Exhibit 10.2
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Name of Offeree
SPO MEDICAL INC.
FORM OF SUBSCRIPTION AGREEMENT
SPO Medical Inc.
Suite 380,
North Building,
21860, Burbank Boulevard,
Woodland Hills,
CA 91367-6493
Attention: Michael Braunold
Gentlemen:
1. Subscription. (a) Subject to the terms and conditions of this Agreement the
undersigned hereby agrees to loan to SPO Medical Inc., a Delaware corporation
(the "Company"), the principal amount set forth on the Purchaser's signature
page of this Agreement (the "Purchase Price"), out of the aggregate amount being
loaned by all Purchasers of US $1,000,000 (the "Offering"). The Company may
increase the aggregate amount of the Offering by $150,000.
(b) The obligation to repay the loan from the Purchaser shall be evidenced
by the Company's issuance of one or more 6% promissory notes with interest and
principal repayable at the end of 18 months ("Note"). In addition the Company
shall issue to each Purchaser a two year common stock purchase warrant to
purchase shares of the Company up to the principal amount of the Note and
exercisable at $0.85 per share (the "Warrant"). The terms of the Note and
Warrant (jointly the "Unit(s)") are set forth in Exhibit "A" and "B" to this
Agreement.
(c) The Purchaser understands that this subscription may be rejected by
the Company at any time in its sole discretion and that the Company will advise
the Purchaser as soon as practicable if the Purchaser's subscription has not
been accepted. If rejected, all amounts delivered by the Purchaser as payment
for the Units will be promptly returned to the Purchaser and this Agreement
shall have no further force or effect (except for the provisions of Section 14
hereof). If the Purchaser's subscription is rejected, the Purchaser agrees to
return to the Company any documents the Company has provided to the Purchaser
for the purpose of evaluating its investment in the Units. If the Purchaser's
subscription is accepted, the Company will promptly provide the Purchaser with a
Note and Warrant that constitute the Units purchased.
2. Payment. Upon execution of this Agreement, the Purchaser will pay by bank
check or wire transfer the full amount of the purchase price of the Units for
which the Purchaser is subscribing pursuant to the terms of this Agreement.
Money shall be sent to the escrow agent as follows. If by wire:
Bank of America
Address: 260 Canal Street
New York, New York
Account #: 2163015671
ABA #: 021200339
Swift Code: FNBBUS33
Account Beneficiary: Lawrence Katz
Reference: SPO Medical Inc.
Or by check to: Lawrence Katz as Attorney
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3. Representations, Warranties and Covenants of the Purchaser. The Purchaser
hereby acknowledges that his investment in the Units involves a high degree of
risk and his economic circumstances are such that he can afford the loss of his
investment. The Purchaser further acknowledges, represents, warrants and agrees
as follows:
(a) The Purchaser is an "accredited investor" as defined by Rule 501 under
the Securities Act of 1933, as amended (the "Act"), and the Purchaser is capable
of evaluating the merits and risks of Subscriber's investment in the Company and
has the capacity to protect the Purchaser's own interests. The Purchaser meets
the requirements of at least one of the suitability standards for an "accredited
investor" as set forth on the Accredited Investor Certification contained
herein;
(b) None of the Units have been registered under the Act or any state
securities laws. The Purchaser understands that the offering and sale of the
Units is intended to be exempt from registration under the Act, by virtue of
Section 4(2) and/or Section 4(6) thereof and the provisions of Regulation D
promulgated thereunder, based, in part, upon the representations, warranties and
agreements of the Purchaser contained in this Agreement;
(c) Neither the Securities and Exchange Commission nor any state
securities commission has approved the sale of the Units or the common stock
being purchased hereby or into which the warrants are convertible nor has the
Commission passed upon or endorsed the merits of the Offering;
(d) The Purchaser has had the opportunity to obtain any information, to
the extent the Company had such information in its possession or could acquire
it without unreasonable effort or expense, necessary to verify the accuracy of
the information contained in all documents received or reviewed in connection
with the purchase of the Units and has had the opportunity to meet with
representatives of the Company and to have them answer any questions and provide
such additional information regarding the terms and conditions of this
particular investment and the finances, operations, business and prospects of
the Company deemed relevant by the Purchaser.
(e) In evaluating the suitability of an investment in the Company, the
Purchaser has not relied upon any representation or other information (oral or
written) other than as contained in documents so furnished to the Purchaser by
the Company. The Purchaser and its advisors, if any, have been furnished with or
have been given access to all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Units which have been requested by the Purchaser, including those set forth on
in any annex attached hereto. The Purchaser and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and its management and
have received complete and satisfactory answers to any such inquiries;
(f) The Purchaser is unaware of, is in no way relying on, and did not
become aware of the Offering of the Units through or as a result of, any form of
general solicitation or general advertising including, without limitation, any
article, notice, advertisement or other communications published in any
newspaper, magazine or similar media or broadcast over television or radio, in
connection with the Offering and is not subscribing for Units and did not become
aware of the Offering as a result of any seminar or meeting to which the
Purchaser was invited by, or any solicitation of a subscription by, a person not
previously known to the Purchaser;
(g) The Purchaser has taken no action which would give rise to any claim
by any person for brokerage commissions, finders' fees or the like relating to
this Agreement or the transactions contemplated hereby;
(h) The Purchaser has sufficient knowledge and experience in financial,
tax, and business matters, and, in particular, investments in securities, so as
to enable the Purchaser to utilize the information made available to the
Purchaser to evaluate the merits and risks of an investment in the Units and to
make an informed investment decision with respect thereto;
(i) The Purchaser is acquiring the Units solely for his own account for
investment and not with a view to resale or distribution thereof, in whole or in
part. The Purchaser has no agreement or arrangement, formal or informal, with
any person to sell or transfer all or any part of the Units purchased hereunder,
and the Purchaser has no plans to enter into any such agreement or arrangement;
(j) The Purchaser must bear the substantial economic risks of the
investment in the Units indefinitely because none of the securities included in
the Units may be sold, hypothecated or otherwise disposed of unless subsequently
registered under the Act and applicable state securities laws or an exemption
from such registration is available. The Purchaser acknowledges and understands
legends shall be placed on the certificates representing the shares of common
stock into which the warrants are convertible to the effect that they have not
been registered under the Act or applicable state securities laws. Appropriate
notations thereof will be made on the securities issued substantially as
follows:
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"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE
ACT OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, QUALIFIES AS AN EXEMPT TRANSACTION
UNDER THE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER."
(k) In addition, the certificates representing the common stock of the
Company, and any and all securities issued in replacement thereof or in exchange
therefore, shall bear such legend as may be required by the securities laws of
the jurisdiction in which Purchaser resides.
(l) The Purchaser has adequate means of providing for the purchaser's
current financial needs and foreseeable contingencies and has no need for
liquidity of the investment in the Units for an indefinite period of time;
(m) The Purchaser: (i) if a natural person represents that he has reached
the age of 21 and has full power and authority to execute and deliver this
Agreement and all other related agreements or certificates and to carry out the
provisions hereof and thereof and has adequate means for providing for his
current financial needs and anticipated future needs and possible personal
contingencies and emergencies and has no need for liquidity in the investment in
the Units; (ii) if a corporation, partnership, limited liability company or
partnership, association, joint stock company, trust, unincorporated
organization or other entity represents that such entity is duly organized,
validly existing and in good standing under the laws of the state of its
organization, the consummation of the transactions contemplated hereby is
authorized by, and will not result in a violation of state law or its charter or
other organizational documents, such entity has full power and authority to
execute and deliver this Agreement and all other related agreements or
certificates and to carry out the provisions hereof and thereof and to purchase
and hold the securities constituting the Units, the execution and delivery of
this Agreement has been duly authorized by all necessary action, this Agreement
has been duly executed and delivered on behalf of such entity and is a legal,
valid and binding obligation of such entity; and (iii) if executing this
Agreement in a representative or fiduciary capacity, represents that it has full
power and authority to execute and deliver this Agreement in such capacity and
on behalf of the subscribing individual, ward, partnership, trust, estate,
corporation, limited liability company or partnership, or other entity has full
right and power to perform pursuant to this Agreement and make an investment in
the Company, and that this Agreement constitutes a legal, valid and binding
obligation of such entity. The execution and delivery of this Agreement will not
violate or be in conflict with any order, judgment, injunction, agreement or
controlling document to which the Purchaser is a party or by which it is bound;
(n) Any information which the Purchaser has heretofore furnished or
furnishes herewith to the Company is complete and accurate and may be relied
upon by the Company in determining the availability of an exemption from
registration under federal and state securities laws in connection with the
offering of the Units. The Purchaser further represents, warrants and covenants
that it will notify and supply corrective information to the Company immediately
upon the occurrence of any change therein occurring prior to the Company's
issuance of the Units;
(o) The Purchaser acknowledges that the Company is in the development
stage, has been engaged in business for only a short period of time and has
limited operations. The Purchaser is knowledgeable about investment
considerations in development-stage companies. The Purchaser's overall
commitment to investments which are not readily marketable is not excessive in
view of the Purchaser's net worth and financial circumstances and the purchase
of the Units will not cause such commitment to become excessive. The investment
in the Units is suitable one for the Purchaser;
(p) Within three days after receipt of a request from the Company, the
Purchaser will provide such information and deliver such documents as may
reasonably be necessary to comply with any and all laws and ordinances to which
the Company or the selected dealers is subject; and
(q) The Purchaser agrees that it may not sell, transfer, pledge, encumber,
hypothecate, permit to be subject to a security interest, grant an option in or
otherwise dispose of the Units being acquired hereunder or the shares of Common
Stock into which the warrants are to be convertible unless such securities are
registered under the Securities Act or unless an opinion of counsel satisfactory
is delivered to the Company that no such registration is required is delivered
to the Company;
4. Representations and Warranties of the Company. The Company represents and
warrants to the Purchaser as follows:
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4.1 Organization and Authority; Subsidiaries. The Company is a corporation
validly existing and in good standing under the laws of the State of Delaware,
with full power and authority to enter into and perform this Agreement and the
other agreements contemplated hereby to which it is a party. The Company is duly
licensed or qualified to do business as a foreign corporation and is in good
standing under the laws of all other jurisdictions in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except for jurisdictions where
failure to become licensed or to so qualify could not reasonably be expected to
have a material adverse effect on the business and operations of the Company
taken as a whole. The Company has all requisite corporate power and authority to
own its properties, to carry on its business as now conducted, and to enter into
and perform its obligations under this Agreement.
4.2 Authorization; Binding Effect. The Company has taken all corporate
actions which are necessary to authorize the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby.
4.3 No Bankruptcy or Insolvency. The Company has not filed any voluntary
petition in bankruptcy or been adjudicated a bankrupt or insolvent, filed by
petition or answer seeking any reorganization, liquidation, dissolution or
similar relief under any federal bankruptcy, insolvency, or other debtor relief
law, or sought or consented to or acquiesced in the appointment of any trustee,
receiver, conservator or liquidator of all or any substantial part of its
properties. No court of competent jurisdiction has entered an order, judgment or
decree approving a petition filed against the Company seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any federal bankruptcy act, or other debtor relief law,
and no other liquidator has been appointed of the Company or of all or any
substantial part of its properties.
4.4 No Litigation. There are no actions, suits or proceedings of any type
pending or, to the knowledge of the Company, threatened, against the Company
which if adversely determined could have a material adverse effect on the
business and operations of the Company taken as a whole.
4.5 Investment Company. The Company is not, and is not controlled by, an
"Investment Company" within the meaning of the Investment Company Act.
4.6 Governmental Consents and Notices. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Units, or the consummation of any other transaction contemplated hereby, except
qualification (or taking such action as may be necessary to secure an exemption
from qualification, if available) of the offer and sale of the Units under
applicable state and federal securities laws, which qualification if required,
will be accomplished in a timely manner.
4.7 Finders/Placement Agents. The Company may retain the services of a
placement agent(s) who may receive a placement fee not exceeding ten percent
(10%) and a 3% non accountable expense allowance. from the gross proceeds from
this Offering.
4.8 Units and Common Stock. The Units and Common Stock, into which the
warrants are convertible, when issued, will be duly authorized, validly issued,
fully paid and nonassessable.
4.9 Ownership. The Company, through its wholly-owned subsidiary, is the
sole and exclusive owner of the patents referenced in the business plan of the
Company, and that the same have not been hypothecated or otherwise encumbered by
the Company.
4.10 Intellectual Property Rights and Interests. The Company has not
received any written or oral notice or claim that the Company is infringing the
intellectual property rights of any other person or legal entity or that the
Company is in material breach or default of any license granting to the Company
rights in any intellectual property. To the knowledge of the Company as of the
date hereof, without having conducted any independent investigation or analysis
of its intellectual property rights and the use thereof by third parties, no
third party is infringing upon any intellectual property rights proprietary to
the Company.
5. Indemnification. (a) The Purchaser agrees to indemnify and hold harmless the
Company, and its officers, directors, employees, agents, control persons and
affiliates against all losses, liabilities, claims, damages, and expenses
whatsoever (including, but not limited to, any and all expenses incurred in
investigating, preparing, or defending against any litigation commenced or
threatened) based upon or arising out of any actual or alleged false
representation or warranty, or misrepresentation or omission to state a material
fact, or breach by the Purchaser of any covenant or agreement made by the
Purchaser herein or in any other document delivered in connection with this
Agreement.
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(b) The Company agrees to indemnify and hold harmless the Purchaser, and
its officers, directors, employees, agents, control persons and affiliates
against all losses, liabilities, claims, damages, and expenses whatsoever
(including, but not limited to, any and all expenses incurred in investigating,
preparing, or defending against any litigation commenced or threatened) based
upon or arising out of any actual or alleged false representation or warranty,
or misrepresentation or omission to state a material fact, or breach by the
Company of any covenant or agreement made by the Company herein or in any other
document delivered in connection with this Agreement.
6. Registration Rights. In consideration of the purchase of the Units by the
Purchaser described in this Agreement, the Company will register the shares of
common stock underlying the Warrants by filing a registration statement with the
Commission within 90 days from the final closing of the Offering with respect to
the resale by the Purchaser of the shares of Common Stock issuable upon exercise
of the Warrant.
7. Lock-Up. As an inducement to the Company to enter into this Agreement, the
Purchaser agrees to certain restrictions on the sale or transfer of any
securities being purchased herein. The Purchaser will sign a lock-up whereby
Purchaser may sale up to 10% of their holdings in the first 90 day period after
the effective date of the registration statement and thereafter up to 20% of
their holdings in each subsequent 90 day period. The lock up shall expire one
year after the effective date of the registration statement. The Purchaser shall
cause each Principal (as defined therein) to sign and deliver to the Company a
lock-up agreement in the form attached hereto as Exhibit "C".
8. Irrevocability; Binding Effect. The Purchaser hereby acknowledges and agrees
that the subscription hereunder is irrevocable by the Purchaser, except as
required by applicable law, and that this Agreement shall survive the death or
disability of the Purchaser and shall be binding upon and inure to the benefit
of the parties and their heirs, executors, administrators, successors, legal
representatives, and permitted assigns. If the Purchaser is more than one
person, the obligations of the Purchaser hereunder shall be joint and several
and the agreements, representations, warranties, and acknowledgments herein
shall be deemed to be made by and be binding upon each such person and such
person's heirs, executors, administrators, successors, legal representatives,
and permitted assigns.
9. Amendment. This Agreement shall not be amended, modified or waived except by
an instrument in writing signed by the party against whom any such amendment,
modification or waiver is sought.
10. Notices. Any notice or other communication required or permitted to be given
hereunder shall be in writing
(a) if to Company, at the address set forth above,
with a copy to:
Aboudi & Brounstein
Attn: David Aboudi, Esq.
Rechov Gavish 3, POB 2432
Kfar Saba Industrial Zone 44641 Israel
Telephone No.: (011-972-9) 764-4833
Telecopier No.: (011-972-9) 764-4834
David@a-blaw.com
(b) if to the Purchaser,
at the address set forth on the signature page hereof
with a copy of all such communications being sent to the escrow agent,
11. Assignability. This Agreement and the rights, interests and obligations
hereunder are not transferable or assignable by the Purchaser.
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12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to its
conflicts of laws principles. The Purchaser hereby irrevocably submits to the
jurisdiction of any United States district court located in the City of New York
over any action or proceeding arising out of or relating to this Agreement. The
Purchaser further agrees that any action or proceeding brought against the
Company shall be brought only in the United States district courts located in
the City of New York.
13. Use of Pronouns. All pronouns and any variations thereof used herein shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons referred to may require.
14. Confidentiality. The Purchaser acknowledges and agrees that any information
or data it has obtained from or about the Company, including, without
limitation, the business plan of the Company, not otherwise properly in the
public domain, was received in confidence. The Purchaser agrees not to divulge,
communicate or disclose, except as may be required by law or for the performance
of this Agreement, or use to the detriment of the Company or for the benefit of
any other person or persons, or misuse in any way, any confidential information
of the Company, including any scientific, technical, trade or business secrets
of the Company and any scientific, technical, trade or business materials that
are treated by the Company as confidential or proprietary, including, but not
limited to, ideas, discoveries, inventions, developments and improvements
belonging to the Company and confidential information obtained by or given to
the Company about or belonging to third parties.
15. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the Purchaser
and the Company with respect to the subject matter hereof and supersede all
prior oral or written agreements and understandings, if any, relating to the
subject matter hereof. The terms and provisions of this Agreement may be waived,
or consent for the departure therefrom granted, only by a written document
executed by the party entitled to the benefits of such terms or provisions.
a. The Purchaser's representations and warranties made in this Agreement
shall survive the execution and delivery hereof and delivery of the Units to the
Purchaser.
b. Each of the parties hereto shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others engaged
by such party) in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated.
c. This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
d. Each provision of this Agreement shall be considered separable and if
for any reason any provision or provisions hereof are determined to be invalid
or contrary to applicable law, such invalidity or illegality shall not impair
the operation of or affect the remaining portions of this Agreement.
e. Paragraph titles are for descriptive purposes only and shall not
control or alter the meaning of this Agreement as set forth in the text.
Accredited Investor Certification and Questionnaire
(Check the appropriate box(es))
1. Please check the appropriate box.
____ (i) I am a natural person who had individual income of more than $200,000
in each of the most recent two years or joint income with my spouse in
excess of $300,000 in each of the most recent two years and reasonably
expect to reach that same income level for the current year ("income", for
purposes hereof, should be computed as follows: individual adjusted gross
income, as reported (or to be reported) on a federal income tax return,
increased by (1) any deduction of long-term capital gains under Section
1202 of the Internal Revenue Code of 1986 (the "Code"), (2) any deduction
for depletion under Section 611 et seq. of the Code, (3) any exclusion for
interest under Section 103 of the Code and (4) any losses of a partnership
as reported on Schedule E of From 1040);
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____ (ii) I am a natural person whose individual net worth (i.e., total assets
in excess of total liabilities), or joint net worth with my spouse, will
at the time of purchase of the Units described in this subscription
agreement to which this certification is attached be in excess of
$1,000,000;
____ (iii) The Purchaser is an investor satisfying the requirements of Section
501(a)(1), (2) or (3) of Regulation D promulgated under the Securities
Act, which includes but is not limited to, a self-directed employee
benefit plan where investment decisions are made solely by persons who are
"accredited investors" as otherwise defined in Regulation D;
____ (iv) The Purchaser is a trust, which trust has total assets in excess of
$5,000,000, which is not formed for the specific purpose of acquiring the
Units offered hereby and whose purchase is directed by a sophisticated
person as described in Rule 506(b)(ii) of Regulation D and who has such
knowledge and experience in financial and business matters that he is
capable of evaluating the risks and merits of an investment in the Units;
____ (v) I am a director or executive officer of the Company; or
____ (vi) The Purchaser is an entity (other than a trust) in which all of the
equity owners meet the requirements of at least one of the above
subparagraphs.
The undersigned agrees that the undersigned will notify the Company at any
time on or prior to the Closing in the event that the representations and
warranties in this Accredited Investor Certification and Questionnaire shall
cease to be true, accurate and complete.
(2) Suitability (please answer each question)
a) For an individual, please describe any college or graduate degrees held by
you:
b) For all subscribers, please state whether you have you participated in
other private placements before:
YES NO
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(c) If your answer to question (b) above was "YES", please indicate
frequency of such prior participation in private placements of:
Public Private
Companies Companies
----------------------- -----------------------
Frequently ----------------------- -----------------------
Occasionally ----------------------- -----------------------
Never ----------------------- -----------------------
(d) For individuals, do you expect your current level of income to
significantly decrease in the foreseeable future?
YES NO
------- -------
(e) For trust, corporate, partnership and other institutional subscribers,
do you expect your total assets to significantly decrease in the foreseeable
future?
YES NO
------- -------
(f) For all subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the Securities for which you seek to
purchase?
YES NO
------- -------
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(g) For all subscribers, do you understand that there is no guarantee of
financial return on this investment and that you run the risk of losing your
entire investment?
YES NO
------- -------
(3) Manner in which title is to be held: (circle one)
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of Survivorship (both parties must sign)
(d) Partnership
(e) Tenants in Common
(f) Company
(g) Trust
(h) Other
(4) NASD Affiliation.
Are you affiliated or associated with an NASD member firm (please
check one):
YES NO
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If Yes, please describe:
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*If subscriber is a Registered Representative with an NASD member
firm, have the following acknowledgment signed by the appropriate
party:
The undersigned NASD member firm acknowledges receipt of the notice
required by the NASD Conduct Rules.
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Name of NASD Member Firm
By:
------------------------------
Authorized Officer
Date:
----------------------------
The undersigned is informed of the significance to the Company of the
foregoing representations and answers contained in this Purchaser Questionnaire
and such answers have been provided under the assumption that the Company will
rely on them.
[Remainder of page intentionally blank, signature pages follow]
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IN WITNESS WHEREOF, the Purchaser has executed this Agreement this ____
day of ____________ , 2005.
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(Loan - Purchase Price)
If the Purchaser is an INDIVIDUAL, or if purchased as JOINT TENANTS, as TENANTS
IN COMMON, or as COMMUNITY PROPERTY:
- ---------------------------- ------------------------------
Print Name(s) Social Security Number(s)
- ---------------------------- ------------------------------
Signature(s) of Purchaser(s)
- ---------------------------- ------------------------------
Date Address
If the Purchaser is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY or
TRUST:
- ---------------------------- ------------------------------
Name of Partnership, Corporation Federal Taxpayer
Limited Liability Company or Trust Identification Number
- ----------------------------
Date
By:
------------------------- ------------------------------
Name: State of Organization
Title: ------------------------------
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Address
SUBSCRIPTION ACCEPTED AND AGREED TO
this ____ day of ________________, 2005.
SPO MEDICAL INC.
By:
----------------------------
Name: Michael Braunold
Title: CEO
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