UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
__________________
FORM
8-K
Current
Report
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
__________________
Date
of
Report (Date of earliest event reported):
July
7, 2006
BIOSANTE
PHARMACEUTICALS, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
001-31812
|
58-2301143
|
|
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(I.R.S.
Employer Identification Number)
|
|
111
Barclay Boulevard
Lincolnshire,
Illinois
|
60069
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(847)
478-0500
(Registrant’s
telephone number, including area code)
N/A
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
| £ |
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
| £ |
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
| £ |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
|
| £ |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
|
Section
1 — Registrant’s Business and Operations
Item
1.01 Entry
into a Material Definitive Agreement
On
July
7, 2006, BioSante Pharmaceuticals, Inc. entered into definitive subscription
agreements with certain institutional and other accredited investors, as defined
in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as
amended, pursuant to which BioSante agreed to sell in a private placement an
aggregate of 3,812,978 shares of its common stock and warrants to purchase
an
aggregate of 1,334,542 shares of its common stock, at a purchase price of $2.00
per unit. The warrants are exercisable for a period of four years and nine
months, beginning six months and one day from the date of issuance, at an
exercise price of $2.75 per share. The number of shares issuable upon exercise
of the warrants and the exercise price of the warrants are adjustable in the
event of stock splits, combinations and reclassifications, but not in the event
of the issuance by BioSante of additional securities. The private placement
is
expected to be completed upon approval of an Additional Listing Application
with
the American Stock Exchange.
BioSante
has agreed to register the resale of the shares sold in the private placement,
including shares issuable upon exercise of the warrants, on a registration
statement to be filed by BioSante with the Securities and Exchange Commission
under the Securities Act of 1933, as amended. BioSante has agreed to use its
reasonable best efforts to file the registration statement with the SEC within
35 days after the closing of the private placement, to cause such registration
statement to be declared effective by the SEC within the earlier of 90 days
after the closing or the 10th
business
day following the date on which BioSante is notified by the SEC that the SEC
will not be reviewing the registration statement or that the SEC has no further
comments on the registration statement and to cause such registration statement
to remain effective for the required registration period. Pursuant to the
subscription agreements, BioSante and the investor parties thereto have made
other covenants and representations and warranties regarding matters that are
customarily included in financings of this nature. If certain of its obligations
under the subscription agreements are not met, BioSante has agreed to make
pro-rata cash payments as liquidated damages to each investor.
The
private placement is expected to result in net proceeds to BioSante of $7.2
million, after the deduction of placement agent commissions and estimated
offering expenses. Other than with respect to the subscription agreements,
there
are no material relationships between BioSante, on the one hand, and any of
the
investors in the private placement, on the other hand.
The
foregoing description of the terms and conditions of the subscription agreements
does not purport to be complete and is qualified in its entirety by reference
to
the full text of the form of subscription agreement filed as Exhibit 10.1 to
this Current Report on Form 8-K and incorporated herein by reference. The form
of subscription agreement has been included to provide information regarding
its
terms and is not intended to provide any other factual information about
BioSante. Such information can be found in BioSante’s other public filings with
the SEC, which are available without charge at www.sec.gov.
A form
of the warrant expected to be issued by BioSante to the investors at the closing
of the private placement is filed as Exhibit 10.2 and a copy of the press
release announcing the private placement is filed as Exhibit 99.1 to this
Current Report on Form 8-K and are both incorporated herein by
reference.
Section
3 — Securities and Trading Markets
Item
3.02 Unregistered
Sale of Equity Securities
As
described in more detail above, on July 7, 2006, BioSante entered into
definitive subscription agreements with certain institutional and other
accredited investors, as defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933, as amended, pursuant to which BioSante agreed to
sell in a private placement an aggregate of 3,812,978 shares of its common
stock
and warrants to purchase an aggregate of 1,334,542 shares of its common stock,
at a purchase price of $2.00 per unit. The warrants are exercisable for a period
of four years and nine months, beginning six months and one day from the date
of
issuance, at an exercise price of $2.75 per share. The number of shares issuable
upon exercise of the warrants and the exercise price of the warrants are
adjustable in the event of stock splits, combinations and reclassifications,
but
not in the event of the issuance of additional securities.
The
offer
of the securities was made and the sale of the securities will be made to a
limited number of institutional and other accredited investors in reliance
upon
exemptions from the registration requirements pursuant to Section 4(2) under
the
Securities Act of 1933, as amended, and Regulation D promulgated thereunder.
There was no general solicitation or advertising with respect to the private
placement and each of the purchasers provided written representations of an
intent to acquire the securities for investment only and not with a view to
or
for sale in connection with any distribution of the securities. Appropriate
legends will be affixed by BioSante to each of the share certificates
representing shares to be issued in the private placement.
Additional
information regarding the private placement is incorporated herein by reference
to “Item 1.01. Entry into a Material Definitive Agreement” of this Current
Report on Form 8-K.
Item
9.01 Financial
Statements and Exhibits.
(d) Exhibits.
|
Exhibit
No.
|
Description
|
|
10.1
|
Form
of Subscription Agreement dated as of July 7, 2006 by and between
BioSante
Pharmaceuticals, Inc. and each of the subscribers party to the
Subscription Agreements (filed herewith)
|
|
10.2
|
Form
of Warrant expected to be issued by BioSante Pharmaceuticals, Inc.
to each
of the subscribers party to the Subscription Agreements (filed
herewith)
|
|
99.1
|
BioSante
Pharmaceuticals, Inc. News Release dated July 10, 2006 (filed
herewith)
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
BIOSANTE
PHARMACEUTICALS, INC.
By:
/s/
Stephen M. Simes
Stephen
M. Simes
President
and Chief Executive Officer
Dated:
July 10, 2006
BIOSANTE
PHARMACEUTICALS, INC.
CURRENT
REPORT ON FORM 8-K
EXHIBIT
INDEX
|
Exhibit
No.
|
Description
|
Method
of Filing
|
|
10.1
|
Form
of Subscription Agreement dated as of July 7, 2006 by and between
BioSante
Pharmaceuticals, Inc. and each of the subscribers party to the
Subscription Agreements
|
Filed
herewith
|
|
10.2
|
Form
of Warrant expected to be issued by BioSante Pharmaceuticals, Inc.
to each
of the subscribers party to the Subscription Agreements
|
Filed
herewith
|
|
99.1
|
BioSante
Pharmaceuticals, Inc. News Release dated July 10, 2006
|
Filed
herewith
|
SUBSCRIPTION
AGREEMENT
SUBSCRIPTION
AGREEMENT (this “Agreement”)
made
as of the date set forth on the signature page hereof between BioSante
Pharmaceuticals, Inc., a Delaware corporation (the “Company”)
and
the undersigned (the “Subscriber”).
WITNESSETH:
WHEREAS,
the Company is offering in a private placement to accredited investors (the
“Offering”)
of a
minimum of 3,500,000 shares of its common stock, par value $0.0001 per share
(the “Common
Stock”)
and a
maximum of 3,812,978 shares of Common Stock at a price equal to $2.00 per share
(the “Offering
Price”),
and
warrants to purchase shares of Common Stock equal to thirty five percent (35%)
of the total number of shares sold to Subscribers in the Offering at an exercise
price per share equal to $2.75 (the “Warrants”).
The
Warrants are exercisable beginning on the date that is six months and one day
after the Closing Date and continuing for a four year and nine-month period.
The
shares of Common Stock and Warrants offered hereby are sometimes referred to
as
the “Securities;”
and
WHEREAS,
the Subscriber desires to purchase that number of Securities set forth on the
signature page hereof on the terms and conditions hereinafter set forth;
and
WHEREAS,
the Company has engaged Rodman & Renshaw, LLC (the “Placement
Agent”)
as
placement agent for the Offering on a “best-efforts” basis.
NOW,
THEREFORE, in consideration of the premises and the mutual representations
and
covenants hereinafter set forth, the parties hereto agree as
follows:
I. SUBSCRIPTION
FOR SECURITIES AND REPRESENTATIONS BY SUBSCRIBER
1.1 Subject
to the terms and conditions hereinafter set forth, the Subscriber hereby
irrevocably subscribes for and agrees to purchase from the Company such
Securities as is set forth upon the signature page hereof and the Company agrees
to sell such Securities to the Subscriber for said purchase price. The purchase
price is payable by wire transfer of immediately available funds
contemporaneously with the execution and delivery of this Agreement by the
Subscriber. All wires should be sent to:
Bank:
JP
Morgan Chase Bank, N.A.
4
Metro
Tech Center
22nd
Floor
Brooklyn,
New York 11245
Name
on
Account: Continental Stock Transfer & Trust Company A/A.F BioSante
Pharmaceuticals, Inc.
ABA#
021000021
Account#:
xxxxxxxxx
Attn:
Sally Omrow
Certificates
for the shares of Common Stock and the Warrants will be delivered by the Company
to the Subscriber promptly following the Closing (as herein defined).
Notwithstanding the foregoing, the Subscriber acknowledges that, although the
Company intends to file on the next business day hereafter or as soon as
practicable hereafter a listing application with the American Stock Exchange
(“AMEX”)
containing all information required by the rules and regulations of AMEX, final
approval by AMEX is required in connection with the listing of the Common Stock
to be eligible for trading on AMEX. The Company shall use its reasonable best
efforts to cause AMEX to approve the listing application for the Securities
as
soon as practicable.
1.2 The
Subscriber recognizes that the purchase of Securities involves a high degree
of
risk in that (i) the Company remains an early stage business with a limited
operating history and will require funds in addition to the proceeds of the
Offering; (ii) an investment in the Company is highly speculative and only
investors who can afford the loss of their entire investment should consider
investing in the Company; (iii) the Subscriber may not be able to liquidate
the
Subscriber’s investment in the Company; (iv) transferability of the Securities
is extremely limited; and (v) in the event of a disposition, the Subscriber
could sustain the loss of its entire investment.
1.3 The
Subscriber represents that the Subscriber is an “accredited investor” as such
term is defined in Rule 501 of Regulation D promulgated under the Securities
Act
of 1933, as amended, (the “Act”),
as
indicated by the responses to the questions contained in Section VII hereof,
and
that the Subscriber is able to bear the economic risk and illiquidity of an
investment in the Securities.
1.4 The
Subscriber hereby acknowledges and represents that (i) the Subscriber has prior
investment experience, including investment in non-listed and unregistered
securities, or that the Subscriber has employed the services of an investment
advisor, attorney and/or accountant to read all of the documents furnished
or
made available by the Company both to the Subscriber and to all other
prospective investors to evaluate the merits and risks of such an investment
on
the Subscriber’s behalf; (ii) the Subscriber recognizes the highly speculative
nature of an investment in the Securities; and (iii) the Subscriber is able
to
bear the economic risk and illiquidity which the Subscriber assumes by investing
in the Securities.
1.5 The
Subscriber (i) hereby represents that the Subscriber has been furnished by
the
Company during the course of this transaction with and has carefully read the
Company’s SEC Filings (as hereafter defined), including without limitation the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2005, the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2006, the additional risk factors specific to the Common Stock and
the
Offering contained in Schedule
1.5
(together with the SEC Filings, the “Offering
Documents”),
and
all other information regarding the Company which the Subscriber has requested
or desired to know; (ii) has been afforded the opportunity to ask questions
of
and receive answers from duly authorized officers or other representatives
of
the Company concerning the terms and conditions of the Offering; and (iii)
has
received any additional information which the Subscriber has
requested.
1.6 To
the
extent necessary, the Subscriber has retained, at its own expense, and relied
upon the advice of appropriate professionals regarding the investment, tax
and
legal merits and consequences of this Agreement and its purchase of the
Securities hereunder.
1.7 The
Subscriber hereby acknowledges that the Offering has not been reviewed by the
United States Securities and Exchange Commission (the “SEC”)
because of the Company’s representations that this Offering is intended to be
exempt from the registration requirements of Section 5 of the Act pursuant
to
Sections 3(b), 4(2) and/or 4(6) thereof and Regulation D promulgated under
the
Act. The Subscriber agrees that the Subscriber will not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers
to
buy, purchase or otherwise acquire or take a pledge of) any of the Securities,
except in compliance with the Act and the rules and regulations promulgated
thereunder.
1.8 The
Subscriber understands that none of the Securities have been registered under
the Act by reason of a claimed exemption under the provisions of the Act which
depends, in part, upon the Subscriber’s investment intention. In this
connection, the Subscriber hereby represents that the Subscriber is purchasing
the Securities for the Subscriber’s own account for investment and not with a
view toward the resale or distribution thereof to others. The Subscriber, if
an
entity, was not formed for the purpose of purchasing the Securities. The
Subscriber understands that Rule 144 promulgated under the Act requires, among
other conditions, a one-year holding period prior to the resale (in limited
amounts) of securities acquired in a non-public offering without having to
satisfy the registration requirements under the Act.
1.9 The
Subscriber understands and hereby acknowledges that the Company is under no
obligation to register the Securities under the Act or any applicable state
securities or “blue sky” laws (collectively, “Securities
Laws”)
other
than as set forth in Section V. Prior to the Legend Removal Date (as hereafter
defined), the Subscriber consents that the Company may, if it desires, permit
the transfer of the Securities out of the Subscriber’s name only when the
Subscriber’s request for transfer is accompanied by an opinion of counsel
reasonably satisfactory to the Company that neither the sale nor the proposed
transfer results in a violation of the Act or any applicable state “blue sky”
laws.
1.10 So
long
as required by Section 5.13, the Subscriber consents to the placement of a
legend on any certificate or other document evidencing the Securities indicating
that such Securities have not been registered under the Act or any state
securities or “blue sky” laws and setting forth or referring to the restrictions
on transferability and sale thereof contained in this Agreement. The Subscriber
is aware that the Company will make a notation in its appropriate records and
issue “stop transfer” instructions to its transfer agent with respect to the
restrictions on the transferability of such Securities.
1.11 The
Subscriber understands that the Company will review this Agreement and, if
such
Subscriber is an individual, hereby gives authority to the Company to call
Subscriber’s bank or place of employment (in a call in which the Placement Agent
participates) or otherwise review the financial standing of the Subscriber;
and
it is further agreed that upon their mutual agreement the Placement Agent and
the Company reserve the unrestricted right, without further documentation or
agreement on the part of the Subscriber, to reject or limit any subscription,
to
accept subscriptions for Securities and to close the Offering to the Subscriber
at any time.
1.12 The
Subscriber hereby represents that the address of the Subscriber furnished by
the
Subscriber on the signature page hereof is the Subscriber’s principal residence
if the Subscriber is an individual or its principal business address if it
is a
corporation or other entity.
1.13 The
Subscriber represents that the Subscriber has full power and authority
(corporate, statutory and other-wise) to execute and deliver this Agreement
and
to purchase the Securities subscribed for hereby. This Agreement constitutes
the
legal, valid and binding obligation of the Subscriber, enforceable against
the
Subscriber in accordance with its terms.
1.14 If
the
Subscriber is a corporation, partnership, limited liability company, trust,
employee benefit plan, individual retire-ment account, Keogh Plan, or other
entity, then (a) it is authorized and qualified to become an investor in the
Company and the person signing this Agreement on behalf of such entity has
been
duly authorized by such entity to do so, and (b) it is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
1.15 The
Subscriber represents and warrants that it has not engaged, consented to nor
authorized any broker, finder or intermediary to act on its behalf, directly
or
indirectly, as a broker, finder or intermediary in connection with the
transactions contemplated by this Agreement. The Subscriber shall indemnify
and
hold harmless the Company from and against all fees, commissions or other
payments owing to any such person or firm acting on behalf of such Subscriber
hereunder.
1.16 The
Subscriber acknowledges that (a) the Company has engaged, consented to and
authorized the Placement Agent in connection with the transactions contemplated
by this Agreement, (b) the Company shall pay the Placement Agent a commission
and reimburse the Placement Agent's expenses and the Company shall indemnify
and
hold harmless the Subscriber from and against all fees, commissions or other
payments owing by the Company to the Placement Agent or any other person or
firm
acting on behalf of the Company hereunder, (c) registered representatives of
the
Placement Agent and/or its designees (including, without limitation, registered
representatives of the Placement Agent and/or its designees who participate
in
the Offering and sale of the securities sold in the Offering) will be paid
a
portion of the commissions paid to the Placement Agent and (d) the Placement
Agent has not independently verified any information (financial, legal or
otherwise) and makes no representation or warranty, express or implied, as
to,
and assumes no responsibility for, the accuracy or completeness of the
information contained in the Offering Documents.
1.17 The
Subscriber, whose name appears on the signature line below, shall be the
beneficial owner of the Securities for which such Subscriber
subscribes.
1.18 The
Subscriber understands, acknowledges and agrees with the Company as
follows:
(a) The
Company may terminate the Offering or reject any subscription at any time in
its
sole discretion. The execution of this Agreement by the Subscriber or
solicitation of the investment contemplated hereby shall create no obligation
on
the part of the Company or the Placement Agent to accept any subscription or
complete the Offering.
(b) The
Subscriber hereby acknowledges and agrees that the subscription hereunder is
irrevocable by the Subscriber, and that, except as required by law, the
Subscriber is not entitled to cancel, terminate or revoke this Agreement or
any
agreements of the Subscriber hereunder and that if the Subscriber is an
individual this Agreement shall survive the death or disability of the
Subscriber and shall be binding upon and inure to the benefit of the parties
and
their heirs, executors, administrators, successors, legal representatives and
permitted assigns.
(c) No
federal or state agency or authority 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 the Offering nor any recommendation or endorsement of the Securities.
Any representation to the contrary is a criminal offense. In making an
investment decision, the Subscriber must rely on its own examination of the
Company and the terms of the Offering, including the merits and risks
involved.
1.19 Other
than the transaction contemplated hereunder, the Subscriber has not directly
or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with the Subscriber, executed any disposition, including “short
sales” as defined in Rule 200 of Regulation SHO under the Exchange Act, in
the securities of the Company during the period commencing from the time that
the Subscriber first received a term sheet (written or oral) from the Company
or
any other Person setting forth the material terms of the transactions
contemplated hereunder until the date hereof (the “Discussion Time”).
Notwithstanding the foregoing, in the case of a Subscriber that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Subscriber’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of the Subscriber’s assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement. Other than to other Persons party to this Agreement,
the Subscriber has maintained the confidentiality of all disclosures made to
it
in connection with this transaction (including the existence and terms of this
transaction).
II. REPRESENTATIONS
BY THE COMPANY
The
Company hereby represents and warrants to the Subscriber and the Placement
Agent
that:
2.1 Organization
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 lawful
authority to conduct its business as presently conducted. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the nature of the business presently conducted by
it
or the properties owned, leased or operated by it, makes such qualification
or
licensing necessary and where the failure to be so qualified or licensed would
have a material adverse effect upon the business, prospects or financial
condition of the Company (a “Material
Adverse Effect”).
2.2 Capitalization
and Voting Rights.
The
authorized capital stock of the Company is as set forth in its most recent
SEC
Filing (as hereafter defined), 19,160,694 shares of common stock and 391,286
shares of class C special stock of which are issued and outstanding as of June
29, 2006. All issued and outstanding shares of capital stock of the Company
are
validly issued, fully paid and nonassessable. Except as set forth in this
Agreement or in the SEC Filings, there are no outstanding options, warrants,
agreements, commitments, convertible securities, preemptive rights or other
rights to subscribe for or to purchase any shares of capital stock of the
Company nor are there any agreements, promises or commitments to issue any
of
the foregoing. Except as set forth in the SEC Filings, in this Agreement and
as
otherwise required by law, there are no restrictions upon the voting or transfer
of the Securities pursuant to the Company's Amended and Restated Certificate
of
Incorporation, as amended, (the “Certificate
of Incorporation”),
By-laws or other governing documents or any agreement or other instruments
to
which the Company is a party or by which the Company is bound; provided,
however, that the Securities will be subject to restrictions on transfer and
Securities Laws (as hereafter defined) as provided herein. No securityholder
has
the right to include any securities in the Registration Statement (as
hereinafter defined) or otherwise cause the Company to effect registration
of
any of the Company’s securities under the Act, except for investors in the
Company’s prior private placements, which rights the Company has to date
satisfied.
2.3 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 Securities 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 Securities and the issuance of shares
of Common Stock upon issuance of the Warrants (the “Warrant
Shares”)
have
been duly and validly authorized and, upon the issuance and delivery thereof
and
payment therefor as contemplated by this Agreement and the terms of the
Warrants, will be free and clear of liens (other than any liens created by
or
imposed on the holders thereof through no action of the Company), duly and
validly authorized and issued, fully paid and nonassessable. The Company has
reserved a sufficient number of shares of Common Stock for its authorized but
unissued shares for issuance upon exercise of the Warrants. The issuance and
sale of the Securities contemplated hereby will not give rise to any preemptive
rights or rights of first refusal on behalf of any person.
2.4 No
Conflict; Governmental Consents.
(a) The
execution and delivery by the Company of this Agreement, the consumma-tion
of
the transactions contemplated hereby and the offer and sale of the Securities
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 that would have a material adverse effect
upon
the business or financial condition of the Company, 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 that would have a material adverse effect upon the business or financial
condition of the Company.
(b) No
consent, waiver, 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, issuance and sale of the Securities, except for such
consents, waivers, approvals, authorizations, orders or filings as may be
required to be obtained or made, and which shall have been obtained or made
at
or prior to the required time and except for such consents, waivers, approvals,
authorizations, orders or filings that would not have a Material Adverse
Affect.
2.5 Licenses.
The
Company has all licenses, permits and other governmental authorizations
currently required for the conduct of its business or ownership of properties
and is in all material respects complying therewith, except for any licenses,
permits or other governmental authorizations which would not materially
adversely affect the business, property, financial condition, or results of
operations of the Company.
2.6 Litigation.
Except
as set forth in the SEC Reports, 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 any of 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 Agreement or the Securities or (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse Effect.
Except as set forth in the SEC Reports, neither the Company, nor any director
or
officer thereof, is or has been the subject of any action involving a claim
of
violation of or liability under federal or state securities laws or a claim
of
breach of fiduciary duty. There has not been, and the Company has not received
any notice or indication from the SEC that there is pending or contemplated
any
investigation by the SEC involving the Company or any current or former director
or officer of the Company. The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)
or the
Act.
2.7 Accuracy
of Report.
The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it under the Act and the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the
date
hereof (the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as
the
“SEC
Reports”)
on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension. As
of
their respective dates, the SEC Reports complied in all material respects with
the requirements of the Act and the Exchange Act, as applicable, and the rules
and regulations of the Commission promulgated thereunder, as applicable, and
none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
2.8 Investment
Company.
The
Company is not and, upon completion of the Offering, will not be an “investment
company” within the meaning of such term under the Investment Company Act of
1940, as amended, and the rules and regulations of the SEC
thereunder.
2.9 Patents
and Trademarks.
The
Company has, or has rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, trade secrets, inventions,
copyrights, licenses and other intellectual property rights and similar rights
necessary or material for use in connection with their respective businesses
as
described in the SEC Reports and which the failure to so have could have a
Material Adverse Effect (collectively, the “Intellectual
Property Rights”).
Except as set forth on Schedule 2.9, the Company has not received a notice
(written or otherwise) that the Intellectual Property Rights used by the Company
or violates or infringes upon the rights of any Person (as hereinafter defined).
To the knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any
of
the Intellectual Property Rights that could have a Material Adverse Effect.
The
Company has taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where
failure to do so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
2.10 No
Material Adverse Change.
Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in a subsequent SEC Report, (i) there
has been no event, occurrence or development that has had or that could
reasonably be expected to result in 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 disclosed in filings
made with the SEC, (iii) the Company has not altered its method of accounting,
except as otherwise required pursuant to GAAP, (iv) the Company has not declared
or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company stock plans. The Company does not have pending before the SEC any
request for confidential treatment of information. Except for the issuance
of
the Securities contemplated by this Agreement, no event, liability or
development has occurred or exists with respect to the Company or its
Subsidiaries or their respective business, properties, operations or financial
condition, that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made that has
not
been publicly disclosed as of June 28, 2006.
2.11 Financial
Statements.
The
financial statements included in the Company's most recent Annual Report on
Form
10-K for the fiscal year ended December 31, 2005 and all other reports filed
by
the Company with the SEC pursuant to the Exchange Act since January 1, 2006
and
prior to the date hereof (collectively, the “SEC
Filings”)
present fairly and accurately in all material respects the financial position
of
the Company as of the dates shown and its results of operations and cash flows
for the periods shown, and such financial statements have been prepared in
conformity with generally accepted accounting principles (“GAAP”)
applied on a consistent basis (except as may be indicated thereon or in the
notes thereto and subject, in the case of unaudited financial statements, to
normal adjustments). The Company has accounted for all option grants and other
incentive-based stock awards in, compliance under GAAP, as in effect on the
respective date of grant or award or as otherwise required by GAAP’s effect at
the time of the SEC filing. Except as set forth in the financial statements
of
the Company included in the SEC Filings filed prior to the date hereof, to
the
Company's knowledge, the Company has no liabilities, contingent or otherwise,
except those which individually or in the aggregate are not material to the
financial condition or operating results of the Company.
2.12 Compliance
with Laws.
Neither
the Company nor, to the Company's knowledge, any Person (as hereafter defined)
acting on the Company’s behalf and in accordance with the Company’s
instructions, has conducted any general solicitation or general advertising
(as
those terms are used in Regulation D of the Act) in connection with the offer
or
sale of the Securities. Assuming the accuracy of the Subscribers’
representations and warranties set forth in Article III, no registration under
the Act is required for the offer and sale of the Securities by the Company
to
the Subscribers. Neither the Company nor any of its Affiliates (as hereafter
defined), nor, to the Company's knowledge, any Person acting on the Company’s or
on the behalf of its Affiliates and in accordance with the Company’s
instructions, has, directly or indirectly, made any offers or sales of any
security of the Company or solicited any offers to buy any security of the
Company, under circumstances that would adversely affect reliance by the Company
on Section 4(2) of the Act for the exemption from registration for the
transactions contemplated hereby or would require registration of the Securities
under the Act. Except as set forth in Schedule 2.12, the Company is in
compliance with the requirements of AMEX for continued listing of the Common
Stock thereon and has not received any notification that, and has no knowledge
that, the AMEX is contemplating terminating such listing nor, to the Company's
knowledge, is there any basis therefore. The transactions contemplated by this
Agreement will not contravene the rules and regulations of the AMEX, however,
the approval of the AMEX will be required for the issuance and sale of the
Shares and the Warrant Shares and the Company will use commercially reasonable
efforts to obtain such approval. The Company intends to file on the next
business day after the date of this Agreement or as soon as practicable
hereafter a subsequent listing application for listing the Securities on and
hereby represents and warrants to the Placement Agent and the Subscriber that
it
will take any other necessary action in accordance with the rules of the AMEX
to
enable the Securities to trade on the AMEX.
2.13 Insurance.
The
Company is insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and customary in the
businesses in which the Company is engaged, including, but not limited to,
directors and officers insurance coverage in the amount of $5,000,000. The
Company has no reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
without a significant increase in cost.
2.14 Sarbanes-Oxley;
Internal Accounting Controls.
The
Company has at all times been and currently is in material compliance with
all
provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as
of
the Closing Date. The
Company believes that it maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that information required to be disclosed by the Company in the
reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Commission’s
rules and forms. The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and procedures as of the end
of the period covered by the Company’s most recently filed periodic report under
the Exchange Act (such date, the “Evaluation
Date”).
The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no changes in the
Company’s internal control over financial reporting (as such term is defined in
the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
2.15 Application
of Takeover Protections.
The
Company and its Board of Directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Subscribers as a result
of the Subscribers and the Company fulfilling their obligations or exercising
their rights under this Agreement and the Warrants, including, without
limitation, as a result of the Company’s issuance of the Securities and the
Subscribers’ ownership of the Securities.
2.16 Disclosure.
Except
with respect to the material terms and conditions of the transactions
contemplated by this Agreement and the Warrants, the Company confirms that,
neither it nor any other Person acting on its behalf has provided any of the
Subscribers or their agents or counsel with any information that it believes
constitutes or might constitute material, non-public information. The Company
understands and confirms that the Subscribers will rely on the foregoing
representation in effecting transactions in securities of the Company. All
disclosure furnished by or on behalf of the Company to the Subscribers regarding
the Company, its business and the transactions contemplated hereby, including
the Offering Documents, with respect to the representations and warranties
made
herein are true and correct with respect to such representations and warranties
and do 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. The Company
acknowledges and agrees that no Subscriber makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section III hereof.
2.17 Accountants.
The
Company’s accountants are set forth on Schedule
2.17.
To the
knowledge of the Company, such accountants, who the Company expects will express
their opinion with respect to the financial statements to be included in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2006, are a
registered public accounting firm as required by the Act.
2.18 Acknowledgment
Regarding Subscribers’ Purchase of Securities.
The
Company acknowledges and agrees that each of the Subscribers is acting solely
in
the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated thereby. The Company further
acknowledges that no Subscriber is acting as a financial advisor or fiduciary
of
the Company (or in any similar capacity) with respect to this Agreement and
the
transactions contemplated thereby and any advice given by any Subscriber or
any
of their respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is merely incidental to Subscribers’
purchase of the Securities. The Company further represents to each Subscriber
that the Company’s decision to enter into this Agreement and the other
agreements contemplated hereby has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company and its
representatives.
2.19 Manipulation
of Price.
The Company has not, and to its knowledge no one acting on its behalf has,
(i)
taken, directly or indirectly, any action designed to cause or to result in
the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or, paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company, other than,
in the case of clauses (ii) and (iii), compensation paid to the Placement Agent
in connection with the placement of the Securities.
2.20 Form
S-3 Eligibility.
The
Company is eligible to register the resale of the Common Stock sold hereunder
and issuable upon exercise of the Warrants for resale by the Subscriber on
Form
S-3 promulgated under the Securities Act.
III. TERMS
OF SUBSCRIPTION
3.1 The
Offering is for a minimum of 3,500,000 shares of Common Stock and a maximum
of
up to 3,812,978 shares of Common Stock and Warrants to purchase thirty five
percent (35%) of the total number of shares of Common Stock sold to Subscribers
in the Offering. The Securities are offered on a “best efforts” basis.
3.2 Upon
the
mutual consent of the Company and the Placement Agent, this Offering may close
(the “Closing”)
on
receipt of subscriptions to purchase 3,500,000 shares of Common Stock and
receipt of at least $7,000,000 in an escrow account established with Continental
Stock Transfer & Trust Company (the “Escrow
Agent”)
as
payment for such subscriptions, and prior to the sale of all 3,812,978 shares
of
Common Stock. The Closing shall occur at the discretion of the Company and
the
Placement Agent following receipt for subscriptions for at least 3,500,000
shares of Common stock and receipt by the Escrow Agent of $7,000,000 as payment
for such subscriptions (the “Closing
Date”).
The
purchase price is payable by wire transfer of immediately available funds as
provided in Section 1.1.
3.3 The
Subscriber hereby authorizes and directs the Company to deliver the Securities
to be issued to the Subscriber pursuant to this Agreement directly to the
Subscriber’s account maintained by the Placement Agent or, if no such account
exists, to the residential or business address indicated on the signature page
hereto.
3.4 The
Subscriber hereby authorizes and directs the Company to return any funds related
to unaccepted subscriptions to the same account from which the funds were drawn,
including any customer account maintained with the Placement Agent.
IV. CONDITIONS
TO OBLIGATIONS OF THE SUBSCRIBERS AND THE COMPANY
4.1 The
Subscribers’ obligation to purchase the Securities at the Closing is subject to
the fulfillment on or prior to the Closing Date of the following conditions,
which conditions may be waived at the option of each Subscriber to the extent
permitted by law:
(a) Representations
and Warranties.
The
representations and warranties made by the Company in Section II hereof shall
be
true and correct in all material respects when made, and shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of said date.
(b) Covenants.
All
covenants, agreements and conditions contained in this Agreement to be performed
by the Company on or prior to such purchase shall have been performed or
complied with in all material respects.
(c) No
Legal Order Pending.
There
shall not then be in effect any legal or other order enjoining or restraining
the transactions contemplated by this Agreement.
(d) No
Law
Prohibiting or Restricting Such Sale.
There
shall not be in effect any law, rule or regulation prohibiting or restricting
such sale or requiring any consent or approval of any person to issue the
Securities which consent or approval shall not have been obtained (except as
may
otherwise be provided in this Agreement).
(e) Legal
Opinion.
Upon
the Closing, counsel to the Company shall have delivered to the Placement Agent
for the benefit of the Subscribers a legal opinion with respect to such legal
matters relating to this Agreement and the Offering as the Placement Agent
may
reasonably require.
(f) Minimum
Subscriptions.
The
Company shall have received and accepted valid subscriptions for an aggregate
of
not less than 3,500,000 shares of Common Stock and the Escrow Agent shall have
received at least $7,000,000 as payment for such subscriptions.
4.2 The
Company’s obligation to sell the Securities at the Closing is subject to the
fulfillment on or prior to the Closing Date of the following conditions, which
conditions may be waived at the option of the Company to the extent permitted
by
law:
(a) Acknowledgements,
Representations and Warranties.
The
acknowledgements, representations and warranties made by the Subscriber in
Section I hereof shall be true and correct in all respects when made, and shall
be true and correct in all material respects on the Closing Date with the same
force and effect as if they had been made on and as of said date; provided,
however,
that
any acknowledgement, representation or warranty made by the Subscriber that
is
not true and correct and as a result the Subscriber is not an “accredited
investor” under Rule 501 under Regulation D of the Act or the Company is not
able to rely upon a private placement exemption under Rule 506 under Regulation
D of the Act for the issuance of the Securities will automatically be deemed
to
be material. If any such representations, warranties or acknowledgements shall
not be true and accurate in any respect prior to the Closing, the undersigned
shall give immediate written notice of such fact to the Company, to the
Placement Agent, and to his representatives, if any, specifying which
representations, warranties or acknowledgements are not true and accurate and
the reason therefor.
(b) Covenants.
All
covenants, agreements and conditions contained in this Agreement to be performed
by the Subscriber on or prior to such purchase shall have been performed or
complied with in all material respects.
(c) No
Legal Order Pending.
There
shall not then be in effect any legal or other order enjoining or restraining
the transactions contemplated by this Agreement.
(d) No
Law
Prohibiting or Restricting Such Sale.
There
shall not be in effect any law, rule or regulation prohibiting or restricting
such sale or requiring any consent or approval of any person to issue the
Securities which consent or approval shall not have been obtained (except as
may
otherwise be provided in this Agreement).
V. REGISTRATION
RIGHTS.
5.1 As
used
in this Agreement, the following terms shall have the following
meanings:
(a) “Affiliate”
shall
mean, with respect to any Person (as defined below), any other Person
controlling, controlled by, or under direct or indirect common control with,
such Person (for the purposes of this definition “control,” when used with
respect to any specified Person, shall mean the power to direct the management
and policies of such person, directly or indirectly, whether through ownership
of voting securities, by contract or otherwise; and the terms “controlling” and
“controlled” shall have meanings correlative to the foregoing).
(b) “Business
Day”
shall
mean a day, Monday through Friday, on which banks are generally open for
business in each of New York, New York; and Chicago, Illinois.
(c) “Holders”
shall
mean the Subscriber and any person holding Registrable Securities as defined
below, or any person to whom the rights under Section V have been
transferred in accordance with Section 5.10 hereof, and who, if known by
the Company, shall be specifically named by the Company as selling stockholders
in the Registration Statement (as defined below).
(d) “Person”
shall
mean any person, individual, corporation, limited liability company,
partnership, trust or other nongovernmental entity or any governmental agency,
court, authority or other body (whether foreign, federal, state, local or
otherwise).
(e) “Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
(f) “Prospectus”
means
the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Registration Statement,
and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
(g) The
terms
“register,”
“registered”
and
“registration”
refer
to the registration effected by preparing and filing with the SEC a registration
statement in compliance with the Act, and the declaration or ordering by the
SEC
of the effectiveness of such registration statement.
(h) “Registrable
Securities”
shall
mean (i) the Common Stock, and (ii) the shares of Common Stock issuable upon
exercise of the Warrants; provided, however, that securities shall only be
treated as Registrable Securities if and only for so long as they (A) have
not
been disposed of pursuant to a registration statement declared effective by
the
SEC, (B) have not been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Act so that all transfer restrictions
and restrictive legends with respect thereto are removed upon the consummation
of such sale, and (C) are held by a Holder or a permitted transferee pursuant
to
Section 5.10; provided that any such securities shall cease to be
Registrable Securities at such time as the Holder may sell all such securities
of the Company then held by such Holder under Rule 144(k) under the
Act.
(i) “Registration
Expenses”
shall
mean all expenses incurred by the Company in complying with Section 5.2
hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and expenses of counsel for
the Company, blue sky fees and expenses and the expense of any special audits
incident to, or required by, any such registration (but excluding the aggregate
fees of legal counsel for all Holders).
(j) “Registration
Statement”
shall
have the meaning ascribed to such term in Section 5.2 (a).
(k) “Registration
Period”
shall
have the meaning ascribed to such term in Section 5.4 (a).
(l) “Selling
Expenses”
shall
mean all underwriting discounts and selling commissions applicable to the sale
of Registrable Securities and the aggregate fees and expenses of legal counsel
for all Holders.
5.2 (a)The
Company shall, as soon as reasonably practicable, but not later than thirty
(35)
days after the Closing Date (the “Filing
Date”),
(i)
use its reasonable best efforts to file with the SEC a shelf registration
statement on Form S-3 (or if not eligible for such form, on such other form
on
which the Company is eligible) (the “Registration
Statement”)
with
respect to the resale of the Registrable Securities for an offering to be made
on a continuous basis pursuant to Rule 415 under the Act and cause such
Registration Statement declared effective by the SEC within the earlier of
(a)
90 days from the Closing Date or (b) the tenth (10th) business day following
the
date on which the Company is notified by the SEC that the SEC will not be
reviewing the Registration Statement or that the SEC has no further comment
on
the Registration Statement (such earlier date is referred to as the
“Effectiveness
Date”)
and
(ii) cause such Registration Statement to remain effective for the Registration
Period. The Registration Statement shall contain (unless otherwise directed
by
at least a majority in interest of the Holders) substantially the “Plan
of Distribution”
attached hereto as Annex
A.
The
Company shall telephonically request effectiveness of a Registration Statement
as of 5:00 pm Eastern Time on a trading day. The Company shall immediately
notify the Holders via facsimile of the effectiveness of a Registration
Statement on the same trading day that the Company telephonically confirms
effectiveness with the SEC, which shall be the date requested for effectiveness
of a Registration Statement. The Company shall, by 9:30 am Eastern Time on
the
trading day after the day the Registration Statement is declared effective
(as
defined in the Subscription Agreement), file a final Prospectus with the SEC
if
required by Rule 424.
(b) If:
(i) a
Registration Statement is not filed on or prior to its Filing Date (if the
Company files a Registration Statement without affording the Holders the
opportunity to review and comment on the same as required by Section 5.4(b)
or
(ii) a Registration Statement filed or required to be filed hereunder is not
declared effective by the Commission by its Effectiveness Date, or (iii) after
the Effectiveness Date, a Registration Statement ceases for any reason to remain
continuously effective as to all Registrable Securities for which it is required
to be effective as to all of the Registrable Securities for which it is required
to be effective, or the Holders are otherwise not permitted to utilize the
Prospectus therein to sell Registrable Securities at any time other than during
a Permitted Black-Out Period (as defined herein) (any such failure or breach
being referred to as an “Event”,
and
for purposes of clause (i) or (ii) the date on which such Event occurs, or
for
purposes of clause (iii) the first date on which the Holders are not permitted
to utilize the Prospectus, being referred to as “Event
Date”),
then
in addition to any other rights the Holders may have hereunder or under
applicable law, on each such Event Date and on each monthly anniversary of
each
such Event Date (if the applicable Event shall not have been cured by such
date)
until the applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as partial liquidated damages and not as a penalty, equal to
2%
of the aggregate purchase price paid for the Securities held by such Holder
pursuant to the Subscription Agreement for any Registrable Securities then
held
by such Holder. Notwithstanding the foregoing, the partial liquidated damages
shall not exceed a maximum of 24% of the aggregate purchase price paid for
the
Securities held by such Holder pursuant to the Subscription Agreement for any
Registrable Securities then held by such Holder. If the Company fails to pay
any
partial liquidated damages pursuant to this Section in full within seven days
after the date payable, the Company will pay interest thereon at a rate of
18%
per annum (or such lesser maximum amount that is permitted to be paid by
applicable law) to the Holder, accruing daily from the date such partial
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full. The partial liquidated damages pursuant to the terms hereof
shall apply on a daily pro-rata basis for any portion of a month prior to the
cure of an Event.
5.3 All
Registration Expenses incurred in connection with any registration,
qualification, exemption or compliance pursuant to Section 5.2 shall be borne
by
the Company. All Selling Expenses relating to the sale of securities registered
by or on behalf of Holders shall be borne by such Holders pro rata on the basis
of the number of securities so registered.
5.4 In
the
case of the registration, qualification, exemption or compliance effected by
the
Company pursuant to this Agreement, the Company shall, upon reasonable request,
inform each Holder as to the status of such registration, qualification,
exemption and compliance. At its expense the Company shall:
(a) use
its
reasonable best efforts to keep such registration, and any qualification,
exemption or compliance under state securities laws which the Holders reasonably
request the Company to obtain, continuously effective as to all Registrable
Securities until the earlier of: (i) the Holders having completed the
distribution of the Registrable Securities described in the Registration
Statement relating thereto; or (ii) with respect to any Holder, such time as
all
Registrable Securities then held by such Holder may be sold in compliance with
Rule 144(k) under the Act. The period of time during which the Company is
required hereunder to keep the Registration Statement effective is referred
to
herein as the “Registration
Period”;
(b) The
Company shall deliver a draft of the Registration Statement or any amendment
or
supplement thereto, which changes as modifies any information regarding a
Holder, a Holder’s beneficial ownership of the Company’s securities or any
information under the caption “Plan of Distribution” to the Holders at least
five (5) business days prior to filing such Registration Statement, amendment
or
supplement. Notify the Holders of Registrable Securities to be sold (which
notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied
by
an instruction to suspend the use of the Prospectus until the requisite changes
have been made) as promptly as reasonably possible (and, in the case of (i)(A)
below, not less than one trading day prior to such filing) and (if requested
by
any such Person) confirm such notice in writing no later than one trading day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to a Registration Statement is proposed to be filed;
and (B) with respect to a Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any request by the SEC
or
any other Federal or state governmental authority for amendments or supplements
to a Registration Statement or Prospectus; (iii) of the issuance by the SEC
or
any other federal or state governmental authority of any stop order suspending
the effectiveness of a Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; (v) of the occurrence of any
event or passage of time that makes the financial statements included in a
Registration Statement ineligible for inclusion therein or any statement made
in
a Registration Statement or Prospectus or any document incorporated or deemed
to
be incorporated therein by reference untrue in any material respect or that
requires any revisions to a Registration Statement, Prospectus or other
documents so that, in the case of a Registration Statement or the Prospectus,
as
the case may be, it will not contain any untrue statement of a material fact
or
omit to state any material fact required to be stated therein or necessary
to
make the statements therein, in light of the circumstances under which they
were
made, not misleading; and (vi) the occurrence or existence of any pending
corporate development with respect to the Company that the Company believes
may
be material and that, in the determination of the Company, makes it not in
the
best interest of the Company to allow continued availability of a Registration
Statement or Prospectus; provided that any and all of such information shall
remain confidential to each Holder until such information otherwise becomes
public, unless disclosure by a Holder is required by law; provided,
further,
notwithstanding each Holder’s agreement to keep such information confidential,
the Holders make no acknowledgement that any such information is material,
non-public information;
(c) Use
its
reasonable best efforts to obtain the withdrawal of (i) any order suspending
the
effectiveness of a Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest reasonably practicable
moment;
(d) furnish
to each Holder, without charge, at least one copy of such Registration Statement
and any post-effective amendment or supplement thereto, including financial
statements and schedules, and, if the Holder so requests in writing, all
exhibits (excluding those incorporated by reference) in the form filed with
the
SEC;
(e) during
the Registration Period, deliver to each Holder, without charge, a reasonable
number of copies of the prospectus included in such Registration Statement
and
any amendment or supplement thereto as such Holder may reasonably request;
and
the Company consents to the use, consistent with the provisions hereof, of
the
prospectus and any amendment or supplement thereto by each of the selling
Holders of Registrable Securities in connection with the offering and sale
of
the Registrable Securities covered by the prospectus and any amendment or
supplement thereto;
(f) during
the Registration Period, deliver to each Holder, without charge, upon request,
(i) a copy of the full Registration Statement (excluding exhibits); (ii) all
exhibits excluded by the parenthetical to the immediately preceding clause
(i);
and (iii) such other documents as may be reasonably requested by the
Holder;
(g) prior
to
any public offering of Registrable Securities pursuant to the Registration
Statement, register or qualify or obtain an exemption for the offer and sale
under the securities or blue sky laws of such jurisdictions as any such Holders
reasonably request in writing, provided that the Company shall not for any
such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent
to
general service of process in any such jurisdiction, and do any and all other
acts or things reasonably necessary or advisable to enable the offer and sale
in
such jurisdictions of the Registrable Securities covered by the Registration
Statement.
(h) cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold pursuant to the
Registration Statement, free of any restrictive legends to the extent not
required at such time as determined by the Company after consultation with
legal
counsel and in such denominations and registered in such names as Holders may
request;
(i) upon
the
occurrence of any event contemplated by Section 5.4(b)(v) above, the Company
shall promptly prepare a post-effective amendment to the Registration Statement
or a supplement to the related prospectus, or file any other required document
so that, as thereafter delivered to purchasers of the Registrable Securities
included therein, the prospectus will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(j) use
its
reasonable best efforts to comply in all material respects with all applicable
rules and regulations of the SEC, and make generally available to the Holders
not later than 45 days (or 90 days if the fiscal quarter is the fourth fiscal
quarter) after the end of its fiscal quarter in which the first anniversary
date
of the effective date of the Registration Statement occurs, an earnings
statement satisfying the provisions of Section 11(a) of the Act;
and
(k) Subject
to the terms of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto, except
after
the giving of any notice pursuant to Section 3(d).
5.5 The
Holders shall have no right to take any action to restrain, enjoin or otherwise
delay any registration pursuant to Section 5.2 hereof as a result of any
controversy that may arise with respect to the interpretation or implementation
of this Agreement.
5.6 (a)To
the
extent permitted by law, the Company shall indemnify each Holder, each
underwriter of the Registrable Securities and each person controlling such
Holder and each such underwriter within the meaning of Section 15 of the Act,
with respect to which any registration, qualification or compliance has been
sought pursuant to this Agreement, against all claims, losses, expenses, costs,
damages and liabilities (or action in respect thereof), including any of the
foregoing incurred in settlement of any litigation, commenced or threatened
(subject to Section 5.6(c) below), arising out of or based on (i) any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus or offering circular, or any amendment or
supplement thereof, incident to any such registration, qualification or
compliance, or based on 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 in light of the circumstances in which they were made,
or
(ii) any violation or alleged violation by the Company of the Act, the Exchange
Act, or any rule or regulation promulgated under the Act or the Exchange Act,
and shall reimburse each Holder, each underwriter of the Registrable Securities
and each person controlling such Holder and each such underwriter, for
reasonable legal and other expenses, in connection with investigating or
defending any such claim, loss, damage, liability or action as and when
incurred; provided that the Company shall not be liable in any such case to
the
extent that any untrue statement or omission thereof is made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such Holder or underwriter and stated to be specifically for use
in
preparation of such registration statement, prospectus or offering circular;
provided that the Company shall not be liable in any such case where the claim,
loss, damage or liability arises out of or is related to the failure of the
Holder to comply with the covenants and agreements contained in Section 5.7
hereof, and except that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any such untrue statement or alleged
untrue statement or omission made in the preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the SEC at the time the
registration statement becomes effective or in the amended prospectus filed
with
the SEC pursuant to Rule 424(b) of the Act or in the prospectus subject to
completion under Rule 434 of the Act, which together meet the requirements
of
Section 10(a) of the Act (the “Final
Prospectus”),
such
indemnity agreement shall not inure to the benefit of any such Holder, any
such
underwriter or any such controlling person, with respect to any Losses relating
to a sale made after the date of the final Prospectus if, and only if, (x)
the
Company complied with Section 5.4(b)
and (y)
if a copy of the Final Prospectus furnished by the Company to the Holder for
delivery was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is required
by the Act and the Final Prospectus would have cured the defect giving rise
to
such loss, liability, claim or damage. Notwithstanding any provision herein
to
the contrary, the Company shall reimburse each Holder, upon such Holder's
demand, for all reasonably necessary expenses and costs which are incurred,
as
and when incurred, by such Holder as a result of the indemnification claims
described in this Section 5.6(a). Such demand may be made from time to time
prior to resolution of the claim. In no event shall the Company be liable for
the expenses and costs of more than one counsel on behalf of the Holders unless
in the reasonable judgment of a Holder, based upon written advice of its
counsel, a conflict of interest exists between the Holders with respect to
such
claims, in which case the Company shall reimburse the Holders for additional
attorneys.
(b) Each
Holder will severally, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors
and
officers, each underwriter of the Registrable Securities and each person who
controls the Company and each underwriter of the Registrable Securities within
the meaning of Section 15 of the Act, against all claims, losses, expenses,
costs, damages and liabilities (or actions in respect thereof), including any
of
the foregoing incurred in settlement of any litigation, commenced or threatened
(subject to Section 5.6(c) below), arising out of or based on any untrue
statement of a material fact contained in any registration statement, prospectus
or offering circular, or any amendment or supplement thereof, incident to any
such registration, qualification or compliance or based on any omission to
state
therein a material fact required to be stated therein or necessary to make
the
statements therein not misleading in light of the circumstances in which they
were made, and will reimburse the Company, such directors and officers, each
underwriter of the Registrable Securities and each person controlling the
Company and each underwriter of the Registrable Securities for reasonable legal
and any other expenses or costs reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action
as
incurred, in each case to the extent, but only to the extent, that such untrue
statement or omission thereof is made in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of the Holder
and
stated to be specifically for use in preparation of such registration statement,
prospectus or offering circular; provided that the indemnity shall not apply
to
the extent that such claim, loss, damage or liability results from the fact
that
a current copy of the prospectus was not made available to the Holder and such
current copy of the prospectus would have cured the defect giving rise to such
loss, claim, expense, costs, damage or liability. Notwithstanding the foregoing,
in no event shall a Holder be liable for any such claims, losses, expenses,
costs, damages or liabilities in excess of the proceeds received by such Holder
in that offering, except in the event of fraud by such Holder.
(c) Each
party entitled to indemnification under this Section 5.6 (the “Indemnified
Party”)
shall
give notice to the party required to provide indemnification (the “Indemnifying
Party”)
promptly after such Indemnified Party has actual knowledge of any claim as
to
which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may participate
in such defense with its own counsel at such Indemnified Party’s expense unless
the named parties to any proceeding covered hereby (including any impleaded
parties) include both the Company or any others the Company may designate and
one or more Indemnified Persons, and representation of the Indemnified Persons
and such other parties by the same counsel would be inappropriate due to actual
or potential differing interests between them, and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement, except
to the extent such failure is materially prejudicial to the Indemnifying Party
in defending such claim or litigation. An Indemnifying Party shall not be liable
for any settlement of an action or claim effected without its written consent
(which consent will not be unreasonably withheld).
(d) If
the
indemnification provided for in this Section 5.6 is held by a court of competent
jurisdiction to be unavailable to an Indemnified Party with respect to any
loss,
liability, claim, damage, cost or expense referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder,
shall contribute to the amount paid or payable by such Indemnified Party as
a
result of such loss, liability, claim, damage, cost or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage, cost or expense as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and of the Indemnified Party shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied or which should have been supplied by the
Indemnifying Party or by the Indemnified Party and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of
any
Losses shall be deemed to include, subject to the limitations set forth in
this
Agreement, any reasonable attorneys’ or other fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have
been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5.6(d) were determined by pro rata allocation or by
any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5.6(d), no Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount
by
which the net proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue statement or omission, except in the case of fraud or willful misconduct
by such Holder.
(e) The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.
5.7 (a)Subject
to the limitations set forth in Section 5.7(b) below, upon receipt of any notice
from the Company of the happening of any event requiring the preparation of
a
supplement or amendment to a prospectus relating to Registrable Securities
so
that, as thereafter delivered to the Holders, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, each Holder shall forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement contemplated by Section 5.2
until its receipt of copies of the supplemented or amended prospectus from
the
Company and, if so directed by the Company, each Holder shall deliver to the
Company all copies, other than permanent file copies then in such Holder’s
possession, of the prospectus covering such Registrable Securities current
at
the time of receipt of such notice.
(b) Any
Holder of the Company’s outstanding Common Stock shall suspend, upon request of
the Company, any disposition of Registrable Securities pursuant to the
Registration Statement and prospectus contemplated by Section 5.2 during
any period, not to exceed two 30-day periods within any 12-month period (each,
a
“Permitted
Black-Out Period”),
when
the Company determines in good faith that offers and sales pursuant thereto
should not be made by reason of the presence of material undisclosed
circumstances or developments with respect to which the disclosure that would
be
required in such a prospectus is premature because it would have an adverse
effect on the Company. The period of time in which the disposition of
Registrable Securities pursuant to the Registration Statement and prospectus
is
so suspended shall be referred to as a “Black-Out
Period.”
The
Company agrees to so advise the Holders promptly of the commencement and
termination of any such Black-Out Period, and the Holders agree to keep the
fact
of such Black-Out Period confidential.
(c) As
a
condition to the inclusion of its Registrable Securities, each Holder shall
furnish to the Company such information regarding the securities of the Company
owned beneficially or of record by such Holder and the distribution proposed
by
such Holder as the Company may request in writing because it is required in
connection with any registration, qualification or compliance referred to in
this Section V. Any sale of any Registrable Securities by any Holder shall
constitute a representation and warranty by such Holder that the required
information relating to such Holder’s beneficial ownership of the Company’s
securities and its plan of distribution is as set forth in the prospectus
delivered by such Holder in connection with such disposition, that such
prospectus does not as of the time of such sale contain any untrue statement
of
a material fact relating to such Holder or its plan of distribution and that
such prospectus does not as of the time of such sale omit to state any material
fact relating to such Holder’s beneficial ownership of the Company’s securities
or its plan of distribution necessary to make the statements in such prospectus,
in the light of the circumstances under which they were made, not
misleading.
(d) With
respect to any sale of Registrable Securities pursuant to a Registration
Statement filed pursuant to this Section V, each Holder hereby covenants with
the Company not to make any sale of the Registrable Securities without
effectively causing the prospectus delivery requirements under the Act to be
satisfied.
(e) Each
Holder acknowledges and agrees that the Registrable Securities sold pursuant
to
the Registration Statement described in this Section are not transferable on
the
books of the Company unless the stock certificate submitted to the transfer
agent evidencing such Registrable Securities is accompanied by a certificate
reasonably satisfactory to the Company to the effect that (i) the
Registrable Securities have been sold in accordance with such Registration
Statement and (ii) the requirement of delivering a current prospectus has
been satisfied.
(f) Each
Holder shall not take any action with respect to any distribution deemed to
be
made pursuant to such registration statement, which would constitute a violation
of Regulation M under the Exchange Act or any other applicable rule, regulation
or law.
(g) At
the
end of the Registration Period, the Holders of Registrable Securities included
in the Registration Statement shall discontinue sales of shares pursuant to
such
Registration Statement upon receipt of notice from the Company of its intention
to remove from registration the shares covered by such Registration Statement
which remain unsold.
5.8 With
a
view to making available to the Holders the benefits of certain rules and
regulations of the SEC which at any time permit the sale of the Registrable
Securities to the public without registration, the Company shall use its
reasonable best efforts:
(a) to
make
and keep public information available, as those terms are understood and defined
in Rule 144 under the Act, at all times;
(b) to
file
with the SEC in a timely manner all reports and other documents required of
the
Company under the Exchange Act; and
(c) so
long
as a Holder owns any Registrable Securities, to furnish to such Holder upon
any
reasonable request a written statement by the Company as to its compliance
with
Rule 144 under the Act, and of the Exchange Act, and a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company as such Holder may reasonably request in availing
itself of any rule or regulation of the SEC allowing a Holder to sell any such
securities without registration.
5.9 With
the
written consent of the Company and the Holders holding a majority of the
Registrable Securities that are then outstanding, any provision of this Section
V may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely) or amended. Upon the effectuation of each such waiver or
amendment, the Company shall promptly give written notice thereof to the
Holders, if any, who have not previously received notice thereof or consented
thereto in writing.
5.10 The
rights and obligations of the Holders under this Section V may not be assigned
or transferred to or assumed by any transferee or assignee except (i) to a
transferee that acquires at least 20% of such Holder's Registrable Securities
or
(ii) to an Affiliate or limited or general partner of a Holder; provided that
such transfer was not in violation of this Agreement or the Securities Laws;
and
provided, further, that any person to whom the rights under this Section V
have
been transferred in accordance with this Section 5.10 has assumed the
obligations of a Holder hereunder and a copy of such written assignment and
assumption is provided to the Company.
5.11 No
Piggyback on Registrations.
Neither
the Company nor any of its security holders (other than the Holders in such
capacity pursuant hereto) may include securities of the Company in the
Registration Statement other than the Registrable Securities. The Company shall
not file any other registration statements until the Registration Statement
is
filed by the Company with the SEC or permit any other registration statement
filed by the Company to be declared effective until the Registration Statement
is declared effective by the SEC, provided that this Section 5.11 shall not
prohibit the Company from filing amendments to registration statements already
filed or registration statements on Form S-8 or S-4 (or their then
equivalent).
5.12 Piggy-Back
Registrations.
If at
any time during the Registration Period there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the SEC a registration statement relating
to
an offering for its own account or the account of others under the Act of any
of
its equity securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business
or
equity securities issuable in connection with the stock option or other employee
benefit plans, then the Company shall send to each Holder a written notice
of
such determination and, if within fifteen (15) days after the date of such
notice, any such Holder shall so request in writing, the Company shall include
in such registration statement all or any part of such Registrable Securities
such Holder requests to be registered.
5.13 Legend
Removal.
(a) The
Company acknowledges and agrees that a Subscriber 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 Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Act and who agrees to be bound by the provisions of this Agreement and, if
required under the terms of such arrangement, such Subscriber may transfer
pledged or secured Securities 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 Subscriber’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities,
including, if the Securities are subject to registration pursuant to this
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.
(b) Certificates
evidencing the Shares and Warrant Shares shall not contain any legend (including
the legends referred to in Section 1.16), (i) following any sale of such Shares
or Warrant Shares pursuant to Rule 144, or (ii) if such Shares or Warrant Shares
are eligible for sale under Rule 144(k), or (iii) if such legend is not required
under applicable requirements of the Act (including judicial interpretations
and
pronouncements issued by the staff of the Commission). The Company shall cause
its counsel to issue a legal opinion to the Company’s transfer agent promptly
after such time as the legend is no longer required pursuant to this Section
if
required by the Company’s transfer agent to effect the removal of the legend
hereunder. The Company agrees that following such time as such legend is no
longer required under this Section 4.1(b), it will, no later than three trading
days following the delivery by a Subscriber to the Company or the Company’s
transfer agent of a certificate representing Shares or Warrant Shares, as the
case may be, issued with a restrictive legend (such third Trading Day, the
“Legend
Removal Date”),
deliver or cause to be delivered to such Subscriber 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. Certificates for Securities subject to legend removal hereunder shall
be transmitted by the transfer agent of the Company to the Subscribers by
crediting the account of the Subscriber’s prime broker with the Depository Trust
Company System.
VI. MISCELLANEOUS
6.1 From
the
date hereof until 45 days after the date the Registration Statement is declared
effective, except as otherwise provided below, the Company shall not issue
shares of Common Stock or any options, warrants, rights or other securities
convertible into or exchangeable for Common Stock. The restriction on issuance
by the Company of securities under this Section shall not apply to: (i) the
issuance of any shares of Common Stock upon the exercise of any options or
warrants outstanding as of the Closing Date; (ii) the issuance of any shares
of
Common Stock upon the conversion of any shares of class C special stock of
the
Company; (iii) the grant of any options with an exercise price no less than
the
closing sale price of the Common Stock on the date of grant pursuant to the
Company’s Amended and Restated 1998 Stock Plan; (iv) any rights offering of
securities, including rights to purchase Common Stock, by the Company to all
of
its stockholders; or (v) the issuance of any shares of Common Stock or other
equity securities to Paladin Labs as described in Schedule 2.2 to this
Agreement.
6.2 From
the
date hereof until the one year anniversary of the Closing Date, the Company
shall be prohibited from effecting or entering into an agreement to effect
any
subsequent financing involving a “Variable Rate Transaction”. The term
“Variable
Rate Transaction”
shall
mean a transaction in which the Company issues or sells (i) 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 or
(ii) enters into any agreement, including, but not limited to, an equity line
of
credit, whereby the Company may sell securities at a future determined price.
Any Subscriber shall be entitled to obtain injunctive relief against the Company
to preclude any such issuance, which remedy shall be in addition to any right
to
collect damages.
6.3 Any
notice or other communication given hereunder shall be deemed sufficient in
writing and sent by (a) telecopy or facsimile at the address or number
designated below (if delivered on a business day during normal business hours
where such notice is to be received); or (b) registered or certified mail,
return receipt requested, or delivered by hand against written receipt therefor,
addressed to BioSante Pharmaceuticals, Inc., 111 Barclay Boulevard,
Lincolnshire, Illinois 60069, Facsimile: (847) 478-9260, Attention: Stephen
M.
Simes, President and Chief Executive Officer. Notices shall be deemed to have
been given or delivered on the date of mailing, except notices of change of
address, which shall be deemed to have been given or delivered when
received.
6.4 Except
as
set forth in Section 5.9 and except with respect to Sections 6.1 and 6.2 (which
Sections may be amended with the written consent of the Company and the Holders
holding at least 66 2/3% of the Registrable Securities that are then
outstanding), this Agreement shall not be changed, modified or amended except
by
a writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
6.5 Upon
the
execution and delivery of this Agreement by the Subscriber, this Agreement
shall
become a binding obligation of the Subscriber with respect to the purchase
of
Securities as herein provided, subject to acceptance by the Company and the
Placement Agent; subject, however, to the right hereby reserved to the Company
to enter into the same agreements with other subscribers and to add and/or
delete other persons as subscribers.
6.6 Remedies.
In the
event of a breach by the Company or by a Holder, of any of their respective
obligations under this Agreement, each Holder or the Company, as the case may
be, in addition to being entitled to exercise all rights granted by law and
under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation
for
any losses incurred by reason of a breach by it of any of the provisions of
this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall not assert or shall
waive the defense that a remedy at law would be adequate.
6.7 Notwithstanding
the place where this Agreement may be executed by any of the parties hereto,
the
parties expressly agree that all the terms and provisions hereof shall be
construed in accordance with and governed by the laws of the State of Delaware
without regard to principles of conflicts of law.
6.8 The
holding of any provision of this Agreement to be invalid or unenforceable by
a
court of competent jurisdiction shall not affect any other provision of this
Agreement, which shall remain in full force and effect. If any provision of
this
Agreement shall be declared by a court of competent jurisdiction to be invalid,
illegal or incapable of being enforced in whole or in part, such provision
shall
be interpreted so as to remain enforceable to the maximum extent permissible
consistent with applicable law and the remaining conditions and provisions
or
portions thereof shall nevertheless remain in full force and effect and
enforceable to the extent they are valid, legal and enforceable, and no
provisions shall be deemed dependent upon any other covenant or provision unless
so expressed herein.
6.9 It
is
agreed that a waiver by either party of a breach of any provision of this
Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
6.10 The
parties agree to execute and deliver all such further documents, agreements
and
instruments and take such other and further action as may be necessary or
appropriate to carry out the purposes and intent of this Agreement.
6.11 This
Agreement may be executed in two or more counterparts each of which shall be
deemed an original, but all of which shall together constitute one and the
same
instrument.
6.12 The
Subscriber agrees not to issue any public statement with respect to the
Subscriber’s investment or proposed investment in the Company or the terms of
any agreement or covenant between them and the Company without the Company’s
prior written consent, except such disclosures as may be required under
applicable law or under any applicable order, rule or regulation.
6.13 Nothing
in this Agreement shall create or be deemed to create any rights in any person
or entity not a party to this Agreement, except for the Placement Agent and
the
holders of Registrable Securities.
6.14 Any
pronoun herein shall include all genders and/or the plural or singular as
appropriate from the context.
|
SIGNATURE
PAGE
|
Date
Signed: July 7 , 2006
|
|
|
Number
of shares:
|
||
|
Multiplied
by Offering Price per share:
|
x
|
$____
|
|
Equals
subscription amount:
|
=
|
Warrants
(multiply
the number of shares by 35%): _______________
“INVESTOR”
(Name
in which securities should be issued)
By:
Print
Name:
Title:
City,
State and Zip Code
Telephone-Business
Facsimile-Business
Tax
ID #
or Social Security #
*The
attached Certificate of Signatory must also be completed.
This
Subscription Agreement is agreed to and accepted as of July 7,
2006.
BIOSANTE
PHARMACEUTICALS, INC.
By:
____________________________________
Name:
Title:
CERTIFICATE
OF SIGNATORY
(To
be
completed if Securities are being subscribed for by an entity)
I,______________________________,
am the____________________________
of
_____________________________________________ (the “Entity”).
I
certify
that I am empowered and duly authorized by the Entity to execute and carry
out
the terms of the Subscription Agreement and to purchase and hold the Securities,
and certify further that the Subscription Agreement has been duly and validly
executed on behalf of the Entity and constitutes a legal and binding obligation
of the Entity.
IN
WITNESS WHEREOF, I have set my hand this7th day of July, 2006.
_______________________________________
(Signature)
--
ANNEX
A
Plan
of Distribution
Each
Selling Stockholder (the “Selling
Stockholders”)
of the
common stock and any of their pledgees, assignees and successors-in-interest
may, from time to time, sell any or all of their shares of common stock on
the
American Stock Exchange or any other stock exchange, market or trading facility
on which the shares are traded or in private transactions. These sales may
be at
fixed or negotiated prices. A Selling Stockholder may use any one or more of
the
following methods when selling shares:
| · |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
| · |
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
| · |
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
| · |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| · |
privately
negotiated transactions;
|
| · |
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a
part;
|
| · |
broker-dealers
may agree with the Selling Stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
| · |
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
|
| · |
a
combination of any such methods of sale;
or
|
| · |
any
other method permitted pursuant to applicable
law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the Securities
Act of 1933, as amended (the “Securities
Act”),
if
available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, but,
except as set forth in a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in compliance
with
NASDR Rule 2440; and in the case of a principal transaction a markup or markdown
in compliance with NASDR IM-2440.
In
connection with the sale of the common stock or interests therein, the Selling
Stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the Common
Stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Stockholder has informed the
Company that it does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock. In
no
event shall any broker-dealer receive fees, commissions and markups which,
in
the aggregate, would exceed eight percent (8%).
The
Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares. The Company has agreed to indemnify
the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because
Selling Stockholders may be deemed to be “underwriters” within the meaning of
the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act including Rule 172 thereunder. In addition, any securities
covered by this prospectus which qualify for sale pursuant to Rule 144 under
the
Securities Act may be sold under Rule 144 rather than under this prospectus.
There is no underwriter or coordinating broker acting in connection with the
proposed sale of the resale shares by the Selling Stockholders.
We
agreed
to keep this prospectus effective until the earlier of (i) the date on which
the
shares may be resold by the Selling Stockholders without registration and
without regard to any volume limitations by reason of Rule 144(k) under the
Securities Act or any other rule of similar effect or (ii) all of the shares
have been sold pursuant to this prospectus or Rule 144 under the Securities
Act
or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not
be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
Under
applicable rules and regulations under the Exchange Act, any person engaged
in
the distribution of the resale shares may not simultaneously engage in market
making activities with respect to the common stock for the applicable restricted
period, as defined in Regulation M, prior to the commencement of the
distribution. In addition, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases
and
sales of shares of the common stock by the Selling Stockholders or any other
person. We will make copies of this prospectus available to the Selling
Stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale.
NEITHER
THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
HAVE 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. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED
BY SUCH SECURITIES.
BIOSANTE
PHARMACEUTICALS, INC.
WARRANT
Warrant
No. «Number»Date
of
Original Issuance: [Closing Date], 2006
BioSante
Pharmaceuticals, Inc.,
a
Delaware corporation (the “Company”),
hereby certifies that, for value received, «Name»
or its
registered assigns (the “Holder”),
is
entitled to purchase from the Company up to a total of «Shares»
shares
of common stock, par value $0.0001 per share (the “Common
Stock”),
of
the Company (each such share, a “Warrant
Share”
and
all
such shares, the “Warrant
Shares”)
at an
exercise price equal to $2.75 per share (as adjusted from time to time as
provided in Section 9, the “Exercise
Price”),
at
any time and from time to time from and after [six
months and one day following closing]
and
through and including [four
years and nine months after initial exercise date]
(the
“Expiration
Date”),
and
subject to the following terms and conditions:
1. Definitions.
In
addition to the terms defined elsewhere in this Warrant, capitalized terms
that
are not otherwise defined herein shall have the meanings given to such terms
in
the Subscription Agreement of even date herewith to which the Company and the
original Holder are parties (the “Purchase
Agreement”).
2. Registration
of Warrant.
The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant
Register”),
in
the name of the record Holder hereof from time to time. The Company may deem
and
treat the registered Holder of this Warrant as the absolute owner hereof for
the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.
3. Registration
of Transfers.
Except
as otherwise provided below, the Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Company at its address specified herein. Upon any such registration or transfer,
a new Warrant to purchase Common Stock, in substantially the form of this
Warrant (any such new Warrant, a “New
Warrant”),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations of a holder
of a Warrant.
4. Exercise
of Warrants.
(a) This
Warrant shall be exercisable by the registered Holder at any time and from
time
to time on or after _________, 2007 [six
months and one day following closing] to
and
including the Expiration Date. At 6:30 p.m., New York City time on the
Expiration Date, the portion of this Warrant not exercised prior thereto shall
be and become void and of no value. The Company may not call or redeem all
or
any portion of this Warrant without the prior written consent of the
Holder.
(b) The
Company shall not effect any exercise of this Warrant, and a Holder shall not
have the right to exercise any portion of this Warrant, pursuant to Section
4 or
otherwise, to the extent that after giving effect to such issuance after
exercise as set forth on the applicable Notice of Exercise, such Holder
(together with such Holder’s Affiliates (as defined in the Purchase Agreement),
and any other person or entity acting as a group together with such Holder
or
any of such Holder’s Affiliates), as set forth on the applicable Notice of
Exercise, would beneficially own in excess of the Beneficial Ownership
Limitation (as hereinafter defined). For purposes of the foregoing sentence,
the
number of shares of Common Stock beneficially owned by such Holder and its
Affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which such determination is being
made,
but shall exclude the number of shares of Common Stock which would be issuable
upon (A) exercise of the remaining, nonexercised portion of this Warrant
beneficially owned by such Holder or any of its Affiliates and (B) exercise
or
conversion of the unexercised or nonconverted portion of any other securities
of
the Company (including, without limitation, any other Warrants) subject to
a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by such Holder or any of its affiliates. Except
as set forth in the preceding sentence, for purposes of this Section 4(b),
beneficial ownership shall be calculated in accordance with Section 13(d) of
the
Exchange Act and the rules and regulations promulgated thereunder, it being
acknowledged by a Holder that the Company is not representing to such Holder
that such calculation is in compliance with Section 13(d) of the Exchange Act
and such Holder is solely responsible for any schedules required to be filed
in
accordance therewith. To the extent that the limitation contained in this
Section 4(b) applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by such Holder together with any
Affiliates) and of which a portion of this Warrant is exercisable shall be
in
the sole discretion of a Holder, and the submission of an Exercise shall be
deemed to be each Holder’s determination of whether this Warrant is exercisable
(in relation to other securities owned by such Holder together with any
Affiliates) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have
no
obligation to verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 2(d), in
determining the number of outstanding shares of Common Stock, a Holder may
rely
on the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more
recent public announcement by the Company or (z) any other notice by the Company
or the Company’s transfer agent setting forth the number of shares of Common
Stock outstanding. Upon the written or oral request of a Holder, the
Company shall within two trading days confirm orally and in writing to such
Holder the number of shares of Common Stock then outstanding. In any case,
the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by such Holder or its Affiliates since the date as
of
which such number of outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation”
shall be
4.99% of the number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock issuable upon exercise
of this Warrant. The Beneficial Ownership Limitation provisions of this Section
4(b) may be waived by such Holder, at the election of such Holder, upon not
less
than 61 days’ prior notice to the Company to change the Beneficial Ownership
Limitation to 9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock upon
exercise of this Warrant, and the provisions of this Section 4(b) shall continue
to apply. Upon such a change by a Holder of the Beneficial Ownership Limitation
from such 4.99% limitation to such 9.99% limitation, the Beneficial Ownership
Limitation may not be further waived by such Holder. The provisions of this
paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 4(b) to correct this paragraph
(or any portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a successor holder
of
this Warrant.
5. Delivery
of Warrant Shares.
(a) To
effect
exercises hereunder, the Holder shall not be required to physically surrender
this Warrant unless the aggregate Warrant Shares represented by this Warrant
is
being exercised. Upon delivery of the Exercise Notice to the Company (with
the
attached Warrant Shares Exercise Log) at its address for notice set forth herein
and upon payment of the Exercise Price multiplied by the number of Warrant
Shares that the Holder intends to purchase hereunder, the Company shall promptly
(but in no event later than five business days after the Date of Exercise (as
defined herein)) issue and deliver to the Holder, a certificate for the Warrant
Shares issuable upon such exercise, which, unless otherwise required by the
Purchase Agreement, shall be free of restrictive legends. Certificates for
Warrant Shares purchased hereunder shall be transmitted by the transfer agent
of
the Company to the Holder by crediting the account of the Holder’s prime broker
with the Depository Trust Company through its Deposit Withdrawal Agent
Commission (“DWAC”)
system
if the Company or its transfer agent is a participant in such system, and
otherwise by physical delivery to the address specified by the Holder in the
Exercise Notice within 3 trading days from the delivery to the Company of the
Exercise Date (as hereinafter defined) and surrender of this Warrant (if
required) (“Warrant
Share Delivery Date”).
This
Warrant shall be deemed to have been exercised on the date the Exercise Price
is
received by the Company. The Warrant Shares shall be deemed to have been issued,
and Holder or any other person so designated to be named therein shall be deemed
to have become a holder of record of such shares for all purposes, as of the
date the Warrant has been exercised by payment to the Company of the Exercise
Price (or by cashless exercise). A “Date
of Exercise”
means
the date on which the Holder shall have delivered to Company: (i) the Exercise
Notice (with the Warrant Exercise Log attached to it), appropriately completed
and duly signed and (ii) if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, payment of the Exercise Price for the
number of Warrant Shares so indicated by the Holder to be
purchased.
(b) If
by the
third business day after a Date of Exercise the Company fails to deliver the
required number of Warrant Shares in the manner required pursuant to Section
5(a), then the Holder will have the right to rescind such exercise.
(c) In
addition to any other rights available to the Holder, if the Company fails
to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by the Holder of the Warrant Shares which
the Holder anticipated receiving upon such exercise (a “Buy-In”),
then
the Company shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Warrant Shares that the Company was required
to
deliver to the Holder in connection with the exercise at issue times (B) the
price at which the sell order giving rise to such purchase obligation was
executed, and (2) at the option of the Holder, either reinstate the portion
of
the Warrant and equivalent number of Warrant Shares for which such exercise
was
not honored or deliver to the Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect
to
an attempted exercise of shares of Common Stock with an aggregate sale price
giving rise to such purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In and, upon request of
the
Company, evidence of the amount of such loss. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant
as
required pursuant to the terms hereof.
(d) The
Company’s obligations to issue and deliver Warrant Shares in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or
any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation
of
law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to
the
Holder in connection with the issuance of Warrant Shares. Nothing herein shall
limit a Holder’s right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to
timely deliver certificates representing shares of Common Stock upon exercise
of
the Warrant as required pursuant to the terms hereof.
6. Charges,
Taxes and Expenses.
Issuance and delivery of certificates for shares of Common Stock upon exercise
of this Warrant shall be made without charge to the Holder for any issue or
transfer tax, withholding tax, transfer agent fee or other incidental tax or
expense in respect of the issuance of such certificates, all of which taxes
and
expenses shall be paid by the Company; provided, however, that the Company
shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the registration of any certificates for Warrant Shares or Warrants
in a name other than that of the Holder. The Holder shall be responsible for
all
other tax liability that may arise as a result of holding or transferring this
Warrant or receiving Warrant Shares upon exercise hereof.
7. Replacement
of Warrant.
If this
Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
hereof, or in lieu of and substitution for this Warrant, a New Warrant, but
only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction and customary and reasonable indemnity (which shall not
include a surety bond), if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Company may
prescribe. If a New Warrant is requested as a result of a mutilation of this
Warrant, then the Holder shall deliver such mutilated Warrant to the Company
as
a condition precedent to the Company’s obligation to issue the New
Warrant.
8. Reservation
of Warrant Shares.
The
Company covenants that it will at all times reserve and keep available out
of
the aggregate of its authorized but unissued and otherwise unreserved Common
Stock, solely for the purpose of enabling it to issue Warrant Shares upon
exercise of this Warrant as herein provided, the number of Warrant Shares which
are then issuable and deliverable upon the exercise of this entire Warrant,
free
from preemptive rights or any other contingent purchase rights of persons other
than the Holder (taking into account the adjustments and restrictions of
Section
9).
The
Company covenants that all Warrant Shares so issuable and deliverable shall,
upon issuance and the payment of the applicable Exercise Price in accordance
with the terms hereof, be duly and validly authorized, issued and fully paid
and
nonassessable.
9. Certain
Adjustments.
The
Exercise Price and number of Warrant Shares issuable upon exercise of this
Warrant are subject to adjustment from time to time as set forth in this
Section
9.
(a) Stock
Dividends and Splits.
If the
Company, at any time while this Warrant is outstanding, (i) pays a stock
dividend on its Common Stock or otherwise makes a distribution on any class
of
capital stock that is payable in shares of Common Stock, (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, or (iii)
combines outstanding shares of Common Stock into a smaller number of shares,
then in each such case the Exercise Price shall be multiplied by a fraction
of
which the numerator shall be the number of shares of Common Stock outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event. Any
adjustment made pursuant to clause (i) of this paragraph shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution, and any adjustment pursuant to clause
(ii) or (iii) of this paragraph shall become effective immediately after the
effective date of such subdivision or combination. If any event requiring an
adjustment under this paragraph occurs during the period that an Exercise Price
is calculated hereunder, then the calculation of such Exercise Price shall
be
adjusted appropriately to reflect such event.
(b) Fundamental
Transactions.
If, at
any time while this Warrant is outstanding, (1) the Company effects any merger
or consolidation of the Company with or into another Person, (2) the Company
effects any sale of all or substantially all of its assets in one or a series
of
related transactions, (3) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (4) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental
Transaction”),
then
the Holder shall have the right thereafter to receive, upon exercise of this
Warrant, the same amount and kind of securities, cash or property as it would
have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of the number of Warrant Shares then issuable upon exercise in full
of this Warrant (the “Alternate
Consideration”).
For
purposes of any such exercise, the determination of the Exercise Price shall
be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration
it
receives upon any exercise of this Warrant following such Fundamental
Transaction. Any successor to the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a new warrant substantially
in
the form of this Warrant and consistent with the foregoing provisions and
evidencing the Holder’s right to purchase the Alternate Consideration for the
aggregate Exercise Price upon exercise thereof. The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the provisions
of this paragraph (b) and insuring that the Warrant (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.
(c) Number
of Warrant Shares.
Simultaneously with any adjustment to the Exercise Price pursuant to paragraph
(a) of this Section, the number of Warrant Shares that may be purchased upon
exercise of this Warrant shall be increased or decreased proportionately, so
that after such adjustment the aggregate Exercise Price payable hereunder for
the adjusted number of Warrant Shares shall be the same as the aggregate
Exercise Price in effect immediately prior to such adjustment.
(d) Calculations.
All
calculations under this Section
9
shall be
made to the nearest cent or the nearest 1/100th
of a
share, as applicable. The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of
the
Company, and the disposition of any such shares shall be considered an issue
or
sale of Common Stock.
(e) Notice
of Adjustments.
Upon
the occurrence of each adjustment pursuant to this Section
9,
the
Company at its expense will promptly compute such adjustment in accordance
with
the terms of this Warrant and prepare a certificate setting forth such
adjustment, including a statement of the adjusted Exercise Price and adjusted
number or type of Warrant Shares or other securities issuable upon exercise
of
this Warrant (as applicable), describing the transactions giving rise to such
adjustments and showing in detail the facts upon which such adjustment is based.
Upon written request, the Company will promptly deliver a copy of each such
certificate to the Holder and to the Company’s transfer agent.
(f) Notice
to Allow Exercise by Holder.
If (A)
the Company shall declare a dividend (or any other distribution in whatever
form) on the Common Stock; (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants
to
subscribe for or purchase any shares of capital stock of any class or of any
rights; (D) the approval of any stockholders of the Company shall be required
in
connection with any reclassification of the Common Stock, any consolidation
or
merger to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property;
(E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company; then, in each case,
the
Company shall cause to be mailed to the Holder at its last address as it shall
appear upon the warrant register of the Company, at least 10 calendar days
prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not
to
be taken, the date as of which the holders of the Common Stock of record to
be
entitled to such dividend, distributions, redemption, rights or warrants are
to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.
10. Payment
of Exercise Price.
The
Holder may pay the Exercise Price in one of the following manners:
(a) Cash
Exercise.
The
Holder may deliver immediately available funds; or
(b) Cashless
Exercise.
The
Holder may notify the Company in an Exercise Notice of its election to utilize
cashless exercise, in which event the Company shall issue to the Holder the
number of Warrant Shares determined as follows:
X
= Y
[(A-B)/A]
where:
X
= the
number of Warrant Shares to be issued to the Holder.
Y
= the
number of Warrant Shares with respect to which this Warrant is being
exercised.
A
= the
VWAP on the trading day immediately prior to the Exercise Date.
B
= the
Exercise Price.
For
purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced,
on
the date this Warrant was originally issued.
“VWAP”
means, for any date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on the American
Stock Exchange (“AMEX”), Nasdaq or another national securities exchange, the
daily volume weighted average price of the Common Stock for such date (or the
nearest preceding date) on AMEX, Nasdaq or another national securities exchange
on which the Common Stock is then listed or quoted for trading as reported
by
Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. (New York City
time) to 4:02 p.m. (New York City time); (b) if the Common Stock is not so
listed or quoted for trading, the volume weighted average price of the Common
Stock for such date (or the nearest preceding date) on the OTC Bulletin Board;
(c) if the Common Stock is not then quoted for trading on the OTC Bulletin
Board
and if prices for the Common Stock are then reported in the “Pink Sheets”
published by Pink Sheets, LLC (or a similar organization or agency succeeding
to
its functions of reporting prices), the most recent bid price per share of
the
Common Stock so reported; or (d) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser selected
in
good faith by the Holder and reasonably acceptable to the Company.
11. No
Fractional Shares.
No
fractional shares of Warrant Shares will be issued in connection with any
exercise of this Warrant. In lieu of any fractional shares which would,
otherwise be issuable, the Company shall pay cash equal to the product of such
fraction multiplied by the closing price of one Warrant Share as reported by
the
American Stock Exchange or such other national exchange on which the Common
Stock is then traded on the date of exercise.
12. Notices.
Any and
all notices or other communications or deliveries hereunder (including, without
limitation, any Exercise Notice) shall be in writing and shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice
or
communication is delivered via facsimile at the facsimile number specified
in
this Section prior to 6:30 p.m. (New York City time) on a business day, (ii)
the
next business day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified
in
this Section on a day that is not a business day or later than 6:30 p.m. (New
York City time) on any business day, (iii) the business day following the date
of mailing, if sent by nationally recognized overnight courier service, or
(iv)
upon actual receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be: (i) if to the Company, to
BioSante Pharmaceuticals, Inc., Attn: Chief Financial Officer, Facsimile No.:
(847) 478-9263, or (ii) if to the Holder, to the address or facsimile number
appearing on the Warrant Register or such other address or facsimile number
as
the Holder may provide to the Company in accordance with this
Section.
13. Warrant
Agent.
The
Company shall serve as warrant agent under this Warrant. Upon 30 days’ notice to
the Holder, the Company may appoint a new warrant agent. Any corporation into
which the Company or any new warrant agent may be merged or any corporation
resulting from any consolidation to which the Company or any new warrant agent
shall be a party or any corporation to which the Company or any new warrant
agent transfers substantially all of its corporate trust or shareholders
services business shall be a successor warrant agent under this Warrant without
any further act. Any such successor warrant agent shall promptly cause notice
of
its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder’s last address as shown on the Warrant
Register.
14. Miscellaneous.
(a) This
Warrant does not entitle the Holder to any voting or other rights as a
stockholder of the Company prior to exercise and payment for the Warrant Price
in accordance with the terms hereof.
(b) Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement.
(c) No
provision hereof, in the absence of any affirmative action by Holder to exercise
this Warrant to purchase Warrant Shares, and no enumeration herein of the rights
or privileges of Holder, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the
Company.
(d) The
Holder, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of
its
rights under this Warrant. The Company agrees that monetary damages would not
be
adequate compensation for any loss incurred by reason of a breach by it of
the
provisions of this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law would be
adequate.
(e) This
Warrant shall be binding on and inure to the benefit of the parties hereto
and
their respective successors and assigns. Subject to the preceding sentence,
nothing in this Warrant shall be construed to give to any Person other than
the
Company and the Holder any legal or equitable right, remedy or cause of action
under this Warrant. This Warrant may be amended only in writing signed by the
Company and the Holder and their successors and assigns.
(f) All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant 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 hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right
to
trial by jury in any legal proceeding arising out of or relating to this Warrant
or the transactions contemplated hereby. If either party shall commence a
proceeding to enforce any provisions of this Warrant, then the prevailing party
in such proceeding shall be reimbursed by the other party for its attorney’s
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such Proceeding.
(g) The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(h) In
case
any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE
PAGE FOLLOWS]
11
OPPENHEIMER:
2439012 v02 07/06/2006
IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its
authorized officer as of the date first indicated above.
BIOSANTE
PHARMACEUTICALS, INC.
By:
Name: Phillip
B. Donenberg
Title: Chief
Financial Officer
OPPENHEIMER:
2439012 v02 07/06/2006
BIOSANTE
PHARMACEUTICALS, INC.
WARRANT
ORIGINALLY ISSUED [ ], 2006
WARRANT
NO. [ ]
EXERCISE
NOTICE
To BIOSANTE
PHARMACEUTICALS, INC.:
(1) The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full),
and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.
(2) Payment
shall take the form of (check applicable box):
[
] in
lawful money of the United States; or
[
] [if
permitted] the cancellation of such number of Warrant Shares as is necessary,
in
accordance with the formula set forth in subsection 2(c), to exercise this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection
2(c).
(3) Please
issue a certificate or certificates representing said Warrant Shares in the
name
of the undersigned or in such other name as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:
_______________________________
_______________________________
_______________________________
(4) Accredited
Investor.
The
undersigned is an “accredited investor” as defined in Regulation D promulgated
under the Securities Act of 1933, as amended.
[SIGNATURE
OF HOLDER]
Name
of
Investing Entity:
Signature
of Authorized Signatory of Investing Entity:
Name
of
Authorized Signatory:
Title
of
Authorized Signatory:
Date:
OPPENHEIMER:
2439012 v02 07/06/2006
Warrant
Shares Exercise Log
|
Date
|
Number
of Warrant Shares Available to be Exercised
|
Number
of Warrant Shares Exercised
|
Number
of Warrant Shares Remaining to be Exercised
|
OPPENHEIMER:
2439012 v02 07/06/2006
BIOSANTE
PHARMACEUTICALS, INC.
WARRANT
ORIGINALLY ISSUED [ ],
2006
WARRANT
NO. [ ]
FORM
OF ASSIGNMENT
[To
be
completed and signed only upon transfer of Warrant]
FOR
VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the above-captioned
Warrant to purchase ____________ shares of Common Stock to which such Warrant
relates and appoints ________________ attorney to transfer said right on the
books of the Company with full power of substitution in the
premises.
Dated: _______________,
____
_______________________________________
(Signature
must conform in all respects to name of holder as specified on the face of
the
Warrant)
_______________________________________
Address
of Transferee
_______________________________________
_______________________________________
In
the
presence of:
__________________________
BioSante
Pharmaceuticals, Inc.
111
Barclay Boulevard
Lincolnshire,
Illinois 60069
www.biosantepharma.com
FOR
IMMEDIATE RELEASE Amex:
BPA
BioSante
Pharmaceuticals Announces $7.6 Million
Private
Placement of Common Stock
LINCOLNSHIRE,
Illinois (July 10, 2006) -- BioSante Pharmaceuticals, Inc. (Amex: BPA) today
announced that it has entered into definitive agreements with institutional
and
other accredited investors with respect to the private placement of 3,812,978
shares of its common stock at a purchase price of $2.00 per share, for gross
proceeds of $7,625,956, before payment of placement agent commissions and
offering expenses. Investors also will receive warrants to purchase 1,334,542
shares of common stock at an exercise price of $2.75 per share. Rodman &
Renshaw, LLC served as placement agent for the transaction. The transaction
is
expected to be completed upon approval of an additional listing application
with
the American Stock Exchange.
"We
are
pleased with this private placement, and are gratified to welcome a new group
of
institutional investors to BioSante," said Stephen M. Simes, BioSante's
president and chief executive officer. “In addition, we are happy to welcome
back previous investors in BioSante, as well as additional investment by current
BioSante stockholders. Among the investors in this private placement are
Perceptive Life Sciences, Quogue Capital, Hunt BioVentures, L.P., Mallette
Capital, and Valesco Capital Management and entities affiliated with Paramount
BioCapital. We believe this strong group of investors will help increase the
company’s visibility in the investment community.”
The
additional $7,244,658 in net proceeds will be used to progress
Bio-E-Gel®
to
approval of its New Drug Application for the treatment of menopausal symptoms,
which application is currently under review by the U.S. Food and Drug
Administration, and to initiate Phase III clinical trials of LibiGel®
in the
treatment of female sexual dysfunction, as well as for general corporate
purposes. Based on its current cash balance and commitments, BioSante believes
that with the net proceeds from this private placement, it should be able to
maintain its current planned development activities and the corresponding level
of expenditures through at least the next twelve months, although no assurance
can be given that it will not need additional cash prior to such
time.
(more)
Page
2
The
securities offered in this placement have not been registered under the
Securities Act of 1933, as amended, or state securities laws, and cannot be
offered or sold in the United States absent registration with the Securities
and
Exchange Commission (SEC) or an applicable exemption from the registration
requirements. As part of the transaction, the company has agreed to file a
registration statement with the SEC covering the resale of the shares of common
stock issued in the offering, including the shares of common stock issuable
upon
exercise of the warrants. This news release is neither an offer to sell nor
a
solicitation of an offer to buy any of the securities discussed herein and
is
being issued under Rule 135c of the Securities Act of 1933.
About
BioSante Pharmaceuticals, Inc.
BioSante
is developing a pipeline of hormone therapy products to treat both men and
women. These hormone therapy products are gel formulations for transdermal
administration that deliver bioidentical estradiol and testosterone. BioSante's
lead products include Bio-E-Gel®
(transdermal estradiol gel) for the treatment of women with menopausal symptoms,
and LibiGel®
(transdermal testosterone gel) for the treatment of female sexual dysfunction
(FSD). A Bio-E-Gel new drug application (NDA) was submitted to the FDA in the
first quarter 2006. The current market in the U.S. for estrogen and testosterone
products is approximately $2.5 billion. The transdermal gel formulations used
in
the women's gel products are licensed by BioSante from Antares Pharma Inc.
The
company also is developing its calcium phosphate nanotechnology (CaP) for novel
vaccines, including avian flu and biodefense vaccines for toxins such as anthrax
and ricin, and drug delivery systems. Additional information is available online
at: www.biosantepharma.com.
This
news release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The statements regarding
BioSante contained in this news release that are not historical in nature,
particularly those that utilize terminology such as "may," "will," "should,"
"likely," "expects," "anticipates," "estimates," "believes", "plans, "hopes",
or
comparable terminology, are forward-looking statements. Forward-looking
statements are based on current expectations and assumptions, and entail various
risks and uncertainties that could cause actual results to differ materially
from those expressed in such forward-looking statements. Important factors
known
to BioSante that cause actual results to differ materially from those expressed
in such forward-looking statements are the difficulty of developing
pharmaceutical products, obtaining regulatory and other approvals and achieving
market acceptance, and other factors identified and discussed from time to
time
in BioSante's filings with the Securities and Exchange Commission, including
those factors discussed on pages 22 to 34 in BioSante's most recent Form 10-K,
which discussion also is incorporated herein by reference. Additional
risk factors include the risk that the closing of the private placement will
not
take place or that BioSante’s product development activities will be more
expensive than contemplated and that BioSante’s cash balances will not be
sufficient to continue its current planned development activities for at least
the next 12 months. All
forward-looking statements speak only as of the date of this news release.
BioSante undertakes no obligation to update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise.
For
more information, please contact:
Phillip
B. Donenberg, CFO
847-478-0500
ext 101
donenber@biosantepharma.com