Exhibit 10.2
FORM OF
OSTEOLOGIX, INC.
SUBSCRIPTION AGREEMENT
Osteologix, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Ladies and Gentlemen:
1. Subscription. The undersigned (the "Purchaser"), intending to be
legally bound, hereby agrees to purchase from Osteologix, Inc. (the "Company")
shares (the "Shares") of the Company's Common Stock, no par value per share (the
"Common Stock") in the amount set forth on the signature page hereof. The
minimum subscription for Shares shall be $100,000, however the Company may, in
its discretion, accept less than the minimum subscription amount. This
subscription is submitted to you in accordance with and subject to the terms and
conditions described in this Subscription Agreement (the "Agreement") and the
Private Placement Memorandum of the Company, dated April 28, 2006, as amended or
supplemented from time to time, including all attachments, schedules and
exhibits thereto (the "Memorandum"), relating to the offering (the "Offering")
by the Company of a minimum of $8,000,000 (the "Minimum Amount") and a maximum
of $13,000,000 (the "Maximum Amount") in aggregate purchase price of Shares. The
purchase price per Share shall be equal to $1.50. All funds received in
connection with subscriptions for Shares will be deposited in a separate escrow
account (the "Escrow Account") held by ▇▇▇▇▇ Fargo & Company (the "Escrow
Agent") pursuant to the terms hereof and of that certain escrow agreement by and
among the Company, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLC, ▇▇▇▇ Capital Partners, LLC and the
Escrow Agent (the "Escrow Agreement").
The terms of the Offering are more completely described in the Memorandum
and such terms are incorporated herein in their entirety. Certain terms used but
not otherwise defined herein shall have the respective meanings provided in the
Memorandum and in Section 7 herein.
2. Closing, Deliverables and Escrow.
(a) Closing. On the Closing Date, each Purchaser shall purchase from
the Company, severally and not jointly with the other Purchasers, and the
Company shall issue and sell to each Purchaser the number of shares of Common
Stock equal to such Purchaser's Subscription Amount divided by the Per Share
Purchase Price. The aggregate Subscription Amounts for Shares sold hereunder
shall be up to the Maximum Amount. Upon satisfaction of the conditions set forth
in this Section 2, the Closing shall occur at the offices of Loeb & Loeb LLP or
such other location as the parties shall mutually agree.
(b) Deliveries.
(1) On or prior to the Closing Date, the Company shall deliver
or cause to be delivered to each Purchaser the following:
i. this Agreement duly executed by the Company;
ii. a certificate evidencing a number of shares of
Common Stock of the successor company in the
Merger described in the Memorandum equal to such
Purchaser's Subscription Amount divided by the Per
Share Purchase Price, registered in the name of
such Purchaser;
iii. the Registration Rights Agreement duly executed by
the Company; and
iv. a legal opinion of Company Counsel.
(2) On or prior to the Closing Date, each Purchaser shall
deliver or cause to be delivered to the Company the following:
i. this Agreement duly executed by such Purchaser;
ii. such Purchaser's Subscription Amount by wire
transfer to the account of the Escrow Agent; and
iii. the Registration Rights Agreement duly executed by
such Purchaser.
(c) Closing Conditions.
(1) The obligations of the Company hereunder in connection
with the Closing are subject to the following conditions being met:
i. the accuracy in all material respects on the
Closing Date of the representations and warranties
of the Purchasers contained herein;
ii. all obligations, covenants and agreements of the
other parties to the Merger required to be
performed at or prior to the Closing Date shall
have been performed;
iii. all obligations, covenants and agreements of the
Purchasers required to be performed at or prior to
the Closing Date shall have been performed; and
iv. the delivery by the Purchasers of the items set
forth in Section 2(b)(2) of this Agreement.
(2) The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions
being met:
i. the accuracy in all material respects on the
Closing Date of the representations and warranties
of the Company contained herein;
ii. the effectiveness of the exchange of all shares in
Osteologix A/S held by Nordic Biotech for shares
issued by the successor company in the Merger
described in the Memorandum;
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iii. all obligations, covenants and agreements of the
Company required to be performed at or prior to
the Closing Date shall have been performed;
iv. the delivery by the Company of the items set forth
in Section 2(b)(1) of this Agreement; and
v. there shall have been no Material Adverse Effect
with respect to the Company since the date hereof.
3. Acceptance of Subscription. The Purchaser understands and agrees that
the Company reserves the right to accept or reject this or any other
subscription for Shares, in whole or in part, and in any order, notwithstanding
prior receipt by the Purchaser of notice of acceptance of this subscription. The
Company shall have no obligation hereunder until the Company shall execute and
deliver to the Purchaser an executed copy of this Subscription Agreement. If
this subscription is rejected in whole or the Offering is terminated or the
Minimum Amount is not raised, all funds received from the Purchaser will be
returned without interest, penalty, expense or deduction, and this Subscription
Agreement and all other documents executed by the Purchasers shall thereafter be
of no further force or effect. If this subscription is rejected in part, and in
any order, the funds for the rejected portion of this subscription will be
returned without interest, penalty, expense or deduction, and this Subscription
Agreement will continue in full force and effect with respect to the part of the
subscription that was accepted.
4. Purchaser Representations and Warranties. The Purchaser hereby
represents, warrants, acknowledges and agrees as follows:
(a) The Shares are not registered under the Securities Act of 1933,
as amended (the "Securities Act"), or any state securities laws. The Purchaser
understands that the offering and sale of the Shares is intended to be exempt
from registration under the Securities Act, by virtue of Section 4(2) thereof
and the provisions of Regulation D promulgated thereunder, or not subject to
such requirement, by virtue of Regulation S promulgated under the Securities
Act, based, in part, upon the representations, warranties and agreements of the
Purchaser contained in this Subscription Agreement.
(b) The Purchaser has received the Memorandum and all other
documents requested by the Purchaser, has carefully reviewed them and
understands the information contained therein, and the Purchaser, prior to the
execution of this Subscription Agreement, has had access to the same kind of
information which would be available in a registration statement filed by the
Company under the Securities Act.
(c) Neither the Securities and Exchange Commission nor any state
securities commission has approved the Shares, or passed upon or endorsed the
merits of the Offering or confirmed the accuracy or determined the adequacy of
the Memorandum. The Memorandum has not been reviewed by any Federal, state or
other regulatory authority.
(d) All documents, records and books pertaining to the investment in
the Shares (including, without limitation, the Transaction Documents) have been
made available for inspection by the Purchaser and its representatives.
Purchaser hereby acknowledges that all such information is confidential and
Purchaser shall not disclose any such confidential information to any third
party other than as set forth herein.
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(e) The Purchaser has had a reasonable opportunity to ask questions
of and receive answers from a person or persons acting on behalf of the Company
concerning the offering of the Shares and the business, financial condition,
results of operations and prospects of the Company, and all such questions have
been answered to the full satisfaction of the Purchaser.
(f) In evaluating the suitability of an investment in the Company,
the Purchaser has not relied upon any representation or other information (oral
or written) other than as stated in the Memorandum.
(g) The Purchaser is unaware of, is in no way relying on, and did
not become aware of the offering of the Shares through or as a result of, any
form of general solicitation or general advertising as those terms are used in
Regulation D under the Securities Act, including, without limitation, any
article, notice, advertisement or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, in
connection with the offering and sale of the Shares and is not subscribing for
Shares and did not become aware of the offering of the Shares through or as a
result of any seminar or meeting to which the Purchaser was invited by, or any
solicitation of a subscription by, a person not previously known to the
Purchaser in connection with investments in Shares generally.
(h) The Purchaser has taken no action which would give rise to any
claim by any person for brokerage commissions, finders' fees or the like
relating to this Subscription Agreement or the transactions contemplated hereby
other than the fees described in the Memorandum.
(i) The Purchaser has such knowledge and experience in financial,
tax, and business matters, and, in particular, investments in securities similar
to the Shares, so as to enable the Purchaser to utilize the information made
available to it in connection with the Offering of the Shares to evaluate the
merits and risks of an investment in the Securities and the Company and to make
an informed investment decision with respect thereto.
(j) The Purchaser is not relying on the Company or any of its
employees, officers or agents with respect to the legal, tax, economic and
related considerations as to an investment in the Shares, and the Purchaser has
relied on the advice of, or has consulted with, only his own advisors.
(k) The Purchaser is acquiring the Shares solely for the Purchaser's
own account for investment and not with a view to resale, assignment or
distribution thereof, in whole or in part. The Purchaser has no agreement or
arrangement, formal or informal, with any person to sell or transfer all or any
part of the Shares, and the Purchaser has no plans to enter into any such
agreement or arrangement. The Purchaser will not engage in hedging transactions
with respect to the Shares or the securities received upon exchange of the
Shares unless in compliance with the registration requirements of the Securities
Act.
(l) The Purchaser must bear the substantial economic risks of the
investment in the Shares indefinitely because none of the Shares may be sold,
hypothecated or otherwise disposed of unless subsequently registered under the
Securities Act and applicable state securities laws or an exemption from such
registration is available. Subject to the terms hereunder, legends shall be
placed on the Shares to the effect that they have not been registered under the
Securities Act or applicable state securities laws and appropriate notations
thereof will be made in the Company's stock books. Stop transfer instructions
will be placed with the transfer agent of the Shares. Although the Company has
the obligation to register for resale the securities received upon exchange of
the Shares (see the Registration Rights Agreement), there can be no assurance
that such registration will be completed within the time frames required by the
Company, or at all. It is not anticipated that there will be any active market
for resale of the Shares or such securities, and such securities will not be
freely transferable at any time in the foreseeable future, until the
registration statement filed pursuant to the Registration Rights Agreement is
declared effective.
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(m) The Purchaser has adequate means of providing for its current
financial needs and foreseeable contingencies and has no need for liquidity of
the investment in the Shares for an indefinite period of time.
(n) The Purchaser is aware that an investment in the Shares involves
a number of very significant risks and has carefully read and considered the
matters set forth under the caption "Risk Factors" in the Memorandum.
(o) The Purchaser meets the requirements of at least one of the
suitability standards for an "accredited investor" as set forth on the Investor
Certification contained herein or is a "non-US Person" that is a "qualified
investor" as defined in the European Union Prospective Directive, as set forth
on such Investor Certification.
(p) The Purchaser: (i) if a natural person, represents that the
Purchaser has reached the age of 21 and has full power and authority to execute
and deliver this Subscription Agreement and all other related agreements or
certificates and to carry out the provisions hereof and thereof; (ii) if a
corporation, partnership, limited liability company or partnership, association,
joint stock company, trust, unincorporated organization or other entity, (A)
such entity was not formed for the specific purpose of acquiring the Shares, (B)
such entity is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, (C) the consummation of the
transactions contemplated hereby is authorized by, and will not result in a
violation of law or its charter or other organizational documents, (D) such
entity has full power and authority to execute and deliver this Subscription
Agreement and all other related agreements or certificates and to carry out the
provisions hereof and thereof and to purchase and hold the Shares and the
securities that will be received upon exchange of the Shares, (E) the execution
and delivery of this Subscription Agreement has been duly authorized by all
necessary action, and (F) this Subscription Agreement has been duly executed and
delivered on behalf of such entity and is a legal, valid and binding obligation
of such entity; and (iii) if executing this Subscription Agreement in a
representative or fiduciary capacity, such representative has full power and
authority to execute and deliver this Subscription Agreement in such capacity
and on behalf of the subscribing individual, ▇▇▇▇, partnership, trust, estate,
corporation, limited liability company or limited liability partnership, or
other entity for whom such representative is executing this Subscription
Agreement, and such individual, ▇▇▇▇, partnership, trust, estate, corporation,
limited liability company or partnership, or other entity has full right and
power to perform this Subscription Agreement and make an investment in the
Company, and that this Subscription Agreement constitutes a legal, valid and
binding obligation of such Purchaser. The execution and delivery of this
Subscription Agreement will not violate or be in conflict with any order,
judgment, injunction, agreement or controlling document to which the Purchaser
is a party or by which it is bound.
(q) The Purchaser had the opportunity to obtain any additional
information, to the extent the Company had such information in its possession or
could acquire it without unreasonable effort or expense, necessary to verify the
accuracy of the information contained in the Memorandum and all documents
received or reviewed in connection with the purchase of the Shares and the
opportunity to have representatives of the Company provide it with such
additional information regarding the terms and conditions of this particular
investment and the financial condition, results of operations, business and
prospects of the Company deemed relevant by the Purchaser and all such requested
information, to the extent the Company had such information in its possession or
could acquire it without unreasonable effort or expense, has been provided to
Purchaser to its full satisfaction
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(r) The Purchaser represents to the Company that any information
which the undersigned has heretofore furnished or furnishes herewith to the
Company is complete and accurate and may be relied upon by the Company in
determining the availability of an exemption from registration under Federal and
state securities laws in connection with the offering of Shares as described in
the Memorandum. The Purchaser further represents and warrants that he will
notify and supply corrective information to the Company immediately upon the
occurrence of any change therein occurring prior to the Company's issuance of
the Shares.
(s) The Purchaser has a sufficient net worth to sustain a loss of
its entire investment in the Company in the event such a loss should occur. The
Purchaser's overall commitment to investments which are not readily marketable
is not excessive in view of its net worth and financial circumstances and the
purchase of the Shares will not cause such commitment to become excessive. The
investment is a suitable one for the Purchaser.
(t) No oral or written representations have been made, or oral or
written information furnished, to the Purchaser in connection with the offering
of the Shares or as to the Company, which are in any way inconsistent with the
information contained in the Memorandum.
(u) THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN STATES AND
ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM, OR IN TRANSACTIONS
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE
SHARES (AND THE SECURITIES THAT WILL BE RECEIVED UPON EXCHANGE OF SUCH SHARES)
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. ALTHOUGH
THE COMPANY HAS AN OBLIGATION TO REGISTER THE SHARES (OR SUCH SECURITIES) FOR
RESALE, THERE CAN BE NO ASSURANCE THAT SUCH REGISTRATION WILL BE COMPLETED
WITHIN THE TIME FRAMES REQUIRED, OR AT ALL. THE SHARES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY
OR ADEQUACY OF THE MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
(v) (For ERISA plans only) The fiduciary of the ERISA plan
represents that such fiduciary has been informed of and understands the
Company's investment objectives, policies and strategies, and that the decision
to invest "plan assets" (as such term is defined in ERISA) in the Company is
consistent with the provisions of ERISA that require diversification of plan
assets and impose other fiduciary responsibilities. The Purchaser fiduciary or
Plan (a) is responsible for the decision to invest in the Company; (b) is
independent of the Company or any of its affiliates; (c) is qualified to make
such investment decision; and (d) in making such decision, the Purchaser
fiduciary or Plan has not relied primarily on any advice or recommendation of
the Company or any of its affiliates.
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(w) The Purchaser should check the Office of Foreign Assets Control
("OFAC") website at (▇▇▇▇://▇▇▇.▇▇▇▇▇.▇▇▇/▇▇▇▇) before making the following
representations. The Purchaser represents that the amounts invested by it in the
Company in the Offering were not and are not directly or indirectly derived from
activities that contravene federal, state or international laws and regulations,
including anti-money laundering laws and regulations. Federal regulations and
Executive Orders administered by OFAC prohibit, among other things, the
engagement in transactions with, and the provision of services to, certain
foreign countries, territories, entities and individuals. The lists of OFAC
prohibited countries, territories, persons and entities can be found on the OFAC
website at (▇▇▇▇://▇▇▇.▇▇▇▇▇.▇▇▇/▇▇▇▇). In addition, the programs administered
by OFAC (the "OFAC Programs") prohibit dealing with individuals(1) or entities
in certain countries regardless of whether such individuals or entities appear
on the OFAC lists.
(x) To the best of the Purchaser's knowledge, none of: (1) the
Purchaser, (2) any person controlling or controlled by the Purchaser, (3) if the
Purchaser is a privately-held entity, any person having a beneficial interest in
the Purchaser, or (4) any person for whom the Purchaser is acting as agent or
nominee in connection with this investment is a country, territory, individual
or entity named on an OFAC list, or a person or entity prohibited under the OFAC
Programs. Please be advised that the Company may not accept any amounts from a
prospective investor if such prospective investor cannot make the representation
set forth in the preceding paragraph. The Purchaser agrees to promptly notify
the Company should the Purchaser become aware of any change in the information
set forth in these representations. The Purchaser understands and acknowledges
that, by law, the Company may be obligated to "freeze the account" of the
Purchaser, either by prohibiting additional subscriptions from the Purchaser,
declining any redemption requests and/or segregating the assets in the account
in compliance with governmental regulations. The Purchaser further acknowledges
that the Company may, by written notice to the Purchaser, suspend the redemption
rights, if any, of the Purchaser if the Company reasonably deems it necessary to
do so to comply with anti-money laundering regulations applicable to the Company
or any of the Company's other service providers. These individuals include
specially designated nationals, specially designated narcotics traffickers and
other parties subject to OFAC sanctions and embargo programs.
(y) To the best of the Purchaser's knowledge, none of: (1) the
Purchaser, (2) any person controlling or controlled by the Purchaser, (3) if the
Purchaser is a privately-held entity, any person having a beneficial interest in
the Purchaser, or (4) any person for whom the Purchaser is acting as agent or
nominee in connection with this investment is a senior foreign political
figure(2), or any immediate family(3) member or close associate(4) of a senior
foreign political figure, as such terms are defined in the footnotes below.
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(1) These individuals include specially designated nationals, specially
designated narcotics traffickers and other parties subject to OFAC sanctions and
embargo programs.
(2) A "senior foreign political figure" is defined as a senior official in the
executive, legislative, administrative, military or judicial branches of a
foreign government (whether elected or not), a senior official of a major
foreign political party, or a senior executive of a foreign government-owned
corporation. In addition, a "senior foreign political figure" includes any
corporation, business or other entity that has been formed by, or for the
benefit of, a senior foreign political figure.
(3) "Immediate family" of a senior foreign political figure typically includes
the figure's parents, siblings, spouse, children and in-laws.
(4) A "close associate" of a senior foreign political figure is a person who is
widely and publicly known to maintain an unusually close relationship with the
senior foreign political figure, and includes a person who is in a position to
conduct substantial domestic and international financial transactions on behalf
of the senior foreign political figure.
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(z) If the Purchaser is affiliated with a non-U.S. banking
institution (a "Foreign Bank"), or if the Purchaser receives deposits from,
makes payments on behalf of, or handles other financial transactions related to
a Foreign Bank, the Purchaser represents and warrants to the Company that: (1)
the Foreign Bank has a fixed address, other than solely an electronic address,
in a country in which the Foreign Bank is authorized to conduct banking
activities, (2) the Foreign Bank maintains operating records related to its
banking activities, (3) the Foreign Bank is subject to inspection by the banking
authority that licensed the Foreign Bank to conduct banking activities, and (4)
the Foreign Bank does not provide banking services to any other Foreign Bank
that does not have a physical presence in any country and that is not a
regulated affiliate.
5. Company Representations and Warranties. The Company hereby represents,
warrants, acknowledges and agrees as follows:
(a) Subsidiaries. The Company has no direct or indirect
subsidiaries.
(b) Organization and Qualification. The Company is an entity duly
incorporated or otherwise organized, validly existing and in good standing under
the laws of the State of Georgia, with the requisite power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. The Company is not in violation of any of the provisions of its
Certificate of Incorporation or By-Laws.
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the Offering. The
execution and delivery of this Subscription Agreement by the Company and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Company and no further
consent or action is required by the Company, other than the Required Approvals
(as defined below). This Subscription Agreement, when executed and delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and general principles of equity.
(d) No Conflicts. The execution, delivery and performance of this
Subscription Agreement by the Company and the consummation by the Company of the
Offering do not and will not: (i) conflict with or violate any provision of the
Company's Certificate of Incorporation or By-Laws, or (ii) subject to obtaining
the Required Approvals (as defined below), conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice or lapse of time or both)
of, any agreement, credit facility, debt or other instrument (evidencing a
Company debt or otherwise) or other understanding to which the Company is a
party or by which any material property or asset of the Company is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority as currently in effect to which the Company is subject (including
federal and state securities laws and regulations), or by which any material
property or asset of the Company is bound or affected; except in the case of
each of clauses (ii) and (iii), such as could not, individually or in the
aggregate (a) adversely affect the legality, validity or enforceability of the
Offering, (b) have or result in a material adverse effect on the results of
operations, assets, prospects, business or condition (financial or otherwise) of
the Company, taken as a whole, or (c) adversely impair the Company's ability to
perform fully on a timely basis its obligations under this Subscription
Agreement (any of (a), (b) or (c), a "Material Adverse Effect").
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(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of this Subscription
Agreement, other than (i) the filing with the Commission of the Registration
Statement, (ii) the filing with the Commission of a Form D pursuant to
Regulation D under the Securities Act and (iii) applicable Blue Sky filings
(collectively, the "Required Approvals").
(f) Issuance of the Shares. The Shares are duly authorized and, when
issued and paid for in accordance with this Subscription Agreement, will be duly
and validly issued, fully paid and nonassessable, free and clear of all liens.
The Shares conform to the description contained in the Memorandum. Assuming the
accuracy of the Purchaser's representations and warranties set forth in Section
4, no registration under the Securities Act is required for the offer and sale
of the Shares by the Company to the Purchaser as contemplated hereby. No
shareholder approval is required for the Company to fulfill its obligations
pursuant to this Offering.
(g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company is as set forth in the
Memorandum. No Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the Offering. Except as a
result of the purchase and sale of the Shares which may be issued in connection
with this Offering and, except as described in the Memorandum (including the
financial statements thereto), there are no outstanding options, warrants,
script rights to subscribe to, calls or commitments of any character whatsoever
relating to, or Shares, rights or obligations convertible into or exchangeable
for, or giving any Person any right to subscribe for or acquire, any shares of
Common Stock, or contracts, commitments, understandings or arrangements by which
the Company is or may become bound to issue additional shares of Common Stock or
rights convertible or exchangeable into shares of Common Stock. Except for
certain outstanding options and warrants to purchase shares of Common Stock
(which options and warrants are fully described in the Memorandum) and as
otherwise described in the Memorandum, the issuance and sale of the Shares will
not obligate the Company to issue shares of Common Stock or other Shares to any
Person (other than the Purchaser and other purchasers in the Offering) and will
not result in a right of any holder of Company equity to adjust the exercise,
conversion, exchange or reset price under such Shares.
(h) Financial Statements. The financial statements of the Company
included in the Memorandum have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved ("GAAP"), except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended.
(i) Material Changes. Except for the proposed Offering or as
otherwise described in the Memorandum, since the date of the latest financial
statements included in the Memorandum: (i) there has been no event, occurrence
or development that has had a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice, and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders
except in the ordinary course of business consistent with prior practice, or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock except consistent with prior practice or pursuant to existing
Company stock option or similar plans, and (v) the Company has not issued any
equity shares to any officer, director or affiliate, except pursuant to existing
Company stock option or similar plans.
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(j) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company or its properties before or
by any court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an "Action")
which: (i) adversely affects or challenges the legality, validity or
enforceability of this Subscription Agreement or the Offering or (ii) would, if
there were an unfavorable decision, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect. The Company is
not nor has it ever been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws. There has not
been, and to the knowledge of the Company, there is not pending or contemplated,
any investigation by the Commission involving the Company.
(k) Compliance. Except as disclosed in the Memorandum, the Company
is not: (i) in default under or in violation of (and no event has occurred that
has not been waived that, with notice or lapse of time or both, would result in
a default by the Company under), nor has the Company received notice of a claim
that it is in default under or that it is in violation of, any material
indenture, loan or credit agreement or any other material agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), which default
or violation would have or result in a Material Adverse Effect, (ii) in
violation of any order of any court, arbitrator or governmental body, or (iii)
or has not been in violation of any statute, rule or regulation of any
governmental authority, except in each case as would not, individually or in the
aggregate, have or result in a Material Adverse Effect.
(l) Regulatory Permits. Except as otherwise described in the
Memorandum, the Company possesses or has applied for all certificates,
authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct its business as described in
the Memorandum, except where the failure to possess such permits would not,
individually or in the aggregate, have a Material Adverse Effect ("Material
Permits"), and the Company has not received any notice of proceedings relating
to the revocation or modification of any Material Permit.
(m) Lack of Publicity. None of the Company, its subsidiaries or any
person acting on its or their behalf have engaged or will engage in any form of
general solicitation or general advertising as those terms are used in
Regulation D under the Securities Act in the United States with respect to the
Shares or the securities that will be exchanged for Shares in the Merger,
including, without limitation, any article, notice, advertisement or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio, regarding the offering, nor did any such person
sponsor any seminar or meeting to which potential investors were invited by, or
any solicitation of a subscription by, a person not previously known to such
investor in connection with investments in the Shares generally. None of the
Company, its subsidiaries or any person acting on its or their behalf have
engaged or will engage in any form of directed selling efforts (as that term is
used in Regulation S under the Securities Act) with respect to the Shares or the
securities that will be exchanged for Shares in the Merger.
(n) Disclosure. The disclosure provided to the Purchaser regarding
the Company, its business and the transactions contemplated hereby, furnished by
or on behalf of the Company, including the Memorandum, does not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
6. Covenants of the Purchaser and the Company.
(a) Transfer Restrictions.
10
(1) The Shares and the securities for which Shares will be
exchanged in the Merger may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer
of such securities (or hedging activities involving such securities)
other than pursuant to an effective registration statement or Rule
144, to the Company or to an affiliate of a Purchaser or in
connection with a pledge as contemplated below, the Company may
require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor and reasonably acceptable to
the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer, any
such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.
(2) The Purchaser agree to the imprinting, so long as is
required by this Section 6(a), of a legend on any of the Securities
in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
ADDITIONALLY, HEDGING TRANSACTIONS IN RESPECT OF THESE SECURITIES
MUST BE EFFECTED IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THESE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR
OTHER LOAN SECURED BY SUCH SECURITIES.
(3) The Company acknowledges and agrees that a Purchaser may
from time to time pledge pursuant to a bona fide margin agreement
with a registered broker-dealer or grant a security interest in some
or all of the Shares to a financial institution that is an
"accredited investor" as defined in Rule 501(a) under the Securities
Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the
terms of such arrangement, such Purchaser may transfer pledged or
secured Shares to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate
Purchaser's expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Shares may
reasonably request in connection with a pledge or transfer of the
Shares, including, if the Shares are subject to registration
pursuant to the Registration Rights Agreement, the preparation and
filing of any required prospectus supplement under Rule 424(b)(3)
under the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of selling
stockholders thereunder.
11
(4) Certificates evidencing Shares shall not contain any
legend (including the legend set forth in Section 6(a)(2)): (i)
following the resale of such Shares pursuant to an effective
registration statement under the Securities Act (including the
Registration Statement) covering the resale of such Shares, or (ii)
following any resale of such Shares pursuant to Rule 144, or (iii)
if such Shares are eligible for resale under Rule 144(k), or (iv) if
such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). Promptly
following the Effective Date, the Company shall cause its counsel to
issue a legal opinion to the Company's transfer agent to the effect
that (A) resale of the Shares has been registered under the
Securities Act and (B) the Shares may be transferred pursuant to
such registration statement and certificates representing such
transferred shares should not contain a legend restricting future
transfers (although residual certificates issued to such holder of
Shares shall contain a restrictive legend). The Company agrees that
following the time when a legend is no longer required under this
Section 6(a)(4), it will, no later than three (3) Trading Days
following the delivery by a Purchaser to the Company or the
Company's transfer agent of a certificate representing Shares issued
with a restrictive legend (such date, the "Legend Removal Date"),
deliver or cause to be delivered to such Purchaser's transferee, a
certificate representing such Shares that is free from all
restrictive and other legends. The Company may not make any notation
on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this
Section. Notwithstanding anything to the contrary contained herein,
the Company shall not be required to effect a removal of a
restrictive legend to the extent such legend is required under
applicable requirements of the Securities Act, including any rule of
the Commission promulgated thereunder, and judicial interpretations
thereof.
(5) Each Purchaser, severally and not jointly with the other
Purchasers, agrees that the removal of the restrictive legend from
certificates representing Shares as set forth in this Section 6(a)
is predicated upon the Company's reliance that the Purchaser will
sell any Shares pursuant to either the registration requirements of
the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom.
(6) In addition to such Purchaser's other available remedies
with respect to claims under this Section 6(a), the Company shall
pay to a Purchaser, in cash, as partial liquidated damages and not
as a penalty, for each $1,000 of Shares (based on the VWAP on the
date such Shares are submitted to the Company's transfer agent)
delivered for removal of the restrictive legend and subject to this
Section 6(a), $5 per Trading Day (increasing to (x) $10 per Trading
Day commencing on the second Trading Day after such damages have
begun to accrue, and (y) $20 per Trading Day commencing on the
fourth Trading Day after such damages have begun to accrue) for each
Trading Day after the Legend Removal Date until such certificate is
delivered. Nothing herein shall limit such Purchaser's right to
pursue actual damages for the Company's failure to deliver
certificates representing any Shares as required by the Transaction
Documents, and such Purchaser shall have the right to pursue all
remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief.
12
(b) Furnishing of Information. As long as any Purchaser owns Shares,
if the Company is not required to file reports pursuant to the Exchange Act, it
will prepare and furnish to each Purchaser and make publicly available in
accordance with Rule 144(c) such information as is required for each Purchaser
to sell the Shares under Rule 144. The Company further covenants that it will
take such further action as any holder of Shares may reasonably request, all to
the extent required from time to time to enable such Person to sell such Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.
(c) Integration. The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Shares in a manner that would require the registration
under the Securities Act of the sale of the Shares to the Purchasers.
(d) Shareholders Rights Plan. No claim will be made or enforced by
the Company or, to the knowledge of the Company, any other Person that any
Purchaser is an "Acquiring Person" under any shareholders rights plan or similar
plan or arrangement in effect or hereafter adopted by the Company, or that any
Purchaser could be deemed to trigger the provisions of any such plan or
arrangement, by virtue of receiving Shares under the Transaction Documents or
under any other agreement between the Company and the Purchasers. The Company is
not, and is not an Affiliate of, and immediately after receipt of payment for
the Shares, will not be or be an Affiliate of, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become subject to
registration under such Act.
(e) Non-Public Information. The Company covenants and agrees that
following the Effective Date neither it nor any other Person acting on its
behalf will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing representations
in effecting transactions in securities of the Company.
(f) Disclosure; Publicity. No Purchaser shall issue any such press
release or otherwise make any such public statement with respect to the
transactions contemplated hereby without the prior consent of the Company,
except if such disclosure is required by law, in which case the Purchaser shall
promptly provide the Company with prior written notice of such public statement
or communication. The Company shall not publicly disclose the name of any
Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except (i) as required by federal securities law in
connection with the registration statement contemplated by the Registration
Rights Agreement and (ii) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure permitted under subclause (i) or
(ii).
(g) Consent to Merger; Waiver of Appraisal Rights. As described in
the Memorandum, the closing of the Offering, which is conditioned upon the
Merger, will occur immediately prior to the effective time of the Merger. As a
result, each Purchaser will be a stockholder of the Company for a moment prior
to the completion of the Merger. By purchasing the Shares hereunder, each
Purchaser hereby approves and adopts the Merger, as described in the Memorandum,
and authorizes the officers of the Company to execute and deliver such
agreements, instruments and documents, for and in the name and on behalf of the
Purchaser as attorney-in-fact, as such officer or officers may deem necessary,
advisable or appropriate in order to effectuate the Merger and the exchange of
Shares for securities described in the Memorandum.
13
(h) Indemnification of Purchasers. Subject to the provisions of this
Section 6(h), the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, partners, employees and agents (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (i) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (ii) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser's representation, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant
to this Agreement, such Purchaser Party shall promptly notify the Company in
writing, and the Company shall have the right to assume the defense thereof with
counsel of its own choosing. Any Purchaser Party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such Purchaser
Party except to the extent that (A) the employment thereof has been specifically
authorized by the Company in writing; (B) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (C) in
such action there is, in the reasonable opinion of such separate counsel, a
material conflict on any material issue between the position of the Company and
the position of such Purchaser Party. The Company will not be liable to any
Purchaser Party under this Agreement (I) for any settlement by a Purchaser Party
effected without the Company's prior written consent, which shall not be
unreasonably withheld, conditioned or delayed; or (II) to the extent, but only
to the extent that a loss, claim, damage or liability is attributable to any
Purchaser Party's breach of any of the representations, warranties, covenants or
agreements made by the Purchasers in this Agreement or in the other Transaction
Documents.
(i) Equal Treatment of Purchasers. No consideration shall be offered
or paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat the Purchasers as a class and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to the
purchase, disposition or voting of Shares or otherwise.
(j) Future Financings. From the date hereof until 15 days after the
Effective Date, other than as contemplated by this Agreement, neither the
Company nor any Subsidiary (with respect to Common Stock Equivalents) shall
issue or sell any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock except for (i) an Exempt Issuance or (ii) if
the consent of two-thirds of the holders of Registrable Securities (as defined
in the Registration Rights Agreement) is obtained. Notwithstanding anything
herein to the contrary, the 15 day period set forth in this Section 6(j) shall
be extended for the number of Trading Days during such period in which,
following the Effective Date, the Registration Statement is not effective or the
prospectus included in the Registration Statement may not be used by each
Purchaser for the resale of the Shares. In addition to the limitations set forth
herein, from the date hereof until sixty (60) days following the Effective Date,
the Company shall be prohibited from effecting or entering into a "Variable Rate
Transaction" (as defined below). The term "Variable Rate Transaction" shall mean
a transaction in which the Company issues or sells any debt or equity securities
that are convertible into, exchangeable or exercisable for, or include the right
to receive additional shares of Common Stock either (A) at a conversion,
exercise or exchange rate or other price that is based upon and/or varies with
the trading prices of or quotations for the shares of Common Stock at any time
after the initial issuance of such debt or equity securities, or (B) with a
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock.
14
(k) Participation in Future Financing.
(1) From the date hereof until the one year anniversary of the
Closing Date, upon any non-public cash financing by the Company or
the parent corporation surviving the Merger ("MergerCo") of Common
Stock or any securities of the Company or MergerCo that would
entitle the holder thereof to acquire at any time Common Stock of
the Company or MergerCo (a "Subsequent Financing"), the Purchasers,
as a group, shall have the right to participate in up to
thirty-three and one-third (33-1/3%) percent of the Subsequent
Financing (the "Participation Maximum"). Each Purchaser while it
remains a holder of Shares purchased in the Offering may participate
in a Subsequent Financing to the extent of the product of (A) a
fraction, the numerator of which is its Subscription Amount and the
denominator of which is the aggregate Subscription Amount in the
Offering, multiplied by (B) the Participation Maximum (the
"Purchaser's Participation").
(2) At least five (5) Business Days prior to the closing of a
Subsequent Financing, the Company shall deliver to each eligible
Purchaser a written notice of its intention to effect a Subsequent
Financing ("Pre-Notice"). The Pre-Notice shall ask such Purchaser if
it wants to review the details of such financing (such additional
notice, a "Subsequent Financing Notice"). Upon the request of a
Purchaser, and only upon a request by such Purchaser for a
Subsequent Financing Notice, the Company shall promptly, but no
later than one (1) Business Day after such request, deliver a
Subsequent Financing Notice to such Purchaser. The Subsequent
Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended
to be raised thereunder, the person(s) with whom such Subsequent
Financing is proposed to be effected, the Purchaser's Participation,
and attached to which shall be a term sheet or similar document
relating thereto. In the event the Company receives responses to
Subsequent Financing Notices from Purchasers seeking to purchase
more than their respective Purchaser's Participations (such persons,
the "Oversubcribing Purchasers") and one or more other Purchasers do
not subscribe or subscribe for less than all of their Purchaser's
Participations, the Oversubcribing Purchasers shall have the right
to purchase their Pro Rata Portion (as defined below) of the amount
of the Participation Maximum not subscribed for by the other
Purchasers. "Pro Rata Portion" is the ratio of (x) the Subscription
Amount of a Oversubscribing Purchaser and (y) the aggregate
Subscription Amount of all Oversubscribing Purchasers. If by 5:30
p.m. (New York City time) on the 5th Business Day after all of the
Purchasers have received the Pre-Notice notifications by the
Purchasers of their willingness to participate in the Subsequent
Financing is, in the aggregate (after taking in consideration
amounts to be purchased by Oversubscribing Purchasers), less than
the total amount of the Participation Maximum, then the Company may
effect the remaining portion of the Participation Amount on the
terms and to the persons set forth in the Subsequent Financing
Notice. If the Company receives no notice from a Purchaser as of
such 5th Business Day, such Purchaser shall be deemed to have
notified the Company that it does not elect to participate in the
Subsequent Financing. The Company must provide the Purchasers with a
second Subsequent Financing Notice, and the Purchasers will again
have the right of participation set forth above in this Subsection
(k), if the Subsequent Financing subject to the initial Subsequent
Financing Notice is not consummated for any reason on the terms set
forth in such Subsequent Financing Notice within 15 Business Days
after the date of the initial Subsequent Financing Notice.
15
(3) Notwithstanding the foregoing, this Subsection (k) shall
not apply in respect of any of the following: (i) shares of Common
Stock or options granted or sold to employees, officers or directors
of the Company or MergerCo pursuant to any stock or option plan duly
adopted by a majority of the non-employee members of the Board of
Directors of the Company or a majority of the members of a committee
of non-employee directors established for such purpose, (ii)
securities issued upon the exercise of or conversion of any
securities issued and outstanding on the date of this Agreement or
issuable in connection with the Offering provided that such
securities have not been amended since the date of this Agreement to
increase the number of such securities (other than by reason of the
anti-dilution provisions therein existing on the date of this
Agreement), (iii) securities issued pursuant to acquisitions or
strategic transactions, provided any such issuance shall only be to
a person which is, itself or through its subsidiaries, an operating
company in a business synergistic with the business of the Company
or MergerCo and in which the Company or MergerCo receives benefits
in addition to the investment of funds, but shall not include a
transaction in which the Company or MergerCo is issuing securities
primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities or (iv) issuance of
securities in a placement, or series of related placements, for
gross proceeds of less than $100,000.
7. Definitions. In addition to the terms defined elsewhere in this
Agreement: (i) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Memorandum (as defined herein), and (ii) the
following terms have the meanings indicated in this Section 7:
(a) "Affiliate" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed under Rule
144 under the Securities Act. With respect to a Purchaser, any investment fund
or managed account that is managed on a discretionary basis by the same
investment manager as such Purchaser will be deemed to be an Affiliate of such
Purchaser.
(b) "Business Day" means any day except Saturday, Sunday and any day
which shall be a Federal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
(c) "Closing Date" means the Trading Day when all of the Transaction
Documents have been executed and delivered by the applicable parties thereto,
and all conditions precedent to (i) each Purchaser's obligations to pay the
Subscription Amount have been satisfied or waived (ii) and the Company's
obligations to deliver the Shares have been satisfied or waived.
16
(d) "Commission" means the Securities and Exchange Commission.
(e) "Common Stock" means the common stock of the Company, par value
$0.001 per share, and any securities into which such common stock shall
hereinafter been reclassified into.
(f) "Common Stock Equivalents" means any securities of the Company
or any Subsidiary which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
(g) "Company Counsel" shall mean Loeb & Loeb LLP.
(h) "Effective Date" means the date that the Registration Statement
is first declared effective by the Commission.
(i) "Exempt Issuance" means the issuance of (a) shares of Common
Stock or options to employees, officers or directors of the Company pursuant to
any stock or option plan duly adopted by a majority of the non-employee members
of the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose, (b) securities
upon the exercise of or conversion of any securities issued hereunder,
convertible securities, options or warrants issued and outstanding on the date
of this Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities, (c) securities
issued pursuant to acquisitions or strategic transactions, provided, any such
issuance shall only be to a Person which is, itself or through its subsidiaries,
either (i) an operating or development stage company in a business synergistic
with the business of the Company and in which the Company receives benefits in
addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in securities
(unless such entity receives such securities merely as a result of its status as
a security holder of a Person with which the Company has entered into such
acquisition or strategic transaction), or (ii) an educational, research or
similar institution or other organization from which the Company acquires the
rights to develop or commercialize, by license or otherwise, pharmaceutical or
biotechnology products.
(j) "Per Share Purchase Price" means $1.50 per share of Common
Stock.
(k) "Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
(l) "Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition).
(m) "Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, among the Company and each Purchaser, in the
form of Exhibit B attached to the Memorandum.
(n) "Subscription Amount" shall mean, as to each Purchaser, the
amount to be paid for the Common Stock purchased hereunder as specified below
such Purchaser's name on the signature page of this Agreement, in United States
Dollars.
17
(o) "Trading Market" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in question:
the American Stock Exchange, the New York Stock Exchange, the Nasdaq National
Market, the Nasdaq SmallCap Market or the OTC Bulletin Board.
(p) "Transaction Documents" means this Agreement, the Memorandum,
the Escrow Agreement, the Registration Rights Agreement and any other documents
or agreements executed in connection with the transactions contemplated
hereunder.
(q) "VWAP" means the volume weighted average selling price of the
Common Stock during the 20 trading days immediately preceding a reference date.
8. Irrevocability; Binding Effect. The Purchaser hereby acknowledges and
agrees that the subscription hereunder is irrevocable by the Purchaser, except
as described in the Memorandum or as required by applicable law, and that this
Subscription Agreement shall survive the death or disability of the Purchaser
and shall be binding upon and inure to the benefit of the parties and their
heirs, executors, administrators, successors, legal representatives and
permitted assigns. If the Purchaser is more than one person, the obligations of
the Purchaser hereunder shall be joint and several and the covenants,
agreements, representations, warranties, and acknowledgments herein shall be
deemed to be made by and be binding upon each such person and such person's
heirs, executors, administrators, successors, legal representatives and
permitted assigns.
9. Modification. This Subscription Agreement shall not be modified or
waived except by an instrument in writing signed by the party against whom any
such modification or waiver is sought.
10. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, sent by nationwide overnight courier or delivered
against receipt to the party to whom it is to be given (a) if to Company, at the
address set forth above, or (b) if to the Purchaser, at the address set forth on
the signature page hereof (or, in either case, to such other address as the
party shall have furnished in writing in accordance with the provisions of this
Section). Any notice or other communication given by certified mail shall be
deemed given at the time that it is signed for by the recipient except for a
notice changing a party's address which shall be deemed given at the time of
receipt thereof. Any notice or other communication given by nationwide overnight
courier shall be deemed given the next business day following being deposited
with such courier.
11. Assignability. This Subscription Agreement and the rights, interests
and obligations hereunder are not transferable or assignable by the Purchaser
and the transfer or assignment of the Shares shall be made only in accordance
with all applicable laws.
12. Applicable Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
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13. Blue Sky Qualification. The purchase of Shares under this Subscription
Agreement is expressly conditioned upon the exemption from qualification of the
offer and sale of the Shares from applicable Federal and state securities laws.
The Company shall not be required to qualify this transaction under the
securities laws of any jurisdiction and, should qualification be necessary, the
Company shall be released from any and all obligations to maintain its offer,
and may rescind any sale contracted, in such jurisdiction.
14. Use of Pronouns. All pronouns and any variations thereof used herein
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the person or persons referred to may require.
15. Miscellaneous.
(a) This Agreement and its exhibits and schedules constitutes the
entire agreement between the Purchaser and the Company with respect to the
subject matter hereof and supersedes all prior oral or written agreements and
understandings, if any, relating to the subject matter hereof. The terms and
provisions of this Agreement may be waived, or consent for the departure
therefrom granted, only by a written document executed by the party entitled to
the benefits of such terms or provisions. The parties acknowledge that the
provisions of the Registration Rights Agreement provided with the Memorandum are
incorporated by reference and made a part hereof.
(b) The Purchaser's and Company's covenants, agreements,
representations and warranties made in this Agreement and the Memorandum shall
survive the execution and delivery hereof and delivery of the Shares.
(c) Each of the parties hereto shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others engaged
by such party) in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated.
(d) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
(e) Each provision of this Subscription Agreement shall be
considered separable and, if for any reason any provision or provisions hereof
are determined to be invalid or contrary to applicable law, such invalidity or
illegality shall not impair the operation of or affect the remaining portions of
this Subscription Agreement.
(f) Section titles are for descriptive purposes only and shall not
control or alter the meaning of this Subscription Agreement as set forth in the
text.
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(g) The undersigned understands and acknowledges that there may be
multiple Closings for the Offering and that the purchase price per Share (as
defined in the Memorandum) will be determined in accordance with Section 1 of
this Agreement.
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Investor Certification
NAME OF INVESTOR:______________________
Initial or Check the appropriate item(s)
US INVESTORS - The undersigned further represents and warrants as indicated
below by the undersigned's initials:
A. Individual investors: (Please initial one or more of the following
statements)
1.____I certify that I am an accredited investor because I have had individual
income (exclusive of any income earned by my spouse) of more than $200,000
in each of the most recent two years and I reasonably expect to have an
individual income in excess of $200,000 for the current year.
2.____I certify that I am an accredited investor because I have had joint income
with my spouse in excess of $300,000 in each of the most recent two years
and reasonably expect to have joint income with my spouse in excess of
$300,000 for the current year.
3.____I certify that I am an accredited investor because I have an individual
net worth, or my spouse and I have a joint net worth, in excess of
$1,000,000.
4.____I am a director or executive officer of Osteologix, Inc.
5.____I have individual net worth or my spouse and I have joint net worth of
over $5,000,000.
B. Partnerships, corporations, trusts or other entities: (Please initial one
of the following seven statements). The undersigned hereby certifies that
it is an accredited investor because it is:
1.____an employee benefit plan whose total assets exceed $5,000,000;
2.____an employee benefit plan whose investments decisions are made by a plan
fiduciary which is either a bank, savings and loan association or an
insurance company (as defined in Section 3(a) of the Securities Act) or an
investment adviser registered as such under the Investment Advisers Act of
1940;
3.____a self-directed employee benefit plan, including an Individual Retirement
Account, with investment decisions made solely by persons that are
accredited investors;
4.____an organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended, not formed for the specific purpose of acquiring
the Shares, with total assets in excess of $5,000,000;
5.____a corporation, partnership, limited liability company, limited liability
partnership, other entity or similar business trust, not formed for the
specific purpose of acquiring the Shares, with total assets excess of
$5,000,000;
6.____a trust, not formed for the specific purpose of acquiring the Shares, with
total assets exceed $5,000,000, whose purchase is directed by a person who
has such knowledge and experience in financial and business matters that
he is capable of evaluating the merits and risks of an investment in the
Shares; or
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7.____an entity (including a revocable grantor trust but other than a
conventional trust) in which each of the equity owners qualifies as an
accredited investor.
NON-US INVESTORS - The undersigned further represents and warrants as indicated
below by the undersigned's initials:
A. Please initial the following statement:
1.____I certify that I am not a "U.S. person" (as defined in Regulation S) or
purchasing for the account or benefit of a "U.S. person" and am purchasing
Shares in an "offshore transaction" in accordance with Regulation S and am
a "qualified investor" as defined in the European Union Prospectus
Directive.
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Osteologix, Inc.
SIGNATURE PAGE TO
SUBSCRIPTION AGREEMENT
EXECUTION OF THIS MEMORANDUM BY ANY PURCHASER SHALL ALSO BE DEEMED TO
CONSTITUTE EXECUTION BY SUCH PURCHASER OF THE REGISTRATION RIGHTS AGREEMENT
ANNEXED TO THE MEMORANDUM.
(NOTE: to be completed by subscriber):
Subscriber hereby elects to subscribe under the Subscription Agreement for a
total of $__________ of Shares
Date: _______________, 2006.
If the purchaser is an INDIVIDUAL, or if the purchasers are INDIVIDUALS who have
purchased as JOINT TENANTS, as JOINT TENANTS with RIGHT OF SURVIVORSHIP, as
TENANTS IN COMMON, or as COMMUNITY PROPERTY:
--------------------------- ---------------------------
Print Names(s) Social Security Number(s)
--------------------------- ---------------------------
Signature(s) of Investor(s) Joint Signature
---------------------------
--------------------------- Date
Address
If the purchaser is a PARTNERSHIP, CORPORATION, TRUST, LIMITED LIABILITY COMPANY
or LIMITED LIABILITY PARTNERSHIP:
--------------------------- ---------------------------
Name of Partnership, Corporation, Federal Taxpayer
Trust, Limited Liability Company Identification Number
or Limited Liability Partnership
Address:
By:___________________________ ___________________________
Name: ________________________ State of Organization
Title:________________________
Company Signature Page Follows
1
THE FOREGOING SUBSCRIPTION IS ACCEPTED AND AGREED TO this 24th day of May,
2006 with respect to _____________ Shares.
OSTEOLOGIX, INC.
By:______________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and CEO
Company Signature Page to Subscription Agreement
2
