
by a "U.S. Person" principally for the purpose of investing in
securities not registered under the Act, it was organized and
is owned by accredited investors (as defined in Rule 501 (a) of
Regulation D under the Act) who are not natural persons,
estates or trusts; (ii) the Securities were not offered to the
Subscriber in the United States and at the time of the
execution of this Subscription Agreement and the time of any
offer to the Subscriber to purchase the Securities hereunder,
the Subscriber was physically outside the United States; (iii)
the Subscriber is purchasing the Securities for its own account
and not on behalf of or for the benefit of any U.S. person and
the sale and resale of the Securities have not been prearranged
with any U.S. person or buyer in the United States; (iv) the
Subscriber agrees, and to the best knowledge of the Subscriber
each distributor, if any, participating in the offering of the
Securities, has agreed, that all offers and sales of the
Securities prior to the expiration of a period commencing on
the date of the last Closing of a sale and purchase of
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Preferred Stock (the "Last Closing") and ending ninety days
thereafter (the "Restricted Period") shall not be made to U.S.
persons or for the account or benefit of U.S. persons.
Subscriber is not a distributor or dealer with respect to the
Securities.
2.2 Subscriber's Independent Investigation. The Subscriber, in
offering to subscribe for the Securities hereunder, has relied
solely upon an independent investigation made by it and its
representatives, if any, and has, prior to the date hereof,
been given access to and the opportunity to examine all books
and records of the Company, and all material contracts and
documents of the Company which have been filed as exhibits to
the Company's filings made under the Act and the Securities
Exchange Act of 1934, as amended. In making its investment
decision to purchase the Preferred Stock, the Subscriber is not
relying on any oral or written representations or assurances
from the Company or any other person or any representation of
the Company or any other person other than as set forth in this
Agreement, or on any information other than that contained in
the Company's Annual Report on Form 10-K for the year ended
April 30, 1995 and (ii) Quarterly Report on Form I O-Q for the
quarter ended July 31. 1995. The Subscriber has relied upon a
representation of ▇▇▇▇▇▇ Investments, Inc. that ▇▇▇▇▇▇ did not
offer the Preferred Stock to any Subscribers in the U.S. or to
any person in the U.S. (unless they have signed the required
fiduciary certificate), or any U.S. person. The Subscriber has
such experience in business and financial matters that it is
capable of evaluating the risk of its investment and
determining the suitability of its investment. The Subscriber
is an accredited investor as defined in Rule 501 of Regulation
D, a copy of which definition is attached hereto as Exhibit C.
2.3 Subscriber's Economic Risk. The Subscriber understands and
acknowledges that an investment in the Securities involves a
high degree of risk. The Subscriber represents that the
Subscriber is able to bear the economic risk of an investment
in the Securities, which Subscriber acknowledges are currently
illiquid and may remain illiquid indefinitely, including a
possible total loss of investment. in making this statement the
Subscriber hereby represents and warrants to the Company that
the Subscriber has adequate means of providing for the
Subscriber's current needs and contingencies; the Subscriber is
able to afford to hold the Securities for an indefinite period
and the Subscriber further represents that the Subscriber has
such knowledge and experience in financial and business matters
that the Subscriber is capable of evaluating the merits and
risks of the investment in the Securities to be received by the
Subscriber. Further, the Subscriber represents, as of the date
of signing this Agreement, that the Subscriber has no present
need for liquidity in the Securities and the Subscriber is
willing to accept such investment risks.
2.4 No Government Recommendation or Approval. The Subscriber
understands that no United States federal or state agency, or
similar agency of any other country, has reviewed, approved,
passed upon or made any recommendation or endorsement of the
Company, the Offering or the subscription of the Securities.
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2.5 No Directed Selling Efforts in Regard to this Transaction. To
the best of the knowledge of the Subscriber and Company,
neither the Company nor any distributor participating in the
Offering, nor any person acting for the Company or any such
distributor, has conducted any "directed selling efforts" in
the United States as the term "directed selling efforts" is
defined in Rule 902 of Regulation S (without the subscriber
having undertaken any investigation or inquiry), which in
general, means any activity undertaken for the purpose of, or
that could reasonably be expected to have the effect of,
conditioning the market in the United States for any of the
Securities being offered. Such activity includes, without
limitation, the mailing of printed material to investors
residing in the United States, the holding of promotional
seminars in the United States, and the placement of
advertisements with radio or television stations broadcasting
in the United States or in publications with a general
circulation in the United States, which discuss the offering of
the Securities.
2.6 Company's Reliance on Representations of Subscribers. This
Agreement is made by the Company with each Subscriber in
reliance upon such Subscriber's representations and covenants
made in this Section 2, which reliance by his execution of this
Agreement the Subscriber hereby confirms.
2.7 Securities Not Registered Under Securities Act. Subscriber
understands that the Preferred Stock and the Common Stock
issuable upon conversion of the Preferred Stock (the "Shares")
have not been registered under the Act or any state securities
laws ("State Acts") and are being offered and sold pursuant to
Regulation S based in part upon the representations of
Subscriber contained herein. The Common Stock does, however,
carry certain registration rights as set forth in the
Registration Rights Agreement executed by the parties hereto.
2.8 No Public Solicitation. Subscriber knows of no public
solicitation or advertisement of an offer in connection with
the proposed issuance and sale of the Securities.
2.9 Investment Intent (Including No Present Intent to Sell
Securities at PreDetermined Time). Subscriber is acquiring the
Preferred Stock to be issued and sold hereunder (and the Shares
issuable upon conversion of the Preferred Stock) for his, her
or its own account (or a trust account if such Subscriber is a
trustee) for investment and not as a nominee and not with a
view to the distribution thereof Subscriber understands that
Subscriber must bear the economic risk of this investment
indefinitely unless such Preferred Stock or such Shares are
registered pursuant to the Act and any applicable State Acts,
or an exemption from such registration is available, and that
the Company has no present intention of registering any such
sale of the Preferred Stock or such Shares, Subscriber
represents and warrants to the Company that as of the date of
this Agreement, Subscriber has no present plan or intention to
sell the Preferred Stock or the Shares in the United States at
any predetermined time, and has made no predetermined
arrangements to sell the Preferred Stock or the Shares.
Subscriber covenants that neither Subscriber nor its affiliates
nor any person acting on its or their behalf has entered, has
the intention of entering, or will enter into any put
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option, short position or other similar instrument or position
in the U.S. with respect to the Preferred Stock or Common Stock
of the Company anytime after receipt of the term sheet from
▇▇▇▇▇▇ Investments concerning this Regulation S Offering until
the end of the Restricted Period, or for purposes of lowering
the price at which the Preferred Stock are convertible into
Shares and neither Subscriber nor any of its affiliates nor any
person acting on its or their behalf will at any time use
Shares acquired upon conversion of the Preferred Stock to
settle/cover any put option, short position or other similar
instrument or position.
2.10 Subscriber Not to Sell or Transfer Securities in Violation of
the Securities Laws. Subscriber covenants that he, she or it
will not make any sale, transfer or other disposition of the
Preferred Stock or the Shares in violation of the Act
(including Regulation S), the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), any applicable State Acts or
the rules and regulations of the Securities and Exchange
Commission (the "Commission") or of any state securities
commissions or similar state authorities promulgated under any
of the foregoing.
2.11 Subscriber's Power and Authority. Subscriber has the full power
and authority to execute, deliver and perform this Agreement.
This Agreement, when executed and delivered by Subscriber, will
constitute a valid and legally binding obligation of
Subscriber, enforceable in accordance with its terms.
2.12 Signatory's Representation. The signatory to this Agreement
hereby represents and warrants that he, she or it is:
(a) not a U. S. Person (as defined in Regulation S), and is not
located in the U. S. at the time of signing this Agreement.
If the signatory to this Agreement does not meet the
requirement in sub-section (a) herein, signatory represents he,
she or it is:
(b) a professional fiduciary of Subscriber (as described in
Section (o)(2) through (o)(4) of Rule 902 of Regulation S),
acting solely in his capacity as holder of such account, as a
fiduciary, executor or trustee, and has completed and signed
the accompanying Certificate (Exhibit D) and forwarded it to
▇▇▇▇▇▇ Investments, Inc.
2.13 No Tax Advice From Company. Subscriber has reviewed with his,
her or its own tax advisors the foreign, U.S. federal, state
and local tax consequences of this investment, and the
transactions contemplated by this Agreement. Subscriber is
relying solely on such advisors and not on any statements or
representations of the Company or any of its agents and
understands that Subscriber (and not the Company) shall be
responsible for the Subscriber's own tax liability that may
arise as a result of this investment or the transactions
contemplated by this Agreement.
2.14 No Legal Advice from Company. Subscriber acknowledges that he,
she, or it has had the opportunity to review this Agreement and
the transactions contemplated by this Agreement with his, or
her or its own legal counsel. Subscriber is relying solely on
such counsel and not on any statements or representations of
the
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Company or any of its agents for legal advice with respect to
this investment or the transactions contemplated by this
Agreement, except for the representations, warranties and
covenants set forth herein and in the opinion provided for in
paragraph 7.3 herein.
2.15 Offering Material Statements. Subscriber acknowledges and
agrees that all offering materials and documents used in
connection with the offers and sales of the Securities to it
included statements to the effect of those contained in the
first fall capitalized paragraph of this Agreement.
2.16 No Scheme to Evade Registration. Subscriber's acquisition of
the Securities is not a transaction (or any element of a series
of transactions) that is part of a plan or scheme to evade the
registration provisions of the Act.
3. Resales of Securities by Subscriber
Subscriber acknowledges, covenants and agrees that the Securities may
and will only be resold by it (a) in compliance with Regulation S and applicable
State Acts, if any; or (b) pursuant to an exemption from registration under the
Act and applicable State Acts, if any; or c) pursuant to an effective and
current Registration Statement under the Act. In addition, in connection with
any resale of the Preferred Stock in accordance with clause (a) or (b), above,
the subscriber will deliver to the Company and will cause the purchaser to
deliver to the Company following documents:
3.1 Documents to be Delivered for Offshore Regulation S Resales. If
the shares of Preferred Stock are being resold in compliance
with Regulation S:
1. Sales Agreement, executed by Subscriber and Purchaser
(in the form of Exhibit E);
2. Seller Representation Letter (in the form of Exhibit
F);
3. Assignment Separate from Certificate (in the form of
Exhibit G) (or endorsed Certificates);
4. Seller's Instruction Letter (in the form of Exhibit
H); and
5. Purchaser Representation Letter (in the form of
Exhibit 1).
3.2 Documents to be Delivered for Resales into the United States.
If the shares of Preferred Stock are being resold pursuant to
an exemption from registration under the Act other than
Regulation S:
1. Sales Agreement, executed by both Subscriber and
Purchaser (in the form of Exhibit E);
2. Seller Representation Letter (in the form of Exhibit
J);
3. Assignment Separate from Certificate (in the form of
Exhibit G) (or endorsed Certificates);
4. Seller's Instruction Letter (in the form of Exhibit
H); and
5. Purchaser Representation Letter (in the form of
Exhibit 1).
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Upon receipt of the executed documents listed above, the Company will
effect the transfer of the Preferred Stock on the Company's books and will issue
and deliver new Preferred Stock in the purchaser's name within three (3)
business days of such receipt. The provisions of this Section 3 shall not apply
to subsequent resales of Preferred Stock that have been sold by Subscriber in
compliance with this Section 3.
4. Legends; Subsequent Sale of Securities
4.1 The certificates representing the Preferred Stock shall bear
the first legend set forth in Section 4.1 (a), 4.1 (b) and 4.1
(c) below and any other legend or legends as reasonably
required to comply with the state, U.S. federal or foreign law.
(a) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT TO A
SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
("REGULATION S") PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED ("THE ACT"). THE SECURITIES MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
UNITED STATES OR TO U.S, PERSONS (AS SUCH TERM IS
DEFINED IN REGULATION S) UNLESS THE SECURITIES ARE
REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS
ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION OR SAFE
HARBOR FROM THE REGISTRATION REQUIREMENTS OF THOSE
LAWS.
(b) THESE SECURITIES MAY NOT BE OFFERED OR SOLD TO OR FOR
THE BENEFIT OR ACCOUNT OF A "U.S. PERSON," AS THAT
TERM IS DEFINED IN RULE 902(o) OF REGULATIONS, PRIOR
TO THE EXPIRATION OF A PERIOD COMMENCING ON THE DATE
OF THE LAST CLOSING OF A SALE AND PURCHASE OF THE
SECURITIES AND ENDING NINETY DAYS THEREAFTER.
(c) THE ISSUER WILL FURNISH, WITHOUT CHARGE, TO THE HOLDER
OF THIS CERTIFICATE, UPON REQUEST, THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS AND
SERIES OF STOCK OF THE CORPORATION AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS.
4.2 Prior to the forty (40) day period following the Last Closing,
any Preferred Shoes submitted to the transfer agent to be
converted into shares of Common Stock shall bear the Regulation
S legend set forth at Section 4.1 (a) of this Agreement.
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(a) Except for Sections 2.1 and 2.9 of this Agreement,
which sections are not applicable, each Subscriber
asserts that the representations and warranties made
by the Subscribers in the Subscription Agreement are
true on the date the Subscriber presents the Preferred
Shares for transfer, including the fact that he, she
or it is not or was not engaged in a plan or scheme to
evade the registration provisions of the Securities
Act of 1933, as amended, then at any time after the
forty (40) day period following the date of Last
Closing, any Subscriber issued Preferred Shares
pursuant to a Subscription Agreement is entitled to
submit its certificate representing the Preferred
Shares ("Stock Certificates") to the Transfer Agent to
either have the Regulation S restrictive legend set
forth in Section 4.1 (a) of the Subscription Agreement
("Regulation S Restrictive Legend") removed or (ii) to
convert such Subscribers's Preferred Shares into
shares of Converted Stock, the certificates for which
shall bear no Regulation S Restrictive Legend.
(b) Except for Sections 2.1 and 2.9 of this Agreement,
which sections are not applicable, the representations
and warranties made by the Subscribers in the
Subscription Agreement remain true upon presentation
of the Preferred Shares for transfer, including the
fact that he, she or it is not or was not engaged in a
plan or scheme to evade the registration provisions of
the Securities Act of 1933, as amended, then, at any
time after the ninety (90) day period following the
date of Last Closing (the "Unrestricted Conversion
Period"), any Subscriber issued Preferred Shares
pursuant to a Subscription Agreement is entitled to
submit its certificate representing the Preferred
Shares to the Transfer Agent to either (i) have the
Regulation S and contractual restrictive legends set
forth in Section 4.1 (a) and (b) of the Subscription
Agreement ("Contractual Legend") removed or (ii) to
convert such Subscriber's Preferred Shares into shares
of Converted Stock, the certificates for which shall
bear no Contractual Legend.
(c) Any conversion of the Preferred Shares shall be at the
conversion prices (the "Conversion Price") specified
in Section 5 of the Certificate of Determination
(which Section is set forth in the Irrevocable
Instructions Agreement at Exhibit A). Any such
conversion shall be accomplished by delivering the
Stock Certificates, duly executed for transfer, to be
converted along with the notice required by said
Section 5 ("Notice of Conversion") to the Transfer
Agent. The Preferred Shares so delivered will be
converted into shares of Converted Stock (but only in
multiples of $50,000).
(d) The Company and Subscribers have agreed that Company
will provide the Transfer Agent with irrevocable
instructions to convert one or more of any
Subscriber's Preferred Shares into shares of Converted
Stock upon receipt of valid Notice of Conversion from
a Subscriber and the Stock Certificates, duly executed
for transfer. The number of shares of Converted Stock
into which the Preferred Shares may be converted is
hereinafter referred to as the "Conversion Rate" for
such Preferred Shares.
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5. Notice of Issuance of Securities
The Company will not issue any debt or equity securities for cash in
public or private capital raising transactions ("Future Offerings") for
a period of seventy five (75) days after the Last Closing without
obtaining the prior written approval of Subscribers holding a majority
of the purchase price of Preferred Stock then outstanding. Furthermore,
the Company will not conduct any Future Offerings for a period of two
hundred and forty (240) days after the Last Closing without delivering
to the Subscriber, at least seven (7) days prior to the closing of such
issuance, written notice describing the proposed issuance and the terms
upon which such securities are being issued, and providing the
Subscriber the option during such seven (7) day period to purchase the
securities being offered in the Future Offerings on the same terms as
contemplated by such Future Offerings and in the amount set forth below
(the limitations referred to in this and the immediately preceding
sentence are collectively referred to as the "Capital Raising
Limitation"). The Capital Raising Limitation shall not apply to any
transaction involving the Company's commercial banking arrangements or
issuances of securities in connection with a merger, consolidation or
sale of assets, or in connection with or as part of the same
transaction as a joint venture or other acquisition or disposition of a
business, a product or a license by the Company or exercise of options
by employees, consultants or directors or any transaction with a
strategic corporate partner. The Capital Raising Limitation also shall
not apply to the issuance of securities upon exercise or conversion of
the Company's options, warrants or other convertible securities
outstanding as of November 24, 1995, or to the grant of additional
options or warrants, or the issuance of additional securities, under
any Company stock option or restricted stock plan. The amount of
securities which a Subscriber is entitled to purchase in such a Future
Offering shall be a number obtained by multiplying the aggregate amount
of securities being offered in the Future Offering by a fraction, the
numerator of which is the purchase price of the Preferred Stock
purchased by the Subscriber pursuant to this Agreement and the
denominator of which is the aggregate dollar amount of Preferred Stock
placed in this Offering.
6. Representations and Warranties of Company
Company represents and warrants to Subscriber as follows:
6.1 Organization, Good Standing, and Qualification. The Company is
a corporation duly organized, validly existing and in good
standing under the laws of the State of California, USA and has
all requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so
qualify would have a material adverse effect on the business or
properties of the Company and its subsidiaries taken as a
whole. The Company, to its knowledge is not the subject of any
pending or threatened investigation or administrative or legal
proceeding by the Internal Revenue Service, the taxing
authorities of any state or local jurisdiction, or the
Securities and Exchange Commission which have not been
disclosed in the reports referred to in Section 6.5 below.
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6.2 Corporate Condition. The Company's condition was, in all
material respects, as described in the Company's reports filed
pursuant to the Exchange Act and provided to Subscriber in
accordance with Section 2.2 above as of the dates of such
reports. There have been no material adverse changes in the
Company's financial condition or business since the date of the
latest report, except as described in the Company's press
releases, copies of which have been provided to Subscriber.
6.3 Authorization. All corporate action on the part of the Company
by its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company hereunder and the
authorization, issuance (or reservation for issuance) and
delivery of the Preferred Stock being sold hereunder and
issuance of the Common Stock obtainable on conversion of the
Preferred Stock have been taken, and this Agreement and the
Registration Rights Agreement constitutes a valid and legally
binding obligation of the Company, enforceable in accordance
with its terms.
6.4 Valid Issuance of Preferred Stock and Common Stock. The
Preferred Stock, when issued, sold and delivered in accordance
with the terms hereof for the consideration expressed herein,
will be validly issued, fully paid and nonassessable and, based
in part upon the representations of the Subscriber in this
Agreement, will be issued in compliance with all applicable
U.S. federal and state securities laws. The Common Stock
issuable upon conversion of the Preferred Stock when issued in
accordance with the terms of the Preferred Stock shall be duly
and validly issued and outstanding, fully paid and
nonassessable, and based in part on the representations and
warranties of Subscriber and any transferee of the Preferred
Stock, will be issued in compliance with all applicable U.S.
federal and state securities laws.
6.5 Current Public Information. The Company represents and warrants
to the Subscriber that the Company is a "reporting issuer" as
defined in Rule 902(l) of Regulation S and it has a class of
securities registered under Section 12(b) or 12(g) of the
Exchange Act or is required to file reports pursuant to Section
15(d) of the Exchange Act, and has filed all the materials
required to be filed as reports pursuant to the Exchange Act
for a period of at least twelve months preceding the date
hereof (or for such shorter period as the Company was required
by law to file such material), and all such filings have been
made on a timely basis. The Company undertakes to furnish the
Subscriber with copies of such information as may be reasonably
requested by the Subscriber prior to consummation of this
Offering.
6.6 No Securities Offered in U.S. or to any U.S. Person. The
Company represents that the Preferred Stock was not offered to
a Subscriber in the U.S. or, to any person in the United States
or any U.S. Person (as defined in Regulation S), and has relied
upon a representation of ▇▇▇▇▇▇ Investments, Inc. that ▇▇▇▇▇▇
did not offer the Preferred Stock to any Subscribers in the
U.S. or to any person in the U.S. (unless they have signed the
required fiduciary certificate), or any U.S. person.
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6.7 Capitalization Structure of the Company. The capitalization of
Company, as of the date of the Closing, as set forth in
Exhibit L.
6.8 Termination Date of Offering. In no event shall the Last
Closing of a sale of a Preferred Stock occur later than
December 22, 1995.
6.9 Use of Proceeds. As of the date hereof, the Company expects to
use the proceeds from this Offering (less fees and expenses)
for the purposes and in the approximate amounts set forth in
Exhibit M hereto. These purposes and amounts are estimates and
are subject to change.
6.10 Liquidated Damages for Late Conversion. As set forth in the
Certificate of Designation, the Company shall use all
reasonable efforts to issue and deliver, within three (3)
business days after the Subscriber has fulfilled all conditions
and submitted all necessary documents duly executed and in
proper form, required for conversion (the "Deadline"), to such
Holder of Class B Convertible Preferred Stock at the address of
the Holder on the books of the Company, a certificate or
certificates for the number of shares of Common Stock to which
the Holder shall be entitled upon submission of a notice of
conversion. The Company understands that a delay in the
issuance of the Shares of Common Stock beyond the Deadline
could result in economic loss to the Holder. As compensation to
the Holder for such loss, the Company agrees to pay liquidated
damages to the Holder for late issuance of Shares upon
Conversion in accordance with the following schedule (where
"No. Business Days Late" is defined as the number of business
days beyond 5 business days from the date of receipt by the
Company of a notice of conversion and the transfer agent of all
necessary documentation duly executed and in proper form
required for conversion, including the original certificate
representing the Preferred Shares to be converted, all in
accordance with the subscription documents and the requirements
of the transfer agent):
No. Business Days Late Liquidated Damages
---------------------- ------------------
1 $500
2 $1,000
3 $1,500
4 $2,000
5 $2,500
6 $3,000
7 $3,500
8 $4,000
9 $4,500
10 $5,000
Greater than 10 $5,000 + $1,000 for each
Business Day Late beyond 10 days
The Company shall pay any liquidated damages incurred under
this Section by check within 7 business days from the date of
issuance of Shares.
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6.11 Payment of Accrued Interest on Funds in Escrow. The Company
shall pay interest to each Subscriber prior to the Last Closing
in an amount equal to 10% per annum of interest of the Original
Class B Issue Price (which is $1,000 per share) per annum for
the period commencing on the date that, in connection with the
consummation of the initial purchase by Subscriber of its
shares of Convertible Class B Preferred Stock from the Company,
the escrow agent first had in its possession funds representing
full payment for such shares of Class B Convertible Preferred
Stock and ending on the Last Closing Date. Such payment shall
be made by the Company to Subscriber, by check, within 7 days
of the date of the Last Closing.
6.12 Company To Be Listed On NASDAQ Within 120 Days. Company
represents that it intends to utilize a portion of the proceeds
from this offering so it can be listed on NASDAQ's small
capitalization market or NASDAQ's national market system. The
Company shall use its best efforts to obtain such listing as
soon as practicable, including filing for NASDAQ listing no
later than 30 days following the date of Last Closing. If
Company fails to obtain the aforementioned NASDAQ listing
within 120 days from the date of Last Closing, Company shall be
obligated to pay to Subscriber (or any subsequent holder) in
Convertible Class B Stock an amount equal to 1.5% per month
until such listing is obtained.
6.13 Planned Increase in Authorized Common Stock
Company agrees to recommend to its shareholder at its annual
meeting on or before August 1, 1996 that the company increase
the authorized number of shares of common stock to 50 million
shares.
7. Covenants of Company
7.1 Independent Auditors. The Company shall, until at least
December 6, 1998, maintain as its independent auditors an
accounting firm authorized to practice before the SEC.
7.2 Corporate Existence and Taxes. The Company shall, until at
least the earlier of December 15, 1998, or the conversion or
redemption of the Preferred Stock purchased pursuant to this
Agreement maintain its corporate existence in good standing
(provided, however, that the foregoing covenant shall not
prevent the Company from entering into any merger or corporate
reorganization as long as the surviving entity in such
transaction, if not the Company, assumes the Company's
obligations with respect to the Preferred Stock) and shall pay
all its taxes when due except for taxes which the Company
disputes.
7.3 Opinion of Counsel. Subscriber shall, upon purchase of the
Preferred Stock, receive an opinion letter from outside counsel
to the Company, to the effect that (i) the Company is duly
incorporated and validly existing under the laws of California;
(ii) this Agreement, the Registration Rights Agreement, the
issuance of the Preferred Stock, and (assuming there are
sufficient authorized shares) the issuance of the Common Stock
upon conversion of the Preferred Stock have been
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duly authorized by all required corporate action, and that all
such Shares, upon delivery, shall be validly issued and
outstanding, fully paid and nonassessable; (iii) this Agreement
constitutes valid and binding obligations of the Company,
enforceable in accordance with their terms, except as
enforceability of any indemnification provisions may be limited
by principles of public policy, and subject to laws of general
application relating to bankruptcy, insolvency and the relief
of debtors and rules of laws governing specific performance and
other equitable remedies; and (iv) based upon the
representations and warranties of the Subscribers contained in
the Regulation S Subscription Agreements entered into in
connection with the Offering, and assuming that no Subscriber
is engaged in a plan or scheme to evade the registration
requirements of the Act, the issuance of the Preferred Stock
has been effected in compliance with Regulation S, and the
issuance of the Shares upon conversion of the Preferred Stock
in accordance with their terms by the holders of the Preferred
Stock (assuming that no commission or other remuneration is
paid or given, directly or indirectly, for soliciting such
conversion) will not be subject to the registration provisions
of the Act.
7.4 Registration Rights. The Company will grant Subscriber the
registration rights covering the Common Stock issuable on
conversion of the Preferred Stock on substantially the terms of
the Registration Rights Agreement attached hereto as Exhibit N.
7.5 Notification of Final Closing Date & Restricted Period by
Company. Within five (5) business days after the Last Closing,
the Company shall notify the Subscriber in writing that the
final Closing has occurred, the date of the final Closing, the
date upon which the 40 day restricted period and the ninety
(90) day contractual restricted period will terminate with
respect to the Securities, and the value of the fixed strike
price, as that term is defined in the Preferred Shares.
8. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of California, U.S.A., applicable to agreements made in
and wholly to be performed in that jurisdiction, except for matters arising
under the Act or the Exchange Act which matters shall be construed and
interpreted in accordance with such laws. Any action brought to enforce, or
otherwise arising out of, this Agreement shall be heard and determined only in
either a federal or state court sitting in the County of Orange in the State of
California, U.S.A.
9. Entire Agreement; Written Amendments Required
This Agreement, the Preferred Stock, the Registration Rights Agreement
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
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10. Written Notices, Etc.
Any notice, demand or request required or permitted to be given by
either the Company or the Subscriber pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally, or by
facsimile (with a hard copy to follow by two day courier), addressed to the
parties at the addresses and/or facsimile telephone number of the parties set
forth at the end of this Agreement or such other address as a party may request
by notifying the other in writing.
11. Execution in Counterparts Permitted
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together hall constitute one instrument.
12. Severability of Agreement
In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to any party.
13. Titles and Subtitles; Gender
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement. The use in this Agreement of a masculine, feminine or neither pronoun
shall be deemed to include a reference to the others.
14. Exact Registered Name of Security Holder; Offshore Delivery
Instructions
Subscriber agrees to provide Company with the exact name in which it
wishes the securities to be registered by providing that information on the
accompanying signature page of his Agreement. Additionally, Subscriber also
agrees to provide Company with detailed delivery instructions to an offshore
addressee and will also provide that information on the accompanying signature
page of this Agreement.
15. Subscriber to Forward Original Signed Subscription Agreement to Company
Subscriber agrees to courier to Company his, her or its original inked
signed Subscription Agreement within 2 days of faxing said signed agreement to
placement agent, ▇▇▇▇▇▇ Investments, Inc.
16. Assignment.
Neither party to this Agreement may assign this Agreement without the
written consent of the other (which may be withheld for any reason). This
provision does not limit the Subscriber's right to transfer the Securities
pursuant to the terms of the Preferred Shares and this Agreement.
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[See following page for provisions regarding the amount of your subscription,
the exact name in which the security is to be issued, and offshore delivery
instructions.]
17. Amount
The undersigned hereby subscribes for $___________ purchase price
of Preferred Stock, and pays herewith funds in the amount of ___________ U.S
Dollars ($___________ U.S.).
The undersigned acknowledges that this Agreement and the subscription
represented hereby shall not be effective unless accepted by the Company as
indicated below.
Dated this day of , 1995.
--------------------------------------------- -----------------------------------------------
Your Signature EXACT NAME IN WHICH YOU WANT
THE SECURITIES TO BE REGISTERED
(Please Print Exact Registered Name)
--------------------------------------------- OFFSHORE DELIVERY INSTRUCTIONS:
Name: Please Print
Please type or print address where your
security is to be delivered
ATTN:
------------------------------------
--------------------------------------------- -----------------------------------------
Title/Representative Capacity (if applicable) Street Address
--------------------------------------------- -----------------------------------------
Name of Company You Represent (if applicable) Street Address
--------------------------------------------- -----------------------------------------
Place of Execution of this Agreement City, State or Province, Country
-----------------------------------------
Offshore Postal Code
-----------------------------------------
Phone Number (For Federal Express)
-----------------------------------------
Facsimile Number (re: Notice)
48
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THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE DAY OF
1995.
TECHNICLONE INTERNATIONAL CORPORATION
A California Corporation
By:
------------------------------------
Print Name:
----------------------------
Title:
---------------------------------
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FIDUCIARY, EXECUTOR OR TRUSTEE CERTIFICATE
Nature of Signatory. The signatory to this Agreement hereby represents
and warrants that if he, she or it is a U.S. Person (as defined in
Regulation S) or is located in the U.S. at the time of signing this
Agreement, then he, she or it is:
a professional fiduciary of Subscriber (as described in Section o(2)
through (o)(4) of Rule 902 of Regulation S), acting solely mi his
capacity as holder of such account, in which case:
(i) After due inquiry the Subscriber is not a U.S. Person (as
defined in Regulation S); and
(ii) either (sign either A, B or C, as applicable):
A. The account for which the Securities are being purchased by
Subscriber is a discretionary account which the undersigned
manages and holds for the benefit or account of Subscriber and
the Subscriber is not located in the U.S. at the time of
signing this Agreement;
(signature)
-----------------------
OR
B. The account for which the Securities are being purchased by
Subscriber is the account of an estate of which the undersigned
acts as executor, provided that an executor or administrator
who is not a U.S. person has sole or shared investment
discretion with respect to the assets of the estate, and the
estate is governed by foreign law and provided further that the
Subscriber is not located in the U.S. at the time of signing
this Agreement;
(signature)
-----------------------
OR
C. The account for which the securities are being purchased by
Subscriber is the account of a trust of which the undersigned
acts as trustee, provided that a trustee who is not a U.S.
Person (as defined in Regulation S) has sole or shared
investment discretion with respect to the trust assets, and no
beneficiary of the trust (and no settlor if the trust is
revocable) is a U.S. Person (as defined in Regulation S) and
provided further that the Subscriber is not located in the U.S.
at the time of signing this Agreement.
(signature)
-----------------------
--------------------------- -----------------------------------------
Print Your Name Person or Entity for Whom You are Signing
50