|
Exhibit
10.12
SUBSCRIPTION AGREEMENT
This
Subscription Agreement (this “Agreement”) is made
as of the date set forth on the signature page of this
Agreement by and between Nile Therapeutics, Inc., a Delaware
corporation (the “Company”), and each party who is
a signatory hereto (individually, a “Subscriber”
and collectively with other signatories of similar
subscription agreements entered into in connection with the
Offering described below, the
“Subscribers”).
RECITALS:
WHEREAS,
the Company is offering to sell shares (the
“Shares” or the “Securities”) of the
Company’s common stock, $0.001 par value per share (the
“Common Stock”) in a private offering (the
“Offering”) to qualified investors as a price per
share equal to $7.92 (the “Offering
Price”);
WHEREAS,
the Company desires to raise in the Offering a minimum of
Fifteen Million Dollars ($15,000,000.00) (the “Minimum
Offering”) and a maximum of and a maximum of Twenty
Million Dollars ($20,000,000.00) (the “Maximum
Offering”). The minimum investment per Subscriber is
$500,000.00, although the Company, in its sole discretion, may
accept subscriptions for lesser amounts;
WHEREAS,
the terms of the Offering are summarized in that certain
Confidential Term Sheet dated August 16, 2007 (the
“Memorandum”) that has been previously provided to
the Subscriber;
WHEREAS,
simultaneously with the Closing (as defined below), the
Company intends to complete a “reverse merger”
(the “Merger”) with the wholly-owned subsidiary
(“Merger Sub”) of a publicly reporting company
(“Pubco”) pursuant to the merger agreement (the
“Merger Agreement”) attached as an exhibit to the
Memorandum. The Company expects that such Merger Sub will be
Nile Merger Sub, Inc., a Delaware corporation, a wholly-owned
subsidiary of SMI Products, Inc., a Delaware
corporation;
WHEREAS,
the Company has retained Riverbank Capital Securities, Inc., a
National Association of Securities Dealers, Inc.
(“NASD”) member broker dealer to act as its
placement agent in connection with the sale of the securities
pursuant to this Agreement (the “Placement
Agent”); and
WHEREAS,
the Company desires to enter into this Agreement to issue and
sell the Securities and the Subscriber desires to purchase
that number of Securities set forth on the signature page
hereto on the terms and conditions set forth
herein.
NOW,
THEREFORE, in consideration of the promises and the mutual
representations and covenants hereinafter set forth, the
parties hereto do hereby agree as follows:
ARTICLE I
SUBSCRIPTION OF SECURITIES
1.1.
Subject
to the terms set forth herein and in the Memorandum, the
Subscriber hereby irrevocably subscribes for and agrees to
purchase from the Company that number of Securities as is set
forth on the signature page hereto at the Offering Price; the
total purchase price is set forth on the signature page
attached hereto (the “Purchase Price”). The
aggregate Purchase Price is payable by wire transfer of
immediately available funds pursuant to the wire instructions
attached as
Exhibit B .
1.2.
The
minimum purchase that may be made by any prospective investor
shall be $500,000.00. Subscriptions for investment below the
minimum investment may be accepted at the discretion of the
Company. The Company reserves the right to reject any
subscription made hereby, in whole or in part, in its sole
discretion. The Company’s agreement with each Subscriber
is a separate agreement and the sale of the Securities to each
Subscriber is a separate sale.
1.3.
Pending
the sale of the Securities, all funds paid hereunder shall be
deposited by the Subscriber in escrow with US Bank National
Association Corporation Trust (the “Escrow
Agent”). The Offering shall expire on August 31, 2007,
subject to extension for up to 30 days (the “Termination
Date”) at the discretion of the Company, and upon
written notice by the Company to Pubco. The Subscriber hereby
authorizes and directs the Company and the Placement Agent to
direct the Escrow Agent to return any funds for unaccepted
subscriptions to the same account from which the funds were
drawn, without interest.
1.4. On
or prior to Termination Date, the Company shall conduct a
closing of the purchase and sale of Securities (the
“Closing”). The Closing shall occur at the offices
of the Placement Agent at 689 5 th Avenue, 14
th Floor, New York, New York, 10022. Certificates
evidencing the Common Stock purchased by the Subscriber
pursuant to this Agreement will be prepared for delivery to
the Subscriber within ten (10) business days following the
Closing. The Subscriber hereby authorizes and directs the
Company to deliver the certificates representing the Common
Stock purchased by the Subscriber pursuant to this Agreement
directly to the residential or business address indicated on
the signature page hereto. In the event the Company shall not
have accepted subscriptions (including the subscription
accepted by its execution and delivery of this Agreement in
accordance with the terms and conditions herein) for purchases
of the Minimum Amount on or before the Termination Date, then
this subscription shall be void an all purchases hereunder by
the Subscriber shall be returned to the Subscriber, without
interest.
1.5.
The
Subscriber hereby authorizes and directs the Company to
return, without interest, any funds for unaccepted
subscriptions (including any subscriptions that were not
accepted as a result of the termination of the Offering) to
the same account from which the funds were drawn.
1.6.
At
Closing, the Company shall pay to the Placement Agent a
non-accountable expense allowance of $100,000 for
introductions to investors and other services related to the
Offering.
ARTICLE II
REPRESENTATIONS BY SUBSCRIBER
The
Subscriber agrees, represents and warrants to the Company and
the Placement Agent, severally and solely with respect to
itself and its purchase hereunder and not with respect to any
of the other Subscribers, that:
2.1.
Organization and Qualification .
If an entity, the Subscriber is duly incorporated, organized or
otherwise formed, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated, organized or
otherwise formed.
2.2.
Authorization .
(a)
If
an entity:
(i)
The
Subscriber has the requisite corporate or other requisite
power and authority to enter into and to perform its
obligations under this agreement and to consummate the
transactions contemplated hereby in accordance with the terms
hereof; and
(ii)
the
execution, delivery and performance of this Agreement by the
Subscriber and the consummation by it of the transactions
contemplated hereby have been duly authorized by the
Subscriber’s Board of Directors or other governing body
and no further consent or authorization of the Subscriber, its
Board of Directors or its shareholders, members or other
interest holders is required.
(b)
If
an individual:
(i)
The
undersigned has reached the age of 21 and has the legal
capacity, power and authority to execute, deliver and perform
the undersigned’s obligations under this Agreement and
all other related agreements or certificates.
2.3.
Enforcement .
This Agreement has been duly executed by the Subscriber and
constitutes a legal, valid and binding obligation of the Subscriber
enforceable against the Subscriber in accordance with its terms,
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or moratorium or similar laws affecting the rights
of creditors generally and the application of general principles of
equity.
2.4.
Consents .
The Subscriber is not required to give any notice to, make any
filing, application or registration with, obtain any authorization,
consent, order or approval of or obtain any waiver from any person
or entity in order to execute and deliver this Agreement or to
consummate the transactions contemplated hereby, except for such
notices, filings, applications, registrations, authorizations,
consents, orders, approvals and waivers (if any) as have been
obtained and the filing of a Form D with the Securities and
Exchange Commission (the “SEC”) and other similar
filings required by applicable state securities or “blue
sky” laws and regulations in connection with offerings of
securities under Rule 506 (“Rule 506”) promulgated
under the Securities Act of 1933, as amended (the “Securities
Act”).
2.5.
Non-contravention .
Neither the execution and the delivery by the Subscriber of this
Agreement, nor the consummation by the Subscriber of the
transactions contemplated hereby, will (a) violate any law, rule,
injunction, or judgment of any governmental agency or court to
which the Subscriber is subject or any provision of its charter,
bylaws, trust agreement, or other governing documents or (b)
conflict with, result in a breach of, or constitute a default
under, any agreement, contract, lease, license, instrument, or
other arrangement to which the Subscriber is a party or by which
the Subscriber is bound or to which any of its assets is
subject.
2.6.
Investment Purpose .
The Subscriber is purchasing the Securities for its own account and
not with a present view toward the public sale or distribution
thereof.
2.7.
Accredited Subscriber Status .
The Subscriber is an “accredited investor” as defined
in Regulation D under the Securities Act and has delivered to the
Company a Confidential Investor Questionnaire substantially in the
form of
Exhibit A attached
hereto. The Subscriber hereby represents and warrants that, either
by reason of the Subscriber’s business or financial
experience or the business or financial experience of the
Subscriber’s advisors (including, but not limited to, a
“purchaser representative” (as defined in Rule 501(h)
promulgated under Regulation D), attorney and/or an accountant each
as engaged by the Subscriber at its sole risk and expense, the
Subscriber (a) has the capacity to protect its own interests in
connection with the transaction contemplated hereby and/or (b) the
Subscriber has prior investment experience, including investments
in securities of privately-held companies or companies whose
securities are not listed, registered, quoted and/or traded on a
national securities exchange, including the Nasdaq Global Select
Market, the Nasdaq Global Market, and the Nasdaq Capital Market
(together, the “NASDAQ”) and/or (c) to the extent
necessary, the Subscriber has retained, at its sole risk and
expense, and relied upon appropriate professional advice regarding
the investment, tax and legal merits and consequences of this
Agreement and the purchase of the Securities hereunder, and/or (d),
if an entity, the Subscriber was not formed for the sole purpose of
purchasing the Securities.
2.8.
Reliance on Exemptions .
The Subscriber agrees, acknowledges and understands that the
Securities are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of United
States federal and applicable state securities or “blue
sky” laws and that the Company and its counsel are relying
upon the truth and accuracy of, and the Subscriber’s
compliance with, the representations, warranties, covenants,
agreements, acknowledgments and understandings of the Subscriber
set forth herein in order to determine the availability of such
exemptions and the eligibility of the Subscriber to acquire the
Securities.
2.9.
No General Solicitation .
The Subscriber (a) was contacted regarding the sale of the
Securities by the Company or the Placement Agent (or their
respective authorized agents or representatives) with whom the
Subscriber had a prior substantial pre-existing relationship and
(b) no Securities were offered or sold to it by means of any form
of general solicitation or general advertising, and in connection
therewith, the Subscriber did not receive any general solicitation
or general advertising including, but not limited to, the
Subscriber’s: (i) receipt or review of any advertisement,
article, notice or other communication published in any newspaper,
magazine or similar media or broadcast over television or radio,
whether closed circuit, or generally available; or (ii) attendance
at any seminar meeting or industry investor conference whose
attendees were invited by any general solicitation or general
advertising.
2.10.
Information .
(a)
The
Subscriber agrees, acknowledges and understands that the
Subscriber and its advisors, if any, have been furnished with
all materials relating to the business, finances and
operations of the Company, and materials relating to the offer
and sale of the Securities that have been requested by the
Subscriber or its advisors, if any, including, without
limitation, the Memorandum, the risk factors set forth
therein, and all exhibits and appendices to the Memorandum
(collectively with this Subscription Agreement, the
“Offering Documents”). The Subscriber represents
and warrants that the Subscriber and its advisors, if any,
have been afforded the opportunity to ask questions of the
Company. The Subscriber agrees, acknowledges and understands
that neither such inquiries nor any other due diligence
investigation conducted by the Subscriber or any of its
advisors or representatives modify, amend or affect the
Subscriber’s right to rely on the Company’s
representations and warranties contained in ARTICLE III
below.
(b)
The
Subscriber agrees, acknowledges and understands that the
Placement Agent has not supplied any information for inclusion
in the Memorandum other than information furnished in writing
to the Company by the Placement Agent specifically for
inclusion in the Memorandum relating to the Placement Agent,
that the Placement Agent has no responsibility for the
accuracy or completeness of the Memorandum and that the
Subscriber has not relied upon the independent investigation
or verification, if any, which may have been undertaken by the
Placement Agent.
2.11.
Acknowledgement of Risk .
The Subscriber agrees, acknowledges and understands that the
Subscriber’s investment in the Securities involves a
significant degree of risk, including, without limitation that: (a)
the Company is a development stage business with limited operating
history and requires substantial funds in addition to the proceeds
from the sale of the Securities; (b) an investment in the Company
is highly speculative and only subscribers who can afford the loss
of their entire investment should consider investing in the Company
and the Securities; (c) the Subscriber may not be able to liquidate
its investment; (d) transferability of the Common Stock is
extremely limited; and (e) in the event of a disposition of the
Common Stock, the Subscriber can sustain the loss of its entire
investment. The Subscriber agrees, acknowledges and understands
that such risks are set forth in greater detail in the
Memorandum.
2.12.
Governmental Review .
The Subscriber agrees, acknowledges and understands that no United
States federal or state agency or any other government or
governmental agency has passed upon or made any recommendation or
endorsement of the Securities or an investment
therein.
2.13.
Transfer or Resale .
The Subscriber agrees, acknowledges and understands
that:
(a)
the
Common Stock has not been and, except as set forth in ARTICLE
IV, will not be registered under the Securities Act or any
applicable state securities or “blue sky” laws.
Consequently, the Subscriber may have to bear the risk of
holding the Common Stock for an indefinite period of time
because the Common Stock may not be transferred unless: (i)
the resale of the Common Stock is registered pursuant to an
effective registration statement under the Securities Act;
(ii) the Subscriber has delivered to the Company an opinion of
counsel reasonably acceptable to the Company and its counsel
(in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that the
Common Stock to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration
including, without limitation, Common Stock sold or
transferred pursuant to Rule 144 promulgated under the
Securities Act (“Rule 144”); and
(b)
any
sale of the Common Stock made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 and, if
Rule 144 is not applicable, any resale of the Common Stock
under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as
that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act
or the rules and regulations of the SEC promulgated
thereunder.
2.14.
No Shorting .
T he
Subscriber agrees, acknowledges and understands that during the
period commencing on the date hereof through the last date upon
which the Subscriber holds any Securities or Registrable Securities
(as defined below), the Subscriber may not directly or indirectly,
through related parties, affiliates or otherwise, sell
“short” or “short against the box” (as
those terms are generally understood) any equity security of the
Company.
2.15.
Legends .
The Subscriber agrees, acknowledges and understands that the
certificates representing the Common Stock (the “Restricted
Securities”) will bear restrictive legends in substantially
the following form (and a stop-transfer order may be placed against
transfer of the certificates for such Restricted
Securities):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
“SECURITIES ACT”) OR THE SECURITIES OR “BLUE
SKY” LAWS OF ANY STATE OF THE UNITED STATES. THE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
UNLESS (I)
THE RESALE OF THE COMMON STOCK IS REGISTERED PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT;
(II) THE SUBSCRIBER HAS DELIVERED TO THE COMPANY AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY AND ITS COUNSEL
(IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF
COUNSEL IN COMPARABLE TRANSACTIONS) TO THE EFFECT THAT THE
COMMON STOCK TO BE SOLD OR TRANSFERRED MAY BE SOLD OR
TRANSFERRED PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION,
INCLUDING, WITHOUT LIMITATION, COMMON STOCK SOLD OR
TRANSFERRED PURSUANT TO RULE 144 PROMULGATED UNDER THE
SECURITIES ACT (“RULE 144”) .
2.16.
The
Subscriber agrees, acknowledges and understands that the
Company will make a notation in the appropriate records with
respect to the foregoing restrictions on the transferability
of the Restricted Securities. Certificates evidencing the
Restricted Securities shall not be required to contain such
legend or any other legend (a) following any sale of the
Restricted Securities to a non-affiliate of the Company
pursuant to Rule 144, or (b) if the Restricted Securities are
being sold under Rule 144(k) or have been sold pursuant to a
registration statement and in compliance with the
Subscriber’s obligations set forth in this Agreement, or
(c) such legend is not required under applicable requirements
of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the SEC), in each such
case (a) through (c) to the extent reasonably determined by
the Company’s legal counsel.
2.17.
Residency .
The Subscriber is a resident of the jurisdiction set forth
immediately below the Subscriber’s name on the signature
pages hereto.
2.18.
Acknowledgements Regarding Placement Agent .
(a)
The
Subscriber agrees, acknowledges and understands that the
Placement Agent is acting as placement agent for the
Securities being offered hereby but will not be compensated
for acting in such capacity, other than that the Company will
pay the Placement Agent a non-accountable expense allowance of
$100,000 for introductions to investors and other services.
The Subscriber further agrees, acknowledges and understands
that the Placement Agent has acted solely as an agent of the
Company in connection with the Offering, that the information
and data provided to the Subscriber in connection with the
transactions contemplated hereby have not been subjected to
independent verification by the Placement Agent and that the
Placement Agent makes no representation or warranty with
respect to the accuracy or completeness of such information,
data or other related disclosure material. The Subscriber
further agrees and acknowledges that in making its decision to
enter into this Agreement and purchase the Securities, it has
relied on its own examination of the Company and the terms and
consequences of holding the Securities. The Subscriber further
agrees, acknowledges and understands that the provisions of
this Section 2.18 are for the benefit of, and may be enforced
by, the Placement Agent.
(b)
The
Subscriber agrees, acknowledges and understands that the
Placement Agent may engage other persons, selected by it in
the Placement Agent’s discretion and with the consent of
the Company, which consent will not unreasonably be withheld,
who are members of the NASD, or who are located outside the
United States, to assist the Placement Agent in connection
with this Offering and that the Placement Agent shall be
responsible for the compensation of any selected dealer so
engaged.
2.19.
Not a Registered Representative .
The Subscriber agrees, acknowledges and understands that if it is a
Registered Representative of a NASD member firm, he or she must
give such firm the notice required by the NASD’s Rules of
Fair Practice, receipt of which must be acknowledged by such firm
in the Confidential Investor Questionnaire attached hereto
as
Exhibit A .
2.20.
No Brokers .
The Subscriber has not engaged, consented to or authorized any
broker, finder or intermediary to act on its behalf, directly or
indirectly, as a broker, finder or intermediary in connection with
the transactions contemplated by this Agreement. The Subscriber
hereby agrees to indemnify and hold harmless the Company and the
Placement Agent from and against all fees, commissions or other
payments owing to any such person or firm acting on behalf of the
Subscriber hereunder.
2.21.
Reliance on Representations .
The Subscriber agrees, acknowledges and understands that the
Company and its counsel, as well as the Placement Agent, are
entitled to rely on the representations, warranties and covenants
made by the Subscriber herein.
2.22.
No Representations by Placement Agent .
The Subscriber acknowledges that the Placement Agent (including any
of its members, managers, employees, agents or representatives) has
not made any representations or warranties to the Subscriber
concerning the Company, Merger Sub, Pubco, their respective
businesses, condition (financial or otherwise) or prospects, or the
Merger.
ARTICLE III
REPRESENTATIONS BY THE COMPANY
The
Company hereby represents and warrants to each Subscriber and
the Placement Agent that:
3.1.
Organization and Qualification .
The Company is duly incorporated, validly existing and in good
standing under the laws of the jurisdiction in which it is
incorporated, with full power and authority (corporate and other)
to own, lease, use and operate its properties and to carry on its
business as and where now owned, leased, used, operated and
conducted. The Company is duly qualified to do business and is in
good standing in every jurisdiction in which the nature of the
business conducted by it makes such qualification necessary, except
where the failure to be so qualified or in good standing would not
have a material adverse effect on (a) the business, operations
assets or condition (financial or otherwise) of the Company or (b)
the ability of the Company to perform its obligations pursuant to
the transactions contemplated by this Agreement or under any
instruments to be entered into or filed in connection herewith
(collectively, a “Material Adverse
Effect”).
3.2.
Authorization; Enforcement .
The Company has the requisite corporate power and authority to
enter into and to perform its obligations under this Agreement, to
consummate the transactions contemplated hereby and to issue the
Securities in accordance with the terms hereof. The execution,
delivery and performance of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby
(including without limitation the issuance of the Common Stock)
have been duly authorized by the Company’s Board of Directors
(the “Board”) and no further consent or authorization
of the Company, its Company or its shareholders is required that
has not or will not be obtained prior to the Closing. This
Agreement has been duly executed by the Company and constitutes a
legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to the
effect of any applicable bankruptcy, insolvency, reorganization or
moratorium or similar laws affecting the rights of creditors
generally and the application of general principles of
equity.
3.3.
Capitalization .
The authorized capital stock of the Company is as set forth in the
Memorandum. Except as set forth in the Memorandum, there are not
issued, reserved for issuance or outstanding: (a) any Securities of
capital stock or other voting securities of the Company; (b) any
securities of the Company convertible into or exchangeable or
exercisable for Securities of capital stock or voting securities of
the Company; or (c) any warrants, calls, options or other rights to
acquire from the Company, or and any obligation of the Company to
issue, any capital stock, voting securities or securities
convertible into or exchangeable or exercisable for capital stock
or voting securities of the Company.
3.4.
Issuance of Securities .
The Securities purchased under this Agreement are duly authorized
and, upon issuance in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable, free and
clear from all taxes, liens, claims, encumbrances and charges with
respect to the issue thereof, will not be subject to preemptive
rights or other similar rights of stockholders of the Company, and
will not impose personal liability on the holders
thereof.
3.5.
No Conflicts; No Violation .
(a)
The
execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the
transactions contemplated hereby (including, without
limitation, the issuance of the Securities) will not: (i)
conflict with or result in a violation of any provision of its
Certificate of Incorporation or Bylaws; (ii) violate or
conflict with, result in a breach of any provision of,
constitute a default (or an event which with notice or lapse
of time, or both, could become a default) under or give to
others any rights of termination, amendment, acceleration or
cancellation of any material agreement, indenture, patent,
patent license or instrument to which the Company is a party;
or (iii) to the best of the Company’s knowledge, result
in a material violation of any law, rule, regulation, order,
judgment or decree (including United States federal and state
securities or “blue sky” laws and regulations and
regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the
Company or by which any property or asset of the Company is
bound or affected (except for such conflicts, breaches,
defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in
the aggregate, have a Material Adverse Effect).
(b)
Except
as specifically contemplated by this Agreement and as required
under the Securities Act and any applicable state securities
or “blue sky” laws or any listing agreement with
any securities exchange or automated quotation system, the
Company is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self
regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement in
accordance with the terms hereof, or to issue and sell the
Securities in accordance with the terms hereof. All consents,
authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the
date hereof.
3.6.
Absence of Certain Changes .
Except as disclosed in the Memorandum, since the date of the
Memorandum (including any subsequent amendments or supplements
thereto) there has been no material adverse change in the assets,
liabilities, business, properties, operations, financial condition,
prospects or results of operations of the Company, except that the
Company has continued losses from operations.
3.7.
Absence of Litigation .
Other than as described in the Memorandum, to the Company’s
there is no action, suit, claim, proceeding, inquiry or
investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened, against or affecting the
Company or any of its officers or directors acting as such that
could, individually or in the aggregate, have a Material Adverse
Effect.
3.8.
Intellectual Property Rights .
The Company owns or possesses licenses or rights to use all
patents, patent applications, patent rights, inventions, know-how,
trade secrets, trademarks, trademark applications, service marks,
service names, trade names and copyrights that it believes are
necessary to enable it to conduct its business as now operated (the
“Intellectual Property”). Except as set forth in the
Memorandum, there are no material options, licenses or agreements
relating to the Intellectual Property, nor is the Company bound by,
or a party to, any material options, licenses or agreements
relating to the patents, patent applications, patent rights,
inventions, know-how, trade secrets, trademarks, trademark
applications, service marks, service names, trade names or
copyrights of any other person or entity. Except as disclosed in
the Memorandum, there is no claim or action or proceeding pending
or, to the Company’s knowledge, threatened, that challenges
the right of the Company with respect to any Intellectual
Property.
3.9.
Tax Status .
The Company has timely made or filed all federal, state and foreign
income and all other tax returns, reports and declarations required
by any jurisdiction to which it is subject (unless and only to the
extent that the Company has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported
taxes) and has timely paid all taxes and other governmental
assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations,
except those being contested in good faith, and has set aside on
its books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns,
reports or declarations apply. To the knowledge of the Company,
there are no unpaid taxes in any material amount claimed to be due
by the taxing authority of any jurisdiction, and the officers of
the Company know of no basis for any such claim. The Company has
not executed a waiver with respect to the statute of limitations
relating to the assessment or collection of any foreign, federal,
state or local tax. To the Company’s knowledge, none of the
Company’s tax returns are presently being audited by any
taxing authority.
3.10.
No Brokers .
Except as disclosed in the Memorandum, the Company has taken no
action which would give rise to any claim by any person for
brokerage commissions, finder’s fees or similar payments
relating to this Agreement or the transactions contemplated hereby,
except for dealings with the Placement Agent, whose commissions and
fees will be paid by the Company.
3.11.
Investment Company Status .
The Company is not, and upon consummation of the sale of the
Securities will not be, an “investment company,” a
company controlled by an “investment company” or an
“affiliated person” of, or “promoter” or
“principal underwriter” for, an “investment
company” as such terms are defined in the Investment Company
Act of 1940, as amended.
3.12.
Placement Agent .
The Company has engaged, consented to and authorized the Placement
Agent to act as agent of the Company in connection with the
transactions contemplated by this Agreement. The Company will pay
the Placement Agent a non-accountable expense allowance of $100,000
for introduction to investors and other services and the Company
agrees to indemnify and hold harmless the Subscribers from and
against all fees, commissions or other payments owing by the
Company to the Placement Agent or any other person or firm acting
on behalf of the Company hereunder.
3.13.
Financial Statements .
The financial statements of the Company included in the Memorandum
(the “Financial Statements”) (a) fairly present in
all material respects the financial condition and position of the
Company at the dates and for the periods indicated; (b) have
been prepared in conformity with generally accepted accounting
principles in the United States (“GAAP”) consistently
applied throughout the periods covered thereby, except as may be
otherwise specified in such Financial Statements or the notes
thereto and except that any unaudited financial statements may not
contain all footnotes required by GAAP; and (c) fairly present
in all material respects the financial position of the Company as
of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of any
unaudited statements, to normal, immaterial, year-end audit
adjustments. Since the date of the most recent balance sheet
included as part of the Financial Statements, and except as set
forth in the Memorandum, there has not been to the Company’s
knowledge (a) any change in the assets, liabilities, financial
condition or operations of the Company from that reflected in the
Financial Statements, other than changes in the ordinary course of
business, including ongoing losses, none of which individually or
in the aggregate would reasonably be expected to have a Material
Adverse Effect; or (b) any other event or condition of any
character that, either individually or cumulatively, would
reasonably be expected to have a Material Adverse Effect, except
for the expenses incurred in connection with the transactions
contemplated by this Agreement.
3.14.
Title to Properties and Assets; Liens, Etc .
The Company has good and marketable title to its
properties
|
