SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”)
is
dated as of April ___, 2008 among Smart Energy Solutions, Inc., a Nevada
corporation (the “Company”),
and
each purchaser identified on the signature pages hereto (each, a “Purchaser”
and
collectively the “Purchasers”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”),
and
Rule 506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, securities of the Company as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, the receipt and adequacy of
which
are hereby acknowledged, the Company and each Purchaser agree as
follows:
ARTICLE
I
PURCHASE
AND SALE
1.1 Subscription.
The
Purchaser, intending to be legally bound, hereby irrevocably subscribes for
and
agrees to purchase the number of shares of Common Stock (hereafter defined)
and
Warrants set forth on the signature page hereof in a transaction exempt from
the
registration requirements of the Securities Act. The Purchaser understands
that
the shares of Common Stock and Warrants are being sold in connection with an
offering (the “Offering”)
by the
Company of $4,000,000 (the “Offering
Amount”).
The
Offering shall consist of the following:
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(1)
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Common
Stock (a “Purchased
Share”);
and
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(2)
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one
common stock purchase warrant for each four (4) Purchased Shares,
as
further described in the Warrant Agreement attached hereto as Exhibit
A,
each Warrant entitling the Purchaser to purchase one share of common
stock
at
a price per share equal to one hundred percent (100%) of the Purchase
Price of the Common Stock sold in the Offering,
expiring five years after the issue date thereof (a “Warrant”).
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For
purposes of this Agreement, (i) “Common
Stock”
means
the common stock of the Company; (ii) “Securities”
means
the Purchased Shares, the Warrant and the Warrant Shares; and (iii)
“Warrant
Share”
means
a
share of Common Stock issuable upon exercise of a Warrant.
1.2 Purchase
of Common Stock.
The
Purchaser understands and acknowledges that the purchase price (the
“Purchase
Price”)
to be
remitted to the Company in exchange for the shares of Common Stock shall be
calculated as a forty percent (40%) discount to the average closing price of
the
Common Stock as quoted on the over-the-counter market under the symbol “SMGY”
fifteen (15) consecutive trading days prior to the closing. The Company shall
deliver the Purchased Shares and the Warrants to the Purchaser promptly after
the acceptance of this Agreement by the Company as provided in Section 2.1
below.
ARTICLE
II
ESCROW;
CLOSING
2.1 Escrow.
The
Purchaser agrees that prior to receipt and acceptance of the Offering Amount,
the Purchase Price will be deposited in an escrow account with Capital
One Bank, 00-00X Xxxxxxxx Xxxxxx, Xxxx Xxxx, XX 00000
(the
“Escrow
Agent”).
In
the event that the Offering Amount is not received prior to April 30, 2008,
unless the Company and Placement Agent mutually agree to extend the Offering
up
and through May 31, 2008, the termination date of this Offering, this Agreement
and any other agreements entered into between the Purchaser and the Company
shall thereafter have no force and effect and the Company will cause the return
of the deposited Purchase Price to the Purchaser without interest. If the amount
of accepted subscription funds held in escrow equals or exceeds the Offering
Amount prior to such date, the initial closing of this Offering may occur and
pursuant to the terms of the Escrow Agreement, which is attached hereto as
Exhibit
B,
the
Company shall instruct the Escrow Agent to release all the accepted Purchase
Prices in escrow to the Company. Subsequently, prior to the termination of
the
Offering, any further accepted Purchase Prices up to the Offering Amount
received by the Escrow Agent will be released by a similar instruction in one
or
a number of subsequent closings, including a closing at the effective time
of
the termination of this Offering.
If
the
Company accepts all or a portion of the Purchaser’s subscription, the Purchaser
agrees that at such time this Agreement shall become effective with respect
to
the Company and the Purchaser, and the Company will promptly deliver to the
Purchaser an executed copy of this Agreement, a stock certificate representing
the Purchased Shares and a Warrant.
2.2 Payment.
Payment
for the Common Stock purchased hereunder can be made by (1) a personal check,
cashier’s check or money order, or (2) electronic fund transfer (bank wire).
If
submitting payment by a personal check, cashier’s check or money order, payment
shall be made payable to "Capital
One Bank as Escrow Agent for Smart Energy Solutions, Inc.".
-2-
If
submitting payment by electronic fund transfer (bank wire), payment shall be
made to the Escrow Agent as follows:
Capital
One Bank
00-00X
Xxxxxxxx Xxxxxx
Xxxx
Xxxx, XX 00000
Fax:
(000) 000-0000
Phone:
(000) 000-0000
ABA:
000000000
SWIFT:
NFBKUS33
ACH:
021407912
7057055574
Master
Escrow Account: 7057055574
Account
name: Capital One Bank as Escrow Agent for Smart Energy Solutions,
Inc.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
3.1 Representations
and Warranties of Purchaser.
The
Purchaser hereby acknowledges, represents and warrants to, and agrees with,
the
Company and its affiliates as follows:
(a) Investment
Intent.
The
Purchaser is acquiring the Securities for his own account as principal, not
as a
nominee or agent, for investment purposes only, and not with a view to, or
for,
resale, distribution or fractionalization thereof in whole or in part and no
other person has a direct or indirect beneficial interest in such Securities
or
any portion thereof. Further, the Purchaser does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
grant
participations to such person or to any third person, with respect to the
Purchased Shares and Warrants for which the Purchaser is subscribing or any
part
of the Securities.
(b) Authority.
The
Purchaser has full power and authority to enter into this Agreement, the
execution and delivery of this Agreement has been duly authorized, and this
Agreement constitutes a valid and legally binding obligation of the
Purchaser.
(c) No
General Solicitation.
The
Purchaser is not subscribing for the Purchased Shares and Warrants as a result
of or subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, or any solicitation of a subscription by a person
previously not known to the Purchaser in connection with investment securities
generally.
(d) No
Obligation to Register Shares.
The
Purchaser understands that, except as set forth in the Registration Rights
Agreement which is attached hereto as Exhibit
C,
the
Company is under no obligation to register the Securities under the Securities
Act, or to assist the Purchaser in complying with the Securities Act or the
securities laws of any state of the United States or of any foreign
jurisdiction.
-3-
(e) Investment
Experience.
The
Purchaser is (i) experienced in making investments of the kind described in
this
Agreement and the related documents, (ii) able, by reason of the business and
financial experience of its officers (if an entity) and professional advisors
(who are not affiliated with or compensated in any way by the Company or any
of
its affiliates or selling agents), to protect its own interests in connection
with the transactions described in this Agreement, and the related documents,
and (iii) able to afford the entire loss of its investment in the
Securities.
(f) Exemption
from Registration.
The
Purchaser acknowledges his understanding that the offering and sale of the
Securities is intended to be exempt from registration under the Securities
Act.
In furtherance thereof, in addition to the other representations and warranties
of the Purchaser made herein, the Purchaser further represents and warrants
to
and agrees with the Company and its affiliates as follows:
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(i)
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The
Purchaser realizes that the basis for the exemption may not be present
if,
notwithstanding such representations, the Purchaser has in mind merely
acquiring the Securities for a fixed or determinable period in the
future,
or for a market rise, or for sale if the market does not rise. The
Purchaser does not have any such
intention;
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(ii)
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The
Purchaser has the financial ability to bear the economic risk of
his
investment, has adequate means for providing for his current needs
and
personal contingencies and has no need for liquidity with respect
to his
investment in the Company;
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(iii)
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The
Purchaser 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 Securities;
and
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(iv)
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The
Purchaser has been provided an opportunity for a reasonable period
of time
prior to the date hereof to obtain additional information concerning
the
offering of the Securities, the Company and all other information
to the
extent the Company possesses such information or can acquire it without
unreasonable effort or expense.
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(g) Economic
Considerations.
The
Purchaser is not relying on the Company, or its affiliates or agents or any
placement agent with respect to economic considerations involved in this
investment. The Purchaser has relied solely on its own advisors.
-4-
(h) No
Other Company Representations.
No
representations or warranties have been made to the Purchaser by the Company,
or
any officer, employee, agent, affiliate or subsidiary of the Company, other
than
the representations of the Company contained herein, and in subscribing for
the
Securities the Purchaser is not relying upon any representations other than
those contained herein.
(i)
Resales;
Legend.
Any
resale of the Securities shall only be made in compliance with exemptions from
registration afforded by the Securities Act and the rules and regulations
promulgated thereunder. The Purchaser will not offer to sell or sell the
Securities in any jurisdiction unless the Purchaser obtains all required
consents, if any. Certificates evidencing the Securities may bear the following
legend, including without limitation, any legend required by the laws of the
jurisdiction in which the Purchaser resides, and any legend required by any
applicable law, including without limitation, any legend that will be useful
to
aid compliance with Regulation D or other regulations adopted by the Securities
and Exchange Commission (the “SEC”)
under
the Securities Act:
“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS TRANSFERRED PURSUANT TO ANY VALID
EXEMPTION FROM REGISTRATION AVAILABLE UNDER SUCH ACT.”
(j) Applicability
of Exemption.
The
Purchaser understands that the Securities are being offered and sold to him
in
reliance on an exemption from the registration requirements of United States
federal and state securities laws under Regulation D promulgated under the
Securities Act and that the Company is relying upon the truth and accuracy
of
the representations, warranties, agreements, acknowledgments and understandings
of the Purchaser set forth herein in order to determine the applicability of
such exemptions and the suitability of the Purchaser to acquire the Securities.
(k) Accredited
Investor.
The
Purchaser is an “accredited investor” as that term is defined in Rule 501 of the
General Rules and Regulations under the Securities Act by reason of Rule
501(a)(3).
(l) Potential
Loss of Investment.
The
Purchaser understands that an investment in the Securities is a speculative
investment which involves a high degree of risk and the potential loss of his
entire investment.
(m) Investment
Commitment.
The
Purchaser's overall commitment to investments which are not readily marketable
is not disproportionate to the Purchaser's net worth, and an investment in
the
Securities will not cause such overall commitment to become
excessive.
-5-
(n) Receipt
of Information.
The
Purchaser has received all documents, records, books and other information
pertaining to the Purchaser’s investment in the Company that has been requested
by the Purchaser. The Purchaser has reviewed all reports and other documents
filed by the Company with the SEC (the “SEC
Documents”),
including without limitation, the risk factors disclosed in the SEC
Documents.
(o) Investor
Questionnaire.
The
Purchaser represents and warrants to the Company that all information that
the
Purchaser has provided to the Company, including, without limitation, the
information in the Investor Questionnaire provided to the Company (the “Investor
Questionnaire”), is correct and complete as of the date hereof.
(p) No
Reliance.
Other
than as set forth herein, the Purchaser is not relying upon any other
information, representation or warranty by the Company or any officer, director,
stockholder, agent or representative of the Company or
any placement agent in
determining to invest in the Securities. The Purchaser has consulted, to the
extent deemed appropriate by the Purchaser, with the Purchaser’s own advisers as
to the financial, tax, legal and related matters concerning an investment in
the
Securities and on that basis believes that his investment in the Securities
is
suitable and appropriate for the Purchaser.
(q) No
Governmental Review.
The
Purchaser is aware that no federal or state agency has (i) made any finding
or
determination as to the fairness of this investment, (ii) made any
recommendation or endorsement of the Securities or the Company, or (iii)
guaranteed or insured any investment in the Securities or any investment made
by
the Company.
(r) Price
of Securities.
The
Purchaser understands that the price of the Securities offered hereby bear
no
relation to the assets, book value or net worth of the Company and were
determined arbitrarily by the Company. The Purchaser further understands that
there is a substantial risk of further dilution on the Purchaser’s investment in
the Company.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
4.1
Representations
and Warranties of the Company.
The
Company represents and warrants to the Purchaser as follows:
(a) Organization
of the Company.
The
Company is a corporation duly organized and validly existing and in good
standing under the laws of the State of Nevada.
-6-
(b) Authority.
(i) The
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement and to issue the shares of Common
Stock, the Warrants and the Warrant Shares; (ii) the execution and delivery
of
this Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or
its
Board of Directors or stockholders is required; and (iii) this Agreement has
been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally
the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application.
(c) Exemption
from Registration; Valid Issuances.
The
sale and issuance of the Securities, in accordance with the terms and on the
basis of the representations and warranties of the Purchaser set forth herein,
may and shall be properly issued by the Company to the Purchaser. When issued
and paid for as herein provided, the Securities shall be duly and validly
issued, fully paid, and nonassessable. Neither the sales of the Securities
pursuant to, nor the Company's performance of its obligations under, this
Agreement shall (i) result in the creation or imposition of any liens, charges,
claims or other encumbrances upon the Securities or any of the assets of the
Company, or (ii) entitle the other holders of the Common Stock of the Company
to
preemptive or other rights to subscribe to or acquire the Common Stock or other
securities of the Company. The Securities shall not subject the Purchaser to
personal liability by reason of the ownership thereof.
(d) No
General Solicitation or Advertising in Regard to this
Transaction.
Neither
the Company nor any of its affiliates nor any person acting on its or their
behalf has conducted or will conduct any general solicitation (as that term
is
used in Rule 502(c) of Regulation D) or general advertising with respect to
the
Securities.
(e) SEC
Documents.
To the
best of Company's knowledge, the Company has not provided to the Purchaser
any
information that, according to applicable law, rule or regulation, should have
been disclosed publicly prior to the date hereof by the Company, but which
has
not been so disclosed. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Securities Exchange Act of 1934, as the case may be, and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and
none
of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents comply as to form and substance in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with respect thereto.
Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (a) as may be otherwise indicated in such financial statements or the
notes thereto or (b) in the case of unaudited interim statements, to the extent
they may not include 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 operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
-7-
ARTICLE
V
MISCELLANEOUS
5.1 Indemnity.
The
Purchaser agrees to indemnify and hold harmless the Company, its officers and
directors, employees and its affiliates and their respective successors and
assigns and each other person, if any, who controls any thereof, against any
loss, liability, claim, damage and expense whatsoever (including, but not
limited to, any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation commenced or
threatened or any claim whatsoever) arising out of or based upon any false
representation or warranty or breach or failure by the Purchaser to comply
with
any covenant or agreement made by the Purchaser herein or in any other document
furnished by the Purchaser in connection with this transaction.
5.2 Modification.
Neither
this Agreement nor any provision hereof shall be modified, discharged or
terminated except by an instrument in writing signed by the
Company.
5.3 Notices.
Any
notice, demand or other communication which a party hereto may be required,
or
may elect, to give to anyone interested hereunder shall be sufficiently given
if
(a) deposited, postage prepaid, in a United States mail letter box, registered
or certified mail, return receipt requested, addressed to such address as
indicated on the signature page hereof, or (b) delivered personally at such
address.
5.4 Execution
and Counterparts.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original thereof.
5.5 Binding
Effect.
Except
as otherwise provided herein, this Agreement shall be binding upon and inure
to
the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives and assigns. If the Purchaser is more than
one
person, the obligation of the Purchaser shall be joint and several and the
agreements, representations, warranties and acknowledgments herein contained
shall be deemed to be made by and be binding upon each such person and his
heirs, executors, administrators and successors.
-8-
5.6 Entire
Agreement.
This
Agreement and the documents referenced herein contain the entire agreement
of
the parties and there are no representations, covenants or other agreements
except as stated or referred to herein and therein.
5.7 Assignability.
This
Agreement is not transferable or assignable by the Purchaser, and any such
attempted assignment shall be null and void and of no force or
effect.
5.8 Applicable
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York, without giving effect to conflicts of law
principles.
5.9 Pronouns.
The use
herein of the masculine pronouns "him" or "his" or similar terms shall be deemed
to include the feminine and neuter genders as well and the use herein of the
singular pronoun shall be deemed to include the plural as well.
[Remainder
of Page Intentionally Omitted; Signature Pages to Follow]
-9-
IN
WITNESS WHEREOF, the Purchaser has executed this Securities Purchase Agreement
on the
day of
________, 2008.
Amount
of
Investment:
$_____________________
INDIVIDUAL
INVESTOR:
______________________
Name:
Address:
Social
Security Number: ___________
PARTNERSHIP,
CORPORATION, TRUST,
CUSTODIAL
ACCOUNT, OTHER INVESTOR
___________________________
(Print
Name of Entity)
By: __________________
Name:
Title:
Address:
Taxpayer
Identification Number:_____________
-10-
ACCEPTANCE
OF SUBSCRIPTION
(to
be
filed out only
by the
Company)
The
Company hereby accepts the above application for subscription for Common Stock
and Warrants on behalf of the Company.
| Dated: ____________ ___, 2008 |
By: ______________________________
Name:
Title:
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INVESTOR
QUESTIONNAIRE
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A.
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General
Information
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1.
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Print
Full Name of Investor:
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Individual:
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____________________________________
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First,
Middle, Last
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Partnership,
Corporation, Trust, Custodial Account, Other:
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____________________________________
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Name
of Entity
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2.
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Address
for Notices:
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____________________________________
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____________________________________
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____________________________________
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3.
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Name
of Primary Contact Person:
Title:
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____________________________________
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4.
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Telephone
Number:
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____________________________________
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5.
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E-Mail
Address:
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____________________________________
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6.
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Facsimile
Number:
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____________________________________
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7.
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Permanent
Address:
(if
different from Address for Notices above)
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____________________________________
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-12-
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8.
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Authorized
Signatory:
Title:
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____________________________________
____________________________________
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Telephone
Number:
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____________________________________
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Facsimile
Number:
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____________________________________
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9.
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U.S.
Investors Only:
U.S.
Taxpayer Identification or Social
Security
Number:
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____________________________________
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B. Accredited
Investor Status
The
Investor represents and warrants that the Investor is an “accredited investor”
within the meaning of Rule 501 of Regulation D under the Securities Act of
1933,
as amended (the “Securities Act”), and has checked the box or boxes below which
are next to the categories under which the Investor qualifies as an accredited
investor:
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FOR
INDIVIDUALS:
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o
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A
natural person with individual net worth (or joint net worth with
spouse)
in excess of $1 million. For purposes of this item, “net worth” means the
excess of total assets at fair market value, including home, home
furnishings and automobiles (and including property owned by a spouse),
over total liabilities.
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o
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A
natural person with individual income (without including any income
of the
Investor’s spouse) in excess of $200,000, or joint income with spouse of
$300,000, in each of the two most recent years and who reasonably
expects
to reach the same income level in the current
year.
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-13-
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FOR
ENTITIES:
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o
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A
bank as defined in Section 3(a)(2) of the Securities Act or any savings
and loan association or other institution as defined in Section 3(a)(5)(A)
of the Securities Act, whether acting in its individual or fiduciary
capacity.
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o
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An
insurance company as defined in Section 2(13) of the Securities
Act.
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o
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A
broker-dealer registered pursuant to Section 15 of the Securities
Exchange
Act of 1934.
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o
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An
investment company registered under the Investment Company Act of
1940, as
amended (the “Investment Company Act”).
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o
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A
business development company as defined in Section 2(a)(48) of the
Investment Company Act.
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o
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A
small business investment company licensed by the Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958.
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o
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A
private business development company as defined in Section 202(a)(22)
of
the Investment Advisers Act of 1940.
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o
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An
organization described in Section 501(c)(3) of the Internal Revenue
Code,
a corporation, Massachusetts or similar business trust, or partnership,
not formed for the specific purpose of acquiring the shares of Common
Stock, with total assets in excess of $5 million.
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o
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A
trust with total assets in excess of $5 million not formed for the
specific purpose of acquiring the shares of Common Stock, whose purchase
is directed by a person with such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and
risks
of an investment in the Company and the purchase of the shares of
Common
Stock.
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o
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An
employee benefit plan within the meaning of ERISA if the decision
to
invest in the shares of Common Stock is made by a plan fiduciary,
as
defined in Section 3(21) of ERISA, which is either a bank, savings
and
loan association, insurance company, or registered investment adviser,
or
if the employee benefit plan has total assets in excess of $5 million
or,
if a self-directed plan, with investment decisions made solely by
persons
that are accredited investors.
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o
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A
plan established and maintained by a state, its political subdivisions,
or
any agency or instrumentality of a state or its political subdivisions,
for the benefit of its employees, if the plan has total assets in
excess
of $5 million.
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o
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An
entity, including a grantor trust, in which all of the equity owners
are
accredited investors as determined under any of the foregoing paragraphs
(for this purpose, a beneficiary of a trust is not an equity owner,
but
the grantor of a grantor trust is an equity
owner).
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-14-
C. Supplemental
Data for Entities
1. If
the
Investor is not a natural person, furnish the following supplemental data
(natural persons may skip this Section C of the Investor
Questionnaire):
Legal
form of entity (trust, corporation, partnership, etc.):
_________________________
Jurisdiction
of organization: ________________________________________________
2.
Was
the
Investor organized for the specific purpose of acquiring the shares of Common
Stock?
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o
Yes
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o
No
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3.
Are
shareholders, partners or other holders of equity or beneficial interest in
the
Investor able to decide individually whether to participate, or the extent
of
their participation, in the Investor’s investment in the Company (i.e., can
shareholders, partners or other holders of equity or beneficial interest in
the
Investor determine whether their capital will form part of the capital invested
by the Investor in the Company)?
|
o
Yes
|
o
No
|
4(a).
Please
indicate whether or not the Investor is, or is acting on behalf of, (i) an
employee benefit plan within the meaning of Section 3(3) of ERISA, whether
or not such plan is subject to ERISA,
or (ii)
an entity which is deemed to hold the assets of any such employee benefit plan
pursuant to 29 C.F.R. § 2510.3-101. For example, a plan which is maintained by a
foreign corporation, governmental entity or church, a Xxxxx plan covering no
common-law employees and an individual retirement account are employee benefit
plans within the meaning of Section 3(3) of ERISA but generally are not subject
to ERISA (collectively, “Non-ERISA
Plans”).
In
general, a foreign or US entity which is not an operating company and which
is
not publicly traded or registered as an investment company under the Investment
Company Act of 1940, as amended, and in which 25% or more of the value of any
class of equity interest is held by employee pension or welfare plans (including
an entity which is deemed to hold the assets of any such plan), would be deemed
to hold the assets of one or more employee benefit plans pursuant to 29 C.F.R.
§
2510.3-101. However, if only Non-ERISA Plans were invested in such an entity,
the entity generally would not be subject to ERISA. For purposes of determining
whether this 25% threshold has been met or exceeded, the value of any equity
interest held by a person (other than such a plan or entity) who has
discretionary authority or control with respect to the assets of the entity,
or
any person who provides investment advice for a fee (direct or indirect) with
respect to such assets, or any affiliate of such a person, is
disregarded.
|
o
Yes
|
o
No
|
-15-
4(b).
If
the
Investor is, or is acting on behalf of, such an employee benefit plan, or is
an
entity deemed to hold the assets of any such plan or plans, please indicate
whether or not the Investor is subject to ERISA.
|
o
Yes
|
o
No
|
4(c.) If
the
Investor answered “Yes” to question 4.(b) and the Investor is investing the
assets of an insurance company general account, please indicate what percentage
of the Investor’s assets the purchase of the shares of Common Stock is subject
to ERISA. ___________%.
5.
Does
the
amount of the Investor’s subscription for the shares of Common Stock in the
Company exceed 40% of the total assets (on a consolidated basis with its
subsidiaries) of the Investor?
|
o
Yes
|
o
No
|
6(a). Is
the
Investor a private investment company which is not registered under the
Investment Company Act, in reliance on Section 3(c)(1) or Section 3(c)(7)
thereof?
|
o
Yes
|
o
No
|
6(b).
If
the
question above was answered “Yes,” was the Investor formed prior to April 30,
1996?
|
o
Yes
|
o
No
|
7(a).
Is
the
Investor a grantor trust, a partnership or an S-Corporation for US federal
income tax purposes?
|
o
Yes
|
o
No
|
7(b).
If
the
question above was answered “Yes,” please indicate whether or not:
(i)
more
than 50 percent of the value of the ownership interest of any beneficial owner
in the Investor is (or may at any time during the term of the Company be)
attributable to the Investor’s (direct or indirect) interest in the Company;
or
|
o
Yes
|
o
No
|
-16-
(ii)
it
is a principal purpose of the Investor’s participation in the Company to permit
the Partnership to satisfy the 100 partner limitation contained in US Treasury
Regulation Section 1.7704-1(h)(3).
|
o
Yes
|
o
No
|
8. If
the
Investor’s tax year ends on a date other than December 31, please indicate such
date below:
|
(Date)
|
D. Related
Parties
1. To
the
best of the Investor’s knowledge, does the Investor control, or is the Investor
controlled by or under common control with, any other investor in the
Company?
|
o
Yes
|
o
No
|
If
the
answer above was answered “Yes”, please identify such related investor(s)
below.
Name(s)
of related investor(s): _______________________________-
2. Will
any
other person or persons have a beneficial interest in the shares of Common
Stock
to be acquired hereunder (other than as a shareholder, partner, or other
beneficial owner of equity interest in the Investor)?
|
o
Yes
|
o
No
|
The
Investor understands that the foregoing information will be relied upon by
the
Company for the purpose of determining the eligibility of the Investor to
purchase the shares of Common Stock. The Investor agrees to notify the Company
immediately if any representation or warranty contained in this Subscription
Agreement, including this Investor Questionnaire, becomes untrue at any time.
The Investor agrees to provide, if requested, any additional information that
may reasonably be required to substantiate the Investor’s status as an
accredited investor or to otherwise determine the eligibility of the Investor
to
purchase the shares of Common Stock. The Investor agrees to indemnify and hold
harmless the Company and each officer, director, shareholder, agent and
representative of the Company and their respective affiliates and successors
and
assigns from and against any loss, damage or liability due to or arising out
of
a breach of any representation, warranty or agreement of the Investor contained
herein.
-17-
|
INDIVIDUAL:
|
|
|
____________________________________
|
|
|
(Signature)
|
|
|
____________________________________
|
|
|
(Print
Name)
|
|
|
PARTNERSHIP,
CORPORATION, TRUST, CUSTODIAL ACCOUNT, OTHER:
|
|
|
___________________________________
|
|
|
(Name
of Entity)
|
|
|
By:
________________________________
|
|
|
(Signature)
|
|
|
________________________________
|
|
|
(Print
Name and Title)
|
-18-
Annex
1
DEFINITION
OF “INVESTMENTS”
The
term
“investments” means:
Securities,
other than securities of an issuer that controls, is controlled by, or is under
common control with, the Investor that owns such securities, unless the issuer
of such securities is:
An
investment company or a company that would be an investment company but for
the
exclusions or exemptions provided by the Investment Company Act, or a commodity
pool; or
a
Public
Company (as defined below);
A
company
with shareholders’ equity of not less than $50 million ?? (determined in
accordance with generally accepted accounting principles) as reflected on the
company’s most recent financial statements, provided that such financial
statements present the information as of a date within 16 months preceding
the
date on which the Investor acquires shares of Common Stock;
Real
estate held for investment purposes;
Commodity
Shares (as defined below) held for investment purposes;
Physical
Commodities (as defined below) held for investment purposes;
To
the
extent not securities, Financial Contracts (as defined below) entered into
for
investment purposes;
In
the
case of an Investor that is a company that would be an investment company but
for the exclusions provided by Section 3(c)(1) or 3(c)(7) of the Investment
Company Act, or a commodity pool, any amounts payable to such Investor pursuant
to a firm agreement or similar binding commitment pursuant to which a person
has
agreed to acquire an interest in, or make capital contributions to, the Investor
upon the demand of the Investor; and
Cash
and
cash equivalents held for investment purposes.
Real
Estate that is used by the owner or a Related Person (as defined below) of
the
owner for personal purposes, or as a place of business, or in connection with
the conduct of the trade or business of such owner or a Related Person of the
owner, will NOT be considered Real Estate held for investment purposes, provided
that real estate owned by an Investor who is engaged primarily in the business
of investing, trading or developing real estate in connection with such business
may be deemed to be held for investment purposes. However, residential real
estate will not be deemed to be used for personal purposes if deductions with
respect to such real estate are not disallowed by section 280A of the Internal
Revenue Code of 1986, as amended.
A
Commodity Interest or Physical Commodity owned, or a Financial Contract entered
into, by the Investor who is engaged primarily in the business of investing,
reinvesting, or trading in Commodity Shares, Physical Commodities or Financial
Contracts in connection with such business may be deemed to be held for
investment purposes.
“Commodity
Shares” means commodity futures contracts, options on commodity futures
contracts, and options on physical commodities traded on or subject to the
rules
of:
Any
contract market designated for trading such transactions under the Commodity
Exchange Act and the rules thereunder; or
Any
board
of trade or exchange outside the United States, as contemplated in Part 30
of
the rules under the Commodity Exchange Act.
“Public
Company” means a company that:
files
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended; or
has
a
class of securities that are listed on a Designated Offshore Securities Market,
as defined by Regulation S of the Securities Act.
“Financial
Contract” means any arrangement that:
takes
the
form of an individually negotiated contract, agreement, or option to buy, sell,
lend, swap, or repurchase, or other similar individually negotiated transaction
commonly entered into by participants in the financial markets;
is
in
respect of securities, commodities, currencies, interest or other rates, other
measures of value, or any other financial or economic interest similar in
purpose or function to any of the foregoing; and
is
entered into in response to a request from a counter party for a quotation,
or
is otherwise entered into and structured to accommodate the objectives of the
counterparty to such arrangement.
“Physical
Commodities” means any physical commodity with respect to which a Commodity
Interest is traded on a market specified in the definition of Commodity Shares
above.
“Related
Person” means a person who is related to the Investor as a sibling, spouse or
former spouse, or is a direct lineal descendant or ancestor by birth or adoption
of the Investor, or is a spouse of such descendant or ancestor, provided that,
in the case of a Family Company, a Related Person includes any owner of the
Family Company and any person who is a Related Person of such an owner. “Family
Company” means a company that is owned directly or indirectly by or for two or
more natural persons who are related as siblings or spouse (including former
spouses), or direct lineal descendants by birth or adoption, spouses of such
persons, the estates of such persons, or foundations, charitable organizations
or trusts established for the benefit of such persons.
For
purposes of determining the amount of investments owned by a company, there
may
be included investments owned by majority-owned subsidiaries of the company
and
investments owned by a company (“Parent Company”) of which the company is a
majority-owned subsidiary, or by a majority-owned subsidiary of the company
and
other majority-owned subsidiaries of the Parent Company.
In
determining whether a natural person is a qualified purchaser, there may be
included in the amount of such person’s investments any investment held jointly
with such person’s spouse, or investments in which such person shares with such
person’s spouse a community property or similar shared ownership interest. In
determining whether spouses who are making a joint investment in the Partnership
are qualified purchasers, there may be included in the amount of each spouse’s
investments any investments owned by the other spouse (whether or not such
investments are held jointly). There shall be deducted from the amount of any
such investments any amounts specified by paragraph 2(a) of Annex 2 incurred
by
such spouse.
In
determining whether a natural person is a qualified purchaser, there may be
included in the amount of such person’s investments any investments held in an
individual retirement account or similar account the investments of which are
directed by and held for the benefit of such person.
-ii-
Annex
2
VALUATIONS
OF INVESTMENTS
The
general rule for determining the value of investments in order to ascertain
whether a person is a qualified purchaser is that the value of the aggregate
amount of investments owned and invested on a discretionary basis by such person
shall be their fair market value on the most recent practicable date or their
cost. This general rule is subject to the following provisos:
In
the
case of Commodity Shares, the amount of investments shall be the value of the
initial margin or option premium deposited in connection with such Commodity
Shares; and
In
each
case, there shall be deducted from the amount of investments owned by such
person the following amounts:
The
amount of any outstanding indebtedness incurred to acquire the investments
owned
by such person.
A
Family
Company, in addition to the amounts specified in paragraph (a) above, shall
have
deducted from the value of such Family Company’s investments any outstanding
indebtedness incurred by an owner of the Family Company to acquire such
investments.
