SUBSCRIPTION AGREEMENT
This
Subscription Agreement (this “Agreement”) is being delivered to you in
connection with your investment in New Design Cabinets, Inc., a Nevada
corporation (the “Company”) that will change its name to Stratos Renewables
Corporation, promptly following the closing of the offering described herein.
The Company is conducting a private placement (the “Private Placement”) of
common stock, $.001 par value (the “Common Stock”), of up to $10.0 million. Each
share of Common Stock will be sold for $0.70 per share. Fractional shares of
Common Stock received by the undersigned will be rounded down. For every two
(2)
shares of Common Stock purchased by an investor, the investor will receive
one
(1) warrant to purchase one (1) share of Common Stock, at an exercise price
of
$.75 per share (the “Warrant”). Fractional Warrants received by the undersigned
will be rounded down. The Warrants shall have a “cashless” exercise provision
and shall be exercisable for five (5) years from the closing date of the Private
Placement. The terms of the Warrants are more fully described in the “Form of
Warrant” attached hereto as Exhibit
A.
All
funds
received in the Private Placement shall be held in escrow by 1st
Century
Bank (the “Escrow Agent”) and, upon fulfillment of the other conditions
precedent set forth herein, shall be released from escrow and delivered to
the
Company at which time the securities subscribed for as further described below
shall be delivered to you.
The
Company reserves the right to withdraw or cancel the Private Placement and
to
accept or reject any subscription in whole or in part, in its sole discretion.
The closing of the Private Placement is conditioned upon the closing of the
Share Exchange (as defined below); provided, however, in no way is the closing
of the Private Placement conditioned upon a minimum amount raised by the Company
in the Private Placement, or the closing of the Bridge Financing or Series
A
Private Placement (as defined below).
The
securities being subscribed for hereby are highly speculative, involve a high
degree of risk, and should be purchased only by persons who can afford the
loss
of their entire investment.
CAUTIONARY
STATEMENT
This
Agreement contains material non-public information within the meaning of
Regulation FD promulgated by the Securities and Exchange Commission (the “SEC”)
including the Share Exchange, the Private Placement, the Series A Private
Placement and the Bridge Financing (as discussed below) (the “Material
Non-Public Information”). By accepting this Agreement, you hereby agree that you
will use the Material Non-Public Information only in connection with your
evaluation of the investment contemplated hereby and not for any other purpose,
and you will not disclose the Material Non-Public Information to any other
person without the Company’s prior written consent (which may be withheld in the
Company’s sole discretion) or except as may be required by law or legal process.
You also agree that you will direct your representatives not to disclose to
any
other person or entity the Material Non-Public Information.
By
accepting this Agreement, you agree that, until the transactions contemplated
herein and hereby are consummated and publicly announced, or such earlier date
as the Share Exchange, the Private Placement, the Series A Private Placement
and
the Bridge Financing are terminated (i) neither you nor your representatives
will trade in the Company’s securities, and (ii) neither your nor your
representatives will disclose the existence of the proposed transactions to
any
third party.
THE
SHARE
EXCHANGE
As
a
condition to the closing of the Private Placement, the Company will enter into
a
Share Exchange Agreement with Stratos del Peru SAC, a company organized under
the laws of Peru (“Stratos”) and the stockholders of Stratos, to acquire 999
shares of Stratos in exchange for 45,000,000 shares of Common Stock of the
Company (the “Share Exchange”).
In
addition, effective as of the closing of the Share Exchange, Xxxxxxx X. Xxxxxxx,
the Company’s Chief Executive Officer, President and sole director, and Xxxx
Xxxxxxx, the Company’s Secretary and Treasurer, will resign from all of their
positions with the Company, and the following persons will be appointed as
the
Company’s officers and directors:
|
Name
|
Position
|
|
|
Xxxxxx
Xxxxxxx Xxxxx
|
Chief
Executive Officer and Director
|
|
|
Xxxx
Xxxxxxxx Xxxxxxxx
|
President
and Director
|
|
|
Xxxxx
Xxxxxxx Aza
|
Chief
Operating Officer
|
|
|
Xxxxx
Xxxxx Xxxxxx
|
Chief
Financial Officer and Treasurer
|
|
|
Xxxxxxx
Xxxxxxxx
|
Secretary
and Director
|
|
|
Xxxxxx
Xxxxxx
|
Chairman
of the Board
|
|
|
Luis
Francisco de las Xxxxx
|
Director
|
Additional
information concerning the Company’s officers and directors is set forth in the
Confidential Information Memorandum (the “Memorandum”) provided herewith under
the section entitled “Management.”
THE
PRIVATE PLACEMENT
Immediately
following the Share Exchange, the Company will close the Private Placement.
Assuming the Private Placement is fully subscribed for, and that all $10.0
million of Common Stock is purchased by the investors, immediately after the
closing of the Private Placement, the investors in the Private Placement will
own in the aggregate approximately 14,285,714 shares of Common Stock and
7,142,857 shares of Common Stock underlying Warrants.
The
closing of the Private Placement is conditioned upon the closing of the Share
Exchange; provided, however, in no way is the closing of the Private Placement
conditioned upon a minimum amount raised by the Company in the Private
Placement, or the closing of the Series A Private Placement or the Bridge
Financing. Subscribers of securities in the Private Placement will not have
the
opportunity to vote on the Share Exchange prior to its completion.
The
full
terms of the Private Placement are set forth below under the heading entitled
“Subscription Procedures.”
THE
SERIES A PRIVATE PLACEMENT
Immediately
following the closing of the Share Exchange, the Company will also close a
private placement of Series A preferred stock, $.001 par value (the “Series A
Preferred Stock”) with a lead investor for $5.0 million (the “Series A Private
Placement”). Each share of Series A Preferred Stock will be sold for $0.70 per
share. Fractional shares of Series A Preferred Stock received by the investor
will be rounded down. For every four (4) shares of Series A Preferred Stock
purchased by the investor, the investor will receive one (1) warrant to purchase
one (1) share of Common Stock, at an exercise price of $.75 per share.
Fractional warrants received by the investor will be rounded down. The warrants
will have a “cashless” exercise provision and will be exercisable for five (5)
years from the closing date of the Series A Private Placement.
All
funds
received in the Series A Private Placement will be held by the Escrow Agent
and,
upon fulfillment of the other conditions precedent set forth in the offering
documents, will be released from escrow and delivered to the Company, at which
time the securities subscribed for will be delivered to the
investor.
The
completion of the Private Placement is conditioned upon the closing of the
Share
Exchange; provided, however, in no way is the closing of the Private Placement
conditioned upon the closing of the Series A Private Placement. Subscribers
of
securities in the Series A Private Placement will not have the opportunity
to
vote on the Share Exchange prior to its completion.
2
Immediately
after the closing of the Series A Private Placement, the investor in the Series
A Private Placement will own in the aggregate approximately 7,142,857 shares
of
Series A Preferred Stock and 1,785,714 shares of Common Stock underlying the
warrant.
The
holder of the Series A Preferred Stock will be entitled to additional rights,
preferences and privileges, including, but not limited to, liquidation,
anti-dilution, conversion, voting and registration rights, as more fully
described in the Memorandum under the heading “Summary of the Series A Private
Placement.”
THE
BRIDGE FINANCING
Immediately
following the closing of the Share Exchange, the Company will close a bridge
financing with investors for up to $5.0 million (the “Bridge Financing”). The
convertible promissory notes to be issued in connection with the Bridge
Financing will bear interest at 10% per annum. The outstanding principal and
all
accrued and unpaid interest will be due and payable on the earlier of (i) three
(3) months from the closing date of the Bridge Financing (the “Maturity Date”),
and (ii) the consummation of the Company’s anticipated PIPE financing with
institutional investors for at least $25.0 million, net of offering expenses
(the “PIPE”). As consideration for making loans to the Company, the bridge note
holders will be entitled to a 5% origination fee. In addition, the bridge note
holders will receive one (1) warrant to purchase (1) share of Common Stock,
at
an exercise price of $.75 per share, for every $3.50 invested in the Company
in
connection with the Bridge Financing (the “Bridge Warrants”). The Bridge
Warrants shall have a “cashless” exercise provision and shall be exercisable for
three (3) years from the closing date of the Bridge Financing.
Upon
the
earlier to occur of the Maturity Date or the consummation of the PIPE, the
bridge note holders will be entitled to repayment (in cash or in Common Stock)
equal to 25% in excess of the principal and accrued interest then due and
outstanding under the terms of the notes (the “Repayment Amount”). At such time,
the bridge note holders will have the right to convert (in whole or in part)
110% of the Repayment Amount into shares of Common Stock of the Company at
the
fair market value of each share of Common Stock, or at the price per share
of
Common Stock sold to investors in the PIPE, as the case may be.
Upon
the
consummation of the PIPE, the Company will file a registration statement (the
“Registration Statement”) covering, for the bridge note holders, 100% of their
shares of the Company’s Common Stock issuable upon conversion of the Repayment
Amount (if any), and the Common Stock issuable upon conversion of the Bridge
Warrants. The bridge note holders will be entitled to the same registration
rights as the set forth in Section 6 of this Agreement, governing the
registration rights of the investors in the Private Placement.
The
completion of the Private Placement is conditioned upon the closing of the
Share
Exchange; provided, however, in no way is the closing of the Private Placement
conditioned upon the closing of the Bridge Financing. Subscribers of securities
in the Bridge Financing will not have the opportunity to vote on the Share
Exchange prior to its completion.
CAPITALIZATION
Upon
completion of the Share Exchange and after giving effect to the Private
Placement and Series A Private Placement, the ownership of the Company will
be
approximately as follows (excluding, (i) the shares of Common Stock underlying
the Warrants to be issued to the investors in the Private Placement, (ii) the
shares of Common Stock underlying the warrant to be issued to the investor
in
the Series A Private Placement, (iii) the shares of Common Stock underlying
the
outstanding convertible promissory notes that may be issued to the bridge note
holders in connection with the Bridge Financing and (iv) the shares of Common
Stock underlying the Bridge Warrants to be issued to the bridge note holders
in
connection with the Bridge Financing):
3
|
Percentage of
|
||||
|
|
Ownership(1)
|
|||
|
|
|
|||
|
Old
NDCI Stockholders
|
13.1
|
%
|
||
|
Former
Stratos Stockholders
|
58.9
|
%
|
||
|
Private
Placement Investors
|
18.7
|
%
|
||
|
Series
A Private Placement Investor
|
9.3
|
%
|
||
(1)
Based
on 76,428,571 shares of capital stock issued and outstanding (assuming all
7,142,857 shares of Series A Preferred Stock are converted into Common Stock
on
a 1:1 basis).
If
the bridge note holders elect to convert any or all of their notes at the
Maturity Date or upon the consummation of the PIPE, investors in the Private
Placement could suffer dilution in terms of their percentage ownership in the
Company. In addition, if any of the warrant holders exercise their warrants
prior to the expiration of the term of such warrants, the Company may be
required to issue
a significant number of shares of Common Stock to such warrant holders, which
could result in dilution to the investors in the Private
Placement.
SUBSCRIPTION
PROCEDURES
1. SUBSCRIPTION
AND PURCHASE PRICE
1.1. Subscription.
Subject to the conditions set forth in Section 2 hereof, the undersigned hereby
subscribes for and agrees to purchase the number of shares of Common Stock
indicated on page 15 hereof on the terms and conditions described herein and
the
Company hereby agrees to issue and sell such shares of Common Stock to the
undersigned on the terms and conditions described herein. Fractional shares
of
Common Stock received by the undersigned will be rounded down. In connection
therewith, the undersigned agrees and acknowledges that for every two (2) shares
of Common Stock purchased by the undersigned, the undersigned will receive
one
(1) Warrant to purchase one (1) share of Common Stock on the terms and subject
to the conditions described in the “Form of Warrant” attached hereto as
Exhibit
A.
Fractional Warrants received by the undersigned will be rounded down.
1.2. Purchase
of Securities. The undersigned understands and acknowledges that the purchase
price to be remitted to the Company in exchange for one (1) share of Common
Stock shall be $0.70 per share, for an aggregate purchase price as set forth
on
page 15 hereof. Payment for the securities subscribed for hereunder shall be
made by the undersigned by check or wire transfer, payable in United States
dollars, in accordance with the specific wire instructions contained herein,
with the undersigned’s delivery of this Agreement to the Company.
2. ACCEPTANCE
AND CLOSING PROCEDURES
2.1. Irrevocable
Obligation. The obligation of the undersigned to purchase the securities
contemplated hereby and the obligation of the Company to issue and sell the
securities contemplated hereby is irrevocable.
2.2. Closing.
The closing (the “Closing”) shall take place at the offices of Loeb & Loeb
LLP, 00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, XX 00000, or such
other place as determined by the Company, on a Business Day (the “Closing
Date”), or such other date as is mutually agreed to by the parties and the
undersigned. “Business Day” shall mean from the hours of 9:00 a.m. (P.S.T.)
through 5:00 p.m. (P.S.T.) of a day other than a Saturday, Sunday or other
day
on which commercial banks in Los Angeles, California are authorized or required
to be closed.
4
3. U.S.
INVESTOR REPRESENTATIONS AND WARRANTIES
Each
investor who is a U.S. Person (as defined below) hereby acknowledges, agrees
with and represents and warrants to the Company and its affiliates, as
follows:
(a) The
undersigned has full power and authority to enter into this Agreement, the
execution and delivery of which has been duly authorized, if applicable, and
this Agreement constitutes a valid and legally binding obligation of the
undersigned enforceable against the undersigned in accordance with its terms,
except as such enforceability may be limited by general principles of equity
or
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement
of
applicable creditors’ rights and remedies.
(b) The
undersigned acknowledges his understanding that the offering and sale of the
Common Stock and Warrants is intended to be exempt from registration under
the
Securities Act of 1933, as amended (the “Securities Act”), by virtue of Section
4(2) of the Securities Act and the provisions of Regulation D promulgated
thereunder (“Regulation D”). In furtherance thereof, the undersigned further
represents and warrants to the Company and its affiliates as
follows:
(i) The
undersigned is acquiring the Common Stock and Warrants solely for the
undersigned’s own beneficial account, for investment purposes, and not with view
to, or resale in connection with, any distribution of the shares of Common
Stock, or shares of Common Stock to be received when the Warrants are exercised,
except pursuant to sale registered or exempted under the Securities Act;
provided, however, that by making the representations herein, the undersigned
does not agree to hold any of the securities for any minimum or other specific
term and reserves the right to dispose of the securities at any time in
accordance with, or pursuant to, a registration statement or an exemption under
the Securities Act.
(ii) The
undersigned has the financial ability to bear the economic risk of the
undersigned’s investment, has adequate means for providing for the undersigned’s
current needs and contingencies, and has no need for liquidity with respect
to
the undersigned’s investment in the Company.
(iii) The
undersigned and the undersigned’s attorney, accountant, purchaser representative
and/or tax advisor, if any (collectively, “Advisors”), has such knowledge and
experience in financial and business matters as to be capable of evaluating
the
merits and risks of the prospective investment in the Company. If other than
an
individual, the undersigned also represents it has not been organized for the
purpose of acquiring the Common Stock and Warrants.
(c) The
information in the “Investor Questionnaire,” attached hereto as Exhibit
B,
completed and executed by the undersigned (the “Investor Questionnaire”) is
accurate and true in all material respects, and the undersigned is an
“accredited investor,” as that term is defined in Rule 501(a) of Regulation
D.
(d) The
undersigned is not relying on the Company or its affiliates with respect to
economic considerations involved in this investment.
(e) The
undersigned understands and agrees that the undersigned must bear the economic
risk of the undersigned’s purchase because, among other reasons, neither the
Common Stock nor the securities underlying the Warrants have been registered
under the Securities Act or under the securities laws of any state and,
therefore, cannot be resold, assigned or otherwise disposed of unless they
are
subsequently registered under the Securities Act and under the applicable
securities laws of such states, or an exemption from such registration is
available. In particular, the undersigned is aware that the securities being
purchased hereunder are “restricted securities”, as such term is defined in Rule
144 promulgated under the Securities Act (“Rule 144”), and they may not be sold
pursuant to Rule 144 unless all of the conditions of Rule 144 are
met.
(f) No
representations or warranties have been made to the undersigned by the Company
or any of its officers, employees, agents, affiliates or subsidiaries, other
than any representations of the Company contained herein, and in subscribing
for
the Common Stock and Warrants the undersigned is not relying upon any
representations other than any contained herein; provided that nothing contained
herein shall modify, amend or affect the undersigned’s right to rely on the
Company’s representations and warranties contained herein.
5
(g) The
undersigned understands and acknowledges that the undersigned’s purchase of the
securities is a speculative investment that involves a high degree of risk
and
the potential loss of the undersigned’s entire investment.
(h) The
undersigned understands and agrees that the certificates for the Common Stock
being purchased hereunder shall bear substantially the following legend until
(i) such securities shall have been registered under the Securities Act pursuant
to a registration statement that has been declared effective or (ii) in the
opinion of counsel reasonably acceptable to the Company, such securities may
be
sold without registration under the Securities Act as well as any applicable
“Blue Sky” or state securities laws:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE
STATE SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,
TRANSFERRED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FILED BY THE ISSUER WITH THE SECURITIES AND EXCHANGE COMMISSION
COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
THE
NOTES.
(i) The
undersigned understands and agrees that the Warrants being issued hereunder
shall bear the legend set forth on the “Form of Warrant,” attached hereto as
Exhibit
A,
until
(i) such shares of Common Stock underlying the Warrants shall have been
registered under the Securities Act pursuant to a registration statement that
has been declared effective or (ii) in the opinion of counsel reasonably
acceptable to the Company, such securities may be sold without registration
under the Securities Act as well as any applicable “Blue Sky” or state
securities laws.
(j) Neither
the SEC nor any state securities commission has approved the Common Stock or
Warrants, or passed upon or endorsed the merits of the Private Placement or
confirmed the accuracy or determined the adequacy of any information provided
to
the undersigned by the Company.
(k) The
undersigned and the undersigned’s Advisors, if any, have had a reasonable
opportunity to ask questions of and receive answers from a person or persons
acting on behalf of the Company concerning the Private Placement and the
business, financial condition, results of operations and prospects of the
Company, and all such questions have been answered to the reasonable
satisfaction of the undersigned and the undersigned’s Advisors, if
any.
(l) The
undersigned is unaware of, is in no way relying on, and did not become aware
of
the Private Placement through or as a result of, any article, notice,
advertisement or other communication published in any newspaper, magazine or
similar media or broadcast over television, radio or over the Internet, in
connection with the offering and sale of the Common Stock and Warrants and
is
not subscribing for the securities and did not become aware of the offering
of
the securities through or as a result of any seminar or meeting to which the
undersigned was invited by, or any solicitation of a subscription by, a person
not previously known to the undersigned in connection with investments in
securities generally.
(m) The
undersigned has not engaged any placement agent, financial advisor or broker,
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 and, in turn, to be paid to other selected
dealers.
6
(n) The
foregoing representations, warranties and agreements shall survive the
Closing.
4. NON-U.S.
INVESTOR REPRESENTATIONS AND WARRANTIES
Each
investor who is a Non-U.S. Person (as defined below) hereby represents and
warrants to the Company as follows:
(a)This
Agreement is made by the Company with such investor who is a Non-U.S. Person
in
reliance upon such Non-U.S. Person’s representations, warranties and covenants
made in this Section 4.
(b)Such
Non-U.S. Person has been advised and acknowledges that:
(i)The
Common Stock and the Common Stock underlying the Warrants have not been, and
when issued, will not be registered under the Securities Act, the securities
laws of any state of the United States or the securities laws of any other
country.
(ii)In
issuing and selling the Common Stock and Warrants to such Non-U.S. Person
pursuant hereto, the Company is relying upon the “safe harbor” provided by
Regulation S and/or on Section 4(2) under the Securities Act.
(iii) It
is a
condition to the availability of the Regulation S “safe harbor” that the Common
Stock, the Warrants and the Common Stock underlying the Warrants not be offered
or sold in the United States or to a U.S. Person until the expiration of a
period of one (1) year following the Closing Date.
(iv) Notwithstanding
the foregoing, prior to the expiration of one (1) year after the Closing (the
“Restricted Period”), the Common Stock, the Warrants and the Common Stock
underlying the Warrants may be offered and sold by the holder thereof only
if
such offer and sale is made in compliance with the terms of this Agreement
and
either: (A) if the offer or sale is within the United States or to or for the
account of a U.S. Person, the securities are offered and sold pursuant to an
effective registration statement or pursuant to Rule 144 under the Securities
Act or pursuant to an exemption from the registration requirements of the
Securities Act; or (B) the offer and sale is outside the United States and
to
other than a U.S. Person.
(c)As
used
in this Agreement, the term “United States” means and includes the United States
of America, its territories and possessions, any State of the United States,
and
the District of Columbia, and the term “U.S. Person” means:
(i) A
natural
person resident in the United States.
(ii) Any
partnership or corporation organized or incorporated under the laws of the
United States.
(iii) Any
estate of which any executor or administrator is a U.S. person.
(iv) Any
trust
of which any trustee is a U.S. person.
(v) Any
agency or branch of a foreign entity located in the United States.
(vi) Any
nondiscretionary account or similar account (other than an estate or trust)
held
by a dealer or other fiduciary for the benefit or account of a U.S.
person.
(vii) Any
discretionary account or similar account (other than an estate or trust) held
by
a dealer or other fiduciary organized, incorporated and (if an individual)
resident in the United States.
7
(viii) A
corporation or partnership organized under the laws of any foreign jurisdiction
and formed by a U.S. person principally for the purpose of investing in
securities not registered under the Securities Act, unless it is organized
or
incorporated, and owned, by accredited investors (as defined in Rule 501(a)
under the Securities Act) who are not natural persons, estates or
trusts.
As
used
in this Agreement, the term “Non-U.S. Person” means any person who is not a U.S.
Person or is deemed not to be a U.S. Person under Rule 902(k)(2) of the
Securities Act.
(d)Such
Non-U.S. Person agrees that with respect to the Common Stock, the Warrants
and
the Common Stock underlying the Warrants until the expiration of the Restricted
Period:
(i) Such
Non-U.S. Person, its agents or its representatives have not and will not solicit
offers to buy, offer for sale or sell any of the securities, or any beneficial
interest therein in the United States or to or for the account of a U.S. Person
during the Restricted Period.
(ii) Notwithstanding
the foregoing, prior to the expiration of the Restricted Period, the securities
may be offered and sold by the holder thereof only if such offer and sale is
made in compliance with the terms of this Agreement and either: (A) if the
offer
or sale is within the United States or to or for the account of a U.S. Person,
the securities are offered and sold pursuant to an effective registration
statement or pursuant to Rule 144 under the Securities Act or pursuant to an
exemption from the registration requirements of the Securities Act; or (B)
the
offer and sale is outside the United States and to other than a U.S. Person.
(iii) Such
Non-U.S. Person shall not engage in hedging transactions with regard to the
securities unless in compliance with the Securities Act.
The
foregoing restrictions are binding upon subsequent transferees of the
securities, except for transferees pursuant to an effective registration
statement. Such Non-U.S. Person agrees that after the Restricted Period, the
securities may be offered or sold within the United States or to or for the
account of a U.S. Person only pursuant to applicable securities
laws.
(e) Such
Non-U.S. Person has not engaged, nor is it aware that any party has engaged,
and
such Non-U.S. Person will not engage or cause any third party to engage, in
any
directed selling efforts (as such term is defined in Regulation S) in the United
States with respect to the Common Stock, the Warrants or the Common Stock
underlying the Warrants.
(f) Such
Non-U.S. Person: (i) is domiciled and has its principal place of business
outside the United States; (ii) certifies it is not a U.S. Person and is not
acquiring the Common Stock or Warrants for the account or benefit of any U.S.
Person; and (iii) at the time of the Closing Date, the Non-U.S. Person or
persons acting on Non-U.S. Person’s behalf in connection therewith will be
located outside the United States.
(g) At
the
time of offering to such Non-U.S. Person and communication of such Non-U.S.
Person’s order to purchase the Common Stock and Warrants and at the time of such
Non-U.S. Person’s execution of this Agreement, the Non-U.S. Person or persons
acting on Non-U.S. Person’s behalf in connection therewith were located outside
the United States.
(h) Such
Non-U.S. Person is not a “distributor” (as defined in Regulation S) or a
“dealer” (as defined in the Securities Act).
(i) Such
Non-U.S. Person acknowledges that the Company shall make a notation in its
stock
books regarding the restrictions on transfer set forth in this Section 4
and shall transfer such securities on the books of the Company only to the
extent consistent therewith.
8
In
particular, such Non-U.S. Person acknowledges that the Company shall refuse
to
register any transfer of the Common Stock, the Warrants or the Common Stock
underlying the Warrants not made in accordance with the provisions of Regulation
S, pursuant to registration under the Securities Act or pursuant to an available
exemption from registration.
(j) The
undersigned understands and agrees that the certificates for the Common Stock
being purchased hereunder shall bear substantially the following legend until
(i) such securities shall have been registered under the Securities Act pursuant
to a registration statement that has been declared effective or (ii) in the
opinion of counsel reasonably acceptable to the Company, such securities may
be
sold without registration under the Securities Act as well as any applicable
“Blue Sky” or state securities laws:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT IN ACCORDANCE WITH THE PROVISIONS
OF
REGULATION S PROMULGATED UNDER THE SECURITIES ACT, PURSUANT TO REGISTRATION
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION. HEDGING TRANSACTIONS INVOLVING THE SHARES REPRESENTED HEREBY
MAY
NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. THIS
CERTIFICATE MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A
CONDITION PRECEDENT TO THE SALE, PLEDGE, HYPOTHECATION OR ANY OTHER TRANSFER
OF
ANY INTEREST IN ANY OF THE SHARES REPRESENTED BY THIS CERTIFICATE.
(k) The
undersigned understands and agrees that the Warrants being issued hereunder
shall bear the legend set forth on the “Form of Warrant”, attached hereto as
Exhibit
A,
until
(i) the shares of Common Stock underlying the Warrants shall have been
registered under the Securities Act pursuant to a registration statement that
has been declared effective or (ii) in the opinion of counsel reasonably
acceptable to the Company, such securities may be sold without registration
under the Securities Act as well as any applicable “Blue Sky” or state
securities laws.
(l) The
investor hereby represents that the investor is satisfied as to the full
observance of the laws of such investor’s jurisdiction in connection with any
invitation to subscribe for the securities, including (i) the legal requirements
within such investor’s jurisdiction for the purchase of the securities, (ii) any
foreign exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained and (iv) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale or transfer of such securities. Such investor’s
subscription and payment for, and such investor’s continued beneficial ownership
of, the Common Stock, the Warrants and the Common Stock underlying the Warrants,
will not violate any applicable securities or other laws of such investor’s
jurisdiction.
(m) The
investor has full power and authority to enter into this Agreement, the
execution and delivery of which has been duly authorized, if applicable, and
this Agreement constitutes a valid and legally binding obligation of the
undersigned enforceable against the undersigned in accordance with its terms,
except as such enforceability may be limited by general principles of equity
or
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement
of
applicable creditors’ rights and remedies.
(n) The
information in the “Investor Questionnaire,” attached hereto as Exhibit
B,
completed and executed by the undersigned (the “Investor Questionnaire”) is
accurate and true in all material respects.
(o) The
undersigned is not relying on the Company or its affiliates with respect to
economic considerations involved in this investment.
(p) The
undersigned understands and agrees that the undersigned must bear the economic
risk of the undersigned’s purchase because, among other reasons, neither the
Common Stock nor the Common Stock underlying the Warrants have been registered
under the Securities Act or under the securities laws of any state and,
therefore, cannot be resold, assigned or otherwise disposed of unless they
are
subsequently registered under the Securities Act and under the applicable
securities laws of such states, or an exemption from such registration is
available.
9
(q) No
representations or warranties have been made to the undersigned by the Company
or any of its officers, employees, agents, affiliates or subsidiaries, other
than any representations of the Company contained herein, and in subscribing
for
the Common Stock and Warrants the undersigned is not relying upon any
representations other than any contained herein; provided that nothing contained
herein shall modify, amend or affect the undersigned’s right to rely on the
Company’s representations and warranties contained herein.
(r) The
undersigned understands and acknowledges that the undersigned’s purchase of the
securities is a speculative investment that involves a high degree of risk
and
the potential loss of the undersigned’s entire investment.
(s) Neither
the SEC nor any state securities commission has approved the Common Stock or
Warrants, or passed upon or endorsed the merits of the Private Placement or
confirmed the accuracy or determined the adequacy of any information provided
to
the undersigned by the Company.
(t) The
undersigned and the undersigned’s Advisors, if any, have had a reasonable
opportunity to ask questions of and receive answers from a person or persons
acting on behalf of the Company concerning the Private Placement and the
business, financial condition, results of operations and prospects of the
Company, and all such questions have been answered to the reasonable
satisfaction of the undersigned and the undersigned’s Advisors, if
any.
(u) The
undersigned is unaware of, is in no way relying on, and did not become aware
of
the Private Placement through or as a result of, any article, notice,
advertisement or other communication published in any newspaper, magazine or
similar media or broadcast over television, radio or over the Internet, in
connection with the offering and sale of the Common Stock and Warrants and
is
not subscribing for the securities and did not become aware of the offering
of
the securities through or as a result of any seminar or meeting to which the
undersigned was invited by, or any solicitation of a subscription by, a person
not previously known to the undersigned in connection with investments in
securities generally.
(v) The
undersigned has not engaged any placement agent, financial advisor or broker,
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 and, in turn, to be paid to other selected
dealers.
(w) The
foregoing representations, warranties and agreements shall survive the
Closing.
5. COMPANY”S
REPRESENTATIONS AND WARRANTIES
The
Company hereby acknowledges, agrees with and represents and warrants to the
undersigned, as follows:
(a) The
Company is duly organized and validly existing in good standing under the laws
of Nevada, and has the requisite power and authority to own its properties
and
to carry on its business as now being conducted.
(b) The
Company has the corporate power and authority to execute and deliver this
Agreement and issue the Common Stock and Warrants and to perform its obligations
hereunder. This Agreement has been duly authorized, executed and delivered
by
the Company and is valid, binding and enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to,
or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.
10
(c) The
Common Stock and Warrants to be issued to the undersigned pursuant to this
Agreement, when issued and delivered in accordance with the terms of this
Agreement, will be duly and validly issued and will be fully paid and
nonassessable.
(d) Neither
the execution and delivery nor the performance of this Agreement by the Company
will conflict with the Company’s Articles of Incorporation or Bylaws, as
amended, as the case may be, or result in a breach of any terms or provisions
of, or constitute a default under, any material contract, agreement or
instrument to which the Company is a party or by which the Company is
bound.
(e) Other
than in connection with the requisite filings under applicable “Blue Sky” laws
and the filing with the SEC of a Form D, the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration
with,
any court, governmental agency or any regulatory or self-regulatory agency
or
any other person in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement, in each case in accordance
with the terms hereof or thereof.
(f) Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of
the
Common Stock and Warrants.
(g) This
Agreement does not contain any untrue statement of a material fact or omit
to
state any material fact with respect to the Company necessary in order to make
the statements made herein, in the light of the circumstances under which they
were made, not misleading.
(h) The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC (the “SEC Documents”) pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have
been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in
all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(i) The
Company is in compliance with all requirements for, and its Common Stock is
quoted on the Electronic Over-the-Counter Bulletin Board system.
(j) The
authorized capital stock of the Company currently consists of 250,000,000 shares
of Common Stock and 50,000,000 shares of preferred stock, $.001 par value (the
“Preferred Stock”), of which 55,000,000 shares of Common Stock and no shares of
Preferred Stock are issued and outstanding. Except as set forth below, there
are
no outstanding shares of Preferred Stock, options, rights, warrants, debentures,
instruments, convertible securities or other agreements or commitments
obligating the Company to issue any additional shares of its capital stock
of
any class. At the closing of the Bridge Financing, the bridge note holders
will
receive Bridge Warrants in the amount of (1) warrant to purchase (1) share
of
Common Stock, at an exercise price of $.75 per share, for every $3.50 invested
in the Company in connection with the Bridge Financing. In addition, upon the
earlier to occur of the Maturity Date or the consummation of the PIPE, the
bridge note holders will be entitled to a Repayment Amount equal to 25% in
excess of the principal and accrued interest then due and outstanding under
the
terms of the notes. At such time, the bridge note holders will have the right
to
convert (in whole or in part) 110% of the Repayment Amount into shares of Common
Stock of the Company at the fair market value of each share of Common Stock,
or
at the price per share of Common Stock sold to investors in the PIPE, as the
case may be. Lastly, concurrently with the Closing, the Company will close
the
Series A Private Placement. The investor in the Series A Private Placement
will
receive an aggregate of 7,142,857 shares of Series A Preferred Stock and a
warrant to purchase 1,785,714 shares of Common Stock.
11
(k) Within
the times and in the manner prescribed by law, the Company has filed all
federal, state and local tax returns required by law and has paid all taxes,
assessments and penalties due and payable.
(l) The
Company is not a defendant in any suit, action, arbitration, or legal,
administrative or other proceeding, or governmental investigation which is
pending or, to the best knowledge of the Company, threatened against or
affecting the Company or its business, assets or financial condition. The
Company is not in default with respect to any order, writ, injunction or decree
of any federal, state, local or foreign court, department, agency or
instrumentality applicable to it. The Company is not engaged in any material
litigation to recover monies due to it.
(m) The
foregoing representations, warranties and agreements shall survive the
Closing.
6. REGISTRATION
RIGHTS
(a) The
Company shall file a Registration Statement with the SEC covering the resale
of
the Common Stock and the shares of Common Stock into which the Warrants are
exercisable (the “Warrant Shares”) no later than thirty (30) calendar days after
the Company closes the PIPE (the “Filing Date”), except that if the SEC limits
the number of securities that may be registered on the Registration Statement,
such number of securities shall be cutback (in the following order) to comply
with any such limitation imposed by the SEC: (i) shares of Common Stock
underlying any and all warrants to be registered, (ii) Common Stock and (iii)
shares of Common Stock underlying Series A Preferred Stock. Any required
cutbacks shall be applied to the investors pro-rata in accordance with the
number of securities sought to be included in such Registration Statement.
The
Company shall use its best efforts to have the Registration Statement declared
effective by the SEC as soon as possible after the Filing Date.
(b) If
the
Registration Statement is not filed within thirty (30) calendar days of the
closing of the PIPE or is not declared effective by the SEC for any reason
within one hundred fifty (150) calendar days after the closing of the PIPE,
the
Company will be required to pay the undersigned an amount (“Periodic Amount”)
equal to 1.5% of the purchase price of the securities for each thirty (30)
day
period (pro rated for a shorter period), in each case until the Registration
Statement is filed or declared effective, as the case may be. In no event will
the aggregate Periodic Amounts exceed 10% of the purchase price of the
securities. Periodic Amount payments shall be made by the Company to the
investor if effectiveness of the Registration Statement is suspended for more
than thirty (30) consecutive days. In no event shall the Company be liable
for
liquidated damages as to any shares of Common Stock or any Warrant Shares which
are not permitted by the SEC to be included in the Registration Statement solely
due to comments received by the Company from the SEC.
(c) The
Company may request the undersigned to furnish the Company with such information
with respect to the undersigned and the undersigned’s proposed distribution of
securities being purchased hereunder pursuant to the Registration Statement
as
the Company may from time to time reasonably request in writing or as shall
be
required by law or by the SEC in connection therewith, and the undersigned
agrees to furnish the Company with such information.
7. MISCELLANEOUS
PROVISIONS
7.1. Modification.
Neither this Agreement, nor any provisions hereof, shall be waived, modified,
discharged or terminated except by an instrument in writing signed by the party
against whom any waiver, modification, discharge or termination is
sought.
7.2. Notices.
Any party may send any notice, request, demand, claim or other communication
hereunder to the undersigned at the address set forth on the signature page
of
this Agreement or to the Company at the following address: 0000 Xxxxxx Xxxxx
Xxxxxx Xxxx., Xxxxx 000, Xxxxxxx Xxxxx, XX 00000, Attn: Xxxxxxxxx Xxxxx,
facsimile: (000) 000-0000, using any means (including personal delivery,
expedited courier, messenger service, facsimile, ordinary mail or electronic
mail), but no such notice, request, demand, claim or other communication will
be
deemed to have been duly given unless and until it actually is received by
the
intended recipient. Any party may change the address to which notices, requests,
demands, claims and other communications hereunder are to be delivered by giving
the other parties written notice in the manner herein set
forth.
12
7.3. Counterparts;
Facsimile Signature. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. This Agreement may be executed by
facsimile signature, any which such signature shall be deemed an original
signature for all purposes hereof.
7.4. Binding
Effect. Except as otherwise provided herein, this Agreement shall be binding
upon, and inure to the benefit of, the parties to this Agreement and their
heirs, executors, administrators, successors, legal representatives and assigns.
If the undersigned is more than one person or entity, the obligation of the
undersigned shall be joint and several and the agreements, representations,
warranties and acknowledgments contained herein shall be deemed to be made
by,
and be binding upon, each such person or entity and his or its heirs, executors,
administrators, successors, legal representatives and assigns.
7.5. Assignability.
This Agreement shall be binding upon and inure to the benefit of the parties
and
their respective successors and assigns, including any purchasers of the
securities. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of at
least a majority of the aggregate number of securities issued and issuable
hereunder. The undersigned may assign some or all of its rights hereunder in
connection with transfer of any of its securities without the consent of the
Company, in which event such assignee shall be deemed to be a buyer hereunder
with respect to such assigned; provided, however, that any such assignee shall
be deemed to have made, with respect to such assignee, all of the
representations, warranties and covenants of the undersigned contained
herein.
7.6. Governing
Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of Nevada, without giving effect to conflicts of law
principles.
[REMAINDER
OF THE PAGE INTENTIONALLY LEFT BLANK]
13
WIRE
TRANSFER INSTRUCTIONS
(to
be
provided)
14
ALL
SUBSCRIBERS MUST COMPLETE THIS PAGE
IN
WITNESS WHEREOF, the undersigned has executed this Agreement on the ___ day
of
________, 2007.
|
___________________*
|
X
$0.70 for each share of Common Stock
|
=
$
|
_____________________
|
||
| Common Stock subscribed for |
Aggregate
Purchase Price
|
*
Fractional shares of Common Stock will be rounded down.
Warrants
subscribed for = Total number of shares of Common Stock subscribed for / 2
=
_____________ (fractional interests will be rounded down).
Manner
in
which Title is to be held (Please Check One):
|
1.
|
o
|
Individual
|
7.
|
o
|
Trust/Estate/Pension
or Profit sharing Plan Date Opened:
|
|
|
2.
|
o
|
Joint
Tenants with Right of Survivorship
|
8.
|
o
|
As
a Custodian for Under the Uniform Gift to Minors Act of the State
of
|
|
|
3.
|
o
|
Community
Property
|
9.
|
o
|
Married
with Separate Property
|
|
|
4.
|
o
|
Tenants
in Common
|
10.
|
x
|
Xxxxx
|
|
|
5.
|
o
|
Corporation/Partnership/
Limited Liability Company
|
11.
|
o
|
Tenants
by the Entirety
|
|
|
6.
|
o
|
XXX
|
IF
MORE
THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN.
INDIVIDUAL
SUBSCRIBERS MUST COMPLETE PAGE 16.
SUBSCRIBERS
WHICH ARE ENTITIES MUST COMPLETE PAGE 17.
15
BY
NATURAL PERSONS
Exact
Name in Which Title is to be Held
|
Name
(Please Print)
|
|
||
|
Residence:
Number and Street
|
|
||
|
City,
State and Zip Code
|
|
||
|
Social
Security Number (if applicable)
|
|
||
|
Telephone
Number
|
|
||
|
Fax
Number (if available)
|
|
||
|
E-Mail
(if available)
|
|
||
|
(Signature)
|
|
ACCEPTED
this ____ day of ________, 2007, on behalf of New Design Cabinets,
Inc.
|
By:
|
|
|
Its:
President
|
|
16
EXECUTION
BY SUBSCRIBER WHICH IS AN ENTITY
(Corporation,
Partnership, Trust, Etc.)
|
Date
of Incorporation or Organization
|
|
||
|
State
of Principal Office
|
|
||
|
Federal
Taxpayer ID Number (if applicable)
|
|
||
|
Office
Address
|
|
||
|
City,
State and Zip Code
|
|
||
|
Telephone
Number
|
|
||
|
Fax
Number (if available)
|
|
||
|
E-mail
(if available)
|
|
||
|
By:
|
|
||
|
Name:
|
|
||
|
Its:
|
|
ACCEPTED
this ____ day of ________, 2007, on behalf of New Design Cabinets,
Inc.
