SUBSCRIPTION AGREEMENT
SUBSCRIPTION
AGREEMENT (“Agreement”) made as of this __ day of ___________, 2007, by and
among Hemcure, Inc., a Nevada corporation (the “Company”), AuraSound, Inc., a
California corporation and upon the Closing Date (as defined below) a wholly
owned subsidiary of the Company (“AuraSound”), and the undersigned subscriber of
securities of the Company (the “Subscriber”).
WHEREAS,
the Company, AuraSound and the shareholders of AuraSound are parties to a
certain Amended and Restated Agreement and Plan of Share Exchange dated as
of
June 7, 2007 (the “Share Exchange Agreement”), pursuant to which the Company
will acquire 100% of the issued and outstanding Common Shares of AuraSound
and
in exchange the Company will issue to the AuraSound shareholders one (1) share
of the Company’s $0.01 par value common stock for every share of AuraSound
common stock acquired, AuraSound will become a wholly owned subsidiary of the
Company, and the AuraSound shareholders will obtain majority ownership and
control of the Company (the “Share Exchange”).
WHEREAS,
subject to compliance with applicable federal securities laws, as soon as
practicable following the closing date of the Share Exchange (the “Exchange
Closing Date”), the Company intends to change its name to AuraSound, Inc.
WHEREAS,
as a condition to the closing of the Share Exchange, the Company intends to
obtain subscriptions for the purchase and sale, in a private placement
transaction (the “Offering”) pursuant to Regulation D promulgated under the
Securities Act of 1933, as amended (the “Act”), of Units (the “Units”)
consisting of (i) one (1) share of the Company’s common stock, par value $0.01
per share (“Common Stock”), and (ii) a five (5) year warrant to purchase one (1)
share of the Company’s Common Stock at an initial exercise price of $1.50 per
share (the “Warrants” and the Common Stock issuable upon the exercise of the
Warrants are referred to herein as the “Warrant Shares”), on the terms and
conditions hereinafter set forth, and the Subscriber desires to acquire that
number of Units set forth on the signature page hereof. The Units, the Common
Stock, the Warrants and the Warrant Shares are sometimes collectively referred
to herein as “Securities”.
NOW,
THEREFORE, for and in consideration of the promises and the mutual covenants
hereinafter set forth, the parties hereto do hereby agree as
follows:
1. Subscription
Procedure
1.1 Subject
to the terms and conditions hereinafter set forth, the Subscriber hereby
subscribes for and agrees to purchase from the Company such number of Units
as
is set forth upon the signature page hereof at a price of $1.00 per Unit (the
“Purchase Price”). The Company agrees to sell such Units to the Subscriber for
the Purchase Price.
1.2 The
subscription period will begin as of June 7, 2007 and will terminate at 5:00
PM
Eastern Standard Time on June 15, 2007, unless terminated earlier or extended
by
the Company and AuraSound for up to an additional 30 days (the “Termination
Date”). The Units will be offered on a “best efforts” basis as more particularly
set forth in the Amended and Restated Confidential Private Placement Memorandum
dated June 7, 2007 and any supplements thereto (including all exhibits,
schedules and attachments thereto, the “Offering Memorandum”). The minimum
dollar amount of Units that may be purchased by the Subscriber is $50,000 unless
AuraSound and the Company waive the requirement. The consummation of the
Offering is subject to the satisfaction of the closing conditions set forth
in
Section 6 of this Agreement.
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1.3 Placement
of Units will be made by GP Group, LLC (the “Placement Agent”), which will
receive certain compensation therefor as described in the Offering
Memorandum.
1.4 The
Purchase Price will be placed in escrow pursuant to an escrow agreement by
and
among the Placement Agent, AuraSound and City National Bank, as escrow agent
(the “Escrow Agreement”), and shall be paid over to the Company at the closing
of the purchase of the Units in the Offering pursuant to this Agreement (the
“Subscription Closing”) to occur on or after the Exchange Closing Date (the
closing date of the purchase and sale of the Units pursuant to this Agreement
is
referred to herein as the “Subscription Closing Date”).
1.5 The
certificates for the Common Stock together with the accompanying Warrants
bearing the name of the Subscriber will be delivered by the Company no later
than ten (10) days following the final closing date of the Offering. The
Subscriber hereby authorizes and directs the Company to deliver the securities
to be issued to the Subscriber pursuant to this Agreement to the residential
or
business address indicated in the Investor Questionnaire.
1.6 The
Purchase Price for the Units purchased hereunder shall be paid by certified
check, payable to AuraSound, Inc., or by wire transfer to AuraSound, Inc.
account pursuant to the following instructions:
Bank
Name: CITY NATIONAL BANK
LOS
ANGELES FED ABA#: 122 016 066
C/O
CITY NATIONAL INVESTMENTS #101281469
(SWIFT#XXXXXX0X
XXX FOREIGN WIRES)
ATTN:
XXX XXXXXXX
FOR
FURTHER CREDIT TO:
ACCT
NAME: AURASOUND, INC
ACCT
NUMBER: ESC07564
1.7 The
Company and/or AuraSound may, in their sole discretion, reject any subscription,
in whole or in part, or terminate or withdraw the Offering in its entirety
at
any time prior to a closing in relation thereto. Neither the Company nor the
Placement Agent shall be required to allocate among investors on a pro rata
basis in the event of an over-subscription.
2. Representations
and Covenants of Subscriber.
2.1 The
Subscriber recognizes that the purchase of Units involves a high degree of
risk
in that (i) the Company will need additional capital but has no assurance of
additional necessary capital; (ii) an investment in the Company is highly
speculative and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Units; (iii) an
investor may not be able to liquidate his or her investment; (iv)
transferability of the securities comprising the Units is extremely limited;
(v)
an investor could sustain the loss of his or her entire investment; and (vi)
the
Company is and will be subject to numerous other risks and uncertainties,
including without limitation, significant and material risks relating to the
Company’s business and the business and operations of AuraSound, and the
industries and markets in which the Company will compete, as well as risks
associated with the Offering, the Share Exchange and the other transactions
contemplated herein, in the Offering Memorandum and in the Share Exchange
Agreement, all as more fully set forth herein and in the Offering Memorandum.
For the avoidance of doubt, all references to the Company in this Section 2.1
include the Company’s business and operations after it acquires the business and
operations of AuraSound through the Share Exchange.
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2.2 The
Subscriber represents that he or she is an “accredited investor” as such term is
defined in Rule 501 of Regulation D promulgated under the Act, as indicated
by
his or her responses to the Investor Questionnaire, the form of which is
attached hereto as Exhibit
A,
and
that he or she is able to bear the economic risk of an investment in the Units.
The Subscriber must complete the Investor Questionnaire to enable the Company
and AuraSound to access the Subscriber’s eligibility for the
Offering.
2.3 The
Subscriber acknowledges that he or she has prior investment experience,
including without limitation, investment in non-listed and non-registered
securities, or he or she has employed the services of an investment advisor,
attorney or accountant to read all of the documents furnished or made available
by the Company or AuraSound both to him or her and to evaluate the merits and
risks of such an investment on his or her behalf, and that he or she recognizes
the highly speculative nature of this investment.
2.4 The
Subscriber acknowledges receipt and careful review of the Offering Memorandum,
this Agreement, the Common Stock Purchase Warrant and any other attachments
hereto and thereto (collectively, the “Offering Documents”) and hereby
represents that he or she has been furnished or given access by the Company
or
AuraSound during the course of this Offering with or to all information
regarding the Company and AuraSound and their respective financial conditions
and results of operations which he or she had requested or desired to know;
that
all documents which could be reasonably provided have been made available for
his or her inspection and review; that he or she has been afforded the
opportunity to ask questions of and receive answers from duly authorized
representatives of the Company and AuraSound concerning the terms and conditions
of the Offering, and any additional information which he or she had requested.
The Subscriber further represents and acknowledges that the Subscriber has
not
seen or received any advertisement or general solicitation with respect to
the
sale of any of the securities of the Company, including, without limitation,
the
Units.
2.5 The
Subscriber acknowledges that this Offering of Units may involve tax
consequences, and that the contents of the Offering Documents do not contain
tax
advice or information. The Subscriber acknowledges that he or she must retain
his or her own professional advisors to evaluate the tax and other consequences
of an investment in the Units.
2.6 The
Subscriber acknowledges that this Offering of Units has not been reviewed or
approved by the United States Securities and Exchange Commission (“SEC”) because
the Offering is intended to be a nonpublic offering pursuant to Section 4(2)
of
the Act. The Subscriber represents that the Units are being purchased for his
or
her own account, for investment and not for distribution or resale to others.
The Subscriber agrees that he or she will not sell or otherwise transfer any
of
the securities comprising the Units unless they are registered under the Act
or
unless an exemption from such registration is available and, upon the Company’s
request, the Company receives an opinion of counsel reasonably satisfactory
to
the Company confirming that an exemption from such registration is available
for
such sale or transfer.
2.7 The
Subscriber understands that the Units have not been registered under the Act
by
reason of a claimed exemption under the provisions of the Act which depends,
in
part, upon his or her investment intention. The Subscriber realizes that, in
the
view of the SEC, a purchase now with the intention to distribute would represent
a purchase with an intention inconsistent with his or her representation to
the
Company, and the SEC might regard such a distribution as a deferred sale to
which such exemption is not available.
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2.8 The
Subscriber understands that Rule 144 (the “Rule”) promulgated under the Act
requires, among other conditions, a one year holding period prior to the resale
(in limited amounts) of securities acquired in a non-public offering, such
as
the Offering, without having to satisfy the registration requirements under
the
Act. The Subscriber consents that the Company may, if it desires, permit the
transfer of the Common Stock included in the Units or issuable upon the exercise
of the Warrants out of his or her name only when his or her request for transfer
is accompanied by an opinion of counsel reasonably satisfactory to the Company
that neither the sale nor the proposed transfer results in a violation of the
Act, any applicable state “blue sky” laws or any applicable securities laws of
any other country, province or jurisdiction (collectively, “Securities Laws”).
The Subscriber agrees to hold the Company, AuraSound and their respective
directors, officers and controlling persons and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses incurred by them as a result of any
misrepresentation made by him contained herein or in the Investor
Questionnaire.
2.9 The
Subscriber consents to the placement of one or more legends on any certificate
or other document evidencing his or her Units and the Common Stock or Warrants
included in the Units or issuable upon the exercise of the Warrants stating
that
they have not been registered under the Act and are subject to the terms of
this
Agreement, and setting forth or referring to the restrictions on the
transferability and sale thereof.
2.10 The
Subscriber understands that the Company and AuraSound will review this Agreement
and the Investor Questionnaire and the Company and AuraSound reserve the
unrestricted right to reject or limit any subscription and to close the offer
at
any time.
2.11 The
Subscriber hereby represents that the address of Subscriber furnished by him
at
the end of this Agreement and in the Investor Questionnaire is the undersigned's
principal residence if he or she is an individual or its principal business
address if it is a corporation or other entity.
2.12 The
Subscriber acknowledges that if the Subscriber is a Registered Representative
of
a National Association of Securities Dealers, Inc. (“NASD”) member firm, he or
she must give such firm the notice required by the NASD Conduct Rules, or any
applicable successor rules of the NASD, receipt of which must be acknowledged
by
such firm on the signature page hereof. The Subscriber shall also notify the
Company if the Subscriber or any affiliate of Subscriber is a registered
broker-dealer with the SEC, in which case the Subscriber represents that the
Subscriber is purchasing the Units in the ordinary course of business and,
at
the time of purchase of the Units, has no agreements or understandings, directly
or indirectly, with any person to distribute the Units or any portion
thereof.
2.13 The
Subscriber hereby represents that, except as set forth in the Offering
Documents, no representations or warranties have been made to the Subscriber
by
either the Company or AuraSound or their agents, employees or affiliates and
in
entering into this transaction, the Subscriber is not relying on any
information, other than that contained in the Offering Documents and the results
of independent investigation by the Subscriber.
2.14 The
Subscriber agrees that he or she will purchase securities in the Offering only
if his or her intent at such time is to make such purchase for investment
purposes and not with a view toward resale provided, however, that by making
the
representations herein the Subscriber does not agree to hold the Securities
for
any minimum or other specific term and reserves the right to dispose of the
Securities in accordance with federal and state securities laws applicable
to
such transactions.
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2.15
.If
the
undersigned Subscriber is a partnership, corporation, trust or other entity,
such partnership, corporation, trust or other entity further represents and
warrants that: (i) it was not formed for the purpose of investing in the
Company; (ii) it is authorized and otherwise duly qualified to purchase and
hold
the Units; and (iii) that this Agreement has been duly and validly authorized,
executed and delivered and constitutes the legal, binding and enforceable
obligation of the undersigned.
2.16 If
the
Subscriber is not a United States person, such Subscriber hereby represents
that
it has satisfied itself as to the full observance of the laws of its
jurisdiction in connection with any invitation to subscribe for the Units or
any
use of this Agreement, including (i) the legal requirements within its
jurisdiction for the purchase of the Units, (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 the Units. Such Subscriber's subscription and payment for,
and his or her or her continued beneficial ownership of the Units and of the
shares of Common Stock included therein or issuable upon the exercise of the
Warrants, will not violate any applicable securities or other laws of the
Subscriber's jurisdiction.
2.17 The
undersigned hereby covenants and agrees that neither it nor any of its
affiliates has or will have an open position (e.g., short sale) in the Common
Stock or any Warrant Shares prior to any Registration Statement required to
be
filed hereunder being declared effective by the SEC with the intent of covering
such open position with Common Stock or Warrant Shares being registered in
such
Registration Statement. The undersigned hereby acknowledges and understands
that
the SEC has taken the position that such an open position would constitute
a
violation of Section 5 of the Act.
2.18 The
Subscriber acknowledges that (i) the Offering Memorandum contains material,
non-public information concerning the Company within the meaning of Regulation
FD promulgated by the SEC, and (ii) the Subscriber is obtaining such material,
non-public information solely for the purpose of considering whether to purchase
the Units pursuant to a private placement that is exempt from registration
under
the Act. In accordance with Regulation FD and other applicable provisions of
the
Securities Laws, the Subscriber agrees to keep such information confidential
and
not to disclose it to any other person or entity except the Subscriber’s legal
counsel, other advisors and other representatives who have agreed (i) to keep
such information confidential, (ii) to use such information only for the purpose
set forth above, and (iii) to comply with applicable securities laws with
respect to such information. In addition, the Subscriber further acknowledges
that the Subscriber and such legal counsel, other advisors and other
representatives are prohibited from trading in the Company’s securities while in
possession of material, non-public information and agrees to refrain from
purchasing or selling securities of the Company until such material, non-public
information has been publicly disseminated by the Company.
2.19 The
Subscriber understands and acknowledges that (i) the Units are being
offered and sold to Subscriber without registration under the Act in a private
placement that is exempt from the registration provisions of the Act under
Section 4(2) of the Act and (ii) the availability of such exemption depends
in part on, and that the Company will rely upon the accuracy and truthfulness
of, the foregoing representations, and such Subscriber hereby consents to such
reliance.
3. Representations
by the Company and AuraSound
Except
as
set forth in the reports previously filed by the Company (the “SEC Reports”)
pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), or in the Offering Memorandum, each of the Company and, as applicable,
AuraSound, jointly and severally represent and warrant to the Subscriber that:
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3.1 Organization
and Authority.
Each of
the Company and AuraSound, and each of their respective subsidiaries, if any
(i)
is a corporation validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as presently conducted, and (iii) has all requisite corporate power and
authority to execute, deliver and perform their obligations under this Agreement
and the Offering Documents being executed and delivered by it in connection
herewith, and to consummate the transactions contemplated hereby and
thereby.
3.2 Qualifications.
Each of
the Company and AuraSound, and each of their respective subsidiaries, if any,
is
duly qualified to do business as a foreign corporation and is in good standing
in all jurisdictions where such qualification is necessary and where failure
to
so qualify could have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company and its subsidiaries (after the effective time of the Share
Exchange), taken as a whole or has the affect of preventing the Company from
performing any of its duties or obligations under this Agreement. (a “Material
Adverse Effect”).
3.3 Capitalization
of the Company.
Immediately after the effective time of the Share Exchange (but before the
initial closing of the Offering), the outstanding capitalization of the Company
will consist of 13,505,305 issued and outstanding shares of Common Stock. Except
as a result of the purchase and sale of the Units, as contemplated in the Share
Exchange Agreement or as disclosed in the Offering Memorandum or the SEC
Reports, there are no outstanding options, warrants, script rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving any person
any right to subscribe for or acquire from the Company, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any subsidiary of the Company (“Subsidiary”) is or may become bound
to issue additional shares of Common Stock, or securities or rights convertible
or exchangeable into shares of Common Stock. The issuance and sale of the Units
will not obligate the Company to issue shares of Common Stock or other
securities to any person (other than the Subscriber) and will not result in
a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. The shares of the Company’s
capital stock outstanding immediately after the effective time of the Share
Exchange (but before the closing of the Offering) are or will be duly authorized
and validly issued and are or will be fully paid and nonassessable. None of
the
outstanding shares of Common Stock or options, warrants, or rights or other
securities entitling the holders to acquire Common Stock has been issued in
violation of the preemptive rights of any security holder of the Company. No
holder of any of the Company’s securities has any rights, “demand,” “piggy-back”
or otherwise, to have such securities registered by reason of the intention
to
file, filing or effectiveness of the any Registration Statement required to
be
filed hereunder, except as contemplated by the Offering Memorandum. The Common
Stock and the Warrants to be issued to the Subscriber have been duly authorized,
and when issued and paid for in accordance with this Agreement, the Common
Stock
will be duly and validly issued, fully paid and non-assessable, and the Warrant
Shares, when issued upon exercise of the Warrants in exchange for the payment
in
full of the exercise price for such Warrant Share therein specified, will be
duly and validly issued, fully paid and non-assessable. The Common Stock is
eligible for quotation on the NASD OTC Bulletin Board, the Company and the
Common Stock meets the criteria for continued quotation and trading on the
OTC
Bulletin Board, and no suspension of trading in the Common Stock is in
effect.
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3.4 Corporate
Authorization.
The
Offering Documents have been duly and validly authorized by the Company and
AuraSound. This Agreement, assuming due execution and delivery by the
Subscriber, and the Warrants, when the Subscription Agreement and the Warrants
are executed and delivered by the Company, will be, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except as the enforceability hereof and thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or
hereafter in effect relating to or affecting creditors’ rights generally and
general principles of equity, regardless of whether enforcement is considered
in
a proceeding in equity or at law.
3.5 Non-Contravention.
The
execution and delivery of the Offering Documents by the Company and AuraSound,
the issuance of the Units as contemplated by the Offering Documents and the
completion by the Company and AuraSound of the other transactions contemplated
by the Offering Documents do not and will not, with or without the giving of
notice or the lapse of time, or both, (i) result in any violation of any
provision of the articles of incorporation or by-laws or similar instruments
of
the Company or AuraSound or their respective subsidiaries, (ii) conflict with
or
result in a breach by the Company or AuraSound or their respective subsidiaries
of any of the terms or provisions of, or constitute a default under, or result
in the modification of, or result in the creation or imposition of any lien,
security interest, charge or encumbrance upon any of the properties or assets
of
the Company or AuraSound or their respective subsidiaries, pursuant to any
agreements, instruments or documents filed as exhibits to the SEC Reports or
any
indenture, mortgage, deed of trust or other agreement or instrument to which
AuraSound or any of its subsidiaries is a party or by which AuraSound or any
of
its subsidiaries or any of its properties or assets are bound or affected,
in
any such case which would have a material adverse effect on the business,
properties, operations, condition (financial or other), results of operations
or
prospects of the Company and AuraSound and their respective subsidiaries, taken
as a whole, or the validity or enforceability of, or the ability of the Company
or AuraSound to perform their obligations under, the Offering Documents, (iii)
violate or contravene any applicable law, rule or regulation or any applicable
decree, judgment or order of any court, United States federal or state
regulatory body, administrative agency or other governmental body having
jurisdiction over AuraSound or any of its subsidiaries or any of its respective
properties or assets that would, except with respect to violations of federal
and state securities laws, have a Material Adverse Effect, or the validity
or
enforceability of, or the ability of the Company or AuraSound to perform its
obligations under, the Offering Documents, (iv) have any material adverse effect
on any permit, certification, registration, approval, consent, license or
franchise necessary for the Company or its subsidiaries (after the effective
time of the Share Exchange) to own or lease and operate any of its properties
and to conduct any of its business or the ability of the Company or its
subsidiaries to make use thereof or (v) except for applicable requirements
of
federal securities laws and state securities or blue-sky laws, requiring filing
with, or permit, authorization, consent or approval of, any third party, public
body or authority.
3.6 Information
Provided.
The
Company hereby represents and warrants to the Subscriber that the information
set forth in the Offering Memorandum, the SEC Reports and any other document
provided by the Company (or the Company’s authorized representatives) to the
Subscriber in connection with the transactions contemplated by this Agreement,
does not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light
of
the circumstances under which they are made, not misleading. AuraSound hereby
represents and warrants to the Subscriber that the information set forth in
the
Offering Memorandum and any other document provided by AuraSound (or AuraSound’s
authorized representatives) to the Subscriber in connection with the
transactions contemplated by this Agreement, does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading.
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3.7 SEC
Reports.
The
Company represents and warrants that (i) the SEC Reports constitute all of
the
documents and reports that the Company was required to file with the SEC
pursuant to the Securities Exchange Act of 1934 (“Exchange Act”) and the rules
and regulations promulgated thereunder by the SEC since September 30, 2004,
(ii)
as of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act and/or the Exchange Act,
as
the case may require, and the rules and regulations promulgated thereunder.
The
Company and AuraSound, as the case may be represent and warrant that the
financial statements of the Company included in the SEC Reports and those of
AuraSound included in the Offering Memorandum comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles in the United States (“GAAP”)
(except, in the case of unaudited statements, as permitted by the applicable
form under the Securities Act or the Exchange Act) applied on a consistent
basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present the financial position of the Company and AuraSound, as
the
case may be; as of the dates thereof and each of their statements of operations,
stockholders’ equity and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal and recurring year-end audit adjustments
which were and are not expected to have a material adverse effect on the Company
or its subsidiaries, or any of their business, financial condition or results
of
operations after the effective time of the Share Exchange). Except as and to
the
extent set forth on the balance sheet of the Company as of March 31, 2007
included in the SEC Reports (including the notes thereto) and the balance sheet
of AuraSound as of December 31, 2006 included in the Offering Memorandum
(including the notes thereto), neither the Company nor AuraSound has any
liability or obligation of any nature (whether accrued, absolute, contingent
or
otherwise and whether required to be reflected on a balance sheet or
not).
3.8 Events
Subsequent.
Since
December 31, 2006 as to AuraSound and since March 31, 2007 as to the Company,
there has not been any of the following that have not been disclosed to the
Subscriber:
(a) Any
sale,
lease, transfer, license or assignment of any assets, tangible or intangible,
of
the Company or AuraSound;
(b)
Any
damage, destruction or property loss, whether or not covered by insurance,
affecting adversely the properties or business of the Company or
AuraSound;
(c)
Any
declaration or setting aside or payment of any dividend or distribution with
respect to the shares of capital stock of the Company or AuraSound or any
redemption, purchase or other acquisition of any such shares;
(d)
Any
subjection to any lien on any of the assets, tangible or intangible, of the
Company or AuraSound;
(e)
Any
incurrence of indebtedness or liability or assumption of obligations by the
Company or AuraSound;
(f)
Any
waiver or release by the Company or AuraSound of any right of any material
value;
(g)
Any
compensation or benefits paid to officers or directors of the Company or
AuraSound;
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(h)
Any
change made or authorized in the articles of incorporation or bylaws of the
Company or AuraSound, except, as to the Company for the change to the articles
of incorporation and by-laws made incident to re-domiciling from Minnesota
to
Nevada;
(i)
Any
loan
to or other transaction with any officer, director or stockholder of the Company
or AuraSound giving rise to any claim or right of either Company or AuraSound
against any such person or of such person against the Company; or
(j)
Any
material adverse change in the condition (financial or otherwise) of the
respective properties, assets, liabilities or business of either Company or
AuraSound, or
. (k) any
agreement, written or otherwise, to take any of the foregoing
actions.
3.9 Liabilities.
Except
as otherwise disclosed in the SEC Reports or the Offering Memorandum, neither
the Company nor AuraSound has any liability or obligation whatsoever, either
direct or indirect, matured or unmatured, accrued, absolute, contingent or
otherwise. In addition, the Company represents that upon the Exchange Closing
Date, the Company will not have any liability or obligation whatsoever, either
direct or indirect, matured or unmatured, accrued, absolute, contingent or
otherwise
3.10 Absence
of Certain Proceedings.
Except
as disclosed in the SEC Reports, neither the Company nor AuraSound is aware
of
any action, suit, proceeding, inquiry or investigation before or by any court,
public board or body, or governmental agency pending or threatened against
or
affecting the Company or AuraSound or any of their respective subsidiaries,
in
any such case wherein an unfavorable decision, ruling or finding would have
a
Material Adverse Effect on the transactions contemplated by the Offering
Documents or which could adversely affect the validity or enforceability of,
or
the authority or ability of the Company or AuraSound to perform its obligations
under, the Offering Documents; and to the Company’s and AuraSound’s knowledge
there is not pending or contemplated any, and there has been no, investigation
by the SEC involving the Company or AuraSound or any of their current or former
directors or officers.
3.11 Compliance
with Law.
Neither
the Company nor AuraSound nor any of their respective subsidiaries is in
violation of or has any liability under any statute, law, rule, regulation,
ordinance, decision or order of any governmental agency or body or any court,
domestic or foreign, except where such violation or liability would not
individually or in the aggregate have a Material Adverse Effect and to the
knowledge of the Company and AuraSound there is no pending investigation that
would reasonably be expected to lead to such a claim.
3.12 Tax
Matters.
The
Company has filed all federal, state and local income and franchise tax returns
required to be filed and has paid all taxes shown by such returns to be due,
and
no tax deficiency has been determined adversely to the Company. AuraSound has
experienced losses for the last two fiscal years and has consequently not filed
all federal, state and local income and franchise tax returns required to be
filed and has not paid any taxes for the last two fiscal years. Any tax or
filing deficiency arising from the foregoing is not expected to have a Material
Adverse Effect.
3.13 Consents.
Each of
the Company and AuraSound has all necessary consents, approvals, authorizations,
orders, registrations, qualifications, licenses, filings and permits of, with
and from all applicable judicial, regulatory and other legal or governmental
agencies and bodies and all third parties, foreign and domestic (collectively,
the “Consents”), to own, lease and operate their respective properties and
conduct their respective businesses as are now being conducted and as disclosed
in the Offering Memorandum, except where the failure to have any such Consent
would not have a Material Adverse Effect. Each such Consent is valid and in
full
force and effect, and neither the Company nor AuraSound has received written
notice of any investigation or proceedings which results in or, if decided
adversely to the Company or AuraSound, could reasonably be expected to result
in, the revocation of, or imposition of a materially burdensome restriction
on,
any Consent.
9
3.14 Property.
The
Company does not own or lease any real property. AuraSound has good and
marketable title to all property and/or assets of all kinds, whether real,
personal or mixed, tangible or intangible (including, without limitation, all
rights relating thereto) (“Property”) owned by it, in each case free and clear
of all liens, except for liens or encumbrances that will not have a Material
Adverse Effect. Any Property held under lease by AuraSound is held by it under
valid, subsisting and enforceable leases with such exceptions as are not to
have
a Material Adverse Effect on the use made or proposed to be made of such
Property by AuraSound.
3.15 Questionable
Payments.
Neither
the Company nor AuraSound, nor any of their respective employees, agents or
representatives have, directly or indirectly, made any bribes, kickbacks,
illegal payments or illegal political contributions using company funds or
made
any payments from the Company's or AuraSound’s funds, respectively, to
governmental officials for improper purposes or made any illegal payments from
the Company's or AuraSound’s funds, respectively, to obtain or retain
business.
3.16 Intellectual
Property.
The
Company does not own or use any trademarks, trade names, service marks, patents,
copyrights or any applications with respect thereto. Neither the Company nor
AuraSound has any knowledge of any claim that, or inquiry as to whether, any
product, activity or operation of the Company infringes upon or involves, or
has
resulted in the infringement of, any trademarks, trade-names, service marks,
patents, copyrights or other proprietary rights of any other person, corporation
or other entity; and no such proceedings have been instituted, are pending
or
are threatened against the Company. The Company and AuraSound: (i) owns or
possesses all rights to use, option and/or license, as the case may be, all
patents, patent applications, provisional patents, trademarks, service marks,
trade names, trademark registrations, service xxxx registrations, copyrights,
licenses, formulae, mask works, customer lists, internet domain names, know-how
and other intellectual property (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures, “Intellectual Property”) necessary for the conduct of their
respective businesses as being conducted and as described in the Offering
Memorandum and (ii) does not believe that the conduct of their respective
businesses does or will conflict with, and have not received any notice of
any
claim of conflict with, any such right of others, which conflict would have
a
Material Adverse Effect. All Intellectual Property developed by and belonging
to
AuraSound (including, without limitation, that which is developed by consultants
to AuraSound which has not been patented has been kept confidential so as,
among
other things, all such information may be deemed proprietary to AuraSound.
To
AuraSound’s knowledge, there is no infringement by third parties of any
Intellectual Property. There are no pending or, to AuraSound’s knowledge,
threatened actions, suits, proceedings or claims by others challenging
AuraSound’s rights in or to any Intellectual Property, and there are no facts
which would form a reasonable basis for any such claim. There is no pending
or,
to AuraSound’s knowledge, threatened action, suit, proceeding or claim by others
that AuraSound infringes or otherwise violates any Intellectual Property rights
of others, in each case which would be reasonably likely to have a Material
Adverse Effect, and AuraSound is not aware of any other fact which would form
a
reasonable basis for any such claim.
3.17 Insurance.
The
Company does not have any insurance policies in effect. AuraSound maintains
insurance in such amounts and covering such risks as are customary for
similarly-sized companies engaged in similar businesses in similar industries,
all of which insurance is in full force and effect. There are no material claims
by AuraSound under any such policy or instrument as to which any insurance
company is denying liability or defending under a reservation of rights clause.
AuraSound reasonably believes that it will be able to renew its existing
insurance as and when such coverage expires or will be able to obtain
replacement insurance adequate for the conduct of its business.
10
3.18 Contracts.
The
Company does not have any material contracts, leases, arrangements or
commitments (whether oral or written). The Company is not a party to or bound
by
or affected by any contract, lease, arrangement or commitment (whether oral
or
written) relating to: (a) the employment of any person; (b) collective
bargaining with, or any representation of any employees by, any labor union
or
association; (c) the acquisition of services, supplies, equipment or other
personal property; (d) the purchase or sale of real property; (e) distribution,
agency or construction; (f) lease of real or personal property as lessor or
lessee or sublessor or sublessee; (g) lending or advancing of funds; (h)
borrowing of funds or receipt of credit; (i) incurring any obligation or
liability; or (j) the sale of personal property. Except as set forth in the
Schedule 3.18, (i) each of AuraSound’s Material Contracts, as defined below, is
valid and binding and in full force and effect, (ii) AuraSound and, to the
knowledge of AuraSound, each other party to any Material Contract is, and at
all
times has been, in compliance with all applicable terms and requirements of
each
Material Contract, except where non-compliance does not have a Material Adverse
Effect, and (iii) AuraSound has not given to, or received from, any other party
to any Material Contract, any notice or other communication regarding any actual
or alleged breach of or default under any Material Contract by AuraSound or
any
other party to such Material Contract, except where such breach would not be
reasonably likely to have a Material Adverse Effect. “Material Contract” shall
mean any agreement that would be required pursuant to Item 601 of Regulation
S-B
promulgated under the Securities Act to be filed as an exhibit to any report,
schedule, registration statement or definitive proxy statement filed or required
to be filed under the Exchange Act or any rule or regulation promulgated
thereunder, assuming such rules and regulations applied to
AuraSound.
3.19 Litigation.
The
Company is not subject to any judgment or order of any court or quasijudicial
or
administrative agency of any jurisdiction, domestic or foreign, nor is there
any
charge, complaint, lawsuit or governmental investigation pending against the
Company. The Company is not a plaintiff in any action, domestic or foreign,
judicial or administrative. There are no existing actions, suits, proceedings
against or investigations of the Company, and the Company knows of no basis
for
such actions, suits, proceedings or investigations. There are no unsatisfied
judgments, orders, decrees or stipulations affecting the Company or to which
the
Company is a party. Except for such matters that, individually or in the
aggregate, would not have a Material Adverse Effect on the business, operations
or financial results of AuraSound (either individually or in the aggregate)
there are no claims, actions, suits, investigations or proceedings before or
by
any arbitrator, court, governmental authority or instrumentality pending or
threatened against or affecting AuraSound or involving the properties of
AuraSound which might affect the business, properties or financial condition
of
AuraSound or which might affect the transactions or other acts contemplated
by
this Agreement or the validity or enforceability of this Agreement;
3.20 Employees.
The
Company does not have any employees. The Company does not owe any compensation
of any kind, deferred or otherwise, to any current or previous employees. The
Company does not have a written or oral employment agreement with any officer
or
director of the Company. Neither the Company nor AuraSound is a party to or
bound by any collective bargaining agreement. Except as set forth in the SEC
Reports or the Offering Memorandum, there are no loans or other obligations
payable or owing by either the Company or AuraSound to any stockholder, officer,
director or employee of the Company, nor are there any loans or debts payable
or
owing by any of such persons to the Company or AuraSound or any guarantees
by
the Company or AuraSound of any loan or obligation of any nature to which any
such person is a party. No labor disturbance by the employees of AuraSound
currently exists or, to AuraSound’s knowledge, is likely to occur
11
3.21 Employee
Benefit Plans.
The
Company does not have any (a) non-qualified deferred or incentive compensation
or retirement plans or arrangements, (b) qualified retirement plans or
arrangements, (c) other employee compensation, severance or termination pay
or
welfare benefit plans, programs or arrangements or (d) any related trusts,
insurance contracts or other funding arrangements maintained, established or
contributed to by the Company. AuraSound has not violated and is not currently
in violation of any provisions of: (a) any federal or state environmental law,
(b) Employee Retirement Income Security Act of 1974, as amended, including
the
regulations and published interpretations thereunder (“ERISA”), (c) the Bank
Secrecy Act, as amended, (d) the Money Laundering Control Act of 1986, as
amended, (e) the Foreign Corrupt Practices Act, or (f) the Uniting and
Strengthening of America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, and the rules and
regulations promulgated under any such law, or any successor law, except for
such violations which, singly or in the aggregate, would not have a Material
Adverse Effect.
3.22 Legal
Compliance.
To the
best knowledge of the Company and AuraSound, after due investigation, no claim
has been filed against either the Company or AuraSound alleging a violation
of
any applicable laws or regulations of foreign, federal, state and local
governments and all agencies thereof. Each of the Company and AuraSound holds
all of the material permits, licenses, certificates or other authorizations
of
foreign, federal, state or local governmental agencies required for its
respective business as presently conducted.
3.23 Internal
Accounting Controls.
Each of
the Company and AuraSound maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company is made known to
the
certifying officers by others within those entities, particularly during the
period in which the Company’s Form 10-KSB or 10-QSB, as the case may be, is
being prepared. The Company's certifying officers have evaluated the
effectiveness of the Company’s controls and procedures as of end of the filing
period prior to the filing date of the Form 10-QSB for the quarter ended March
31, 2007 (such date, the "Evaluation Date"). The Company presented in its most
recently filed Form 10-KSB or Form 10-QSB the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures
based
on their evaluations as of the Evaluation Date. Since the Evaluation Date,
there
have been no significant changes in the Company's internal controls (as such
term is defined in Item 307(b) of Regulation S-K under the Exchange Act) or,
to
the Company's knowledge, in other factors that could significantly affect the
Company's internal controls.
3.24 Listing
and Maintenance Requirements.
The
Company’s common stock is currently quoted on the OTC Bulletin Board. The
Company has not, since October 1, 2005, received any notice from the OTC
Bulletin Board or the NASD or any trading market on which the Company’s common
stock is or has been listed or quoted to the effect that the Company is not
in
compliance with the quoting, listing or maintenance requirements of the OTC
Bulletin Board or such other trading market. The Company is, and has no reason
to believe that it will not, in the foreseeable future continue to be, in
compliance with all such quoting, listing and maintenance
requirements.
12
3.25 No
SEC
or NASD Inquiries.
Neither
the Company nor AuraSound nor any of their past or present officers or directors
is, or has ever been, the subject of any formal or informal inquiry or
investigation by the SEC or NASD.
3.26 Disclosure.
The
representations and warranties and statements of fact made by the Company and
AuraSound in this Agreement are, as applicable, accurate, correct and complete
and do not contain any untrue statement of a material fact or omit to state
any
material fact necessary in order to make the statements and information
contained herein not false or misleading. Neither the Company nor AuraSound
is
and, at all times up to and including consummation of the transactions
contemplated by this Agreement, and after giving effect to application of the
net proceeds of the Placement, will not be, subject to registration as an
“investment company” under the Investment Company Act of 1940, as amended (the
“1940 Act”), and is not and will not be an entity “controlled” by an “investment
company” within the meaning of the 1940 Act. The Company and AuraSound will: (i)
utilize the proceeds of the Offering for working capital purposes, repayment
of
certain affiliate loans and bridge loans of AuraSound and payment of expenses
(including reasonable attorneys’ fees and costs) in accordance with the “Use of
Proceeds” section of the Offering Memorandum and (ii) initially utilize the
proceeds of the Offering and all other funds of AuraSound in such a manner
so as
to cause AuraSound not to be subject to the 1940 Act, and will thereafter use
its best efforts to avoid AuraSound’s becoming subject to the 1940
Act.
3.27 Anti-takeover
Device.
Neither
the Company or AuraSound, nor any of their respective subsidiaries has any
outstanding shareholder rights plan or “poison pill” or any similar arrangement.
There are no provisions of any anti-takeover or business combination statute
applicable to the Company or AuraSound or their respective Articles of
Incorporation or Bylaws which would preclude the issuance and sale of the
Securities, the reservation for issuance of the Warrant Shares and the
consummation of the other transactions contemplated by this Agreement or any
of
the other Offering Documents.
3.28 No
Integrated Offering.
Neither
the Company or AuraSound, nor any of their respective affiliates, nor any person
acting on its or their behalf, has directly or indirectly made any offers or
sales of any security or solicited any offers to buy any security under
circumstances that would cause the offering of the Securities pursuant to this
Agreement to be integrated with prior offerings by the Company for purposes
of
the Act which would prevent the Company from selling the Securities pursuant
to
Regulation D and Rule 506 thereof under the Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company,
AuraSound nor any of their respective affiliates or subsidiaries take any action
or steps that would cause the offering of the Securities to be integrated with
other offerings if such other offering, if integrated, would cause the offer
and
sale of the Securities not to be exempt from registration pursuant to Regulation
D and Rule 506 thereof under the Act. The Company does not have any registration
statement pending before the SEC or currently under the SEC’s
review.
3.29 Xxxxxxxx-Xxxxx
Act.
The
Company is in compliance with the applicable provisions of the Xxxxxxxx-Xxxxx
Act of 2002 (the “Xxxxxxxx-Xxxxx
Act”),
and
the rules and regulations promulgated thereunder, that are effective and for
which compliance by the Company is required as of the date hereof and intends
to
comply with other applicable provisions of the Xxxxxxxx-Xxxxx Act, and the
rules
and regulations promulgated thereunder, upon the effectiveness of such
provisions or the date by which compliance therewith by the Company is required.
13
3.30 Securities
Law Compliance.
Subject
to the accuracy and completeness of the representations and warranties of the
Subscriber contained in this Agreement, the Company and AuraSound have complied
and will comply with all applicable federal and state securities laws in
connection with the offer, issuance and sale of the Securities hereunder.
Neither the Company nor anyone acting on its behalf, directly or indirectly,
has
or will sell, offer to sell or solicit offers to buy any of the Securities
or
similar securities to, or solicit offers with respect thereto from, or enter
into any negotiations relating thereto with, any person, or has taken or will
take any action so as to bring the issuance and sale of any of the Securities
under the registration provisions of the Act and applicable state securities
laws, and 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 under the Act) in
connection with the offer or sale of any of the Securities.
4. Covenants
of the Company
The
Company covenants with the Subscriber as follows, which covenants are for the
benefit of the Subscriber and its, his or her permitted assignees.
4.1 Securities
Compliance.
The
Company shall notify the SEC in accordance with its rules and regulations,
of
the transactions contemplated by any of Offering Documents and shall take all
other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Securities to the Subscriber, or their respective subsequent
holders.
4.2 Registration
and Listing.
The
Company shall cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, to comply in all respects with its reporting
and filing obligations under the Exchange Act, to comply with all requirements
related to any registration statement filed pursuant to this Agreement, and
to
not take any action or file any document (whether or not permitted by the Act
or
the rules promulgated thereunder) to terminate or suspend such registration
or
to terminate or suspend its reporting and filing obligations under the Exchange
Act or Act, except as permitted herein. The Company will take all action
necessary to continue the quotation of its Common Stock on the OTC Bulletin
Board or any successor market. Subject to the terms of Offering Documents,
the
Company further covenants that it will take such further action as the
Subscriber may reasonably request, all to the extent required from time to
time
to enable the Subscriber to sell the Securities without registration under
the
Act within the limitation of the exemptions provided by Rule 144 promulgated
under the Act. Upon the request of the Subscriber, the Company shall deliver
to
the Subscriber a written certification of a duly authorized officer as to
whether it has complied with such requirements.
4.3 Compliance
with Laws.
The
Company shall comply, and cause each Subsidiary to comply, with all applicable
laws, rules, regulations and orders, noncompliance with which would be
reasonably likely to have a Material Adverse Effect.
4.4 Keeping
of Records and Books of Account.
The
Company shall keep and cause each Subsidiary to keep adequate records and books
of account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company
and
its Subsidiaries.
14
4.5 Reporting
Requirements.
If the
Company ceases to file its periodic reports with the SEC, or if the SEC ceases
making these periodic reports available via the Internet without charge, then
the Company shall, promptly after filing with the SEC, furnish the following
to
the Subscriber so long as the Subscriber shall be obligated hereunder to
purchase the Securities or shall beneficially own Securities:
| (a) | Quarterly Reports filed with the SEC on Form 10-QSB; |
| (b) | Annual Reports filed with the SEC on Form 10-KSB; and |
|
(c)
|
Copies
of all notices, information and proxy statements in connection with
any
meetings, that are, in each case, provided to holders of shares of
Common
Stock, contemporaneously with the delivery of such notices or information
to such holders of Common Stock.
|
4.6 Other
Agreements.
The
Company shall not enter into any agreement in which the terms of such agreement
would restrict or impair the right or ability of the Company or any Subsidiary
to perform its obligations under any Offering Documents.
4.7 Use
of
Proceeds.
The
Company will use the net proceeds from the sale of the Securities for the
purposes set forth in the Offering Memorandum under the section titled “Use of
Proceeds”.
4.8 Reporting
Status.
So long
as the Subscriber beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or
the
rules and regulations thereunder would permit such termination.
4.9 Disclosure
of Transaction.
The
Company shall issue a press release describing the material terms of the
transactions contemplated hereby (the “Press
Release”)
as
soon as practicable after the Exchange Closing Date but in no event later than
four (4) Trading Days following the Exchange Closing Date. The Company shall
also file with the SEC a Current Report on Form 8-K (the “Form
8-K”)
describing the material terms of the transactions contemplated hereby (and
attaching as exhibits thereto this Agreement, the Lock-Up Agreement, the form
of
Warrant and the Press Release) as soon as practicable following the date hereof
but in no event more than four (4) Trading Days following the Exchange Closing
Date. “Trading
Day”
means
any day during which the OTC Bulletin Board (or other principal exchange on
which the Common Stock is traded) shall be open for trading.
4.10 Disclosure
of Material Information.
The
Company covenants and agrees that neither it nor any other person acting on
its
behalf has provided or will provide the Subscriber or its agents or counsel
with
any information that the Company believes constitutes material non-public
information, unless prior thereto the Subscriber shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that the Subscriber shall be relying on the foregoing
representations in effecting transactions in securities of the
Company.
4.11 Form
D.
The
Company agrees to file a Form D with respect to the Securities as required
by
Rule 506 under Regulation D and to provide a copy thereof to the Subscriber
promptly after such filing.
4.12 No
Integrated Offerings.
The
Company shall not make any offers or sales of any security (other than the
Securities being offered or sold hereunder) under circumstances that would
require registration of the Securities being offered or sold hereunder under
the
Act.
15
4.13 Pledge
of Securities.
The
Company acknowledges and agrees that the Securities may be pledged by the
Subscriber in connection with a bona fide
margin
agreement or other loan or financing arrangement that is secured by the Common
Stock. The pledge of Common Stock shall not be deemed to be a transfer, sale
or
assignment of the Common Stock hereunder, and no Subscriber effecting a pledge
of Common Stock shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or
the
Warrants; provided that the Subscriber and its pledgee shall be required to
comply with the provisions of Section 5.13 hereof in order to effect a sale,
transfer or assignment of Common Stock to such pledgee. At the Subscriber'
expense, the Company hereby agrees to execute and deliver such documentation
as
a pledgee of the Common Stock may reasonably request in connection with a pledge
of the Common Stock to such pledgee by the Subscriber.
4.14 Confidentiality.
The
Subscriber agrees that it will not disclose and it will cause its officers,
directors, employees, representatives, agents, and advisers not to disclose,
any
Confidential Information (as hereinafter defined) with respect to the other
party furnished, at any time or in any manner, provided that (i) any disclosure
of such information may be made to which the Company and Subscriber consent
in
writing; and (ii) such information may be disclosed if so required by law or
regulatory authority. “Confidential
Information”
means
information or knowledge obtained in any due diligence or other investigation
relating to the negotiation and execution of this Agreement, information
relating to the terms of the transactions contemplated hereby and any
information identified as confidential in writing from one party to the other;
provided,
however,
that
Confidential Information shall not include information or knowledge that (a)
becomes generally available to the public absent any breach of this Section
4.14, (b) was available on a non-confidential basis to a party prior to its
disclosure pursuant to this Agreement, or (c) becomes available on a
non-confidential basis from a third party who is not bound to keep such
information confidential.
4.15 Lock-Up
Agreement.
The
Chief Executive Officer of AuraSound, Xxxxxx Xxx, shall be subject to the terms
and provisions of the Lock-Up Agreement attached as an exhibit to the Offering
Memorandum.
4.16 Rule
144.
As long
as the Subscriber owns Securities, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the Subscription
Closing Date pursuant to Section 13(a) or 15(d) of the Exchange Act. As long
as
the Subscriber owns Securities, if the Company is not required to file reports
pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and
furnish to the Subscriber and make publicly available in accordance with Rule
144(c) promulgated under the Act annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form
and
substance substantially similar to those that would otherwise be required to
be
included in reports required by Section 13(a) or 15(d) of the Exchange Act,
as
well as any other information required thereby, in the time period that such
filings would have been required to have been made under the Exchange Act.
The
Company further covenants that it will take such further action as the
Subscriber may reasonably request, all to the extent required from time to
time
to enable the Subscriber to sell the Common Stock and the Warrant Shares without
registration under the Act within the limitation of the exemptions provided
by
Rule 144 promulgated under the Act, including providing any legal opinions
relating to such sale pursuant to Rule 144.
16
4.17 Company
Indemnity.
The
Company agrees to indemnify and hold harmless the Subscribers (and their
respective directors, officers, affiliates, agents, successors and assigns)
from
and against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorneys’ fees, charges and
disbursements) incurred by the Subscribers and their directors, officers,
affiliates, agents, successors and assigns as a result of any inaccuracy in
or
breach of the representations, warranties or covenants made by the Company
herein.
4.18 Affiliate
Loan Repayment.
The
Company may only use the net proceeds from the Offering to repay affiliate
loans
if aggregate subscriptions under the Offering Memorandum exceed $12,000,000,
and
the total amount of affiliate loan repayment shall equal the difference between
$12,000,000 and the total amount raised, up to a maximum of $1,750,000;
provided, however, if the Company is able to obtain a $12 million accounts
receivable credit facility, then the amount the Company may use to repay
affiliate loans shall be the amount of proceeds received over $10,000,000 up
to
a maximum of $1,750,000.
5. Registration
Rights.
5.1 Registration
Requirement.
Subject
to the terms and limitations hereof, the Company shall file an initial
Registration Statement on Form SB-2 or other appropriate registration document
under the Act (the “Initial Registration Statement”) for resale of all the
shares of Common Stock sold and issued to the Subscriber on the Subscription
Closing Date and all the Warrant Shares and shall use its reasonable best
efforts to maintain the Initial Registration Statement effective for a period
of
twenty-four (24) months following the Subscription Closing Date at the Company’s
expense (the “Effectiveness Period”). The Company shall use reasonable best
efforts to file the Initial Registration Statement no later than sixty (60)
days
after the Exchange Closing Date (the “Registration Filing Date”), and shall use
reasonable best efforts to cause the Initial Registration Statement to become
effective within two hundred and ten (210) days after the Exchange Closing
Date
(the “Effectiveness Date”). The Subscriber understands and agrees that the
Company shall have no obligation whatsoever to register with the SEC any of
the
shares of Common Stock issuable in connection with the Additional Investment
Option (as hereinafter defined).
5.2 Liquidated
Damages.
If: (i)
the Initial Registration Statement is not filed on or prior to the Registration
Filing Date, or (ii) the Company fails to file with the SEC a request for
acceleration in accordance with Rule 461 promulgated under the Securities Act
within three trading days of the date that the Company is notified in writing
by
the SEC that the Initial Registration Statement will not be “reviewed,” or not
subject to further review; or (iii) the Initial Registration Statement is not
declared effective by the SEC by the Effectiveness Date; or (iv) the date on
which trading in the Company’s Common Stock is suspended for more than three
business days in the aggregate (any such failure or breach being referred to
as
an “Event”,
and
for purposes of clause (i) or (iii) the date on which such Event occurs, or
for
purposes of clause (ii) and (iv) the date on which such three trading day period
is exceeded, being referred to as an “Event
Date”),
then
on each such Event Date and on each monthly anniversary of each such Event
Date
(if the applicable Event shall not have been cured by such date) until the
applicable Event is cured, the Company shall pay to the Subscriber an amount
in
cash, as liquidated damages, equal to 1.5% of the aggregate purchase price
paid
by the Subscriber hereunder. In no event will the Company be liable for
liquidated damages under this Agreement in excess of 1.5% of the Subscriber’s
subscription amount in any 30-day period and in no event will the total
liquidated damages hereunder exceed 18% of the Subscriber’s subscription amount
hereunder. Notwithstanding anything to the contrary contained herein, in no
event shall any liquidated damages be payable with respect to the Warrants
or
the Warrant Shares.
17
Notwithstanding
anything to the contrary set forth in this Section 5, in the event the SEC
does
not permit the Company to register all of the Registrable Securities in the
initial Registration Statement because of the SEC’s application of Rule 415, the
Company shall register in the initial Registration Statement such number of
Registrable Securities as is permitted by the SEC, provided, however, that
the
number of Registrable Securities to be included in such Registration Statement
or any subsequent registration statement shall be determined in the following
order: (i) first, the shares of Common Stock issued pursuant to this Agreement
and all other Subscription Agreements under the Offering Memorandum, along
with
all of the shares of Common Stock that the Company is obligated to register
on
the Initial Registration Statement as set forth in Section 5.8 (i) hereof shall
be registered on a pro rata basis among the holders of such Common Stock, and
(ii) second, the shares of Common Stock issuable upon exercise of the Warrants
shall be registered on a pro rata basis among the holders of the Warrants.
In
the event the SEC does not permit the Company to register all of the Registrable
Securities in the Initial Registration Statement, the Company shall use its
best
efforts to file subsequent Registration Statements to register the Registrable
Securities that were not registered in the Initial Registration Statement as
promptly as possible and in a manner permitted by the SEC. The Company shall
use
its best efforts to file each
subsequent Registration Statement by the
later
of (i) sixty (60) days following the sale of substantially all of the
Registrable Securities included in the initial Registration Statement or any
subsequent Registration Statement and (ii) six (6) months following the
effective date of the initial Registration Statement or any subsequent
Registration Statement, as applicable, or such earlier date as permitted by
the
SEC. The Company shall use its best efforts to obtain effectiveness of each
subsequent
Registration Statement by the
earlier of (A) the ninetieth (90th)
day
following the filing date of such Registration Statement (or in the event such
Registration Statement receives a “full review” by the SEC, the one hundred
twentieth (120th)
day
following such filing date) or (B) the date which is within three (3) business
days after the date on which the SEC informs the Company (i) that the SEC will
not review such Registration Statement or (ii) that
the
Company may request the acceleration of the effectiveness of such Registration
Statement and the Company makes such request.
5.3 Registrable
Securities for the Initial Registration Statement Defined.
For the
purposes of this Agreement, “Registrable Securities” shall mean all unregistered
shares of Common Stock and Warrant Shares underlying the Units purchased by
the
Subscriber hereunder, but none of the shares issuable in connection with the
Additional Investment Option, each as defined herein.
5.4 Limitation
to Registration Requirement.
Notwithstanding the foregoing, the Company shall not be obligated to effect
any
registration of the Registrable Securities or take any other action pursuant
to
this Section 4: (i) in any particular jurisdiction in which the Company would
be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Act, or
(ii) during any period in which the Company suspends the rights of a subscriber
after giving the Subscriber written notification of a Potential Material Event
(defined below) pursuant to Section 4.6 hereof.
5.5 Expenses
of Registration.
Except
as otherwise expressly set forth herein, the Company shall bear all expenses
incurred by the Company in compliance with the registration obligations of
the
Company, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company incurred
in
connection with any registration, qualification or compliance pursuant to this
Agreement and all underwriting discounts, selling commissions and expense
allowances applicable to the sale of any securities by the Company for its
own
account in any registration. All underwriting discounts, selling commissions
and
expense allowances applicable to the sale by Subscriber of Registrable
Securities and all fees and disbursements of counsel for the Subscriber shall
be
borne by the Subscriber.
18
5.6 Indemnification.
(a) To
the
extent permitted by law the Company will indemnify the Subscriber, each of
its
officers, directors, agents, employees and partners, and each person controlling
the Subscriber, with respect to each registration, qualification or compliance
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter, and their respective counsel against all
claims, losses, damages and liabilities (or actions, proceedings or settlements
in respect thereof) arising out of or based on (i) any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document prepared by the Company (including any
related registration statement, notification or the like) incident to any such
registration, qualification or compliance, or (ii) any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the
Company of the Act or any rule or regulation there-under applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and subject to the
provisions of Section 5.7(b) below, will reimburse the Subscriber, each of
its
officers, directors, agents, employees and partners, and each person controlling
the Subscriber, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses as they are reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in
any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement (or alleged untrue statement)
or omission (or alleged omissions) based upon written information furnished
to
the Company by (or on behalf of) the Subscriber or underwriter, or if the person
asserting any such loss, claim, damage or liability (or action or proceeding
in
respect thereof did not receive a copy of an amended preliminary prospectus
or
the final prospectus (or the final prospectus as amended and supplemented)
at or
before the written confirmation of the sale of such Registrable Securities
to
the person because of the failure of the Subscriber or underwriter to so provide
such amended preliminary or final prospectus (or the final prospectus as amended
and supplemented); provided, however, that the indemnity agreement contained
in
this subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld),
nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration
by
the Subscriber, any such partner, officer, director, employee, agent or
controlling person of such Subscriber, or any such underwriter or any person
who
controls any such underwriter; provided, however, that the obligations of the
Company hereunder shall be limited to an amount equal to the portion of net
proceeds represented by the Registrable Securities pursuant to this
Agreement.
(b) To
the
extent permitted by law, the Subscriber will indemnify the Company, and its
directors, officers, agents, employees and each underwriter, if any, of the
Company’s securities covered by any registration statement required to be filed
pursuant to this Agreement, each person who controls the Company or such
underwriter within the meaning of the Act and the rules and regulations
thereunder, and their respective counsel against all claims, losses, damages
and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material
fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company for any legal or any other expenses
as they are reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by the Subscriber;
provided,
however,
that
the obligations of the Subscriber hereunder shall be limited to an amount equal
to the net proceeds to the Subscriber from Registrable Securities sold under
such registration statement, prospectus, offering circular or other document
as
contemplated herein; provided, further, that the indemnity agreement contained
in this subsection shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Subscriber, which consent shall not be unreasonably withheld
or delayed.
19
(c) Each
party entitled to indemnification under this Section (the “Indemnified Party”)
shall give notice to the party required to provide indemnification (the
“Indemnifying Party”) promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying Party, who
shall
conduct the defense of such claim or any litigation resulting therefrom, shall
be approved by the Indemnified Party (whose approval shall not unreasonably
be
withheld), and the Indemnified Party may participate in such defense at such
party’s expense; and provided further that if any Indemnified Party reasonably
concludes that there may be one or more legal defenses available to it that
are
not available to the Indemnifying Party, or that such claim or litigation
involves or could have an effect on matters beyond the scope of this Agreement,
then the Indemnified Party may retain its own counsel at the expense of the
Indemnifying Party; and provided further that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party
of its obligations under this Agreement unless and only to the extent that
such
failure to give notice results in material prejudice to the Indemnifying Party.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and
as
shall be reasonably required in connection with defense of such claim and
litigation resulting there-from.
(d) If
the
indemnification provided for in this Section is held by a court of competent
jurisdiction to be unavailable to an Indemnified Party with respect to any
loss,
liability, claim, damage or expense referred to herein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party hereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such loss, liability, claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the
one
hand and of the Indemnified Party on the other in connection with the statements
or omissions that resulted in such loss, liability, claim, damage or expense
as
well as any other relevant equitable considerations. The relative fault of
the
Indemnifying Party and of the Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the Indemnifying Party or by the Indemnified Party and the parties’
relative intent, knowledge, access to information and opportunity to correct
or
prevent such statement or omission.
20
5.7 Transfer
or Assignment of Registration Rights.
The
Registrable Securities, and any related benefits to the Subscriber hereunder
may
be transferred or assigned by the Subscriber to a permitted transferee or
assignee, provided that the Company is given written notice of such transfer
or
assignment, stating the name and address of said transferee or assignee and
identifying the Registrable Securities with respect to which such registration
rights are being transferred or assigned; provided further that the transferee
or assignee of such Registrable Securities shall be deemed to have assumed
the
obligations of the Subscriber under this Agreement by the acceptance of such
assignment and shall, upon request from the Company, evidence such assumption
by
delivery to the Company of a written agreement assuming such obligations of
the
Subscriber; and provided further, that the transferee or assignee shall not
be a
competitor (or an affiliate of a competitor) of the Company or any of its
subsidiaries and shall not have (and shall not be an affiliate of a person
that
has) any pending or threatened claim against the Company or any of its
subsidiaries.
5.8 Registration
Procedures.
In the
case of any registration effected by the Company pursuant to this Agreement,
the
Company will keep the Subscriber advised in writing as to the initiation of
each
registration and as to the completion thereof. The Company will:
(a) Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Act with respect to
the
disposition of securities covered by such registration statement;
(b) Respond
as promptly as reasonably practicable to any comments received from the SEC
with
respect to a registration statement or any amendment thereto.
(c) Notify
the Subscriber as promptly as reasonably practicable and (if requested by any
such person) confirm such notice in writing no later than one trading day
following the day (A) when a prospectus or any prospectus supplement or
post-effective amendment to a registration statement is proposed to be filed
and
(B) with respect to a registration statement or any post-effective amendment,
when the same has become effective;
(d) Furnish
such number of prospectuses and other documents incident thereto, including
supplements and amendments, as the Subscriber may reasonably request;
(e) Furnish
to the Subscriber, upon request, a copy of all documents filed with and all
correspondence from or to the SEC in connection with any such registration
statement other than non-substantive cover letters and the like;
(f) Use
its
reasonable best efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of a registration
statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment; and
(g) Use
its
reasonable best efforts to comply with all applicable rules and regulations
of
the SEC.
Notwithstanding
the foregoing, if at any time or from time to time after the date hereof, the
Company notifies the Subscriber in writing of the existence of an event or
circumstance that is not disclosed in the Registration Statement and that may
have a material effect on the Company or its business (a “Potential Material
Event”), the Subscriber shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until the Company notifies the Subscriber that such Potential
Material Event either has been added to the Registration Statement by amendment
or supplement or no longer constitutes a Potential Material Event; provided,
that
the Company may not so suspend the right of Subscriber for more than 60 days
in
any twelve month period.
21
(h) File
the
final prospectus pursuant to Rule 424 of the Securities Act no later than 9:00
am Eastern time on the business day following the date the Registration
Statement is declared effective by the SEC.
(i) The
Company shall not permit any Securities other than (i) the Registrable
Securities, (ii) 3,200,000 shares of Common Stock issuable upon exercise of
warrants issued in the Second Bridge Financing (as defined in the Offering
Memorandum), (iii) 1,229,476 shares of Common Stock held by Next Stage
Investments, Inc., an affiliate of the Placement Agent, and (iv) 619,329 shares
of Common Stock held by Synergy Business Consulting, LLC, the former majority
shareholder of the Company, to be included in the Initial Registration
Statement.
5.9 Statement
of Beneficial Ownership.
The
Company may require the Subscriber to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially owned by
the
Subscriber and the controlling person thereof and any other such information
regarding the Subscriber, the Registrable Securities held by the Subscriber
and
the intended method of disposition of such securities as shall be reasonably
required with respect to the registration of the Subscriber’s Registrable
Securities. The Subscriber hereby understands and agrees that the Company may,
in its sole discretion, exclude the Subscriber’s shares of Common Stock
(including such shares into which the Warrants are exercisable) from any
Registration Statement required to be filed hereunder in the event that the
Subscriber fails to provide such information requested by the Company within
the
time period reasonably specified by the Company or is required to do so by
law
or the SEC.
5.10 Compliance.
The
Subscriber covenants and agrees that the Subscriber will comply with the
prospectus delivery requirements of the Act as applicable to such Subscriber
in
connection with any resale of Registrable Securities pursuant to a Registration
Statement required to be filed hereunder.
5.11 Piggy-Back
Registrations.
If at
any time during the Effectiveness Period there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the SEC a Registration Statement other than
as required hereunder relating to an offering for its own account or the account
of others under the Act of any of its Common Stock, other than an offering
of
securities issued pursuant to a Strategic Issuance (as defined below) and other
than a Form S-4 or Form S-8 Registration Statement (each as promulgated under
the Act or their then equivalents relating to equity securities to be issued
solely in connection with any business combination transaction, acquisition
of
any entity or business or equity securities issuable in connection with stock
option or other employee benefit plans), then the Company shall send to the
Subscriber (together with any other holders of its Common Stock or Warrants
possessing “piggyback registration rights” comparable to those granted to the
Subscriber hereunder (“Rights holders”)) written notice of such determination
and, if within fifteen (15) days after receipt of such notice, the Subscriber
shall so request in writing, the Company shall include in such Registration
Statement all or any part of such Registrable Securities such Subscriber
requests to be registered; provided that the Company shall not be required
to
register any Registrable Securities pursuant to this Section that are eligible
for resale pursuant to Rule 144(k) promulgated under the Act; and provided
further that the Company may, without the consent of the Subscriber, withdraw
such registration statement before its becoming effective if the Company or
other stockholders have elected to abandon the proposal to register the
securities proposed to be registered thereunder. If the registration statement
is being filed for an underwritten public offering, the Subscriber must timely
execute and deliver the usual and customary agreement among the Company, the
Subscriber and the underwriters relating to the registration. If the
Registration Statement is being filed for an underwritten offer and sale by
the
Company of securities for its own account and the managing underwriters advise
the Company in writing that in their opinion the offering contemplated by the
Registration Statement cannot be successfully completed if the Company were
to
also register the Registrable Securities of the Subscriber requested to be
included in such Registration Statement, then the Company will include in the
registration: (i) first, any securities the Company proposes to sell, (ii)
second, any securities of any person whose securities are being registered
as a
result of the exercise of a demand registration right, and (iii) third, that
portion of the aggregate number of shares being requested for inclusion in
the
Registration Statement by (X) the Subscriber and (Y) all other Rights holders,
which in the opinion of such managing underwriters can successfully be sold,
such number of shares to be taken pro rata from the Rights holders on the basis
of the total number of shares being requested for inclusion in the Registration
Statement by each Rights holder. “Strategic Issuance” shall mean an issuance of
securities: (i) in connection with a “corporate partnering” transaction or a
“strategic alliance” (as determined by the Board of Directors of the Company in
good faith); (ii) in connection with any financing transaction in respect of
which the Company is a borrower; or (iii) to a vendor, lessor, lender, or
customer of the Company, or a research, manufacturing or other commercial
collaborator of the Company, in a transaction approved by the Board of
Directors, provided in any case, that such issuance is not being made primarily
for the purpose of avoiding compliance with this Agreement.
22
5.12 Legend.
Each
certificate representing the Securities shall be stamped or otherwise imprinted
with a legend substantially in the following form (in addition to any legend
required by applicable state securities or “blue sky” laws):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR HEMCURE, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL
THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
The
Company agrees to reissue certificates representing any of the Common Stock
and
the Warrant Shares, without the legend set forth above if at such time, prior
to
making any transfer of any such Common Stock or Warrant Shares, such holder
thereof shall give written notice to the Company describing the manner and
terms
of such transfer and removal as the Company may reasonably request. Such
proposed transfer and removal will not be effected until: (a) either (i) the
Company has received an opinion of counsel reasonably satisfactory to the
Company, to the effect that the registration of the Common Stock or Warrant
Shares under the Act is not required in connection with such proposed transfer,
(ii) a registration statement under the Act covering such proposed disposition
has been filed by the Company with the SEC and has become and remains effective
under the Act, (iii) the Company has received other evidence reasonably
satisfactory to the Company that such registration and qualification under
the
Act and state securities laws are not required, or (iv) the holder provides
the
Company with reasonable assurances that such security can be sold pursuant
to
Rule 144 under the Act; and (b) either (i) the Company has received an opinion
of counsel reasonably satisfactory to the Company, to the effect that
registration or qualification under the securities or “blue sky” laws of any
state is not required in connection with such proposed disposition, or (ii)
compliance with applicable state securities or “blue sky” laws has been effected
or a valid exemption exists with respect thereto. The Company will respond
to
any such notice from a holder within five (5) business days. In the case of
any
proposed transfer under this Section 5.13, the Company will use reasonable
efforts to comply with any such applicable state securities or “blue sky” laws,
but shall in no event be required, (x) to qualify to do business in any state
where it is not then qualified, or (y) to take any action that would subject
it
to tax or to the general service of process in any state where it is not then
subject. The restrictions on transfer contained in this Section 5.13 shall
be in
addition to, and not by way of limitation of, any other restrictions on transfer
contained in any other section of this Agreement. Whenever a certificate
representing the Common Stock or Warrant Shares is required to be issued to
the
Subscriber without a legend, in lieu of delivering physical certificates
representing the Common Stock or Warrant Shares, provided the Company’s transfer
agent is participating in the Depository Trust Company (“DTC”)
Fast
Automated Securities Transfer program, the Company shall use its reasonable
best
efforts to cause its transfer agent to electronically transmit the Common Stock
or Warrant Shares to a Subscriber by crediting the account of such Subscriber’s
Prime Broker with DTC through its Deposit Withdrawal Agent SEC (“DWAC”)
system
(to the extent not inconsistent with any provisions of this
Agreement).
23
6. Subsequent
Equity Sales.
6.1 If
the
Company at any time after the Subscription Closing Date consummates a sale
of
any Common Stock for cash at a price per share less than the $1.00 or
consummates a sale of any securities exercisable for or convertible into Common
Stock (“Common Stock Equivalents”) having an exercise or conversion price per
share less than the Purchase Price (such lower price, the “Base Share Price” and
each such issuance, a “Dilutive Issuance”), then the Company shall upon each
Dilutive Issuance issue to the Subscriber a number of additional shares of
Common Stock in accordance with the following formula:
|
ACS
|
= SA minus ONS | |||
|
|
BSP
|
|||
|
Where
|
|||||
|
ACS
|
=
|
The
number of additional shares of Common Stock to be issued pursuant
to this
Section 6(a).
|
|||
|
SA
|
=
|
The
aggregate Purchase Price paid by the Subscriber pursuant to this
Agreement.
|
|||
|
BSP
|
=
|
The
Base Share Price.
|
|||
|
ONS
|
=
|
The
original number of shares of Common Stock issued to the Subscriber
pursuant to this Agreement (not including any Warrant
Shares).
|
|||
Notwithstanding
the foregoing, no adjustments shall be made under this Section 6(a) in respect
of an Exempt Issuance (as defined below).
24
6.2 “Exempt
Issuance” means (i) shares of Common Stock issued pursuant to an equity
incentive plan duly adopted by the Company’s board of directors, provided that
during the first twelve months following the Exchange Closing Date the number
of
securities so issued shall not exceed, during such twelve (12) month period,
twelve and one-half percent (12.5%) of the outstanding shares of Common Stock
on
a fully diluted basis as of the Exchange Closing Date after giving effect to
the
sale and issuance of all the Units purchased as of such date; and provided
further that such fully diluted calculation shall include all Units issued
pursuant to the Offering Memorandum from and after the Exchange Closing Date
through the termination of the Offering, (ii) shares of Common Stock issued
upon
exercise of any options or warrants of the Company outstanding on the Exchange
Closing Date, (iii) shares of Common Stock issued upon exercise of warrants
to
be issued pursuant to Section 7.1(f) of the Amended and Restated Agreement
and
Plan of Share Exchange, dated as of June 7, 2007, between the Company and
AuraSound (the “Share Exchange Agreement”), and (iv) shares of Common Stock
issued to the shareholders of AuraSound pursuant to the Share Exchange Agreement
(including, without limitation, shares issued in connection with the Share
Cancellation and the Debt Conversion (as defined in the Offering
Memorandum).
6.3 If
the
Company at any time after the Subscription Closing Date shall split, subdivide
or combine its outstanding shares of Common Stock into a different number of
shares, then, for the purposes of this Section 6, the Purchase Price shall
be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
7. Closing
Conditions
7.1 Conditions
Precedent to the Obligation of the Company to Close and to Sell the
Securities.
The
obligation hereunder of the Company to close and issue and sell the Securities
to the Subscriber at the Subscription Closing Date is subject to the
satisfaction or waiver, at or before the Subscription Closing of the conditions
set forth below. These conditions are for the Company's sole benefit and may
be
waived by the Company at any time in its sole discretion.
(a) Accuracy
of the Subscriber’s Representations and Warranties.
The
representations and warranties of the Subscriber shall be true and correct
in
all material respects as of the date when made and as of the Subscription
Closing Date as though made at that time, except for representations and
warranties that are expressly made as of a particular date, which shall be
true
and correct in all material respects as of such date.
(b) Performance
by the Subscriber.
The
Subscriber shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by the Subscriber at or prior to the
Subscription Closing Date.
(c) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
(d) Delivery
of Purchase Price.
The
Subscriber shall have delivered to the Company the purchase price for the
Securities to be purchased by the Subscriber.
25
(e) Delivery
of this Agreement and the Warrants.
This
Agreement and the Warrants shall have been duly executed and delivered by the
Subscriber and, with respect to the Escrow Agreement, the escrow agent, to
the
Company.
7.2 Conditions
Precedent to the Obligation of the Subscriber to Close and to Purchase the
Securities.
The
obligation hereunder of the Subscriber to purchase the Securities and consummate
the transactions contemplated by this Agreement is subject to the satisfaction
or waiver, at or before the Subscription Closing Date, of each of the conditions
set forth below. These conditions are for the Subscriber’s sole benefit and may
be waived by the Subscriber at any time in its sole discretion.
(a) Accuracy
of the Company's Representations and Warranties.
Each of
the representations and warranties of the Company in this Agreement and the
Registration Rights Agreement shall be true and correct in all respects as
of
the Subscription Closing Date, except for representations and warranties that
speak as of a particular date, which shall be true and correct in all material
respects as of such date.
(b) Performance
by the Company.
The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by the Company at or prior to the
Subscription Closing Date.
(c) No
Suspension, Etc.
Trading
in the Common Stock shall not have been suspended by the SEC or the OTC Bulletin
Board (except for any suspension of trading of limited duration agreed to by
the
Company, which suspension shall be terminated prior to the Closing), and, at
any
time prior to the Subscription Closing Date, trading in securities generally
as
reported by Bloomberg Financial Markets (“Bloomberg”)
shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg, or on the
New
York Stock Exchange, nor shall a banking moratorium have been declared either
by
the United States or New York State authorities.
(d) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
(e) No
Proceedings or Litigation.
No
action, suit or proceeding before any arbitrator or any governmental authority
shall have been commenced, and no investigation by any governmental authority
shall have been threatened, against the Company or any Subsidiary, or any of
the
officers, directors or affiliates of the Company or any Subsidiary seeking
to
restrain, prevent or change the transactions contemplated by this Agreement,
or
seeking damages in connection with such transactions.
(f) Opinion
of Counsel.
The
Subscriber shall have received an opinion of counsel to the Company, dated
the
Subscription Closing Date, in the form attached to the Offering Memorandum
as
Exhibit
F.
(g) Shares
and Warrants.
At or
prior to the Subscription Closing, the Company shall have delivered to the
Subscriber the Warrants (in such denominations as each Subscriber may request)
duly executed by the Company. In addition, the Company shall provide for the
delivery to the Subscriber of certificates representing the Common Stock (in
such denominations as the Subscriber may request) in a reasonable period of
time
after the close, not to exceed five (5) days.
26
(h) Secretary's
Certificate.
The
Company shall have delivered to the Subscriber a secretary's certificate, dated
as of the Subscription Closing Date, as to (i) the resolutions adopted by the
Board of Directors approving the transactions contemplated hereby, (ii) the
Articles, (iii) the Bylaws, each as in effect at the Closing, and (iv) the
authority and incumbency of the officers of the Company executing the Offering
Documents and any other documents required to be executed or delivered in
connection therewith.
(i) Officer's
Certificate.
On the
Subscription Closing Date, the Company shall have delivered to the Subscriber
a
certificate signed by an executive officer on behalf of the Company, dated
as of
the Subscription Closing Date, confirming the accuracy of the Company's
representations, warranties and its compliance with covenants as of the
Subscription Closing Date and confirming the compliance by the Company with
the
conditions precedent set forth in this Section 7 as of the Subscription Closing
Date.
(j) Material
Adverse Effect.
No
Material Adverse Effect shall have occurred at or before the Subscription
Closing Date.
(k) Minimum
Investment Amount.
The
Company shall have in escrow pursuant to the Offering Memorandum at least
$10,000,000.
(l) Credit
Facility.
The
Company shall have written approval from a lender to provide receivables
financing in an amount of at least $10,000,000 independent of the amount raised
under the Offering Memorandum and such receivables financing agreement must
have
an initial term of twelve months.
8. Additional
Investment Option.
If
the Subscriber’s aggregate Purchase Price paid pursuant to this
Subscription Agreement equals or exceeds $3,000,000, then for a period of twelve
(12) months from the Closing Date the Subscriber will have the right but not
the
obligation to purchase additional Units up to 50% of the dollar amount invested
by such investor in the Offering at a price of $1.35 per Unit, provided that
the
additional Warrants included in such additional Investment Units shall not
be
subject to cashless exercise (“the Additional Investment Option”). For example,
if the investor invested $4,000,000 in the Offering, then for a period of 12
months from the Closing Date, such investor shall have the option to purchase
an
additional $2,000,000 in Units except that the price per Unit shall be $1.35
and
the Warrants included in such additional Units shall not be subject to cashless
exercise. For purposes of this Additional Investment Option, all investments
managed by the same Investment Advisor shall be aggregated and deemed to be
as
one.
9. Miscellaneous.
9.1 In
connection with the Additional Investment Option, the Subscriber will provide
the Company with a written notice stating the number of additional Units the
Subscriber desires to purchase and a written representation and warranty, in
form and substance reasonably acceptable to the Company, that the Subscriber
continues to be an “accredited investor” as defined in Rule 501 of Regulation D
promulgated under the Act. The Company and the Subscriber will use their
best efforts, cooperate in good faith and provide each other such additional
documentation and instructions as each may reasonably request in order to
consummate such additional purchase and sale within 10 trading days of the
Company’s receipt of the Subscriber’s notice hereunder. The Subscriber
understands and agrees that the shares of Common Stock underlying the additional
Units, including warrant shares, will not be registered in the Initial
Registration Statement.
27
9.2 Any
notice or other communication given hereunder shall be deemed sufficient if
in
writing and sent by registered or certified mail, return receipt requested,
addressed to the Company (or to Xxxxxx Xxx for the purposes of Section 4.11),
at
AuraSound, Inc., 00000 Xxxx Xxxxx Xxxxxx, Xxxxx Xx Xxxxxxx, XX 00000, Attention:
Xxxxxx Xxx, Chief Executive Officer, with a copy to (which shall not constitute
notice) Xxxxxxxxxx & Xxxxx LLP, 000 Xxxxxxxxx Xxxxxx, 00xx
Xxxxx,
Xxx Xxxx, XX 00000, Attention: Xxxxx Xxxxxxxx, Esq., and to the Subscriber
at
the address indicated on the signature page of this Agreement. Notices shall
be
deemed to have been given three (3) business days after the date of mailing,
except notices of change of address, which shall be deemed to have been given
when received.
9.3 This
Agreement may be amended through a written instrument signed by the Subscriber,
AuraSound and the Company; provided, however, that the terms of Section 4 of
this Agreement may be amended without the consent or approval of the Subscriber
so long as such amendment applies in the same fashion to the subscription
agreements of all of the other subscribers for Units in the Offering and at
least holders of a majority of the Units sold in the Offering have given their
approval of such amendment, which approval shall be binding on all holders
of
Units.
9.4 This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and to their respective heirs, legal representatives, successors and assigns.
This Agreement sets forth the entire agreement and understanding between the
parties as to the subject matter hereof and merges and supersedes all prior
discussions, agreements and understandings of any and every nature among
them.
9.5 Notwithstanding
the place where this Agreement may be executed by any of the parties hereto,
the
parties expressly agree that all the terms and provisions hereof shall be
construed in accordance with and governed by the laws of the State of
Nevada.
9.6 This
Agreement may be executed in counterparts. It shall not be binding upon the
Company and AuraSound unless and until it is accepted by the Company and
AuraSound. Upon the execution and delivery of this Agreement by the Subscriber,
this Agreement shall become a binding obligation of the Subscriber with respect
to the purchase of Units as herein provided; subject, however, to the right
hereby reserved to the Company to enter into the same agreements with other
subscribers and to add and/or to delete other persons as
subscribers.
9.7 The
holding of any provision of this Agreement to be invalid or unenforceable by
a
court of competent jurisdiction shall not affect any other provision of this
Agreement, which shall remain in full force and effect.
9.8 It
is
agreed that a waiver by either party of a breach of any provision of this
Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
9.9 The
parties agree to execute and deliver all such further documents, agreements
and
instruments and take such other and further action as may be necessary or
appropriate to carry out the purposes and intent of this Agreement.
9.10 The
Company agrees not to disclose the names, addresses or any other information
about the Subscriber, except as required by law, provided that the Company
may
provide information relating to the Subscriber as required in any registration
statement under the Act that may be filed by the Company pursuant to the
requirements of this Agreement.
28
9.11 Specific
Performance. The Company and the Subscriber acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Offering Documents are not performed in accordance with
their specific terms or are otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent or
cure
breaches of the provisions of this Agreement or the other Offering Documents
and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law
or
equity.
9.12 Survival.
The representations and warranties of the Company and the Subscriber shall
survive the execution and delivery hereof and the Subscription Closing until
the
second anniversary of the Subscription Closing Date.
9.13 The
obligation of the Subscriber hereunder is several and not joint with the
obligations of any other subscribers for the purchase of Units in the Offering
(the “Other Subscribers”), and the Subscriber shall not be responsible in any
way for the performance of the obligations of any Other Subscribers. Nothing
contained herein or in any other agreement or document delivered at the Closing,
and no action taken by the Subscriber pursuant hereto, shall be deemed to
constitute the Subscriber and the Other Subscribers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Subscriber and the Other Subscribers are in any way acting
in concert with respect to such obligations or the transactions contemplated
by
this Agreement. The Subscriber shall be entitled to protect and enforce the
Subscriber’s rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any Other Subscriber to be joined
as an additional party in any proceeding for such purpose. The language used
in
this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied
against any party. The Subscriber is not acting as part of a “group” (as that
term is used in Section 13(d) of the 0000 Xxx) in negotiating and entering
into
this Agreement or purchasing the Units or acquiring, disposing of or voting
any
of the underlying Common Shares or the Warrant Shares. The Company hereby
confirms that it understands and agrees that the Subscriber is not acting as
part of any such group.
[SIGNATURE
PAGE FOLLOWS]
29
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year
first written above.
|
Full Legal Name of Subscriber (Please print) |
Full Legal Name of Co-Subscriber
(if applicable)
|
|
Signature of (or on behalf of) Subscriber |
Signature of or on behalf of Co-Subscriber |
||
| Name: | (if applicable) | ||
| Title: |
|
Address of Subscriber |
Address
of Co-Subscriber (if applicable)
|
|
Social Security or Taxpayer |
Social Security or Taxpayer Identification |
||
| Identification Number of Subscriber |
Number
of Co-Subscriber (if applicable)
|
|
Number of Units Subscribed For |
| Subscription Agreed to and Accepted | ||||
| HEMCURE, INC., a Nevada corporation | AuraSound, Inc., a California corporation | |||
| By: | By: | |||
| Name: |
Xxxxxxx X. Xxxxxxx |
Name: |
Xxxxxx Xxx |
|
| Title: | Chief Executive Officer | Title: | Chief Executive Officer | |
30
Exhibit
A-1
Corporate
Investor Questionnaire
IMPORTANT:
Please
Complete
CORPORATE
INVESTOR QUESTIONNAIRE
HEMCURE,
INC.
AuraSound,
Inc.
Hemcure,
Inc. and AuraSound,
Inc.
c/o
AuraSound, Inc.
00000
Xxxx Xxxxx Xxxxxx
Xxxxx
Xx
Xxxxxxx, XX 00000
Attn:
Xxxxxx Xxx
The
information contained in this Corporate Investor Questionnaire is being
furnished
in
order to determine whether the undersigned Corporation’s
subscription
to
purchase Units
(“Units”) each Unit consisting of one share
of
common stock and warrants to purchase one (1) share of Common Stock of
AuraSound,
Inc.
and
Hemcure, Inc. (the
“Company”) may proceed.
This
Questionnaire should be completed, signed, dated and
a copy
should be sent to GP Group, LLC (the “Placement Agent”) via facsimile at (000)
000-0000 or electronic format (e.g., PDF) to xxxxxxxx@xxxxxxxxxxxxxx.xxx
and the
original delivered to GP Group, LLC, 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxx Xxxxxxx.
Please
keep a copy for your files.
A-1
(1)
ALL
INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY.
The
undersigned Corporation understands, however, that the Company may present
this
Questionnaire to such parties as it deems appropriate
if called upon to establish that the proposed offer and sale of the Units in
the
Company is
exempt
from registration under the Securities Act
of
1933, as
amended, or meets
the
requirements of applicable state securities or “blue sky” laws. Further, the
undersigned
Corporation understands that the offering required to be reported to the
Securities
and Exchange Commission and to various state securities or “blue sky”
regulators.
I. PLEASE
CHECK ANY OF STATEMENTS 1-3 BELOW THAT APPLY TO THE
CORPORATION.
|
¨
1.
|
Each
of the shareholders of the undersigned Corporation is able to certify
that
such shareholder meets at least one of the following two
conditions:
|
| (a) |
The
shareholder is a natural person whose individual net worth* or joint
net
worth with his or her spouse exceeds $1,000,000;
or
|
| (b) |
The
shareholder is a natural person who had an individual income* in
excess of
$200,000 in each of the previous two years and who reasonably expects
an
individual income in excess of $200,000 this
year.
|
|
¨
2.
|
Each
of the shareholders of the undersigned Corporation is able to certify
that
such shareholder is a natural person who, together with his or her
spouse,
has had a joint income in excess of $300,000 in each of the previous
two
years and who reasonably expects a joint income in excess of $300,000
this
year.
|
|
¨
3.
|
The
undersigned Corporation: (a) was not formed for the specific purpose
of
acquiring the Units;
and (b) has total assets in excess of
$5,000,000.
|
|
*
|
For
purposes of this Questionnaire, the term “net worth” means the excess of
total assets over total liabilities. In determining income, an investor
should add to his or her adjusted gross income any amounts attributable
to
tax-exempt income received, losses claimed as a limited partner in
any
limited partnership, deductions claimed for depletion, contributions
to
XXX or Xxxxx retirement plans, alimony payments and any amount by
which
income from long-term capital gains has been reduced in arriving
at
adjusted gross income.
|
A-1
(2)
IF
YOU
CHECKED STATEMENT 1 OR STATEMENT 2 IN SECTION I, ABOVE, AND DID NOT
CHECK STATEMENT 3, YOU MUST PROVIDE A LETTER SIGNED BY AN OFFICER OF THE
UNDERSIGNED CORPORATION LISTING THE NAME
OF
EACH SHAREHOLDER AND THE REASON (UNDER STATEMENT 1 OR STATEMENT 2) WHY
SUCH SHAREHOLDER QUALIFIES AS AN ACCREDITED INVESTOR (ON THE BASIS OF NET WORTH,
INDIVIDUAL INCOME OR JOINT INCOME), OR EACH SHAREHOLDER MUST PROVIDE A COMPLETED
INDIVIDUAL INVESTOR QUESTIONNAIRE (PAGES A-1 (2) TO
A-1 (6)).
II.
OTHER
CERTIFICATIONS
By
signing the Signature Page, the undersigned certifies the
following:
| (a) |
that
the Corporation’s purchase of Units
will
be solely for the Corporation’s own account and not for the account of any
other person or entity;
|
| (b) |
that
the Corporation’s name, address of principal office, place of
incorporation and taxpayer identification number as set forth in
this
Questionnaire are true, correct and complete;
and
|
| (c) |
that
one of the following is true and correct (check
one):
|
|
¨
(i)
|
the
Corporation is a corporation organized in or under the laws of the
United
States or any political subdivision
thereof.
|
| ¨ (ii) |
the Corporation is a corporation which is neither
created
nor
organized in or under the United States or any political subdivision
thereof, but which has made an election under either Section 897(1)
or
897(k) of the United States Internal Revenue Code of 1986, as amended,
to
be treated as a domestic corporation for certain purposes of United
States
federal income taxation (A COPY OF THE INTERNAL REVENUE SERVICE
ACKNOWLEDGMENT OF THE UNDERSIGNED’S ELECTION MUST BE ATTACHED TO THIS
QUESTIONNAIRE IF THIS PROVISION IS
APPLICABLE).
|
| ¨ (iii) | neither (1) nor (ii) above is true. |
|
®
(i)
|
A-1
(3)
|
III.
|
GENERAL
INFORMATION
|
(a) PROSPECTIVE
PURCHASER (THE CORPORATION)
|
Name:
|
|
|
Principal
Place of Business:
|
||
|
|
(Number
and Street)
|
|
|
(City)
|
(State)
|
(Zip
Code)
|
|
Address
for Correspondence (if
different):
|
||
|
(Number
and Street)
|
||
|
(City)
|
(State)
(Zip
Code)
|
|
|
Telephone
Number:
|
||
| (Area Code) | (Number) | |
|
Facsimile
Number:
|
||
| (Area Code) | (Number) | |
|
State
of Incorporation:
|
|
|
Date
of Formation:
|
|
|
Taxpayer
Identification Number:
|
|
|
NASD
Affiliation or Association of the Corporation, if any:
|
|
If
none,
check here o
|
Number
of Shareholders:
|
|
| (b) |
INDIVIDUAL
WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE
CORPORATION
|
|
Name:
|
|
|
Position
or Title:
|
|
A-1
(4)
|
IV.
|
BENEFICIAL,
OWNERSHIP
|
List
the
name, address, title, phone number and email address of the natural
person
or persons who will possess voting and investment power over the Units
subscribed
for herein:
|
Name
of Natural Person(s):
|
|
|
Address:
|
|
|
|
|
|
Title
(if any):
|
|
|
Phone:
|
|
|
Email
address (if
any):
|
|
|
V.
|
SIGNATURE
|
The
Signature Page to this Questionnaire is contained on page A-1 (6), entitled
Corporation Signature Page.
A-1
(5)
Corporation
Signature Page
HEMCURE,
INC.
AURASOUND,
INC.
1. The
undersigned Corporation represents that (a) the information contained in this
Questionnaire is complete and accurate and (b) the Corporation will immediately
notify (i) GP Group, LLC, 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, Attention: Xxxxxx Xxxxxxx, phone
number (000) 000-0000, facsimile
(000) 000-0000 and (ii) Xxxxxx X. Xxxxxxx, Esq., counsel to GP Group, LLC,
at Xxxxxxxxxxx & Xxxxxxxx Xxxxxxx Xxxxx Xxxxx LLP, 00000 Xxxxx Xxxxxx Xxxx.,
0xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, phone number (000) 000-0000, facsimile
(000) 000-0000 if any material change in any of the information occurs prior
to
the acceptance of the undersigned Corporation’s subscription and will promptly
send the foregoing written confirmation of such change.
2. The
undersigned Corporation hereby represents and warrants that the person signing
this Questionnaire on behalf of the Corporation has been duly authorized by
all
requisite action on the part of the Corporation to acquire the Units and sign
this Questionnaire and this Agreement on behalf of the Corporation and, further,
that the undersigned Corporation has all requisite authority to purchase the
Units and enter into the Subscription Agreement.
|
|
||||
|
Date
|
Name
of Corporation
|
(Please Type or Print) | ||
| By: | ||||
| Signature | ||||
| Name: | ||||
|
(Please
Type or Print)
|
||||
| Title: | ||||
|
(Please Type
or Print)
|
||||
THE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH
SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR
AN OPINION OF COUNSEL HAS BEEN DELIVERED TO THE EFFECT THAT REGISTRATION OF
SUCH
SECURITIES IS NOT REQUIRED.
A-1
(6)
Exhibit
A-2
Individual
Investor
Questionnaire
Name:
_________________________
IMPORTANT:
Please
Complete
INDIVIDUAL
INVESTOR QUESTIONNAIRE
HEMCURE,
INC.
AURASOUND,
INC.
Hemcure,
Inc. and AuraSound,
Inc.
c/o
AuraSound, Inc.
00000
Xxxx Xxxxx Xxxxxx
Xxxxx
Xx
Xxxxxxx, XX 00000
Attn:
Xxxxxx Xxx
The
information contained in this Corporate Investor Questionnaire is being
furnished
in
order to determine whether the undersigned Corporation’s
subscription
to
purchase Units
(“Units”) each Unit consisting of one share
of
common stock and warrants to purchase one (1) share of Common Stock of
AuraSound,
Inc.
and
Hemcure, Inc. (the
“Company”) may proceed.
This
Questionnaire should be completed, signed, dated and
a copy
should be sent to GP Group, LLC (the “Placement Agent”) via facsimile at (000)
000-0000 or electronic format (e.g., PDF) to xxxxxxxx@xxxxxxxxxxxxxx.xxx
and the
original delivered to GP Group, LLC, 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxx Xxxxxxx.
Please
keep a copy for your files.
ALL
INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY.
The
undersigned Corporation understands, however, that the Company may present
this
Questionnaire to such parties as it deems appropriate
if called
upon to
establish that the proposed offer and sale of the Units in the
Company is
exempt
from registration under the Securities Act
of
1933, as
amended, or meets
the
requirements of applicable state securities or “blue sky” laws. Further, the
undersigned
Corporation understands that the offering required to be reported to the
Securities
and Exchange Commission and to various state securities or “blue sky”
regulators.
IF
YOU
ARE PURCHASING UNITS WITH YOUR SPOUSE, YOU MUST BOTH SIGN THE SIGNATURE PAGE
(PAGE A-2 (5)).
IF
YOU
ARE PURCHASING UNITS WITH ANOTHER PERSON NOT YOUR SPOUSE, YOU MUST EACH FILL
OUT
A SEPARATE QUESTIONNAIRE. Please make a photocopy of pages A-2 (1) to
A-2 (5) and return both completed Questionnaires to G P Group, LLC in the
same envelope.
| I. |
PLEASE
INDICATE DESIRED TYPE OF OWNERSHIP OF
SHARES:
|
¨ Individual
¨ Joint
Tenants (rights of survivorship)
A-2
(1)
¨ Tenants
in Common (no rights of survivorship)
| II. |
PLEASE
CHECK ANY OF STATEMENTS 1-4 BELOW THAT APPLY TO
YOU.
|
| ¨ |
1. I
have an individual net worth* or joint net worth with my spouse in
excess
of $1,000,000.
|
| ¨ |
2. I
have had an individual income* in excess of $200,000 in each of
the
previous two years and I reasonably expect an individual income in
excess
of $200,000 this year. NOTE: IF YOU ARE BUYING JOINTLY WITH YOUR
SPOUSE,
YOU MUST EACH HAVE AN INDIVIDUAL INCOME IN EXCESS OF $200,000 IN
EACH OF
THESE YEARS IN ORDER TO CHECK THIS
BOX.
|
| ¨ |
3. My
spouse and I have had a joint income* in excess of $300,000
in each
of the previous two years and I reasonably expect a joint income
in excess
of $300,000 this year.
|
| ¨ |
4. I
am a director and/or an executive officer of Company as
such terms
are defined in Regulation D promulgated under the Securities Act
of 1933,
as amended.
|
*
For
purposes of this Questionnaire, the term “net worth” means the excess of total
assets over total liabilities. In determining income, an investor should add
to
his or her adjusted gross income any amounts attributable to tax-exempt income
received, losses claimed as a limited partner in any limited partnership,
deductions
claimed for depletion, contributions to XXX or Xxxxx retirement
plans, alimony
payments and any amount by which income from long-term capital gains
has been
reduced in arriving at adjusted gross income.
A-2
(2)
|
III.
|
OTHER
CERTIFICATIONS
|
By
signing the Signature Page, I certify the following (or, if I am purchasing
Units
with
my
spouse as co-owner, each of us certifies the following):
| (a) |
that
I am at least 21 years of age;
|
| (b) |
that
my purchase of Units
will
be solely for my own account and not for the account of any other
person
(other than my spouse, if
co-owner);
|
| (c) |
that
the name, home address and social security number or taxpayer
identification number as set forth in this Questionnaire are true,
correct
and complete; and
|
| (d) |
that
one of the following is true and correct (check
one):
|
Spouse,
if Co-owner
¨
¨ (i) I
am a
United States citizen or resident of the United States for United States
federal income tax purposes.
¨
¨
(ii) I
am
neither a United States citizen nor a resident of the United
States
for United
States federal income tax purposes.
|
IV.
|
GENERAL
INFORMATION
|
| (a) |
PERSONAL
INFORMATION
|
| Name: |
| Social Security or Taxpayer Identification Number: | ||
| Residence Address: | |
|
(Number
and
Street)
|
|
(City)
|
(State)
|
(Zip
Code)
|
| Residence Telephone Number: | |
|
(Area
Code) (Number)
Residence
|
| Facsimile Number: | |
|
(Area
Code) (Number)
|
| Name of Business: |
| Business Address: | |
|
(Number
and
Street)
|
|
(City)
|
(State)
|
(Zip
Code)
|
A-2
(3)
| Business Telephone Number: | |
|
(Area
Code) (Number)
|
| Business Telephone Number: | ||
|
(Area
Code) (Number)
|
||
I
prefer
to have correspondence sent to: ¨ Residence
¨
Business
| NASD Affiliation or Association, if any: |
If
none,
check here ¨
Spouse,
if Potential Co-owner
| Name: |
| Social Security or Taxpayer Identification Number: | ||
| Residence Address: | |
|
(Number
and
Street)
|
|
(City)
|
(State)
|
(Zip
Code)
|
| Residence Telephone Number: |
| Name of Business: |
| Business Address: | |
|
(Number
and
Street)
|
|
(City)
|
(State)
|
|
I
prefer
to have correspondence sent to: ¨ Residence
¨ Business
| NASD Affiliation or Association, if any: |
If
none,
check here ¨
|
V.
|
SIGNATURE
|
The
Signature Page to this Questionnaire is contained on page A-2 (5), entitled
Individual Signature Page.
A-2
(4)
INDIVIDUAL
SIGNATURE PAGE
HEMCURE,
INC.
AURASOUND,
INC.
1. The
undersigned represents that (a) the information contained in this Questionnaire
is complete and accurate, and (b) he/she/it will immediately notify
(i) GP
Group,
LLC,
00000
Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxx
Xxxxxxx, phone
number (000) 000-0000, facsimile
(000) 000-0000 and (ii) Xxxxxx X. Xxxxxxx, Esq., counsel to GP
Group,
LLC,
at
Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxx Xxxxx Xxxxx LLP,
00000
Xxxxx Xxxxxx Xxxx., 0xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, phone number
(000)
000-0000, facsimile (000) 000-0000 if any material change in any of the
information occurs prior to the acceptance of the undersigned’s subscription and
will promptly send the foregoing written confirmation of such change.
|
Date: |
Name (Please Type or Print) |
||
|
Signature |
|||
|
Name of Spouse if Co-owner
(Please Type or Print)
|
|||
|
Signature of Spouse if Co-owner |
IF
YOU
ARE PURCHASING UNITS WITH YOUR SPOUSE, YOU MUST BOTH SIGN THIS SIGNATURE PAGE
(PAGE A-2 (5)). IF YOU ARE PURCHASING UNITS WITH ANOTHER PERSON NOT YOUR SPOUSE,
YOU MUST EACH FILL OUT A SEPARATE QUESTIONNAIRE. Please make a photocopy of
pages A-2 (1) to A-2 (5) and return both completed Questionnaires to G P Group,
LLC in the same envelope.
THE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH
SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR
AN OPINION OF COUNSEL HAS BEEN DELIVERED TO THE EFFECT THAT REGISTRATION OF
SUCH
SECURITIES IS NOT REQUIRED.
A-2
(5)
Exhibit
A-3
Limited
Partnership Investor Questionnaire
Name:
IMPORTANT:
Please Complete:
LIMITED
PARTNERSHIP INVESTOR QUESTIONNAIRE
HEMCURE,
INC.
AURASOUND,
INC.
Hemcure,
Inc. and AuraSound,
Inc.
c/o
AuraSound, Inc.
00000
Xxxx Xxxxx Xxxxxx
Xxxxx
Xx
Xxxxxxx, XX 00000
Attn:
Xxxxxx Xxx
The
information contained in this Corporate Investor Questionnaire is being
furnished
in
order to determine whether the undersigned Corporation’s
subscription
to
purchase Units
(“Units”) each Unit consisting of one share
of
common stock and warrants to purchase one (1) share of Common Stock of
AuraSound,
Inc.
and
Hemcure, Inc. (the
“Company”) may proceed.
This
Questionnaire should be completed, signed, dated and
a copy
should be sent to GP Group, LLC (the “Placement Agent”) via facsimile at (000)
000-0000 or electronic format (e.g., PDF) to xxxxxxxx@xxxxxxxxxxxxxx.xxx
and the
original delivered to GP Group, LLC, 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxx Xxxxxxx. Please
keep a copy for your files.
A-3
(1)
| I. |
PLEASE
CHECK THE STATEMENT BELOW, IF IT APPLIES TO THE
LP.
|
|
¨
|
The
undersigned Limited Partnership: (a) was not formed for the specific
purpose of acquiring the Units, and
(b) has total assets in excess of
$5,000.000.
|
II. OTHER
CERTIFICATIONS
By
signing the Signature Page, the undersigned certifies that the Limited
Partnership’s name,
address of principal office, place of organization and taxpayer identification
number as set
forth in
this Questionnaire are true, correct and complete; and
|
III.
|
GENERAL
INFORMATION
|
| (a) |
PROSPECTIVE
PURCHASER (THE LIMITED PARTNERSHIP)
|
| Name: |
| Principal Place of Business: | |
|
(Number
and
Street)
|
| (City) |
(State)
|
(Zip
Code)
|
| Address for Correspondence (if different): | |
|
(Number
and
Street)
|
| (City) |
(State)
|
(Zip
Code)
|
| Telephone Number: | |
|
(Area
Code) (Number)
|
| Facsimile Number: | |
|
(Area
Code) (Number)
|
| State of Formation: |
| Date of Formation: |
| Taxpayer Identification Number: |
| NASD Affiliation or Association of the Corporation, if any: | ||
|
(Number)
|
A-3
(2)
If
none,
check here ¨
| (c) |
INDIVIDUAL
WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE LIMITED
PARTNERSHIP
|
| Name: |
| Position or Title: |
|
IV.
|
SIGNATURE
|
The
Signature Page to this Questionnaire is contained on page A-3 (4), entitled
Limited Partnership Signature Page.
A-3
(3)
Limited
Partnership Signature Page
HEMCURE,
INC.
AURASOUND,
INC.
1. The
undersigned Corporation represents that (a) the information contained in this
Questionnaire is complete and accurate and (b) the Corporation will immediately
notify (i) GP Group, LLC, 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, Attention: Xxxxxx Xxxxxxx, phone
number (000) 000-0000, facsimile
(000) 000-0000 and (ii) Xxxxxx X. Xxxxxxx, Esq., counsel to GP Group, LLC,
at Xxxxxxxxxxx & Xxxxxxxx Xxxxxxx Xxxxx Xxxxx LLP, 00000 Xxxxx Xxxxxx Xxxx.,
0xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, phone number (000) 000-0000, facsimile
(000) 000-0000 if any material change in any of the information occurs prior
to
the acceptance of the undersigned Corporation’s subscription and will promptly
send the foregoing written confirmation of such change.
2. The
undersigned Limited Partnership hereby represents and warrants that the person
or entity signing this Questionnaire on behalf of the Limited Partnership has
been
duly
authorized by all requisite action on the part of the Limited
Partnership to acquire the Shares and to sign this Questionnaire and this
Agreement on behalf of the
Limited
Partnership and, further, that the undersigned Limited Partnership has all
requisite authority to purchase the Shares and enter into the Units
Agreement.
|
Date |
Name of Limited Partnership
(Please Type or Print)
|
||
|
By:
Signature
|
|||
|
Name:
|
|||
|
(Please
Type or Print)
|
|||
|
Title:
(Please Type
or Print)
|
THE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH
SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR
AN OPINION OF COUNSEL HAS BEEN DELIVERED TO THE EFFECT THAT REGISTRATION OF
SUCH
SECURITIES IS NOT REQUIRED.
A-3
(4)
