Document:

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of March 3, 2011, between BioSante Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

 

ARTICLE I.
  DEFINITIONS

 

1.1           Definitions.  In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:

 

“Acquiring Person” shall have the meaning ascribed to such term in Section 4.5.

 

“Action” shall have the meaning ascribed to such term in Section 3.1(j).

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Board of Directors” means the board of directors of the Company.

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

 

“Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived, but in no event later than the third Trading Day following the date hereof.

 

1

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

“Company Counsel” means Oppenheimer Wolff & Donnelly LLP, with offices located at Plaza VII, Suite 3300, 45 South Seventh Street, Minneapolis, Minnesota 55402.

 

“Disclosure Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.

 

“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(r).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to current or former employees, officers, directors or independent contractors of the Company pursuant to any stock-based compensation plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities, (c) securities issued pursuant to stock splits, stock dividends or distributions, recapitalizations and similar events affecting the Common Stock; (d) shares of Common Stock or warrants to vendors of the Company approved by a majority of the non-employee members of the Board of Directors; (e) securities issued pursuant to mergers, acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company; and (f) securities issued after the completion of any merger, acquisition or strategic transaction approved by a majority of the disinterested directors of the Company upon the exercise or exchange of or conversion of any securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of effectiveness of such merger, acquisition or strategic transaction.

 

“FDA” shall have the meaning ascribed to such term in Section 3.1(gg).

 

2

 

“FDCA” shall have the meaning ascribed to such term in Section 3.1(gg).

 

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(z).

 

“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).

 

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction, other than restrictions imposed by securities laws.

 

“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

 

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).

 

“Per Share Purchase Price” equals $2.0613, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Pharmaceutical Product” shall have the meaning ascribed to such term in Section 3.1(gg).

 

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

“Prospectus” means the base prospectus filed with the Registration Statement.

 

“Prospectus Supplement” means the supplement to the Prospectus complying with Rule 424(b) of the Securities Act that is filed with the Commission and delivered by the Company to each Purchaser prior to or at the Closing.

 

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.8.

 

“Registration Statement” means the effective registration statement with Commission File No. 333-159606 or the effective registration statement with Commission File No. 166859, as the case may be, which registers the sale of the Shares, the Warrants and the Warrant Shares to the Purchasers.

 

“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

3

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities” means the Shares, the Warrants and the Warrant Shares.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Shares” means the shares of Common Stock issued or issuable to each Purchaser pursuant to this Agreement.

 

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).

 

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Shares and Warrants purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.

 

“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a), and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 

“Trading Day” means a day on which the principal Trading Market is open for trading.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

 

“Transaction Documents” means this Agreement, the Warrants and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

“Transfer Agent” means Computershare Investor Services, the current transfer agent of the Company, with a mailing address of 350 Indiana Street, Suite 750, Golden

 

4

 

CO 80401 and a facsimile number of 312.601.2312, and any successor transfer agent of the Company.

 

“Warrants” means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Warrants shall be exercisable immediately and have a term of exercise equal to 3 years, in the form of Exhibit A attached hereto.

 

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.

 

“WS” means Weinstein Smith LLP with offices located at 420 Lexington Avenue, Suite 2620, New York, New York 10170-0002.

 

ARTICLE II.
  PURCHASE AND SALE

 

2.1           Closing.  On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and each of the Purchasers, severally and not jointly, agrees to purchase the number of Shares and Warrants specified below such Purchaser’s name on the signature page to this Agreement.  Each Purchaser shall deliver to the Company, via wire transfer or a certified check of immediately available funds equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser and the Company shall deliver to each Purchaser its respective Shares and a Warrant as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing.  Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at such location as the parties shall mutually agree.

 

2.2           Deliveries.

 

(a)           On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

 

(i)            this Agreement duly executed by the Company;

 

(ii)           a legal opinion of Company Counsel, in the form to be mutually agreed upon by the parties;

 

(iii)          a copy of the irrevocable instructions to the Company’s transfer agent instructing the transfer agent to deliver via The Depository Trust Company Deposit or Withdrawal at Custodian system (“DWAC”) Shares equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser;

 

(iv)          a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 33% of such Purchaser’s Shares,

 

5

 

with an exercise price equal to $2.25, subject to adjustment therein (such Warrant certificate may be delivered within three Trading Days of the Closing Date); and

 

(v)           the Prospectus and Prospectus Supplement (which may be delivered in accordance with Rule 172 under the Securities Act).

 

(b)           On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:

 

(i)            this Agreement duly executed by such Purchaser; and

 

(ii)           such Purchaser’s Subscription Amount by wire transfer to the account as specified in writing by the Company.

 

2.3           Closing Conditions.

 

(a)           The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

 

(i)            the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);

 

(ii)           all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed in all material respects; and

 

(iii)          the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.

 

(b)           The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:

 

(i)            the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);

 

(ii)           all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed in all material respects;

 

(iii)          the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;

 

(iv)          there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and

 

6

 

(v)           from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s principal Trading Market (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing), and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of each Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.

 

ARTICLE III.
  REPRESENTATIONS AND WARRANTIES

 

3.1           Representations and Warranties of the Company.  Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or warranty made herein to the extent of such disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:

 

(a)           Subsidiaries.  All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a).  The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.  If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

 

(b)           Organization and Qualification.  The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document with respect to the Company, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the

 

7

 

Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(c)           Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection therewith other than in connection with the Required Approvals.  Each Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(d)           No Conflicts.  The execution, delivery and performance by the Company of the Transaction Documents, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby to which it is a party do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not have a Material Adverse Effect.

 

(e)           Filings, Consents and Approvals.  The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority

 

8

 

or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of the Prospectus Supplement, (iii) application(s) to each applicable Trading Market for the listing of the Shares and Warrant Shares for trading thereon in the time and manner required thereby and (iv) such filings as are required to be made under applicable state securities laws and FINRA (collectively, the “Required Approvals”).

 

(f)            Issuance of the Securities; Registration.  The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company.  The Warrant Shares, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company.  The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement and the Warrants. The Company has prepared and filed each of the Registration Statements in conformity in all material respects with the requirements of the Securities Act, which Registration Statements became effective on June 9, 2009 and June 10, 2010, respectively (the “Effective Date”), including the Prospectus, and such amendments and supplements thereto as may have been required to the date of this Agreement.  Each of the Registration Statements is effective under the Securities Act and to the actual knowledge of the Company, no stop order preventing or suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Prospectus has been issued by the Commission and no proceedings for that purpose have been instituted or, to the knowledge of the Company, are threatened by the Commission.  The Company, if required by the rules and regulations of the Commission, proposes to file the Prospectus Supplement, with the Commission pursuant to Rule 424(b).  At the time each of the Registration Statements and any amendments thereto became effective, at the date of this Agreement and at the Closing Date, the Registration Statement and any amendments thereto conformed and will conform in all material respects to the requirements of the Securities Act and did not and 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 not misleading; and the Prospectus and any amendments or supplements thereto, at time the Prospectus or any amendment or supplement thereto was issued and at the Closing Date, conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(g)           Capitalization.  The authorized capitalization of the Company is as set forth on Schedule 3.1(g).  The Company has not issued any capital stock since its most recently filed report under the Exchange Act, other than pursuant to the exercise of stock options under the Company’s stock-based compensation plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed report under the Exchange Act.  No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the

 

9

 

transactions contemplated by the Transaction Documents.  Except as disclosed in the SEC Reports or Schedule 3.1(g) or as a result of the purchase and sale of the Securities, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is bound to issue additional shares of Common Stock or Common Stock Equivalents.  The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in all material respects in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.  No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.  Except as disclosed in any SEC Report, including any exhibit thereto, there are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

(h)           SEC Reports; Financial Statements.  The Company has complied in all material respects with requirements to file all reports, schedules, forms, statements and other documents required to be filed by the Company under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (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 Securities Act and the Exchange Act, 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. The Company is not an issuer currently subject to Rule 144(i) under the Securities Act. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results

 

10

 

of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

(i)            Material Changes; Undisclosed Events, Liabilities or Developments.  Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i) there has been no event, occurrence or development that has had or that would result in a Material Adverse Effect, (ii) the Company has not incurred any material liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not materially altered its method of accounting, (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-based compensation plans.  The Company does not have pending before the Commission any request for confidential treatment of information.  Except for the issuance of the Securities contemplated by this Agreement or as set forth in the SEC Reports or on Schedule 3.1(i), no event, liability or development has occurred 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 or deemed made that has not been publicly disclosed prior to the date that this representation is made.

 

(j)            Litigation.  Except as disclosed in the SEC Reports or on Schedule 3.1(j), 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, any Subsidiary or any of their respective 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 any of the Transaction Documents or the Securities or (ii) would, if there were an unfavorable decision, have a Material Adverse Effect.  Except as disclosed in the SEC Reports or on Schedule 3.1(j), neither the Company nor any Subsidiary, nor to the Company’s actual knowledge, director or officer thereof, is or during the past 12 months 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 to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or to the Company’s knowledge, any current director or officer of the Company during the past 12 months.   The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

(k)           Labor Relations.  No material labor dispute exists or, to the actual knowledge of the Company, is imminent with respect to any of the employees of the

 

11

 

Company, which would have a Material Adverse Effect.  None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good.  No executive officer, to the knowledge of the Company, is, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.  The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not, individually or in the aggregate, result in a Material Adverse Effect.

 

(l)            Compliance.  Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or governmental body or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except as would not, individually or in the aggregate, result in a Material Adverse Effect.

 

(m)          Regulatory Permits.  The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits would not result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

(n)           Title to Assets.  The Company and the Subsidiaries do not own any real property. The Company and the Subsidiaries have good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens created under license or collaboration agreements relating to the Company’s products or Intellectual Property Rights, Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties.  Any real property and facilities held under lease by the Company and the Subsidiaries are held by them

 

12

 

under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance with the provisions thereof, except where such non-compliance would not result in a Material Adverse Effect.

 

(o)           Patents and Trademarks.  The Company and the Subsidiaries have, or have 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 would not result in a Material Adverse Effect (collectively, the “Intellectual Property Rights”).  Neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person.  To the actual 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 which would result in a Material Adverse Effect.  The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so would not, individually or in the aggregate, result in a Material Adverse Effect.

 

(p)           Insurance.  The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary for companies of similar size as the Company in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage.  Neither the Company nor any Subsidiary has any 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.

 

(q)           Transactions With Affiliates and Employees.  Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock-based compensation plan of the Company.

 

(r)            Sarbanes-Oxley; Internal Accounting Controls.  The Company 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 and the Subsidiaries maintain a

 

13

 

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.

 

(s)           Certain Fees.  Except as set forth in the Prospectus Supplement, no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents.  The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due from the Company in connection with the transactions contemplated by the Transaction Documents.

 

(t)            Investment Company. The Company is not, and immediately after receipt of payment for the Securities, will not be an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

(u)           Registration Rights.  Except as described in the SEC Reports or as provided in agreements filed as exhibits to the SEC Reports, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company, which rights are currently not satisfied.

 

(v)           Listing and Maintenance Requirements.  The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and listed on the NASDAQ Global Market (the “NASDAQ Stock Market”), and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or the delisting of the Common Stock from the NASDAQ Stock Market nor has the Company received any notification that the

 

14

 

Commission is contemplating terminating such registration.  The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the material listing or maintenance requirements of such Trading Market.

 

(w)          Application of Takeover Protections.  The Company and the 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 Purchasers solely as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.

 

(x)            Disclosure.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed in the Prospectus Supplement.   The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.  All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company, its business and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.

 

(y)           No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of any applicable stockholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

 

(z)            Solvency.  Except as described in the SEC Reports, based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now

 

15

 

conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid.  The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).  The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date.  Schedule 3.1(z) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments.  For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP.  Neither the Company nor any Subsidiary is in default with respect to any Indebtedness except where such default would not result in a Material Adverse Effect.

 

(aa)         Tax Status.  Except for matters that would not, individually or in the aggregate, result in a Material Adverse Effect, the Company and each Subsidiary has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no actual knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary.

 

(bb)         Foreign Corrupt Practices.  Neither the Company, nor to the actual knowledge of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

(cc)         Accountants.  The Company’s accounting firm is set forth on Schedule 3.1(cc) of the Disclosure Schedules.  To the knowledge and belief of the Company, such accounting firm is a registered public accounting firm as required by the Exchange Act who the Company expects will express its opinion with respect to the financial statements

 

16

 

to be included in the Company’s next Annual Report on Form 10-K for the year ending December 31, 2010.

 

(dd)         Acknowledgment Regarding Purchasers’ Purchase of Securities.  The Company acknowledges and agrees that each of the Purchasers 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 Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities.  The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

(ee)         Acknowledgement Regarding Purchaser’s Trading Activity.  Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(e) and 4.14 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers have been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term; (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities; (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently may have a “short” position in the Common Stock, and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction.  The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the Warrant Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing stockholders’ equity interests in the Company at and after the time that the hedging activities are being conducted.  The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.

 

(ff)           Regulation M Compliance.  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

 

17

 

(iii), compensation paid to the Company’s placement agent in connection with the placement of the Securities.

 

(gg)         FDA.  As to each product subject to the jurisdiction of the U.S. Food and Drug Administration (“FDA”) under the Federal Food, Drug and Cosmetic Act, as amended, and the regulations thereunder (“FDCA”) that is manufactured, packaged, labeled, tested, distributed, sold, and/or marketed by the Company or any of its Subsidiaries (each such product, a “Pharmaceutical Product”), such Pharmaceutical Product is being manufactured, packaged, labeled, tested, distributed, sold and/or marketed by the Company in compliance with all applicable requirements under FDCA and similar laws, rules and regulations relating to registration, investigational use, premarket clearance, licensure, or application approval, good manufacturing practices, good laboratory practices, good clinical practices, product listing, quotas, labeling, advertising, record keeping and filing of reports, except where the failure to be in compliance would not have a Material Adverse Effect.  There is no pending, completed or, to the Company’s knowledge, threatened, action (including any lawsuit, arbitration, or legal or administrative or regulatory proceeding, charge, complaint, or investigation) against the Company or any of its Subsidiaries, and none of the Company or any of its Subsidiaries has received any notice, warning letter or other communication from the FDA or any other governmental entity, which (i) contests the premarket clearance, licensure, registration, or approval of, the uses of, the distribution of, the manufacturing or packaging of, the testing of, the sale of, or the labeling and promotion of any Pharmaceutical Product, (ii) withdraws its approval of, requests the recall, suspension, or seizure of, or withdraws or orders the withdrawal of advertising or sales promotional materials relating to, any Pharmaceutical Product, (iii) imposes a clinical hold on any clinical investigation by the Company or any of its Subsidiaries, (iv) enjoins production at any facility of the Company or any of its Subsidiaries, (v) enters or proposes to enter into a consent decree of permanent injunction with the Company or any of its Subsidiaries, or (vi) otherwise alleges any violation of any laws, rules or regulations by the Company or any of its Subsidiaries, and which, either individually or in the aggregate, would have a Material Adverse Effect.  The properties, business and operations of the Company have been and are being conducted in all material respects in accordance with all applicable laws, rules and regulations of the FDA.  The Company has not been informed by the FDA that the FDA will prohibit the marketing, sale, license or use in the United States of any product proposed to be developed, produced or marketed by the Company nor has the FDA expressed any concern as to approving or clearing for marketing any product being developed or proposed to be developed by the Company.

 

3.2   Representations and Warranties of the Purchasers.  Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):

 

(a)           Organization; Authority.  Such Purchaser is either an individual or an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement

 

18

 

and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser.  Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(b)           Understandings or Arrangements.  Such Purchaser is acquiring the Securities as principal for its own account and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement or Registration Statements, as the case may be, or otherwise in compliance with applicable federal and state securities laws).  Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

 

(c)           Purchaser Status.  At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it exercises any Warrants, it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.  Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.  Such Purchaser together with all of its affiliates, after giving effect to the completion of the transactions contemplated by this Agreement, will own or have the right to acquire less than 20% of the outstanding shares of capital stock or voting power of the Company.

 

(d)           Experience of Such Purchaser.  Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(e)           Certain Transactions and Confidentiality.  Other than consummating the transactions contemplated hereunder, such Purchaser has not, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct

 

19

 

knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’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, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). The Purchasers acknowledge that they have read the Prospectus, the Prospectus Supplement, the Registration Statements and the SEC Reports. The Purchasers have not received any written documents that would constitute an offer to sell, or the solicitation of an offer to buy the Securities or that would constitute a prospectus under the Securities Act, other than the Prospectus and the Prospectus Supplement. Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the future.

 

The Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.

 

ARTICLE IV.
  OTHER AGREEMENTS OF THE PARTIES

 

4.1       Warrant Shares.  If all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the issuance or resale of the Warrant Shares or if the Warrant is exercised via cashless exercise, the Warrant Shares issued pursuant to any such exercise shall be issued free of all legends.  If at any time following the date hereof the Registration Statement registering the sale or resale of the Warrant Shares (or any subsequent registration statement registering the sale or resale of the Warrant Shares) is not effective or is not otherwise available for the sale or resale of the Warrant Shares, the Company shall immediately notify the holders of the Warrants in writing that such registration statement is not then effective and thereafter shall promptly notify such holders when the registration statement is effective again and available for the sale or resale of the Warrant Shares (it being understood and agreed that the foregoing shall not limit the ability of the Company to issue, or any Purchaser to sell, any of the Warrant Shares in compliance with applicable federal and state securities laws).  The Company shall use best efforts to keep a registration statement (including the Registration Statements) registering the issuance or resale of the Warrant Shares effective during the term of the Warrants.

 

4.2       Furnishing of Information.  Until the earliest of the time that (i) no Purchaser owns Securities or (ii) the Warrants have expired, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.  As long as any Purchaser owns Securities, if the Company is not required to file reports pursuant to the Exchange Act, it

 

20

 

will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Securities, including without limitation, under Rule 144. The Company further covenants that it will take such further action as any holder of Securities may reasonably request, to the extent required from time to time to enable such Person to sell such Securities without registration under the Securities Act, including without limitation, within the requirements of the exemption provided by Rule 144.

 

4.3       Integration.  The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require stockholder approval prior to the closing of such other transaction unless stockholder approval is obtained before the closing of such subsequent transaction.

 

4.4       Securities Laws Disclosure; Publicity.  The Company shall, by 9:00 a.m. (New York City time) on the Trading Day immediately following the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby.  From and after the issuance of such press release, the Company shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents.  The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.  Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal securities law in connection with the filing of final Transaction Documents (including signature pages thereto) with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b).

 

4.5       Stockholder Rights Plan.  No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.

 

4.6       Non-Public Information.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and

 

21

 

agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have entered into a written agreement with the Company regarding the confidentiality and use of such information.  The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.

 

4.7       Use of Proceeds.  Except as set forth in the Prospectus Supplement, the Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes.

 

4.8       Indemnification of Purchasers.   Subject to the provisions of this Section 4.8, the Company will indemnify and hold each Purchaser and its directors, officers, stockholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, stockholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur due to a claim by a third party as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against a Purchaser in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser may have with any such stockholder or any violations by such Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance).  If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party.  Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.  The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants

 

22

 

or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The Company will have the exclusive right to settle any claim or proceeding, provided that the Company will not settle any such claim, action or proceeding without the prior written consent of the Purchaser Party, which will not be unreasonably withheld or delayed; provided, however, that such consent shall not be required if the settlement includes a full and unconditional release satisfactory to the Purchaser Party from all liability arising or that may arise out of such claim or proceeding and does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any Purchaser Party.

 

4.9       Reservation of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue Shares pursuant to this Agreement and Warrant Shares pursuant to any exercise of the Warrants.

 

4.10         Listing of Common Stock. The Company hereby agrees to use reasonable best efforts to maintain the listing or quotation of the Common Stock on the Trading Market on which it is currently listed, and concurrently with the Closing, the Company shall apply to list or quote all of the Shares and Warrant Shares on such Trading Market and promptly secure the listing of all of the Shares and Warrant Shares on such Trading Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading Market, it will then include in such application all of the Shares and Warrant Shares, and will take such other action as is necessary to cause all of the Shares and Warrant Shares to be listed or quoted on such other Trading Market as promptly as possible.  The Company will use its reasonable best efforts to continue the listing and trading of its Common Stock on a Trading Market and will comply in all material respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market.

 

4.11         Subsequent Equity Sales.  From the date hereof until 30 days after the Closing Date, the Company shall not issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents, including, without limitation, any drawdowns on the Company’s existing equity line of credit. Notwithstanding the foregoing, this Section 4.11 shall not apply in respect of an Exempt Issuance.

 

4.12         [RESERVED].

 

4.13         Equal Treatment of Purchasers.  No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents.  For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

 

23

 

4.14         Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4.  Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.4, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Disclosure Schedules.  Notwithstanding the foregoing and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4 and (iii) no Purchaser shall have any duty of confidentiality to the Company or its Subsidiaries after the issuance of the initial press release as described in Section 4.4.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant 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.

 

ARTICLE V.
  MISCELLANEOUS

 

5.1       Termination.  This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before March 10, 2011; provided, however, that no such termination will affect the right of any party to sue for any breach by the other party (or parties).

 

5.2       Fees and Expenses.  Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.

 

5.3       Entire Agreement.  The Transaction Documents, together with the exhibits and schedules thereto, the Prospectus and the Prospectus Supplement, contain the entire

 

24

 

understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.4       Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as set forth on the signature pages attached hereto.

 

5.5       Amendments; Waivers.  No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers holding at least 67% in interest of the Shares then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

5.6       Headings.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

5.7       Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger).  Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”

 

5.8       No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.8.

 

5.9       Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and

 

25

 

any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, stockholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.  If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.8, the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

 

5.10         Survival.  The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.

 

5.11         Execution.  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

5.12         Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

5.13         Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within

 

26

 

the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of an exercise of a Warrant, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid to the Company for such shares and the restoration of such Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).

 

5.14         Replacement of Securities.  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity or security, if requested.  The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

 

5.15         Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

5.16         Payment Set Aside.  To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

5.17         Independent Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  Each Purchaser shall be entitled to

 

27

 

independently protect and enforce its rights including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.  Each Purchaser has been represented by its own separate legal counsel in their review and negotiation of the Transaction Documents.  The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers.  For reasons of administrative convenience only, each Purchaser and its respective counsel have chosen to communicate with the Company through WS.  WS does not represent any of the Purchasers and only represents Rodman & Renshaw, LLC, the placement agent.

 

5.18         Liquidated Damages.  The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

 

5.19         Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

5.20         Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

5.21         WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

(Signature Pages Follow)

 

28

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

 

	
BIOSANTE   PHARMACEUTICALS, INC.
    	
 
    	
Address   for Notice:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
Fax: (847) 478-9260
    
	
 
    	
Name:
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    	
 
    

 

With a copy to (which shall not constitute notice):

 

Oppenheimer Wolff & Donnelly LLP

Plaza VII, Suite 3300

45 South Seventh Street

Minneapolis, Minnesota 55402

Facsimile: (612) 607-7100

Attention: Amy E. Culbert, Esq.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

29

 

[PURCHASER SIGNATURE PAGES TO BPAX SECURITIES PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

	
Name   of Purchaser:
    	
 
    
	
 
    
	
Signature   of Authorized Signatory of Purchaser:
    	
 
    
	
 
    
	
Name   of Authorized Signatory:
    	
 
    
	
 
    
	
Title   of Authorized Signatory:
    	
 
    
	
 
    
	
Email   Address of Authorized Signatory:
    	
 
    
	
 
    
	
Facsimile   Number of Authorized Signatory:
    	
 
    
							

 

Address for Notice to Purchaser:

 

 

Address for Delivery of Securities to Purchaser (if not same as address for notice):

 

 

Subscription Amount: $

 

Shares: 

 

Warrant Shares: 

 

 

[SIGNATURE PAGES CONTINUE]

 

30Exhibit 4.1

 

GEOPETRO RESOURCES COMPANY

150 California Street, Suite 600

San Francisco, California 94111

 

UNIT SUBSCRIPTION AGREEMENT

 

TO:                                                                            GeoPetro Resources Company, a California corporation (the “Corporation”)

 

The undersigned (the “Subscriber”) hereby irrevocably subscribes for and agrees to purchase from the Corporation  units of the Corporation (the “Units”) in the number set forth below at a subscription price of $0.45 per Unit. Each Unit shall consist of one (1) share of common stock of the Corporation (a “Common Share”) and a one-half (1/2) Common Share purchase warrant of the Corporation (“Warrants”). Each one (1) whole Warrant shall entitle the holder to acquire one (1) Common Share (a “Warrant Share”) at a price of $0.75 per Warrant Share for a period of three years from the Closing Date (as hereinafter defined). The Subscriber agrees to be bound by the attached terms and conditions of subscription (the “Terms and Conditions”) and agrees that the Corporation may rely upon the representations, warranties and covenants contained therein and in the applicable Accredited Investor Certificate (as hereinafter defined). This subscription, plus the Terms and Conditions and each completed and executed Accredited Investor Certificate are collectively referred to as the “Subscription Agreement” or the “Agreement”.

 

SUBSCRIPTION AND SUBSCRIBER INFORMATION

 

Please print all information (other than signatures), as applicable, in the space provided below

 

	
 
    	
 
    	
Number   of Units:
    	
 
    
	
(Name   of Subscriber)
    	
 
    	
 
    
	
 
    	
 
    	
Unit   Price:         X        $0.45
    	
 
    
	
Account Reference (if applicable):
    	
 
    	
 
    	
 
    	
=
    
	
 
    	
 
    	
 
    	
Aggregate   Subscription Price: 
    	
 
    
	
By:
    	
 
    	
 
    	
(the “Subscription Price”)
    
	
 
    	
Authorized   Signature
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
If the Subscriber is signing as agent for a principal 
    
	
(Official   Capacity or Title — if the Subscriber is not an individual) 
    	
 
    	
(beneficial purchaser) and is not purchasing as trustee or   agent for accounts fully managed by it, complete the following:  
    
	
 
    	
 
    	
 
    
	
(Name   of individual whose signature appears above if different 
    	
 
    	
 
    
	
than   the name of the Subscriber printed above.)
    	
 
    	
(Name   of Principal) 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(Subscriber’s   Address, including State)
    	
 
    	
(Principal’s   Address)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(Telephone   Number)
    	
(Email Address)
    	
 
    	
 
    
									

 

1

 

	
Account Registration Information:
    	
 
    	
Delivery Instructions as set forth below: 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(Name)
    	
 
    	
(Name)   
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(Account   Reference, if applicable) 
    
	
(Account   Reference, if applicable)
    	
 
    	
 
    
	
 
    	
 
    	
(Address)   
    
	
 
    	
 
    	
 
    
	
(Address,   including Zip Code)
    	
 
    	
(Contact   Name) 
    	
(Telephone Number)
    
	
 
    	
 
    	
 
    
	
Number   and kind of securities of the Corporation held, if any:
    	
 
    	
State   whether Subscriber is an insider* of the Corporation:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Yes  o
    	
No o
    
	
 
    	
 
    	
*   The term “insider” means a person who is a director or
    
	
 
    	
 
    	
senior   officer (chair, vice chair, president, vice president, 
    
	
 
    	
 
    	
secretary,   treasurer or general manager) or holder of more than 10% of the voting rights   attached to all outstanding voting securities of the Corporation.
    
					

 

2

 

TYPE OF OWNERSHIP (CHECK ONE)

 

	
o
    	
Individual   Ownership
    	
o
    	
Joint   Tenants with Right of Survivorship 
    
	
 
    	
 
    	
 
    	
(both parties must sign)
    
	
 
    	
 
    	
 
    	
 
    
	
o
    	
Corporation
    	
o
    	
Husband   and Wife as Community Property
    
	
 
    	
 
    	
 
    	
(Spouse’s signature required)
    
	
 
    	
 
    	
 
    	
 
    
	
o
    	
Partnership
    	
o
    	
Husband and Wife as Community Property with Right   of Survivorship
    
	
 
    	
 
    	
 
    	
(Spouse’s signature required)
    
	
 
    	
 
    	
 
    	
 
    
	
o
    	
Trust   or Pension Plan
    	
o
    	
Tenants-in-common
    
	
 
    	
 
    	
 
    	
(both parties must sign)
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
o
    	
Limited   Liability Company
    

 

ACCEPTANCE: The Corporation hereby accepts the subscription as set forth above on the terms and conditions contained in this Subscription Agreement.

 

GEOPETRO RESOURCES COMPANY,
 a California corporation

 

 

	
By:
    	
 
    	
 
    	
Date:
    	
 
    
	
Its:
    	
 
    	
 
    	
 
    

 

3

 

TERMS AND CONDITIONS OF SUBSCRIPTION FOR UNITS

 

1.                                       DEFINITIONS.

 

1.1                                 In this Agreement, which includes the cover page and all of the appendices, the following words have the following meanings unless otherwise indicated:

 

(a)                                  “1933 Act” means Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

(b)                                 “Accredited Investor Certificate” means the accredited investor certificate attached hereto as Exhibit “A”.

 

(c)                                  “Closing” means the completion of the issue and sale of the Units to the Subscriber hereunder upon satisfaction of the conditions under the Unit Subscription Agreement.

 

(d)                                 “Closing Date” means the date on which all conditions to the closing under the Unit Subscription Agreement have been satisfied, but not later than                                      (unless a later date is agreed to by the parties to the Unit Subscription Agreement).

 

(e)                                  “Common Share” means a share of common stock in the capital of the Corporation.

 

(f)                                    “Corporation” means GeoPetro Resources Company, a California corporation.

 

(g)                                 “Exchange” means the NYSE American Stock  Exchange.

 

(h)                                 “Offering” means this private placement.

 

(i)                                     “Registrable Securities” means the Common Shares acquired hereby and the Warrant Shares (if the Warrants are exercised); provided, however, that Registrable Securities shall not include any Common Shares which have previously been registered or which have been sold to public either pursuant to a registration statement or Rule 144, or which have been sold in a private transaction in which the Subscriber’s rights under this Agreement are not assigned.

 

(j)                                     “Rule 144” shall mean Rule 144 as promulgated by the SEC under the 1933 Act, as such Rule may be  amended from time to time, or any similar successor rule that may be promulgated by the SEC.

 

(k)                                  “SEC” means the United States Securities and Exchange Commission.

 

(l)                                     “Subscriber” means the purchaser of Units hereunder.

 

4

 

(m)                               “Units” means the units of the Corporation offered hereby; each Unit consisting of one (1) Common Share and a one-half (1/2) Warrant.

 

(n)                                 “Warrants” means the Common Share purchase warrants of the Corporation comprising part of the Units acquired hereby.

 

(o)                                 “Warrant Shares” means the Common Shares underlying the Warrants.

 

1.2                                 All capitalized terms in this Agreement not defined above have the meanings ascribed to them in this Agreement.

 

1.3                                 All references to currency refer to United States dollars.

 

2.                                      PURCHASE AND SALE OF UNITS.

 

2.1                                 The Units will be registered in the name of the Subscriber.

 

2.2                                 The issue of the Units will not restrict or prevent the Corporation from obtaining any other financing, or from issuing additional securities from time to time.

 

2.3                                 Closing will be completed at the offices of the Corporation, in San Francisco, California, at 5:00 p.m. (Pacific Time), or such other place or time as the Corporation may designate (the “Closing Time”) on the Closing Date.  If the Closing does not occur on or before the Closing Date, the subscription proceeds will be returned to the Subscriber without interest or deduction and the Subscriber will have the right to withdraw this subscription and to terminate its obligations hereunder.

 

2.4                                 The Corporation shall have the right to reject this Subscription Agreement if it believes for any reason that the Subscriber is not an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated by the Securities and Exchange Commission as presently in effect, or for any other reason in its sole and absolute discretion. Acceptance is evidenced only by execution of this Subscription Agreement by the Corporation in the space provided at the end of this Subscription Agreement.

 

3.                                       REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS OF THE SUBSCRIBER.

 

3.1                                 The Subscriber represents and warrants, as at the date of this Agreement and at the Closing, that:

 

(a)                                  the Subscriber is purchasing the Units for Subscriber’s own account, for long-term investment, and not with a view to, or for sale in connection with, the distribution thereof. Subscriber has no present intention of selling, granting any participation in, or otherwise distributing the Units. The Units will not be resold without registration under the 1933 Act and qualification under the securities laws of all applicable states, unless such sale would be exempt therefrom;

 

5

 

(b)                                 the Subscriber is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D promulgated under the 1933 Act;

 

(c)                                  the Subscriber has received, completed and returned to the Corporation the Accredited Investor Certificate relating to its general ability to bear the risks of an investment in the Corporation and its suitability as an investor in a private offering, and hereby affirms the correctness of its answers in such Accredited Investor Certificate;

 

(d)                                 the Subscriber (i) has adequate means of providing for its current needs and possible personal contingencies, and has no need for liquidity of this investment in the Corporation; (ii) can bear the economic risk of losing its entire investment herein; (iii) has such knowledge and experience in financial and business matters that it is capable of evaluating the relative risks and merits of this investment; and (iv) has an overall commitment to investments which are not readily marketable that is not disproportionate to its net worth and the investment subscribed for herein will not cause such overall commitment to become excessive;

 

(e)                                  it never has been represented, guaranteed or warranted to Subscriber by the Corporation, its agents, or employees or any other person, expressly or by implication, any of the following:

 

(i)                                     the approximate or exact length of time that Subscriber will be required to remain as owner of the Units;

 

(ii)                                  THE PROFIT OR RETURN, IF ANY, TO BE REALIZED AS A RESULT OF THE CORPORATION’S VENTURE; or

 

(iii)                               that the past performance or experience on the part of the Corporation or any affiliate, its agents, or employees or of any other person, will in any way indicate the predictable results of the ownership of the Units or the overall Corporation venture;

 

(f)                                    the Subscriber, if an individual, is at least twenty-one (21) years of age;

 

(g)                                 the Subscriber has no reason to anticipate any change in Subscriber’s personal circumstances, financial or otherwise, which may cause or require any sale or distribution by Subscriber of all or any part of the Units subscribed for herein;

 

(h)                                 the Subscriber has carefully reviewed the documents regarding the Corporation available on the SEC EDGAR web site (www.sec.gov), as well as the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and “Liquidity and Capital Resources” discussions contained therein (collectively, the “Disclosure Documents”), and is fully familiar with and understands the contents thereof, and has received no other written communication;

 

(i)                                     the Subscriber confirms that all documents, records and books pertaining to the Corporation and to the investment requested by the Subscriber have been made available to the Subscriber and that the Subscriber has been given an opportunity to make

 

6

 

further inquiries of the Corporation and its representatives in order to verify the accuracy of the information contained in the Disclosure Documents and has had the opportunity to review all facts concerning the Corporation which the Subscriber deems pertinent;

 

(j)                                     the Subscriber, if a partnership, corporation, trust, or other entity, declares:

 

(i)                                     the person executing this Subscription Agreement has the necessary power and authority to do so; and

 

(ii)                                  the Subscriber was not organized for the specific purpose of acquiring the Units;

 

(k)                                  the exhibits to this Agreement will be completed truthfully and with reasonable diligence;

 

(l)                                     as to the source of subscription funds,

 

(i)                                     to the best of the Subscriber’s knowledge, none of the subscription funds used for the purchase of the Subscriber’s Units (A) have been or will be derived from or related to any activity that is deemed criminal under the laws of the United States or any other jurisdiction, or (B) are being tendered on behalf of a person or entity who has not been identified to the Subscriber; and

 

(ii)                                  the Subscriber will promptly notify the Corporation if the Subscriber discovers that any of the representations in above subparagraph (l)(i) above ceases to be true, and to provide the Corporation with appropriate information in connection therewith;

 

(m)                               the Subscriber understands that the foregoing representations and warranties are to be relied upon by the Corporation as a basis for exemption of the sale of the Units under the 1933 Act, under the securities laws of all applicable states, and for other purposes;

 

(n)                                 the Subscriber warrants that the information herein provided to the Corporation by the Subscriber is true and correct as of the date hereof, and the Subscriber agrees to advise the Corporation, prior to its acceptance of this Subscription, of any material change in any such information; and

 

(o)                                 the Subscriber agrees that the representations and warranties of the Subscriber set forth in this Section 3 shall survive the acceptance of this subscription, in the event the subscription is accepted.

 

3.2                                 The Subscriber understands and acknowledges that:

 

(a)                                  no federal or state agency has made any finding or determination as to the fairness of the offering of Units for investment or any recommendation or endorsement of the offering;

 

7

 

(b)                                 the Units have not been registered under the 1933 Act or qualified under any state securities laws in reliance on exemptions from registration provided thereunder, and the Corporation has no obligation or present intention of filing a registration statement under the 1933 Act in respect of the Units other than as set forth herein;

 

(c)                                  there are restrictions on the Subscriber’s ability to resell the Units and it is the responsibility of the Subscriber to find out what those restrictions are and to comply with them before selling the securities comprising the Units;

 

(d)                                 the Subscriber acknowledges and agrees with the Corporation that the Corporation shall refuse to register any transfer of the Units not made pursuant to registration under the 1933 Act, or pursuant to an available exemption from registration under the 1933 Act (including Regulation S);

 

(e)                                  the Corporation may be required to provide applicable securities regulatory authorities with a list setting forth the identities of the beneficial purchasers of the Units and the Subscriber acknowledges and agrees that it will provide, on request, particulars as to the identity of such beneficial purchasers as may be required by the Corporation in order to comply with the foregoing, provided that this undertaking shall not require the Subscriber to breach its confidentiality obligations to any other person;

 

(f)                                    by providing personal information to the Corporation, the Subscriber and each person for whom it is contracting hereunder, is consenting to the Corporation’s collection, use and disclosure of that information for the purposes of the subscription of Units and the offering in general, for corporate governance purposes and to contact the Subscriber as an investor. The Subscriber, and each person for whom it is contracting hereunder, acknowledges that, from time to time, the Corporation may be required to disclose such personal information and, by providing such personal information to the Corporation, the Subscriber and each person for whom it is contracting hereunder, hereby expressly consents to such disclosure, and the Subscriber and each person for whom it is contracting agrees and acknowledges that the Corporation may use and disclose personal information as follows:

 

(i)                                     for internal use with respect to managing the relationships between and contractual obligations of the Corporation and the Subscriber and each person for whom it is contracting;

 

(ii)                                  for use and disclosure for income tax related purposes, including without limitation, where required by law, disclosure to the Internal Revenue Service;

 

(iii)                               disclosure to securities regulatory authorities and other regulatory bodies with jurisdiction with respect to reports of trades and similar regulatory filings;

 

(iv)                              disclosure to a governmental or other authority to which the disclosure is required by court order or subpoena compelling such disclosure and where there is no reasonable alternative to such disclosure;

 

8

 

(v)                                 disclosure to professional advisers of the Corporation in connection with the performance of their professional services;

 

(vi)                              disclosure to any person where such disclosure is necessary for legitimate business reasons and is made with the prior written consent of the Subscriber and each person for whom it is contracting;

 

(vii)                           disclosure to a court determining the rights of the parties under this Agreement; or

 

(viii)                        for use and disclosure as otherwise required or permitted by law.

 

(g)                                 during the 20 trading day period prior to the date hereof, the Subscriber has not purchased, sold, or “sold short” any securities of the Corporation.

 

4.                                       ISSUANCE OF SECURITIES.

 

The Subscriber agrees to deliver to the Corporation, as soon as possible and, in any event, not later than 5:00 p.m. (Pacific Standard time) on                             ; (a) this duly completed and executed Subscription Agreement; (b) a duly executed Accredited Investor Certificate attached hereto as Exhibit “A”; (c) such other documents as may be required under applicable securities laws; and (d) a certified check or bank draft payable to the Corporation for the aggregate subscription price or payment of the same amount in such other manner as is acceptable to the Corporation (including wire transfer directly to the Corporation’s account).

 

5.                                       LEGEND.

 

The certificates representing the Units will bear a legend denoting the restrictions on transfer. The Subscriber agrees to sell, assign or transfer the Units only in accordance with such restrictions.

 

The legend will be in substantially the following form:

 

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (C) IN COMPLIANCE WITH RULE 144 OR 144A THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR (E) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE CORPORATION AN OPINION OF COUNSEL OR OTHER

 

9

 

EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE CORPORATION. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.”

 

6.                                       RELIANCE UPON REPRESENTATIONS, WARRANTIES AND COVENANTS.

 

The Subscriber acknowledges that the representations and warranties and covenants and acknowledgements contained in this Agreement are made with the intent that they may be relied upon by the Corporation in determining the Subscriber’s eligibility to purchase the Units and the Subscriber hereby agrees to indemnify the Corporation against all losses, claims, costs, expenses and damages or liabilities which it may suffer or incur caused or arising from its reliance thereon. The Subscriber further agrees that by accepting the Units the Subscriber shall be representing and warranting that the foregoing representations and warranties are true as at the Closing Date with the same force and effect as if they had been made by the Subscriber on the Closing Date and that they shall survive the purchase by the Subscriber of the Units and shall continue in full force and effect notwithstanding any subsequent disposition by the Subscriber of any of the Units.

 

7.                                      REGISTRATION RIGHTS

 

7.1                                 Piggyback Registration.

 

(a)                                  If the Corporation shall determine to register any of its securities under the 1933 Act for its own account, other than a registration relating solely to employee benefit plans, or a registration relating to a corporate reorganization or other transaction on Form S-4 or any successor form, or any registration on any registration form that does not permit secondary sales, the Corporation will:

 

(i)                                     promptly give to the Subscriber written notice thereof;

 

(ii)                                  use its commercially reasonable efforts to include in such registration (and any related qualification under blue sky laws or other compliance), except as set forth in Section 7.1(b) below, and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made by the Subscriber and received by the Corporation within ten (10) days after the written notice from the Corporation described in clause (i) above (such written request may specify all or a part of the Subscriber’s Registrable Securities); and

 

(iii)                               the Corporation shall have the right to terminate or withdraw any registration initiated by it under this Section 7.1(a) prior to the effectiveness of such registration whether or not the Subscriber has elected to include securities in such registration.  The expenses of such withdrawn registration shall be borne by the Corporation.

 

10

 

(b)                                 If the registration of which the Corporation gives notice is for a registered public offering involving an underwriting, the Corporation shall so advise the Subscriber as a part of the written notice given pursuant to Section 7.1(a)(i).  In such event, the right of the Subscriber to registration pursuant to this Section 7.1(b) shall be conditioned upon the Subscriber’s participation in such underwriting and the inclusion of the Subscriber’s Registrable Securities in the underwriting to the extent provided herein.  The Subscriber shall (together with the Corporation and the other holders of securities of the Corporation with registration rights to participate therein distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected by the Corporation.

 

Notwithstanding any other provision of this Section 7.1, if the representative of the underwriters advises the Corporation in writing that marketing factors require a limitation on the number of shares to be underwritten, the representative may (subject to the limitations set forth below) exclude all Registrable Securities from, or limit the number of Registrable Securities to be included in, the registration and underwriting.  The Corporation shall so advise all holders of securities requesting registration, and the number of shares of securities that are entitled to be included in the registration and underwriting shall be allocated first to the Corporation for securities being sold for its own account and thereafter pro rata in accordance with the number of Common Shares requested to be included in such registration.  If any person does not agree to the terms of any such underwriting, such person shall be excluded therefrom by written notice from the Corporation or the underwriter.  Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration.

 

If shares are so withdrawn from the registration and if the number of shares of Registrable Securities to be included in such registration was previously reduced as a result of marketing factors, the Corporation shall then offer to all persons who have retained the right to include securities in the registration the right to include additional securities in the registration in an aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated pro rata among the persons requesting additional inclusion.

 

7.2                                 Cooperation and Indemnification.  The Corporation agrees to indemnify and hold harmless the Subscriber against any losses, damages or liabilities to which the Subscriber may become subject under the 1933 Act or otherwise insofar as said losses damages or liabilities (or actions in respect thereof) relate to the sale of stock by them in connection with such registration statement, arising from any untrue statement or alleged untrue statement of material fact or from the omission or the alleged omission therein of a material fact required to be stated therein or necessary to make the statements therein not misleading; but such indemnity shall apply only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was not made in reliance upon and in conformity with information furnished by the Subscriber for use in the preparation thereof.  The Corporation agrees to reimburse the Subscriber for any legal or other expenses reasonably incurred in connection with any such loss, damage or liability.  The Subscriber agrees to cooperate fully with the Corporation in the preparation and filing of any registration statement which includes any Registrable Securities owned by the Subscriber.  The

 

11

 

Subscriber will provide at its own expense and in writing to the Corporation all information and data with respect to itself and to its plan of distribution as shall be required by the rules and regulations of the SEC to be included in any such registration statement.  The Subscriber further agrees to indemnify and hold harmless the Corporation, each of its directors, and each of its officers who has signed such registration statement (or any amendments thereof) and each person, if any, who controls the Corporation, within the meaning of the 1933 Act, against any losses, damages or liabilities to which the Corporation, or any such director, officer or controlling person of the Corporation may become subject under the 1933 Act or otherwise, insofar as said losses, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement (or any amendment thereof) or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; such indemnity shall apply only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with information furnished by the Subscriber for use in the preparation thereof.  The Subscriber agrees to reimburse the Corporation and any such director, officer or controlling person for any legal or other expenses reasonably incurred in connection with any such loss, damage or liability.

 

7.3                                 Lock-Up.  The Subscriber agrees that if so requested by an underwriter in connection with any public offering of securities by the Corporation, the Subscriber shall not sell, or make any short sale of, the Corporation’s securities without the prior written consent of the underwriter for a period of 180 days following the effective date of such registration statement.

 

7.4                                 Termination of Registration Rights.  The right of the Subscriber to request inclusion in any registration pursuant to Section 7.1 shall terminate, as to any specific Registrable Security, on the earlier of (i) such date as the Registrable Security may immediately be sold under Rule 144, and (ii) two years after the Closing Date.

 

8.                                       MISCELLANEOUS.

 

8.1                                 The Subscriber hereby authorizes the Corporation to correct any minor errors in, or complete any minor information missing from any of the Exhibits returned herewith.

 

8.2                                 The Corporation shall be entitled to rely on delivery by facsimile machine of an executed copy of this subscription, and acceptance by the Corporation of such facsimile copy shall be equally effective to create a valid and binding agreement between the Subscriber and the Corporation in accordance with the terms hereof.

 

8.3                                 This Agreement is not assignable or transferable by the parties hereto without the express written consent of the other party hereto, which such other party may withhold in its sole and absolute discretion.

 

8.4                                 Time is of the essence of this Agreement.

 

8.5                                 Except as expressly provided in this Agreement and in the agreements, instruments and other documents contemplated or provided for herein, this Agreement contains

 

12

 

the entire agreement between the parties with respect to the Units and there are no other terms, conditions, representations or warranties whether expressed, implied, oral or written, by statute, by common law, by the Corporation or by anyone else.

 

8.6                                 The parties to this Agreement may amend this Agreement only in writing.

 

8.7                                 This Agreement inures to the benefit of and is binding upon the parties to this Agreement and their successors and permitted assigns.

 

8.8                                 A party to this Agreement will give all notices to or other written communications with the other party to this Agreement concerning this Agreement by hand or by registered mail addressed to the address given above.

 

8.9                                 This Agreement will be governed by and construed in accordance with the laws of the State of California.  Any controversy or claim arising out of or relating to this Agreement, or breach thereof, including without limitation claims against either party, its affiliates, employees, professionals, officers or directors, shall be settled by binding arbitration in San Francisco, California, in accordance with the Commercial Rules of the American Arbitration Association.  The arbitrator shall be an active member of the California Bar.  In the proceeding, the arbitrator shall apply California substantive law and the California Evidence Code, and the arbitrator’s authority in awarding damages shall be interpreted under California law.  The undersigned agrees that the arbitrator shall have no authority to award punitive damages, and the undersigned has been advised to seek counsel concerning the possible waiver by the undersigned of certain rights otherwise available to the undersigned as a consequence of such agreement.  The arbitrator shall prepare an award in writing, which shall include factual findings and any legal conclusions on which the decision is based.  Judgment upon any award rendered by the arbitrator may be entered in any court having jurisdiction thereof.  In any such proceeding, the prevailing party shall be entitled, in addition to any other relief awarded or adjudged, such sum as the arbitrator may fix as and for reasonable attorneys’ fees and costs, and the same shall be included in the award and any judgment.

 

8.10                           This Agreement, including without limitation the representations, warranties and covenants contained herein and in each Accredited Investor Certificate, shall survive and continue in full force and effect and be binding upon the Corporation and the Subscriber, notwithstanding the completion of the purchase of the Units by the Subscriber pursuant hereto, the completion of the Offering and any subsequent disposition by the Subscriber of the Common Shares, Warrants or Warrant Shares.

 

13

 

EXHIBIT “A”

 

ACCREDITED INVESTOR CERTIFICATE

 

The undersigned (“Subscriber”), in connection with the acquisition of units (“Units”) of GeoPetro Resources Company (the “Corporation”) pursuant to that certain subscription agreement (the “Agreement”), hereby makes the following representations and warranties:

 

Subscriber understands that the Corporation is relying on this information in determining to offer Units to the undersigned in a manner exempt from the registration requirements of the Securities Act of 1933, as amended (the “1933 Act”), and applicable state securities laws.  Terms that are not defined in this certificate have the meanings set forth in the Agreement.

 

1.                                       Accredited Investor.

 

Subscriber represents and warrants that he, she or it falls within the category (or categories) marked. PLEASE INDICATE EACH CATEGORY OF ACCREDITED INVESTOR THAT YOU, THE SUBSCRIBER, SATISFY, BY PLACING YOUR INITIALS ON THE APPROPRIATE LINE BELOW.

 

	
 
    	
Category   1.
    	
 
    	
A   bank, as defined in Section 3(a)(2) of the 1933 Act, whether acting   in its individual or fiduciary capacity; or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Category   2.
    	
 
    	
A   savings and loan association or other institution as defined in   Section 3(a) (5) (A) of the 1933 Act, whether acting in   its individual or fiduciary capacity; or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Category   3.
    	
 
    	
A   broker or dealer registered pursuant to Section 15 of the Securities   Exchange Act of 1934; or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Category   4.
    	
 
    	
An   insurance company as defined in Section 2(13) of the 1933 Act; or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Category   5.
    	
 
    	
An   investment company registered under the Investment Company Act of 1940; or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Category   6.
    	
 
    	
A   business development company as defined in Section 2(a) (48) of the   Investment Company Act of 1940; or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Category   7.
    	
 
    	
A   small business investment company licensed by the U.S. Small Business   Administration under Section 301(c) or (d) of the Small   Business Investment Act of 1958; or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Category   8.
    	
 
    	
A   plan established and maintained by a state, its political subdivision or any   agency or instrumentality of a state or its political subdivisions, for the   benefit of its employees, with assets in excess of $5,000,000; or
    

 

 

	
 
    	
Category   9.
    	
 
    	
An   employee benefit plan within the meaning of the Employee Retirement Income   Security Act of 1974 in which the investment decision is made by a plan   fiduciary, as defined in Section 3(21) of such Act, which is either a   bank, savings and loan association, insurance company or registered   investment advisor, or an employee benefit plan with total assets in excess   of $5,000,000 or, if a self-directed plan, the investment decisions are made   solely by persons who are accredited investors; or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Category   10.
    	
 
    	
A   private business development company as defined in   Section 202(a) (22) or the Investment Advisors Act of 1940; or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Category   11.
    	
 
    	
An   organization described in Section 501(c)(3) of the Internal Revenue   Code, a corporation, a Massachusetts or similar business trust, or a   partnership, not formed for the specific purpose of acquiring the Units, with   total assets in excess of $5,000,000; or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Category   12.
    	
 
    	
A   director, executive officer or general partner of the Corporation; or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Category   13.
    	
 
    	
A   natural person whose individual net worth, or joint net worth with that   person’s spouse, at the time of this purchase exceeds $1,000,000, excluding   the value of his or her personal residence; or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Category   14.
    	
 
    	
A   natural person who had an individual income in excess of $200,000 in each of   the two most recent years or joint income with that person’s spouse in excess   of $300,000 in each of those years and has a reasonable expectation of   reaching the same income level in the current year; or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Category   15.
    	
 
    	
A   trust, with total assets in excess of $5,000,000, not formed for the specific   purpose of acquiring the Units, whose purchase is directed by a sophisticated   person as described in SEC Rule 506(b)(2)(ii); or
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Category   16.
    	
 
    	
An   entity in which all of the equity owners are accredited investors.
    

 

2.                                       Purchasing Entirely for Own Account.

 

Subscriber represents and warrants that he, she or it is purchasing the Units solely for Subscriber’s own account for investment and not with a view to or for sale or distribution of the Units or any portion thereof and without any present intention of selling, offering to sell or otherwise disposing of or distributing the Units or any portion thereof in any transaction other than a transaction complying with the registration requirements of the 1933 Act, and applicable state securities or “blue sky” laws, or pursuant to an exemption therefrom. Subscriber also represents that the entire legal and beneficial interest of the Units is being purchased for, and will be held for, Subscriber’s account only, and neither in whole nor in part for any other person or entity.

 

3.                                      Economic Risk and Suitability.

 

Subscriber represents and warrants as follows:

 

 

(a)                            Subscriber realizes that Subscriber’s purchase of the Units involves a high degree of risk and will be a highly speculative investment, and that he, she or it is able, without impairing Subscriber’s financial condition, to hold the Units for an indefinite period of time.

 

(b)                           Subscriber alone, or with the assistance of professional advisors, has such knowledge and experience in financial and business matters that the undersigned is capable of evaluating the merits and risks of Subscriber’s purchase of the Units, or has a pre-existing personal or business relationship with the Corporation or any of its officers, directors, or controlling persons, of a duration and nature that enables the undersigned to be aware of the character, business acumen and general business and financial circumstances of the Corporation or such other person.

 

(c)                            If Subscriber is a partnership, trust, corporation or other entity, its principal place of business and principal office are located within the state set forth in its address below.

 

(d)                           Subscriber has relied solely upon the documents and materials submitted therewith, advice of his or her representatives, if any, and independent investigations made by Subscriber and/or his or her Subscriber representatives, if any, in making the decision to purchase the Units subscribed for herein and acknowledges that no representations or agreements other than those set forth in the Disclosure Documents have been made to the Subscriber in respect thereto.

 

(e)                            Subscriber confirms that Subscriber has received no general solicitation or general advertisement and has attended no seminar or meeting (whose attendees have been invited by any general solicitation or general advertisement) and has received no advertisement in any newspaper, magazine, or similar media, broadcast on television or radio regarding the offering of the Units.

 

4.                                       Restricted Securities.

 

Subscriber acknowledges that the Corporation has hereby disclosed to Subscriber in writing:

 

(a)                            The Units have not been registered under the 1933 Act, or the securities laws of any state of the United States, and such securities must be held indefinitely unless a transfer of them is subsequently registered under the 1933 Act or an exemption from such registration is available; and

 

(b)                           The Corporation will make a notation in its records of the above-described restrictions on transfer.

 

 

IN WITNESS WHEREOF, Subscriber has executed this Certificate as of                                                                                 .

 

 

	
SUBSCRIBER:
    	
 
    
	
 
    	
(Signature   and Office, if applicable)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(Signature   of spouse, if applicable)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(Print   Name)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(Address)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(City/State/Zip   Code)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(Area   Code/Telephone Number)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00185-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00185-of-00352.parquet"}]]