EXHIBIT 4.1
SUBSCRIPTION AGREEMENT
ENCHIRA BIOTECHNOLOGY CORPORATION
UP TO 150 UNITS
$100,000 PER UNIT
To: Enchira Biotechnology Corporation
This Subscription Agreement (this "Subscription Agreement" or the "Agreement")
is made between Enchira Biotechnology Corporation, a Delaware corporation in
the development stage, (the "Company"), and the undersigned prospective
purchaser who is subscribing hereby for units (the "Units"). The Company
desires to offer and sell (the "Offering") up to 150 Units (the "Offering
Amount"), with each Unit consisting of (i) a number of shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock")
(rounded to the nearest whole share, with one-half (0.5) of one share, or
greater fraction thereof, being rounded upward), determined by dividing one
hundred thousand dollars ($100,000) by the number determined by multiplying
(A) the average of the closing prices of the Common Stock on the Nasdaq
National Market for the five trading days prior to the date of this Agreement
(the "Closing Price") and (B) 1.0375, and (ii) a warrant (collectively, the
"Warrants") to purchase a number of shares of Common Stock equal to thirty
percent (30%) of the shares of Common Stock included in such Unit, such
warrants to be exercisable, in whole or in part, at any time prior to the
second anniversary of the date of issuance at an exercise price per share (the
"Exercise Price") equal to the number determined by multiplying (A) the
Closing Price and (B) 120% (the Common Stock, the Warrants, and the Common
Stock issuable upon the exercise of the Warrants (the "Warrant Shares") are
sometimes herein collectively referred to as the "Securities") at a purchase
price of $100,000 per Unit (the "Offering Price"). The Company may hold a
closing at any time after subscriptions for at least 70 Units (the "Minimum
Offering Amount") have been received. This subscription is submitted to you
in accordance with and subject to the terms and conditions described in this
Subscription Agreement and the sheet of Offering Terms dated August 24, 2000
(the "Term Sheet") relating to the Offering.
In consideration of the Company's agreement to sell Units to the undersigned
upon the terms and conditions summarized in the Term Sheet, the undersigned
agrees and represents as follows:
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A. SUBSCRIPTION
(1) The undersigned hereby irrevocably subscribes for and agrees to
purchase the number of Units indicated on the signature page
hereto at a purchase price of $100,000 per Unit. Fractions of a
Unit may be purchased, but the minimum subscription is one Unit
unless the Company in its sole discretion, elects to accept
subscriptions for less than one Unit. The undersigned encloses
herewith a check payable to "Enchira Biotechnology Corporation--
Escrow Account" or has completed the wire transfer of the full
amount of the purchase price of the Units for which the
undersigned is subscribing (the "Payment"). The undersigned
hereby acknowledges that the actual number of Units which the
undersigned will receive will be equal to the amount of the
undersigned's subscription divided by the Purchase Price for the
Units as set forth in the Term Sheet and herein.
(2) The undersigned understands that all payments of the subscription
amount provided in Paragraph (1) above shall be delivered to
either The Trout Group, LLC (the "Trout Group") or Ten Peaks
Capital Corp. ("Ten Peaks" and each referred to herein as a
"Placement Agent" and together as the "Placement Agents") or the
Company, and, thereafter, such payment will be deposited as soon
as practicable for the undersigned's benefit in a non-interest
bearing escrow account. The payment will be returned promptly,
without interest, if the undersigned's subscription is rejected as
a result of the Company not receiving the Minimum Offering Amount.
The Placement Agents and the Company expect to hold a closing of
the Offering (the "Closing") at any time after subscriptions for
the Minimum Offering Amount have been accepted. Upon receipt by
the Company of the requisite payment for all Units to be purchased
by the subscribers whose subscriptions are accepted (each, a
"Purchaser" and, collectively, the "Purchasers") at the Closing,
the Units so purchased will be issued in the name of each
Purchaser, and the name of such Purchaser will be registered on
the books of the Company as the record owner of such Units. The
Company will issue to each Purchaser stock certificates
representing the shares of Common Stock contained in the Units
purchased. The Shares may not be transferred prior to the
Closing.
(3) The undersigned hereby acknowledges receipt of a copy of the Term
Sheet, and hereby agrees to be bound hereby upon the (i) execution
and delivery to the Company, in care of either of the Placement
Agents, of the signature page to this Subscription Agreement, and
(ii) acceptance at the Closing by the Company of the undersigned's
subscription (the "Subscription").
(4) The undersigned agrees that the Company may, in its sole and
absolute discretion, reduce the undersigned's subscription to any
amount of Units that in the aggregate does not exceed the amount
of Units hereby applied for without any prior notice to or further
consent by the undersigned.
B. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The undersigned hereby represents and warrants to, and agrees with, the
Company and the Placement Agent as follows:
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(1) The undersigned has been furnished with and has carefully read the
Company's annual report on Form 10-K for the year ended December
31, 1999 (the "1999 Form 10-K"), the Company's quarterly report on
Form 10-Q for the quarter ended June 30, 2000 (the "2Q 2000 Form
10-Q") and the Company's proxy statement for its 2000 annual
meeting of stockholders (the "2000 Proxy Statement" and together
with the 1999 Form 10-K and 2Q 2000 Form 10-Q, the "SEC Reports"),
the Term Sheet and this Agreement (collectively referred to herein
as the "Offering Documents"), and is familiar with and understands
the terms of the Offering. The undersigned has carefully
considered and has, to the extent the undersigned believes such
discussion necessary, discussed with the undersigned's
professional legal, tax, accounting and financial advisors the
suitability of an investment in the Units for the undersigned's
particular tax and financial situation and has determined that the
Units being subscribed for by the undersigned are a suitable
investment for the undersigned.
(2) The undersigned acknowledges that (i) the undersigned has had the
right to request copies of any documents, records, and books
pertaining to this investment and (ii) any such documents, records
and books which the undersigned requested have been made available
for inspection by the undersigned, the undersigned's attorney,
accountant or adviser(s).
(3) The undersigned and/or the undersigned's adviser(s) has/have 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 and all such questions have been answered
to the full satisfaction of the undersigned.
(4) The undersigned is not subscribing for Units as a result of or
subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar
media or broadcast over television or radio or presented at any
seminar or meeting.
(5) If the undersigned is a natural person, the undersigned has
reached the age of majority in the state in which the undersigned
resides, has adequate means of providing for the undersigned's
current financial needs and contingencies, is able to bear the
substantial economic risks of an investment in the Units for an
indefinite period of time, has no need for liquidity in such
investment and, at the present time, could afford a complete loss
of such investment.
(6) The undersigned or the undersigned's purchaser representative, as
the case may be, has had such knowledge and experience in
financial, tax and business matters so as to enable the
undersigned to utilize the information made available to the
undersigned in connection with the Offering to evaluate the merits
and risks of an investment in the Units and to make an informed
investment decision with respect thereto.
(7) The undersigned will not sell or otherwise transfer the Units
without registration under the Securities Act of 1933, as amended
(the "Securities Act"), or applicable state securities laws or an
exemption therefrom. None of the Securities contained in the
Units have been
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registered under the Securities Act or under the securities laws
of any state. The undersigned represents that the undersigned
is purchasing the Units for the undersigned's own account, for
investment and not with a view toward resale or distribution.
The undersigned has not offered or sold the Units being acquired
nor does the undersigned have any present intention of selling,
distributing or otherwise disposing of such Units either
currently or after the passage of a fixed or determinable period
of time or upon the occurrence or non-occurrence of any
predetermined event or circumstances in violation of the
Securities Act. The undersigned is aware that there is
currently no market for the Units. The undersigned is aware
that an exemption from the registration requirements of the
Securities Act pursuant to Rule 144 promulgated thereunder is
not presently available; and the Company has no obligation to
register the Securities contained in the Units subscribed for
hereunder, except as provided in Paragraph D hereof, or to make
available an exemption from the registration requirements
pursuant to such Rule 144 or any successor rule for resale of
the Units.
(8) The undersigned recognizes that an investment in the Units
involves substantial risks, including loss of the entire amount of
such investment. Further, the undersigned has carefully read and
considered the matters set forth in Note 1 to the Company's
financial statements in the 2Q 2000 Form 10-Q, "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" in the 2Q 2000 Form
10-Q and "Item 1. Business--Risk Factors" in the 1999 Form 10-K,
and has taken full cognizance of and understands all of the risks
related to the purchase of the Units, including the risk of the
Company's current arbitration proceeding with Maxygen, Inc.
("Maxygen"). On April 27, 2000, the Company received notice from
Maxygen that it had elected to seek arbitration under the License
and Development Agreement dated May 19, 1997 between the Company
and Maxygen. Maxygen claims that the Company used Maxygen's
confidential information which they allege was provided to the
Company under the Agreement to develop its own RACHITT-TM-
directed evolution technology. While the Company believes that
there is no merit to the allegations brought against it by
Maxygen, the Company cannot assure that its defense will be
substantially successful, if at all. If the Company is not
successful, its business could be materially and adversely
affected and the Company could be required to enter into cross
license agreements, pay a substantial amount in damages or
otherwise have its proprietary rights in directed evolution
technology adversely affected.
(9) The undersigned acknowledges that the certificate representing the
Securities contained in the Units shall be stamped or otherwise
imprinted with a legend substantially in the following form:
"The Securities represented hereby have not been registered under
the Securities Act of 1933, as amended, or any state securities
laws and neither the Securities nor any interest therein may be
offered, sold, transferred, pledged or otherwise disposed of
except pursuant to an effective registration under such act or
an exemption therefrom, which, in the opinion of counsel for the
holder, which counsel and opinion are reasonably satisfactory to
counsel for this corporation, is available."
(10) If this Subscription Agreement is executed and delivered on behalf
of a partnership, corporation, trust or estate: (i) such
partnership, corporation, trust or estate has the full legal right
and power and all authority and approval required (a) to execute
and deliver, or
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authorize execution and delivery of, this Subscription Agreement
and all other instruments executed and delivered by or on behalf
of such partnership, corporation, trust or estate in connection
with the purchase of its Units, and (b) to purchase and hold
such Units; (ii) the signature of the party signing on behalf of
such partnership, corporation, trust or estate is binding upon
such partnership, corporation, trust or estate; and (iii) such
partnership, corporation or trust has not been formed for the
specific purpose of acquiring such Units, unless each beneficial
owner of such entity is qualified as an accredited investor
within the meaning of Rule 501(a) of Regulation D promulgated
under the Securities Act and has submitted information
substantiating such individual qualification.
(11) If the undersigned is a retirement plan or is investing on behalf
of a retirement plan, the undersigned acknowledges that an
investment in the Units poses additional risks including the
inability to use losses generated by an investment in the Units to
offset taxable income.
(12) The information contained in the Questionnaire delivered by the
undersigned in connection with this Agreement (the
"Questionnaire") is complete and accurate in all respects. The
undersigned shall indemnify and hold harmless the Company, the
Placement Agents and each officer, director or control person of
any such entity, who is or may be a party or is or may be
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of or arising from any
actual or alleged misrepresentation or misstatement of facts or
omission to represent or state facts made or alleged to have been
made by the undersigned to the Company, the Placement Agents (or
any agent or representative of any of them) or omitted or alleged
to have been omitted by the undersigned, concerning the
undersigned or the undersigned's authority to invest or financial
position in connection with the Offering, including, without
limitation, any such misrepresentation, misstatement of omission
contained in the Subscription Agreement or any other document
submitted by the undersigned, against losses, liabilities and
expenses for which the Company, the Placement Agents, or any
officer, director or control person of any such entity has not
otherwise been reimbursed (including attorney's fees, judgments,
fines and amounts paid in settlement) actually and reasonably
incurred by the Company, the Placement Agents, or such officer,
director or control person in connection with such action, suit or
proceeding.
C. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the undersigned that:
(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 Delaware and has full corporate
power and authority to conduct its business as currently
conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in the State of Texas.
(2) CAPITALIZATION. The authorized capital stock of the Company
consists of 30,000,000 shares of common stock, par value $.01 per
share, of which there were 7,050,374 shares issued and
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outstanding as of August 15, 2000, 785,350 shares of Series B
Convertible Preferred Stock, $.01 par value per share, of which
390,700 shares were issued and outstanding as of August 15, 2000
and 4,214,650 shares of undesignated preferred stock, none of
which shares are issued and outstanding. All outstanding shares
of Common Stock and Series B Convertible Preferred Stock are
duly authorized, validly issued, fully paid and non-assessable,
free of any liens or encumbrances and are not subject to
preemptive rights. As of August 15, 2000, the Company had
reserved 1,690,147 shares of Common Stock for issuance to
employees, directors and consultants pursuant to the Company's
1992 Stock Compensation Plan, the Company's 1997 Stock Option
Plan and the Company's Non-Employee Director Option Plan, of
which 772,104 shares of Common Stock are subject to outstanding,
unexercised options. In addition, as of August 15, 2000, the
Company has 595,731 shares of Common Stock subject to
outstanding warrants, of which 553,660 shares are subject to
warrants issued under the Company's 1999 private placement of
its Common Stock and warrants to purchase its Common Stock.
Dividends on the Series B Convertible Preferred Stock are
cumulative from the date of the initial closing of the sale of
such shares, February 27, 1997, and are payable, at the
Company's election, in cash or in the Company's common stock, or
a combination thereof, at an annual rate equal to (i) $4.00 per
share to the extent the dividend is paid in cash and (ii) $4.50
per share to the extent the dividend is paid in Common Stock.
The Company has not declared a dividend payment since November
1998, and has not paid dividends on Series B Convertible
Preferred Stock except on conversion of Series B Preferred Stock
to common stock. Other than as set forth above or as
contemplated in this Agreement, there are no other options,
warrants, calls, rights, commitments or agreements of any
character to which the Company is a party or by which either the
Company is bound or obligating the Company to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of the capital stock
of the Company or obligating the Company to grant, extend or
enter into any such option, warrant, call, right, commitment or
agreement.
(3) ISSUANCE. The Units, the Common Stock included in the Units, the
Warrants and the Warrant Shares, have been duly and validly
authorized and, when issued and paid for pursuant to this
Agreement, or, in the case of the Warrant Shares, pursuant to the
terms of the Warrants, will be validly issued, fully paid and
nonassessable.
(4) AUTHORIZATION; ENFORCEABILITY. The Company has all corporate
right, power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. All corporate
action on the part of the Company, its directors and stockholders
necessary for the authorization, execution, delivery and
performance of this Agreement by the Company, the authorization,
sale, issuance and delivery of the Units contemplated herein and
the performance of the Company's obligations hereunder has been
taken. This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with
its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy. The
issuance and sale of the Units contemplated hereby will not give
rise to any preemptive rights or rights of first refusal on behalf
of any person.
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(5) NO CONFLICT; GOVERNMENTAL AND OTHER CONSENTS.
(a) The execution and delivery by the Company of this Agreement
and the consummation of the transactions contemplated
hereby will not result in the violation of any law,
statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority
to or by which the Company is bound, or of any provision of
the Certificate of Incorporation or By-Laws of the Company,
and will not conflict with, or result in a breach or
violation of, any of the terms or provisions of, or
constitute (with due notice or lapse of time or both) a
default under, any lease, loan agreement, mortgage,
security agreement, trust indenture or other agreement or
instrument to which the Company is a party or by which it
is bound or to which any of its properties or assets is
subject, nor result in the creation or imposition of any
lien upon any of the properties or assets of the Company.
(b) No consent, approval, authorization or other order of any
governmental authority or other third-party is required to
be obtained by the Company in connection with the
authorization, execution and delivery of this Agreement or
with the authorization, issue and sale of the Units, except
such filings as may be required to be made with the
Commission, the Nasdaq National Market and with any state
or foreign blue sky or securities regulatory authority.
(6) LITIGATION. Other than as set forth in Section B(8) herein, the
Company knows of no pending or threatened legal or governmental
proceedings against the Company which could materially adversely
affect the business, property, financial condition, results of
operations or prospects of the Company.
(7) ACCURACY OF REPORTS. All material reports, including the SEC
Reports, required to be filed by the Company within the two years
prior to the date of this Agreement under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), have been duly filed
with the Commission, complied at the time of filing in all
material respects with the requirements of their respective forms
and, except to the extent updated or superseded by any
subsequently filed report, to the best of the Company's knowledge,
were complete and correct in all material respects as of the dates
at which the information was furnished, and contained (as of such
dates) no untrue statements of a material fact nor omitted to
state any material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they
were made, not misleading.
(8) FINANCIAL INFORMATION. The Company's financial statements that
appear in the SEC Reports have been prepared in all material
respects in accordance with United States generally accepted
accounting principles (except that the financial statements that
are not audited do not have notes thereto) applied on a consistent
basis throughout the periods indicated and with each other and
that such financial statements fairly present, in all material
respects, the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein.
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(9) ABSENCE OF CERTAIN CHANGES. Since the date of the Company's
financial statements in the 2Q 2000 Form 10-Q, there has not been
any material adverse effect on the assets, liabilities, condition
(financial or otherwise) or results of operations of the Company
or any occurrence, circumstance or combination thereof that
reasonably could be expected to result in such material adverse
effect.
(10) INVESTMENT COMPANY. The Company is not an "investment company"
within the meaning of such term under the Investment Company Act
of 1940, as amended, and the rules and regulations of the
Commission thereunder.
(11) BROKERS. Except for the payment of placement agency fees to each
of the Placement Agents as described herein, the Company has not
incurred any obligation for any finder's, broker's or agent's fee
in connection with the Offering hereby. In exchange for their
services in introducing potential investors to the Company, (A)
Trout Group shall receive a fee comprised of (i) 2.5% of the gross
proceeds received from the investors introduced to the Company by
Trout Group and (ii) a warrant with the same terms as the Warrants
sold herein to purchase that number of shares of the Company's
Common Stock equal to 2.5% of the total number of shares of Common
Stock purchased by investors introduced by Trout Group and (B) Ten
Peaks shall receive a fee of 5% of the gross proceeds received
from five investment groups introduced to the Company by Ten
Peaks.
(12) INDEMNIFICATION. The Company shall indemnify and hold harmless
the undersigned purchaser, and each officer, director or control
person of such entity (each, an "Indemnified Party"), from any and
all damage, loss, liability and expense (including, without
limitation, reasonable fees and disbursements of counsel as
incurred in connection with any action, suit or proceeding)
incurred or suffered by any Indemnified Party arising out of any
misrepresentation or breach of warranty, covenant or agreement
made or to be performed by the Company pursuant to this Agreement
or the Warrants.
D. UNDERSTANDINGS.
The undersigned understands, acknowledges and agrees with the Company and the
Placement Agents as follows:
(1) The Company may terminate this Offering at any time in its sole
discretion. The execution of this Agreement by the undersigned or
solicitation of the investment contemplated hereby shall create no
obligation of the Company to accept any subscription or complete
the Offering in the event that the Company does not receive the
Minimum Offering Amount.
(2) Except as set forth in Section D(1) above, the undersigned hereby
acknowledges and agrees that the subscription hereunder is
irrevocable by the undersigned, that, except as required by law,
the undersigned is not entitled to cancel, terminate or revoke
this Agreement or any agreements of the undersigned hereunder and
that this Agreement and such other agreements shall survive the
death or disability of the undersigned and shall be binding upon
and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and
permitted assigns; provided, however, that the Company has
received commitment and funds for the Minimum Offering Amount. If
the undersigned is more than one person, the obligations of the
undersigned hereunder shall be joint and several and the
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agreements, representations, warranties and acknowledges herein
contained shall be deemed to be made by and be binding upon each
such person and his/her heirs, executors, administrators,
successors, legal representatives and permitted assigns.
(3) No federal or state agency has made any finding or determination
as to the accuracy or adequacy of the Offering Documents or as to
the fairness of the terms of this offering for investment nor any
recommendation or endorsement of the Units.
(4) The Offering is intended to be exempt from registration under the
Securities Act by virtue of Section 4(2) of the Securities Act and
the provisions of Regulation D thereunder, which is in part
dependent upon the truth, completeness and accuracy of the
statements made by the undersigned herein and in the
Questionnaire.
(5) There is no public or other market for the Units and no such
public or other market may ever develop. There can be no
assurance that the undersigned will be able to sell or dispose of
the Units. It is understood that in order not to jeopardize the
Offering's exempt status under Section 4(2) of the Securities Act
and Regulation D, any transferee may, at a minimum, be required to
fulfill the investor suitability requirements thereunder.
(6) The undersigned acknowledges that the information contained in
this Agreement and the Term Sheet is confidential and non-public
and agrees that all such information shall be kept in confidence
by the undersigned and neither used for the undersigned's personal
benefit (other than in connection with this subscription) nor
disclosed to any third party for any reason; provided, however,
that this confidentiality obligation shall not apply to any such
information that (i) is part of the public knowledge or literature
and readily accessible at the date hereof, (ii) becomes part of
the public knowledge or literature and readily accessible by
publication (except as a result of a breach of this provision) or
(iii) is received from third parties (except third parties who
disclose such information in violation of any confidentiality
agreements or obligations, including, without limitation, any
Subscription Agreement entered into with the Company).
(7) The undersigned acknowledges that the foregoing restrictions on
the undersigned's use and disclosure of any such confidential,
non-public information contained in the above-described documents
restricts the undersigned from trading in the Company's securities
to the extent such trading is based on such confidential,
non-public information.
(8) The representations, warranties and agreements of the undersigned
contained herein and in any other writing delivered in connection
with the transactions contemplated hereby shall be true and
correct in all respects on and as of the sale of the Units as if
made on and as of such date and shall survive the execution and
delivery of this agreement and the purchase of the Units.
(9) Insofar as indemnification for liabilities under the Securities
Act may be permitted to directors, officers or controlling persons
of the Company, the Company has been informed
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that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act
and is therefore unenforceable to such extent.
(10) IN MAKING AN INVESTMENT DECISION PURCHASERS MUST RELY ON THEIR OWN
EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED. THE UNITS OFFERED HEREBY
HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE
ADEQUACY OF THE OFFERING DOCUMENTS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
(11) THE SECURITIES OFFERED HEREBY MAY NOT BE TRANSFERRED, RESOLD OR
OTHERWISE DISPOSED OF EXCEPT AS PERMITTED UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. PURCHASERS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
(12) For Residents of California:
THE SALE OF THE SHARES WHICH ARE THE SUBJECT OF THIS SUBSCRIPTION
AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SHARES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SHARES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102
OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL
PARTIES TO THIS SUBSCRIPTION AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
(13) For Residents of Connecticut:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER SECTION 36-485 OF THE
CONNECTICUT UNIFORM SECURITIES ACT AND THEREFORE CANNOT BE RESOLD
UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION
FROM REGISTRATION IS AVAILABLE. THE SHARES OFFERED HEREBY HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE BANKING COMMISSIONER OF
THE STATE OF CONNECTICUT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
(14) For Residents of New York:
THIS PRIVATE OFFERING MEMORANDUM HAS NOT BEEN REVIEWED BY THE
ATTORNEY GENERAL PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY
GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
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THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
E. REGISTRATION RIGHTS.
(1) REGISTRATION OF SECURITIES. Within sixty days from the Closing
Date, the Company shall use its reasonable best efforts to prepare
for filing with the Commission, and cause to be filed, a "shelf"
registration statement (the "Shelf Registration") pursuant to Rule
415 under the Securities Act providing for the sale by the
Purchasers of the shares of Common Stock and the Warrant Shares
included in the Units (the "Registrable Securities"). The Company
shall use its reasonable best efforts to cause the registration
statement to be declared effective as soon as practicable after it
has been filed with the Commission. The Company agrees to use its
reasonable best efforts to keep such Shelf Registration
continuously effective for a period ending on the earliest of (a)
the fifth anniversary of the effective date of such Shelf
Registration, (b) the date on which all such Registrable
Securities have been sold thereunder, or (c) the date upon which
all such Registrable Securities are freely transferable without
restriction under the Securities Act. For the purpose of this
Agreement, "reasonable best efforts" shall mean the best efforts
of the Company consistent with sound and reasonable business
practices and judgment.
(2) PAYMENTS BY THE COMPANY.
(a) If the Registration Statement covering the Registrable
Securities is not filed in proper form with the SEC within
sixty (60) days after the Closing Date (the "Required
Filing Date") and declared effective within one hundred
twenty (120) days within the Closing Date (the "Required
Effective Date"), the Company will make payment to the
undersigned in such amounts and at such times as shall be
determined pursuant to this Section E(2).
(b) The amount (the "Periodic Amount") to be paid by the
Company to the undersigned shall be determined as of each
Computation Date (as defined below) and such amount shall
be equal to (A) one-half of one percent (0.5%) of the
purchase price paid by the undersigned (the "Purchase
Price") for all Units then purchased and outstanding
pursuant to this Agreement for the period from the date
following the Required Effective Date to the first relevant
Computation Date and (B) 1 percent (1%) to each Computation
Date thereafter. By way of illustration and not in
limitation of the foregoing, if the Registration Statement
is not effective until one hundred sixty (160) days after
the Closing Date, the Periodic Amount will aggregate one
and one-half percent (1.5%) of the purchase price of the
Units (0.5% for days 120-150 plus 1% for days 150-160).
(c) Each Periodic Amount will be payable by the Company in cash
or other immediately available funds to the undersigned
upon demand of the undersigned.
-11-
(d) The parties acknowledge that the damages which may be
incurred by the Investor if the Registration Statement has
not been effective by the Required Effective Date may be
difficult to ascertain. Therefore, the parties agree that
the Periodic Amount represents a reasonable estimate on the
part of the parties, as of the date of this Agreement, of
the amount of such damages and that the payment by Company
of the Periodic Amount shall be deemed in complete and
total satisfaction of all claims of undersigned against
Company for failure of Company to comply with Section
E(2)(a) above.
(e) Notwithstanding the foregoing, the amounts payable by the
Company pursuant to this provision shall not be payable to
the extent any delay in the effectiveness of the
Registration Statement occurs because of an act of, or a
failure to act or to act timely by the undersigned, the
Placement Agents or their counsel, or in the event all of
the Registrable Securities may be sold pursuant to Rule 144
or another available exemption under the Act.
(f) "Computation Date" means (i) the date which is the earlier
of (A) thirty (30) days after the Required Effective Date
or (B) the date after the Required Effective Date on which
the Registration Statement is effective and (ii) each date
which is the earlier of (A) thirty (30) days after the
previous Computation Date or (B) the date after the
previous Computation Date on which the Registration
Statement is effective.
(g) Notwithstanding the above, the Company shall not be
obligated under any circumstances to pay any Periodic
Amount otherwise due under the terms of this Section E(2)
unless and until the shareholders of the Company have
approved such payment at a duly called and convened meeting
by the required minimum vote. The Company agrees that it
will use reasonable best efforts to obtain shareholder
approval, if such approval is required, including calling
and conducting such meeting on a timely basis and
recommending it to the shareholders.
(3) REGISTRATION PROCEDURES. In connection with the Company's
obligations with respect to the Shelf Registration, the Company
shall use its reasonable best efforts to effect the registration
in furtherance of the sale of the Registrable Securities by the
holders thereof in accordance with the intended method or methods
of distribution thereof described in the Shelf Registration. In
connection therewith, the Company shall, as promptly as may be
practicable:
(a) prepare and file with the Commission a registration
statement with respect to the Registrable Securities on any
form for which the Company then qualifies or which counsel
for the Company shall deem appropriate and which form shall
be available for the disposition of the Registrable
Securities in accordance with the intended method or
methods of disposition thereof;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the
prospectus used in connection therewith as may be necessary
to keep such registration statement effective for the
applicable period specified in Paragraph (1) above;
-12-
(c) furnish to each Purchaser who is selling Registrable
Securities a copy of such registration statement, each
amendment and supplement thereto (in each case including
all exhibits thereto but excluding all documents
incorporated by reference therein unless specifically so
requested by such Purchaser) and such reasonable number of
copies of the prospectus included in such registration
statement (including each preliminary prospectus) as such
Purchaser may reasonably request;
(d) use reasonable best efforts to register or qualify the
Registrable Securities under such other securities laws or
blue sky laws of such jurisdictions as the Purchasers shall
reasonably request, and take any and all such actions as
may be reasonably necessary or advisable to enable the
Purchasers to consummate the disposition in such
jurisdictions of such Registrable Securities;
(e) notify each Purchaser, at any time when a prospectus
relating thereto is required to be delivered under the
Securities Act within the period that the Company is
required to keep the registration statement effective, of
the happening of any event as a result of which the
prospectus included in such registration statement (as then
in effect) contains an untrue statement of a material fact
or omits to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading. As promptly as practicable following any such
occurrence, the Company shall prepare and furnish to each
Purchaser a reasonable number of copies of a supplement or
an amendment of such prospectus as may be necessary so
that, as thereafter delivered to subsequent purchasers of
the Registrable Securities, such prospectus shall meet the
requirements of the Securities Act and relevant state
securities laws, provided that such obligation on the part
of the Company shall be suspended for such period of time
as the Company considers reasonably necessary and in its
best interest due to circumstances then existing (but not
more than 30 days in any 180-day period). Each Purchaser
shall furnish to the Company such information regarding
each such Purchaser and its proposed method of distribution
of the Registrable Securities as the Company may from time
to time request and as shall be required by law to effect
and maintain the registration of such Securities under the
Securities Act and any state securities laws;
(f) advise each Purchaser, promptly after receiving notice
thereof, of any stop order issued or threatened by the
Commission and use its reasonable best efforts to take all
actions required to prevent the entry of such stop order,
or to remove it if entered;
(g) use its reasonable best efforts to cause all Registrable
Securities included in such registration statement to be
listed, by the date of the first sale of Registrable
Securities pursuant to such registration statement, on each
securities exchange (or the NASDAQ) on which the Common
Stock of the Company is then listed or proposed to be
listed;
-13-
(h) furnish to each Purchaser on the effective date of such
registration statement a signed counterpart, addressed to
the Purchasers, of (i) an opinion of counsel representing
the Company and reasonably satisfactory to such Purchasers
that the registration statement (including each amendment
or supplement thereto and prospectus included therein)
complies as to form in all material respects with the
requirements of the Securities Act and the applicable rules
and regulations thereunder, and (ii) a "comfort" letter
from the independent public accountants retained by the
Company, stating that they are independent public
accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial
statements of the Company included or incorporated by
reference in the registration statement or the prospectus,
or any amendment or supplement thereof, comply as to form
in all material respects with the applicable accounting
requirements of the Securities Act and the published rules
and regulations thereunder, and covering such other
financial matters of the type customarily covered by such
letters; and
(i) otherwise use its reasonable best efforts to comply with
the provisions of the Securities Act with respect to the
disposition of all of the Registrable Securities in
accordance with the intended methods of disposition by the
Purchasers thereof set forth in such registration statement
and to make generally available to its security holders, as
soon as reasonably practicable, an earnings statement
satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder.
(4) EXPENSES. All expenses incident to the Company's performance of
or compliance with the provisions of this Section E (including,
without limitation, all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws, fees and
expenses incurred in connection with the listing of the
Registrable Securities to be registered on each securities
exchange (or the NASDAQ) on which similar securities issued by the
Company are then listed, printing expenses, fees and disbursements
of separate counsels for each of the Company and the Purchaser,
and fees and disbursements of all independent certified public
accountants and other persons retained by the Company) will be
borne by the Company. Notwithstanding the foregoing, the
Purchasers shall pay any and all underwriting fees, discounts or
commissions attributable to the sale of Registrable Securities.
(5) INDEMNIFICATION.
(a) Upon the registration of Registrable Securities pursuant to
Section E(1) of this Agreement, and in consideration of the
agreements of the Purchasers contained herein, the Company
shall, and it hereby agrees to, indemnify and hold
harmless, to the extent permitted by law, each of the
Purchasers which holds Registrable Securities, its officers
and directors, each underwriter of such Registrable
Securities, if any, and each person who controls such
person (within the meaning of the Securities Act) against
all losses, claims, damages, liabilities and expenses
(including reasonable attorneys' fees and expenses) to
which such Purchaser, its officers, directors, each
underwriter, or such controlling persons may become
subject, insofar as such losses, claims, damages,
liabilities and expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or
alleged untrue statement of material fact contained in any
such registration statement, any
-14-
prospectus or preliminary prospectus contained therein or
any amendment or supplement thereto, or any omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse
each such Purchaser, each such underwriter and each such
controlling person for any legal or other expenses
reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action; except (i) insofar as the same arise
out of or are based upon an untrue statement or omission
or alleged omission so made based upon information
furnished by such Purchaser, underwriter or controlling
person in writing specifically for use in such
registration statement or prospectus or (ii) insofar as
the same are caused by such Purchaser's or such
underwriter's failure to deliver a copy of such
registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such
Purchaser or such underwriter with a sufficient number of
copies of the same; and provided, however, that the
foregoing indemnity and reimbursement obligation shall
not be applicable to the extent that any such loss,
claim, damage, liability or action arises out of or is
based on any untrue statement or omission made in: (i) a
preliminary prospectus, which untrue statement or
omission is corrected in the final prospectus and such
final prospectus is made available to such Purchaser in
accordance with the requirements of Rule 424 under the
Securities Act; or (ii) any prospectus, which untrue
statement or omission is corrected in a prospectus
supplement or amended prospectus and such prospectus
supplement or amended prospectus is made available to
such Purchaser prior to the sale of Registrable
Securities which gave rise to such loss, claim, damage,
liability or expense.
(b) In connection with any registration statement under which
Registrable Securities are registered under the Securities
Act and pursuant to which a Purchaser offers and sells
Registrable Securities, each such Purchaser shall, and it
hereby agrees to, indemnify and hold harmless, to the
extent permitted by law, each of the Company, its officers
and directors, and each person who controls the Company
(within the meaning of the Securities Act) and, if the
offering is an underwritten offering, the underwriters,
against all losses, claims, damages, liabilities and
expenses (including reasonable attorneys' fees and
expenses) to which the Company, its officers and directors,
underwriters, or controlling persons may become subject,
insofar as such losses, claims, damages, liabilities and
expenses (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue
statement of material fact contained in any such
registration statement, any prospectus or preliminary
prospectus contained therein or any amendment or supplement
thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading and
will reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action, insofar as (i) the same arise out of
or are based upon any untrue statement or omission or
alleged omission so made based upon information furnished
by such
-15-
Purchaser or controlling person of such Purchaser, in
writing specifically for use in such registration
statement or prospectus or (ii) the same are caused by such
Purchaser's failure to deliver a copy of such registration
statement or prospectus or any amendments or supplements
thereto after the Company has furnished such Purchaser with
a sufficient number of copies of the same and provided,
further, that the liability of each Purchaser under this
Paragraph 4(b) shall be limited to the proportion of any
such loss, claim, damage, liability or expense which is
equal to the proportion that the public offering price of
Common Stock sold by such Purchaser under such registration
statement bears to the total public offering price of all
securities sold thereunder, but not to exceed the amount of
the proceeds received by such Purchaser from the sale of
the Registrable Securities covered by such registration
statement.
(c) Any person entitled to indemnification hereunder will (i)
give prompt notice to the indemnifying party of any claim
with respect to which it seeks indemnification (but the
failure to give such notice will not affect the right to
indemnification hereunder, unless the indemnifying party is
materially prejudiced by such failure) and (ii) unless in
such indemnified party's reasonable judgment a conflict of
interest may exist between such indemnified and
indemnifying parties with respect to such claim, permit
such indemnifying party to assume the defense of such claim
with counsel selected by the indemnifying party and
reasonably satisfactory to the indemnified party. If such
defense is not assumed by the indemnifying party or if the
indemnifying party is not permitted to assume such defense
then (x) the indemnified party shall select counsel, which
counsel must be reasonably satisfactory to the indemnifying
party and (y) the indemnifying party will not be subject to
any liability for any settlement made without its consent
(which consent will not be unreasonably withheld). No
indemnifying party will consent to entry of any judgment or
enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation. An
indemnifying party who is not entitled to, or elects not
to, assume the defense of a claim will not be obligated to
pay the fees and expenses of more than one counsel for all
parties indemnified by such indemnifying party with respect
to such claim, unless in the reasonably judgment of any
indemnified party a conflict of interest may exist between
such indemnified party and any other of such indemnified
parties with respect to such claim, in which case the
indemnifying party shall be obligated to pay the fees and
expenses of one additional counsel, who must be reasonably
satisfactory to the indemnifying party.
(d) Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Paragraph 4(a)
or Paragraph 4(b) are unavailable or are insufficient to
hold harmless an indemnified party in respect of any
losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses (or
actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the
indemnifying party and the indemnified party as well as any
other relevant equitable considerations. The relative
fault of such indemnifying
-16-
party and indemnified party shall be determined by
reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to
information supplied by such indemnifying party or
indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to
correct or prevent such statement or omission. The
parties hereto agree that it would not be just and
equitable if contribution pursuant to this Paragraph
4(d) were determined by pro rata allocation (even if the
Purchasers or any underwriters or all of them were
treated as one entity for such purpose) or by any other
method of allocation which does not take into account
the equitable considerations referred to in this
Paragraph 4(d). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.
(e) The indemnification and contribution obligations and each
other provision set forth in this Paragraph 4 shall remain
in full force and effect regardless of any investigation
made by or on behalf of the Company, any Purchaser, any
officer or employee of the Company or such Purchaser, any
underwriter, any officer or employee of such underwriter,
or any controlling person of any of the foregoing and shall
survive the transfer and registration of Registrable
Securities by such Purchaser.
(6) RULE 144 REPORTING. With a view to making available to Purchasers
the benefits of Rule 144 promulgated by the Commission under the
Securities Act, the Company agrees to use its reasonable best
efforts to:
(a) make and keep adequate current public information with
respect to the Company available, as those terms are used
in Rule 144 under the Securities Act, at all times after
the Final Closing Date;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Exchange
Act; and
(c) furnish to Purchasers promptly upon request a written
statement by the Company as to its compliance with the
reporting requirements of Rule 144 and the Exchange Act, a
copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the
Company as any Purchaser may reasonably request in order to
permit such Purchaser to avail itself of any rule or
regulation of the Commission allowing such Purchaser to
sell its Registrable Securities without registration.
(7) AMENDMENTS AND WAIVERS. Any provision of this Section E may be
amended or waived if, but only if, in the case of an amendment,
such amendment is in writing and is signed by the Company and the
Purchasers who are the holders of a majority of the Registrable
Securities or, in the case of a waiver, such waiver is in writing
and is signed by the party to be charged
-17-
with having granted such waiver. No failure or delay by the
Company or any Purchaser in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other
or further exercise thereof or the exercise of any other right,
power or privilege.
F. COVENANTS OF THE COMPANY
(1) The Company hereby agrees that, for so long as the undersigned
owns at least ten percent (10%) of the total number of outstanding
shares of Common Stock of the Company (including shares of Common
Stock issuable upon conversion of the Company's Series B
Convertible Preferred Stock, par value $.01 per share), the
Company shall notify such individual as shall be designated from
time to time by the undersigned of all regular meetings and
special meetings of the Board of Directors of the Company at least
two business days in advance of such meetings, and afford one
representative designated by the undersigned, and acceptable to
the Company, the right and opportunity to attend any such meeting.
(2) The Company hereby agrees that, for a period of 120 days after the
Closing Date, it shall not issue or sell any Common Stock of the
Company, any warrants, options, or other rights to acquire Common
Stock, or any other securities that are convertible into Common
Stock, for a purchase or exercise price less than the Closing
Price.
(3) The Company agrees at Closing to pay the reasonable fees and
disbursements of counsel to the undersigned purchasers, not to
exceed $20,000 in the aggregate.
G. MISCELLANEOUS
(1) All pronouns and any variations thereof used herein shall be
deemed to refer to the masculine, feminine, singular or plural, as
the identity of the person or persons may require.
(2) Except as set forth in Section A(4) herein, neither this Agreement
nor any provision hereof shall be waived, modified, changed,
discharged, terminated, revoked or canceled except by an
instrument in writing signed by the party effecting the same
against whom any change, discharge or termination is sought.
(3) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when
personally delivered or sent by registered mail, return receipt
requested, addressed: (i) if to the Company, to Enchira
Biotechnology Corporation, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, III, or (ii) if
to the undersigned, to the address for correspondence set forth in
the Subscription Agreement, or at such other address as may have
been specified by written notice given in accordance with this
Paragraph (3).
(4) Failure of the Company to exercise any right or remedy under this
Agreement or any other agreement between the Company and the
undersigned, or otherwise, or delay by the Company in exercising
such right or remedy, will not operate as a waiver thereof. No
waiver by the Company will be effective unless and until it is in
writing and signed by the Company.
-18-
(5) This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of Texas, as
such laws are applied by the Texas courts to agreements entered
into and to be performed in Texas by and between residents of
Texas, and shall be binding upon the undersigned, the
undersigned's heirs, estate, legal representatives, successors and
assigns and shall inure to the benefit of the Company, its
successors and assigns. If any provision of this Subscription
Agreement is invalid or unenforceable under any applicable statute
or rule of law, then such provision shall be deemed modified to
conform with such statute or rule of law. Any provision hereof
that may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provisions
hereof.
(6) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and may
be amended only by writing executed by both parties hereto.
(7) Each party hereto has had the opportunity to review this Agreement
with its separate legal counsel.
H. SIGNATURE
The signature of this Agreement is contained as part of the applicable
subscription package, entitled "Signature Page".
-19-
ENCHIRA BIOTECHNOLOGY CORPORATION
SIGNATURE PAGE
The undersigned hereby subscribes for the number of Units as set forth below.
1. Dated: , 20
------------------- -----
2. Number of Units subscribed for:
---------------------------
3. Aggregate purchase price for number of Units subscribed for at $100,000
per Unit
$
------------------------
------------------------------------- -------------------------------------
Signature of Subscriber Taxpayer Identification or Social
(and title, if applicable) Security Number
------------------------------------- -------------------------------------
Signature of Joint Purchaser Taxpayer Identification or Social
(if any) Security Number
------------------------------------- -------------------------------------
Name and Residence Address Mailing Address
(Post Office Address Not Acceptable) (if different from Residence Address)
------------------------------------- -------------------------------------
Name (please print as name will appear Name (please print)
on certificate)
------------------------------------- -------------------------------------
Number and Street Number and Street
------------------------------------- -------------------------------------
City State Zip Code City State Zip Code
ACCEPTED BY: ENCHIRA BIOTECHNOLOGY CORPORATION
Dated: By:
--------------------------- --------------------------
President and CEO
PURCHASER QUESTIONNAIRE
Enchira Biotechnology Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Re: Purchase of Units
Ladies & Gentlemen:
The information contained herein is being furnished to Enchira
Biotechnology Corporation, a Delaware corporation, (the "Company") in connection
with the purchase of Units by the undersigned to assure the Company that the
undersigned will meet the suitability standards for potential investors for
purposes of federal and state securities laws, and to assure that the offer and
sale of such securities by the Company may be made to the undersigned without
registration under the Securities Act of 1933, as amended (the "Act"), and
applicable state securities laws.
The undersigned represents to the Company that (i) the information
and representations contained herein are complete and accurate and may be relied
upon by the Company and (ii) the undersigned will notify the Company immediately
of any material change in any of such information occurring prior to the closing
of the purchase of the Securities by the undersigned. All information furnished
is for the sole use of the Company and their counsel and will be held in
confidence, except that this Questionnaire may be furnished to such parties as
is necessary to establish compliance with federal or state securities laws.
PLEASE COMPLETE ALL OF THE FOLLOWING QUESTIONS (1-10), SIGN AND DATE AND RETURN
TO THE CORPORATION.
ALL INFORMATION WILL BE TREATED CONFIDENTIALLY
1. Name of Entity or Individual:
-------------------------------------------
Business Address:
-------------------------------------------------------
City: State: Zip:
------------------------- ------------------- ----------
Telephone:
--------------------
Taxpayer Identification No. or Social Security No.:
---------------------
2. (ANSWER ONLY IF AN INDIVIDUAL)
(a) Principal Residence Address:
-------------------------------------
City: State: Zip:
----------------------- --------------- -------
Telephone:
------------------
Communications should be sent to (check one)
business address or home address.
-------------- --------------
(b) Date of Birth: U.S. Citizen: Yes No
-------------- ---- ----
College: Degree: Year:
------------------------ ----------- ------
Graduate School: Degree: Year:
---------------- ----------- ------
Other Education:
-------------------------------------------------
(c) Employment and Nature of Business:
-------------------------------
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Position and Duties:
---------------------------------------------
-----------------------------------------------------------------
Any other Prior Occupations or Duties during Past Five Years:
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-2-
(d) Income from all sources before this investment is in excess of
$ (exclusive of any income attributable to your
spouse) for each of the undersigned's two previous tax years and
estimated to be in excess of $ (exclusive of any
income attributable to your spouse) for the undersigned's current
tax year.
(e) The undersigned's personal net worth (excluding the proposed
investment in the Shares) is in excess of $_____________________.
(f) The undersigned understands the full nature and risk of this
investment.
Yes No
----- -----
(g) The undersigned believes the undersigned can afford the complete
loss of the investment.
Yes No
----- -----
(h) This investment constitutes less than ten percent (10%) of the
undersigned's net worth.
Yes No
----- -----
3. (ANSWER ONLY IF A CORPORATION, PARTNERSHIP, TRUST OR OTHER ENTITY)
(a) Form of Organization:
-------------
(b) Jurisdiction of Incorporation or Formation:
----------------------
(c) Address of principal place of business:
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-----------------------------------------------------------------
-----------------------------------------------------------------
(d) Date of Incorporation or Formation:
------------------------------
(e) Nature of Business:
----------------------------------------------
-----------------------------------------------------------------
(f) Names of Directors if a Corporation, of Partners (together with
the address of each Partner) if a Partnership, of Trustees if a
Trust, of Joint Venturers if a Joint Venture:
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-3-
(g) The persons named in Section 3(f) above understand the full nature
and risk of this investment. Yes No
----- -----
(h) The undersigned can afford the complete loss of the investment.
Yes No
----- -----
(i) The undersigned's net income before this investment is in excess
of $ for the undersigned's two previous tax
years and estimated to be in excess of $ for the
undersigned's current tax year.
(j) The undersigned's total assets (excluding the proposed investment
in the Units) is in excess of $__________________.
(k) Was the undersigned formed or organized for the specific purpose
of acquiring the Units?
Yes No
----- -----
4. The undersigned is an experienced and sophisticated investor.
Yes No
----- -----
5. The undersigned has invested in excess of $_______________ over the past
five years.
6. Please state below the types of investments the undersigned has made in
the past five years, with particular attention to investments in
nonmarketable investments. Include amount invested in each type of
investment.
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
7. Please state below any additional information which the undersigned
thinks qualifies the undersigned to evaluate the merits and risks of this
investment.
------------------------------------------------------------------------
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8. The undersigned will have an attorney, accountant, or other consultant
review this investment as the undersigned may require for a full
understanding of the investment and the risk involved.
Yes No
----- -----
9. The undersigned will have a representative, who has such knowledge and
experience in business and financial matters and is capable of evaluating
the merits and risks of this investment, make the investment decision on
behalf of the undersigned with respect to the Units.
Yes No
----- -----
10. The undersigned (or in the case of a corporation, partnership, trust or
other entity, either such entity or each person named in Section 3(f)
hereof) is an "accredited investor", as such term is defined by
Regulation D ("Regulation D") promulgated under the Act within the
meaning of one of the categories described in Schedule I attached
thereto.
Yes No
----- -----
-4-
Please specify the category or categories of qualification:
------------------------------------------------------------------------
Name:
--------------------------------
Dated: , 2000 By:
--------------- ----------------------------------
Title:
-------------------------------
-------------------------------------
(Please Type or Print Name)
NAME OF PARTNERSHIP, CORPORATION,
TRUST, ESTATE OR OTHER ENTITY
(IF APPLICABLE):
--------------------------------
TITLE OF PERSON SIGNING ON
BEHALF OF SUCH ENTITY:
--------------------------------
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SCHEDULE I
An "accredited investor" includes ANY of the following:
(a) An individual with net worth (including principal residence) or,
together with his or her spouse, JOINT net worth in EXCESS of $1,000,000;
(b) An individual who had an income in EXCESS of $200,000 for each of
the two most recent years or joint income with such individual's spouse in
excess of $300,000 in each of those years AND who reasonably expects to reach
the same income level in the current year;
(c) Any of certain institutional investors, including:
(1) a state or national bank as defined in 3(a)(2) of the Act,
or savings and loan association or other institution defined in section
3(a)(5) of the Act (whether acting in an individual or fiduciary
capacity);
(2) an insurance company as defined in section 2(13) of the
Act;
(3) an investment company registered under the Investment
Company Act of 1940;
(4) a business development company as defined in section 2(a)48
of the Act;
(5) a Small Business Investment Company licensed by the U.S.
Small Business Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958;
(6) an ERISA employee benefit plan where (i) the investment
decision is made by a plan fiduciary which is a bank, insurance company
or registered investment advisor, OR (ii) the employee benefit plan has
total assets IN EXCESS OF $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited
investors;
(7) an Internal Revenue Code 501(c)(3) organization, a
corporation, a Massachusetts or similar business trust or partnership,
not formed for the specific purpose of purchasing the Units, with total
assets IN EXCESS OF $5,000,000;
(d) Any director, executive officer or general partner of the issuer
of the Units being offered or sold or any director, executive officer, or
general partner of a general partner of that issuer;
(e) Any legal entity (corporation, partnership, etc.) WHOLLY owned by
persons or entities who are themselves accredited investors.
(f) A trust, with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the Units offered, whose purchase is directed
by a "sophisticated person" as defined by Regulation D.
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