SUBSCRIPTION AGREEMENT
THIS
SUBSCRIPTION AGREEMENT (this “Agreement”) made as of the date set forth on the
signature page hereof between Netsmart Technologies, Inc., a Delaware
corporation, having its principal office at 0000 Xxxxxxx Xxxxxxx, Xxxxx X000,
Xxxxx Xxxxx, XX 00000 (the “Company”), and the undersigned (the
“Subscriber”).
W
I T N E
S S E T H:
WHEREAS,
the Company is offering (the “Offering”) to a limited number of “accredited
investors,” as such term is defined in Rule 501 of Regulation D under the
Securities Act of 1933, as amended (the “Securities Act”), shares (the “Shares”)
of its Common Stock, par value $.01 per share (“Common Stock”), and, in addition
to the Shares, a 5-year warrant in the form attached as Exhibit W(the “Warrant”)
to purchase, for an initial exercise price of $11 per share, 1 share of Common
Stock for every 4 Shares purchased in the Offering (the “Warrant Shares”). (The
Shares, the Warrant and the Warrant Shares are collectively referred to herein
as the “Securities”); and
WHEREAS,
the Shares and the Warrant are offered and sold as a Unit, consisting of
1 Share
and a Warrant, at a purchase price of $9.1796 per Unit (the “Unit Purchase
Price”) for an aggregate Offering price to the Subscriber and the other
subscribers in the Offering of $6,000,000; and
WHEREAS,
the Subscriber desires to purchase, and the Company desires to sell, Units
on
the terms and conditions hereinafter set forth;
NOW,
THEREFORE, in consideration of the mutual promises and the representations
and
covenants hereinafter set forth, the parties hereto agree as
follows:
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1.
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PURCHASE
AND SALE OF SECURITIES.
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1.1 At
the
Closing (the “Closing”), the Company shall issue and sell to the Subscriber and
the Subscriber shall purchase from the Company, a number of Units equal to
the
quotient resulting from dividing (a) the total dollar amount of the Subscriber’s
subscription (the “Subscription Price”) as set forth on the signature page
hereof by (b) the Unit Purchase Price. The number of Shares and Warrant Shares
shall be rounded to the nearest whole number.
1.2 The
Closing shall be held at a date and time designated by the Company prior
to
11:59 p.m. Eastern Standard Time on October 19, 2005 (subject to extension
of up
to 15 days at the discretion of the Company without notice to the Subscriber)
(the “Expiration Date”). The Closing shall be contemporaneous with and subject
to the closing of the merger transaction (the “Transaction”) described in the
“Recent Developments” section of the Memorandum (as defined) and to the other
closing conditions set forth herein. The certificates representing the Shares
and Warrants will be delivered by the Company to the Subscriber within 10
days
following the Closing.
1.3 The
Subscription Price is payable by personal or business check, subject to
collection, or money order, made payable to North Fork Bank (the “Escrow Agent”)
F/B/O Netsmart Technologies, Inc. contemporaneously with the execution and
delivery of this Agreement by the Subscriber. Subscribers may also pay by
wire
transfer in immediately available funds to:
North
Fork Bank
ABA
Routing Number: 000000000
Account
Number: 6824029638
For:
Netsmart Technologies, Inc. Escrow Account
The
Subscription Price will remain in escrow until the earlier of termination
of
this Agreement or Closing. Accrued interest on the funds in escrow shall
be
disbursed to the Company if Closing occurs within fifteen (15) days from
the
date of this Agreement; otherwise, accrued interest earned on the funds in
escrow (including during the aforementioned fifteen (15) days) shall be
disbursed to the Subscriber.
2. REPRESENTATIONS
AND WARRANTIES OF SUBSCRIBER.
2.1 The
Subscriber acknowledges that the purchase of the Securities involves a high
degree of risk including, but not limited to, the following: (i) an investment
in the Company is speculative, and only investors who can afford the loss
of
their entire investment should consider investing in the Company and the
Securities; (ii) the Subscriber may not be able to liquidate his/its investment;
(iii) transferability of the Securities is limited; (iv) in the event of
a
disposition of the Securities, the Subscriber could sustain the loss of his/its
entire investment and (v) the Company has not paid any dividends on its Common
Stock, except as described in the Company’s filings with the Securities and
Exchange Commission, and the Company does not anticipate the payment of
dividends in the foreseeable future.
2.2 The
Subscriber represents that the Subscriber is an “accredited investor”, as such
term is defined in Rule 501 of Regulation D under the Securities Act, as
indicated by the Subscriber’s responses to the questions contained in Article 8
hereof. If the Subscriber is a natural person, the Subscriber has reached
the
age of majority in the state or other jurisdiction in which the Subscriber
resides, has adequate means of providing for the Subscriber’s current financial
needs and contingencies, is able to bear the economic risks of an investment
in
the Securities for an indefinite period of time, has no need for liquidity
in
such investment and, at the present time, can afford a complete loss of such
investment.
2.3 The
Subscriber acknowledges and represents that the Subscriber has prior investment
experience, including investment in securities which are non-listed,
unregistered and/or not traded on the Nasdaq National or SmallCap Market
or a
national stock exchange, or the Subscriber has employed the services of a
financial or investment advisor, attorney and/or accountant to review the
documents and information furnished and/or made available by the Company
to the
Subscriber and to evaluate the merits and risks of such an investment on
the
Subscriber’s behalf.
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2.4 The
Subscriber acknowledges receipt and review of, among other information,
a private placement memorandum (the “Memorandum”) relating to this Offering and
describing the proposed Transaction
to which consummation of this Offering is subject. Subscriber further represents
that the Subscriber has been furnished by the Company during the course of
this
Offering transaction, all information regarding the Company which the Subscriber
or its advisors or representatives have requested, and has been afforded
the
opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the Company,
the
proposed Transaction and the terms and conditions of the Offering.
2.5 (a) The
Subscriber has relied solely upon the information provided by the Company
in
making the decision to invest in the Securities. The Subscriber is familiar
with
and understands the terms of the Offering, including the rights to which
the
Subscriber is entitled under this Agreement. In evaluating the suitability
of an
investment in the Company, the Subscriber has not relied upon any representation
or other information (whether oral or written) from the Company, or any agent,
employee or affiliate of the Company other than as set forth in
the
Memorandum or the documents incorporated by reference therein and the results
of
Subscriber’s own independent investigation. To the extent necessary, the
Subscriber has retained, at his/its sole expense, and relied upon appropriate
professional advice regarding the investment, tax and legal merits and
consequences of this Agreement and its purchase of the Securities hereunder.
(b) The
Subscriber represents that no Securities were offered or sold to it by means
of
any form of general solicitation or general advertising, and in connection
therewith the Subscriber did not receive or review any advertisement, article,
notice or other communication published in a newspaper or magazine or similar
media or broadcast over television or radio whether closed circuit, or generally
available, or attend any seminar meeting or industry investor conference
whose
attendees were invited by any general solicitation or general
advertising.
2.6 The
Subscriber acknowledges that none of the Offering, the Memorandum or the
Securities have been reviewed by the Securities and Exchange Commission (“SEC”)
or any state securities regulatory authority or other governmental body or
agency, since the Offering is intended to be exempt from the registration
requirements of the Securities Act pursuant to Regulation D promulgated under
the Securities Act. The Subscriber understands that if required by the laws
or
regulations or any applicable jurisdictions, the Offering contemplated hereby
will be submitted to the appropriate authorities of such state(s) for
registration of exemption therefrom.
2.7 The
Subscriber understands that the Securities have not been registered under
the
Securities Act by reason of a claimed exemption under the provisions of the
Securities Act which depends, in part, upon the Subscriber’s investment
intention. In this connection, the Subscriber hereby represents that the
Subscriber is purchasing the Securities for the Subscriber’s own account for
investment purposes only and not with a view toward the resale or distribution
to others and has no contract, undertaking, agreement or other arrangement,
in
existence or contemplated, to sell, pledge, assign or otherwise transfer
the
Securities to any other person. The Subscriber, if an entity, also represents
that it was not formed for the purpose of purchasing the Securities.
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2.8 The
Subscriber understands that although there currently is a public market for
the
Company’s Common Stock, Rule 144 promulgated under the Securities Act (“Rule
144”) requires, among other conditions, a one-year holding period prior to the
resale (in limited amounts) of securities acquired in a non-public offering
without having to satisfy the registration requirements under the Securities
Act. The Subscriber understands and acknowledges that the Company is under
no
obligation to register any of the Securities under the Securities Act or
any
state securities or “blue sky” laws or assist the Subscriber in obtaining an
exemption from various registration requirements, other than as set forth
in
Article 6 herein.
2.9 The
Subscriber consents to the placement of a legend on any certificate or other
document evidencing the Securities substantially as set forth below. The
Subscriber is aware that the Company will make a notation in its appropriate
records, or will cause such notation to be made in the records of its transfer
agent, with respect to the restrictions on the transferability of the
Securities.
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT PURSUANT TO REGISTRATION UNDER THE
ACT
AND APPLICABLE STATE SECURITIES LAWS OR EXEMPTION THEREFROM. THE ISSUER OF
THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
The
foregoing legend will be removed upon the registration and sale of the
Securities in accordance with Section 6 of this Agreement.
2.10 The
Subscriber agrees to supply
the Company, within five (5) days after the Subscriber receives the request
therefor from the Company, with such additional information concerning the
Subscriber as the Company reasonably deems necessary or advisable in order
to
establish or verify the Subscriber’s representations contained
herein.
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2.11 The
Subscriber represents that the address of the Subscriber furnished by Subscriber
on the signature page hereof is the Subscriber’s principal residence if
Subscriber is an individual or its principal business address if it is a
corporation or other entity.
2.12 The
Subscriber represents that the Subscriber has full power and authority
(corporate, statutory and otherwise) to execute, deliver, and perform this
Agreement and to purchase the Securities. This Agreement constitutes the
legal,
valid and binding obligation of the Subscriber, enforceable against the
Subscriber in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of
law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy.
2.13 If
the
Subscriber is a corporation, partnership, limited liability company, trust,
employee benefit plan, individual retirement account, Xxxxx Plan, or other
entity (a) it is authorized and qualified to become an investor in the Company
and the person signing this Agreement on behalf of such entity has been duly
authorized by such entity to do so and (b) it is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
2.14 The
Subscriber understands, acknowledges and agrees with the Company that this
Subscription may be rejected, in whole or in part, by the Company, in the
sole
discretion of the Company, at any time before any Closing notwithstanding
prior
receipt by the Subscriber of notice of acceptance of the Subscriber’s
Subscription; provided that the Company may not so reject this Subscription
after acceptance of the Subscriber’s Subscription and the deposit into escrow of
available funds in the amount of the Subscriber’s Subscription Price.
2.15 The
Subscriber understands, acknowledges and agrees with the Company that, (i)
except as otherwise set forth herein, the subscription hereunder is irrevocable
by the Subscriber, (ii) except as required by law, the Subscriber is not
entitled to cancel, terminate or revoke this Agreement or any agreements
of the
Subscriber hereunder and (iii) this Agreement and such other agreements of
the
Subscriber shall survive the death, disability or dissolution of the Subscriber
and shall be binding upon and inure to the benefit of the parties and their
heirs, executors, administrators, successors, legal representatives and
permitted assigns. If the Subscriber is more than one person, the obligations
of
the Subscriber hereunder shall be joint and several and the agreements,
representations, warranties and acknowledgments herein contained shall be
deemed
to be made by and be binding upon each such person and his/her heirs, executors,
administrators, successors, legal representatives and permitted
assigns.
2.16 The
Subscriber agrees that during the period from the date that Subscriber was
first
contacted with respect to the Offering through the Closing Date or any
abandonment of termination of the Offering, the Subscriber has not and will
not,
directly or indirectly, through related parties, affiliates or otherwise
sell
"short" or "short against the box" (as those terms are generally understood)
any
equity security of the Company.
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2.17 The
Subscriber acknowledges that the information contained in the Memorandum
and
this Agreement or otherwise made available to the Subscriber is confidential
and
non-public and agrees that all such information shall be kept in confidence
by
the Subscriber and neither used by the Subscriber for the Subscriber’s personal
benefit (other than in connection with this Subscription) nor disclosed to
any
third party for any reason, notwithstanding that a Subscriber’s subscription may
not be accepted by the Company; provided,
however,
that
this obligation shall not apply to any such information that (i) is part
of the
public knowledge or literature and readily accessible at the date hereof,
(ii)
becomes part of the public knowledge or literature and readily accessible
by
publication (except as a result of a breach of this provision); (iii) is
received from third parties (except third parties who disclose such information
in violation of any confidentiality agreements or obligations, including,
without limitation, any subscription or other similar agreement entered into
with the Company); or (iv) is required to be disclosed by the Subscriber
by law
or legal process; provided, further, that Subscriber shall provide the Company
with written notice of any legal action that seeks such disclosure and, upon
the
request and at the expense of the Company, the Subscriber will cooperate
in all
reasonable respects to contest the disclosure, or obtain a protective order
or
other remedy.
2.18 If
the
Subscriber is purchasing the Securities in a fiduciary capacity for another
person or entity, including without limitation a corporation, partnership,
trust
or any other entity, the Subscriber has been duly authorized and empowered
to
execute this Agreement and all other subscription documents, and such other
person is an “accredited investor” and otherwise fulfills all the requirements
for purchase of the shares as such requirements are set forth herein, concurs
in
the purchase of the Securities and agrees to be bound by the obligations,
representations, warranties and covenants contained herein. Upon request
of the
Company, the Subscriber will provide true, complete and current copies of
all
relevant documents creating the Subscriber, authorizing its investment in
the
Company and/or evidencing the satisfaction of the foregoing, which information
shall be kept confidential by the Company.
2.19 The
Subscriber represents that no
authorization, approval, consent or license of any person is required to
be
obtained for the purchase of the Securities
by the
Subscriber, other than as have been obtained and are in full force and effect.
The execution and delivery of this Agreement does not, and the consummation
of
the transactions contemplated hereby will not, result in any violation of
or
constitute a default under any material agreement or other instrument to
which
the Subscriber is a party or by which the Subscriber or any of its properties
are bound, or to the best of the Subscriber’s knowledge, any permit, franchise,
judgment, order, decree, statute, rule or regulation to which the Subscriber
or
any of its businesses or properties is subject.
2.20 The
Subscriber represents that the representations, warranties and agreements
of the
Subscriber contained herein, in the Registration Questionnaire attached hereto
as Appendix A (the “Registration Questionnaire”) and in any other writing
delivered in connection with the transactions contemplated hereby shall be
true
and correct in all respects on the date hereof and as of the date of Closing
as
if made on and as of such date and shall survive the execution and delivery
of
this Agreement and the purchase of the Securities. The Subscriber agrees
that
any placement agent in the Offering shall be entitled to rely on the
representations, warranties and agreements of the Subscriber contained herein
as
if such representations, warranties and agreements were made or provided
to such
placement agent. The Subscriber agrees that the Company shall be entitled
to
rely on the representations, warranties and agreements of the Subscriber
contained herein for the purpose of preparing any Registration Statement
prepared by the Company pursuant to Section 6 hereof.
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3. REPRESENTATIONS
BY AND COVENANTS OF THE COMPANY.
The
Company represents and warrants to the Subscriber that as of the date of
this
Agreement and at Closing:
3.1 Organization,
Good Standing and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate power and
authority to conduct its business as currently conducted. The Company is
duly
qualified as a foreign corporation to do business and is in good standing
in
every jurisdiction in which the property owned or leased by it or the nature
of
the business conducted by it makes such qualification necessary, except to
the
extent that the failure to be so qualified or in good standing would not
have a
Material Adverse Effect (as hereinafter defined)..
3.2 Capitalization.
(a) The
authorized capital stock of the Company consists of 15,000,000 shares
of
Common Stock and 3,000,000 shares of preferred stock. As of September 1,
2005,
there were 5,390,950 shares of Common Stock issued and outstanding, all of
which
are duly authorized, validly issued, fully paid and non-assessable and no
shares
of preferred stock issued and outstanding. In addition, there were 1,100,875
shares of Common Stock reserved for issuance pursuant to outstanding options
and
warrants. All of the securities issued by the Company have been issued in
accordance with all applicable federal and state securities laws. Other than
as
set forth above and the issuance of shares of Common Stock pursuant to the
Transaction, there are no other options, warrants, calls, rights, commitments
or
agreements of any character to which the Company is a party or by which the
Company is bound or obligating the Company to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or redeemed,
any
shares of the capital stock of the Company or obligating the Company to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement. There are no preemptive rights or rights of first refusal or similar
rights which are binding on the Company permitting any person to subscribe
for
or purchase from the Company shares of its capital stock pursuant to any
provision of law, the Company’s Certificate of Incorporation (the “Certificate
of Incorporation”) or the Company’s By-laws (the “By-laws”) or by agreement or
otherwise. There are no securities or instruments or any agreements containing
or understandings providing for anti-dilution or similar provisions that
will be
triggered by the issuance of the Securities or issuance of the Warrant Shares.
True and correct copies of the Company’s Certificate of Incorporation and
By-laws are contained or incorporated into the exhibits to the Term Sheet.
(b) The
Securities have been duly authorized and, when issued, delivered and paid
for in
the manner set forth in this Agreement, will be duly authorized, validly
issued,
fully paid and non-assessable. The Warrant Shares have been duly authorized
and,
when issued, delivered and paid for in the manner set forth in the Warrant,
will
be duly authorized, validly issued, fully paid and non-assessable. No
stockholder of the Company has any right to request or require the Company
to
register the sale of any shares owned by such stockholder under the Securities
Act. No further approval or authority of the stockholders or the Board of
Directors of the Company will be required for the issuance and sale of the
Securities to be sold by the Company as contemplated herein.
7
(c) Each
of
the Company’s subsidiaries (the "Subsidiaries") is set forth in Schedule 3.2(c
). Each Subsidiary is a corporation or other business entity duly organized,
validly existing and in good standing under the laws of its jurisdiction
of
incorporation or organization. Each Subsidiary (i) has the corporate or other
organizational power and authority required for it to own its properties
and
assets and to carry on its business as it is now being conducted and (ii)
is
duly qualified to do business and is in good standing in each jurisdiction
in
which the ownership of its properties or the conduct of its business requires
such qualification, except for jurisdictions in which the failure to be so
qualified or in good standing would not, individually or in the aggregate,
have
a Material Adverse Effect. All the outstanding shares of capital stock of,
or
other ownership interests in, the Subsidiaries are duly authorized, validly
issued, fully paid and non-assessable and are owned by the Company free and
clear of all liens, claims, mortgages, encumbrances, pledges, security
interests, equities or charges of any kind (each, a "Lien"), except a Lien
in
favor of lenders. All the outstanding shares of capital stock of, or other
ownership interests in, the Subsidiaries are wholly owned by the Company.
Other
than the Subsidiaries, there are no entities 10% or more of whose outstanding
voting securities or other equity interests are owned, directly or indirectly,
through one or more intermediaries, by the Company.
3.3 Authorization;
Enforceability.
The
Company has all corporate power and authority to enter into this Agreement
and
to consummate the transactions contemplated hereby. All corporate action
on the
part of the Company necessary for the authorization, execution, delivery
and
performance of this Agreement by the Company, the authorization, sale, issuance
and delivery of the Securities contemplated herein and the performance of
the
Company’s obligations hereunder has been taken. This Agreement has been duly
executed and delivered by the Company and constitutes a legal, valid and
binding
obligation of the Company, enforceable against the Company in accordance
with
its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and to limitations
of public policy. The issuance and sale of the Securities contemplated hereby
will not give rise to any preemptive rights or rights of first refusal on
behalf
of any person.
3.4 No
Conflict; Governmental and Other Consents.
(a) The
execution and delivery by the Company of this Agreement and the consummation
of
the transactions contemplated hereby will not result in the violation of
any
material law, statute, rule, regulation, order, writ, injunction, judgment
or
decree of any court or governmental authority to or by which the Company
or any
Subsidiary is bound, or of any provision of the Certificate of Incorporation
or
By-Laws of the Company, and will not conflict with, or result in a breach
or
violation of, any of the terms or provisions of, or constitute (with due
notice
or lapse of time or both) a default under, any material lease, loan agreement,
mortgage, security agreement, trust indenture or other agreement or instrument
to which the Company or any Subsidiary is a party or by which it is bound
or to
which any of its properties or assets is subject, nor result in the creation
or
imposition of any lien upon any of the properties or assets of the Company
or
any Subsidiary.
8
(b) No
consent, approval, authorization or other order of any governmental authority
or
other third-party is required to be obtained by the Company or any Subsidiary
in
connection with the authorization, execution and delivery of this Agreement
or
with the authorization, issue and sale of the Securities, except such filings
as
may be required to be made with the SEC, the NASD and with any state or foreign
blue sky or securities regulatory authority. Without limiting the foregoing,
and
assuming the accuracy of the Subscriber’s representations and warranties set
forth in Article II, no registration under the Securities Act is required
for
the offer and sale of the Shares and Warrants by the Company to the Subscriber
or the issuance of Warrant Shares as contemplated hereby. The issuance and
sale
of the Shares and Warrants hereunder does not, and the issuance of Warrant
Shares will not, contravene the rules and regulations of the NASDAQ National
Market.
3.5 Accuracy
of SEC Filings.
All
reports and any amendments thereto required to be filed by the Company under
the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) (“SEC Reports”)
have been duly filed; complied at the time of filing in all material respects
with the requirements of their respective forms and the rules and regulations
thereunder; except to the extent updated or superseded by any subsequently
filed
report, were complete and correct in all material respects as of the dates
at
which the information was furnished; and as updated or superseded such reports
do not contain (as of their respective dates) any untrue statements of a
material fact nor omit to state any material fact necessary in order to make
the
statements contained therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company included
in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have
been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved
(“GAAP”),
except as may be otherwise specified in such financial statements or the
notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of
and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
3.6 Investment
Company.
The
Company is not an “investment company” within the meaning of such term under the
Investment Company Act of 1940, as amended, and the rules and regulations
of the
SEC thereunder.
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3.7 Material
Changes.
Since
the date of the latest financial statements included in the SEC Reports,
except
as disclosed in the SEC Reports, in this Agreement or in the case of clause
(ii)
in connection with the Transaction, (i) there has been no event, occurrence
or
development that has had or that could reasonably be expected to result in
a
Material Adverse Effect, (ii) the Company and its Subsidiaries have not incurred
any liabilities (contingent or otherwise) other than (x) trade payables,
accrued
expenses and other liabilities incurred in the ordinary course of business
consistent with past practice and (y) liabilities not required to be reflected
in the Company’s financial statements pursuant to generally accepted accounting
principles in the United States (“GAAP”)
or
required to be disclosed in filings made with the SEC, (iii) the Company
and its
Subsidiaries have not altered its method of accounting, except as may be
required by a change in accounting standards, or the identity of its auditors,
(iv) the Company and its Subsidiaries have not declared or made any dividend
or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, and (v) the Company and its Subsidiaries have not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company stock option plans. The Company does not have pending before the
SEC any
request for confidential treatment of information. “Material
Adverse Effect”
means
any of (i) a material and adverse effect on the legality, validity or
enforceability of this Agreement and the Warrants, (ii) a material and adverse
effect on the results of operations, assets, condition (financial or otherwise),
business or prospects of the Company and its Subsidiaries, taken as a whole
or
(iii) a material and adverse impairment to the Company's ability to perform
on a
timely basis its obligations under this Agreement and the Warrants.
“Affiliate”
means
any person (including any individual or entity) that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with a person, as such terms are used in and construed under
Rule
144.
3.8 Compliance.
The
Company (i) is not in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company under), nor has the Company received
written notice of a claim that it is in default under or that it is in violation
of, any indenture, loan or credit agreement or any other agreement or instrument
to which it is a party or by which it or any of its properties is bound (whether
or not such default or violation has been waived), (ii) is not in violation
of
any order of any court, arbitrator or governmental body, or (iii) to the
Company’s knowledge, is not or has not been in violation of any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not, individually
or
in the aggregate, have or reasonably be expected to result in a Material
Adverse
Effect.
3.9 Litigation.
There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting
the
Company or its properties before or by any court, arbitrator, governmental
or
administrative agency or regulatory authority (federal, state, county, local
or
foreign) (collectively, an “Action”) which (i) adversely affects or challenges
the legality, validity or enforceability of this Agreement or the offering
described in the Term Sheet or (ii) except as set forth in the SEC Reports,
would, if there were an unfavorable decision, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any director or officer thereof (in his or her capacity as
such)
is or has been the subject of any Action involving a claim of violation of
or
liability under federal or state securities laws or a claim of breach of
fiduciary duty, except as specifically disclosed in the SEC Reports. There
has
not been, and to the Company’s knowledge, there is not pending any investigation
by the SEC involving the Company or any current or former director or officer
of
the Company (in his or her capacity as such). The Company is not nor has
it ever
been the subject of any Action involving a claim of violation of or liability
under federal or state securities laws. There has not been, and to the knowledge
of the Company, there is not pending or contemplated, any investigation by
the
SEC involving the Company. The SEC has not issued any stop order or other
order
suspending the effectiveness of any registration statement filed by the Company
under the Exchange Act or the Securities Act.
10
3.10 Xxxxxxxx-Xxxxx;
Internal Accounting Controls.
The
Company is in material compliance with all provisions of the Xxxxxxxx-Xxxxx
Act
of 2002 which are applicable to it as of the Closing Date. The
Company and the Subsidiaries maintain 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, including its
Subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company's most recently
filed periodic report under the Exchange Act, as the case may be, is being
prepared. The Company's certifying officers have evaluated the effectiveness
of
the Company's disclosure controls and procedures as of the end of the period
covered by the most recently filed periodic report under the Exchange Act (such
date, the “Evaluation
Date”).
The
Company presented in its most recently filed periodic report under the Exchange
Act 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.
4. TERMS
OF SUBSCRIPTION.
4.1 The
Company reserves the right to reject the subscription made hereby, in whole
or
in part, in its sole discretion; provided that the Company may not so reject
such subscription after acceptance of the Subscriber’s Subscription and the
deposit into escrow of available funds in the amount of the Subscriber’s
Subscription Price.
11
4.2 Pending
the sale of the Securities, all funds paid hereunder shall be deposited by
the
Company in escrow with the Escrow Agent.
4.3 The
Subscriber hereby authorizes and directs the Company to deliver the Shares
and
Warrants to be issued to the Subscriber pursuant to this Agreement to the
residential or business address(es) for delivery of the Securities indicated
on
the signature page hereto.
4.4 The
Subscriber hereby authorizes and directs the Company to return, without
interest, any funds for unaccepted subscriptions to the same account from which
the funds were drawn. If the Closing shall not have taken place by the
Expiration Date, all funds paid by the Subscriber will be returned to the
Subscriber without interest.
4.5 The
Company’s agreement with each Subscriber is a separate agreement and the sale of
the Securities to each Subscriber is a separate sale. The Subscribers are not
a
“group” within the meaning of Section 13(d)(3) of the Exchange Act.
4.6 At
the
Closing, Subscriber shall receive an opinion of counsel to the Company covering
the legal matters set forth on Appendix B attached hereto.
5. CLOSING
CONDITIONS.
5.1 The
Subscribers’ obligation to purchase the Securities at the Closing is subject to
(a) the closing of the Transaction on or before the Expiration Date, and (b)
the
truth and accuracy of each of the representations and warranties of the Company
as of the Closing as if made at the Closing, which conditions may be waived
in
writing at the option of each Subscriber to the extent permitted by law.
6. REGISTRATION
RIGHTS.
6.1 The
Company covenants and agrees with the Holder that the terms and conditions
of
this Section 6 shall be contained in each Subscription Agreement entered into
by
the Company in connection with the Offering.
6.2 As
used
in this Section 6, the following terms shall have the following
meanings:
(a) “Affiliate”
shall
mean, with respect to any Person (as defined below), any other Person
controlling, controlled by or under direct or indirect common control with
such
Person (for the purposes of this definition “control,” when used with respect to
any specified Person, shall mean the power to direct the management and policies
of such person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise; and the terms “controlling” and
“controlled” shall have meanings correlative to the foregoing).
(b) “Business
Day”
shall
mean a day Monday through Friday on which banks are generally open for business
in New York.
12
(c) “Holders”
shall
mean the Subscribers and any person holding Registrable Securities or any person
to whom the rights under Article 6 have been transferred in accordance with
Section 6.9 hereof.
(d) “Person”
shall
mean any person, individual, corporation, limited liability company,
partnership, trust or other nongovernmental entity or any governmental agency,
court, authority or other body (whether foreign, federal, state, local or
otherwise).
(e) The
terms
“register,”“registered”
and
“registration”
refer
to the registration effected by preparing and filing a registration statement
in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(f) “Registrable
Securities”
shall
mean the Shares and the Warrant Shares; provided,
however,
that
securities shall only be treated as Registrable Securities if and only for
so
long as they (A) have not been disposed of pursuant to a registration statement
declared effective by the SEC; (B) have not been sold in a transaction exempt
from the registration and prospectus delivery requirements of the Securities
Act
so that all transfer restrictions and restrictive legends with respect thereto
are removed upon the consummation of such sale; (C) are held by a Holder or
a
permitted transferee pursuant to Section 6.9; or (D) are not eligible
for
sale pursuant to Rule 144(k) (or any successor thereto) under the Securities
Act.
(g) “Registration
Expenses”
shall
mean all expenses incurred by the Company in complying with Section 6.3
hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and expenses of counsel for
the Company, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration.
(h) “Registration
Statement”
shall
have the meaning ascribed to such term in Section 6.3.
(i) “Registration
Period”
shall
have the meaning ascribed to such term in Section 6.3.
(j) “Selling
Expenses”
shall
mean all underwriting discounts and selling commissions applicable to the sale
of Registrable Securities and, except to the extent set forth in the definition
of Registration Expenses, all fees and expenses of legal counsel for any
Holder.
6.3 (a)
Subject to the terms herein, the Company will, as soon as practicable but not
later than 30 days following the date of Closing Date, (i) file a
registration statement with the SEC on the appropriate form (the “Registration
Statement”) to allow the resale of the Registrable Securities under the
Securities Act and in accordance with the plan of distribution to be provided
by
the Holder, and use its reasonable best efforts to have such Registration
Statement declared effective by the SEC prior to the date which is 90 days
after
the date of Closing (the “Registration Effective Date”) (following advice from
the SEC that the Registration Statement is not being reviewed or, if reviewed,
that the staff has no comments, subject to Section 6.5(b)(v) hereof, the Company
will make a request for acceleration of the effective date to a date not later
than 3 business days thereafter); and (ii) cause such Registration Statement
to
remain effective (the “Registration Period”) until the earlier of (A) such date
as the holders of the securities have completed the sale of all of the
Registrable Securities described in the Registration Statement or (B) at such
time that such shares have become eligible for sale pursuant to Rule 144(k)
(or
any successor thereto) under the Securities Act. To the extent permissible,
such
Registration Statement also shall cover, to the extent allowable under the
Securities Act and the rules promulgated thereunder (including Rule 416 under
the Securities Act), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions
with
respect to the Registrable Securities.
13
(b) The
Holder
and the Company hereby agree that the obligations of the Company under this
Section 6.3 shall not (i) for a period of up to 15 days, require the Company
to
make any initial or continuing disclosure in the event that the Company
determines in good faith and upon advice of counsel that there are present
material undisclosed circumstances or developments with respect to which the
disclosure that would be required would have a material adverse effect on the
Company, or (ii) prevent the Company from contesting any position taken by
the
Commission in any comment letter that, in each case, it determines in good
faith
as advised by counsel is not required or may not be in the best interests of
the
Company or its shareholders or (iii) require the Company, to incur any expenses
which are not reasonable in the circumstances.
(c) If:
(i) a
Registration Statement is not filed within 30 days of the Closing Date or (ii)
subject to Section 6.3(b)(i), the Company fails to file with the Commission
a
request for acceleration in accordance with Rule 461 promulgated under the
Securities Act, within three business days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission that
a
Registration Statement will not be “reviewed,” or is not subject to further
review, or (iii) prior to the date when such Registration Statement is first
declared effective by the Commission, and subject to Section 6.3(b)(ii), the
Company fails to file a pre-effective amendment and otherwise respond in writing
to comments made by the Commission in respect of such Registration Statement
within 30 calendar days after the receipt of comments by or notice from the
Commission that such amendment is required in order for a Registration Statement
to be declared effective, or (iv) a Registration Statement filed or required
to
be filed hereunder is not declared effective by the Commission on or before
the
Registration Effectiveness Date, other than due to (x) the failure of the
Commission to deliver its initial written comments on such Registration
Statement within 30 days of its filing, (y) the delivery by the Commission
of
comments on the Company’s subsequent filings (except to the extent that such
subsequent comments were due to the Company’s failure to respond in the manner
and to the extent required by the comments of the Commission) or (z) the failure
of the Commission to timely deliver written comments on the Company’s subsequent
filings or (v) after a Registration Statement is first declared effective by
the
Commission, it ceases for any reason to remain continuously effective as to
all
Registrable Securities for which it is required to be effective, or the Holders
are not permitted to utilize the Prospectus therein to resell such Registrable
Securities, for in any such case other than as provided in Section 6.7(b) (any
such failure or breach being referred to as an “Event,”
and
the date of the occurrence of such breach or failure being an “Event
Date”),
then
in addition to any other rights the Holder may have hereunder or under
applicable law: (x) on the first monthly anniversary of such Event Date the
Company shall pay to each Holder an amount in cash, as partial liquidated
damages and not as a penalty, equal to 2.5% of the aggregate purchase price
paid
by such Holder pursuant to this Agreement for any Registrable Securities then
held by such Holder; and (y) on each subsequent 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 each Holder an
amount in cash, as partial liquidated damages and not as a penalty, equal to
2.5% of the aggregate purchase price paid by such Holder pursuant to this
Agreement for any Registrable Securities then held by such Holder; provided,
however, that in no event shall the sum of the partial liquidated damages
payable pursuant to (x) and (y) exceed 20% of the aggregate purchase paid by
such Holder pursuant to this Agreement for any Registrable Securities then
held
by such Holder. If the Company fails to pay any partial liquidated damages
pursuant to this Section in full within seven days after the date payable,
the
Company will pay interest thereon at a rate of 10% per annum (or such lesser
maximum amount that is permitted to be paid by applicable law) to the Holder,
accruing daily from the date such partial liquidated damages are due until
such
amounts, plus all such interest thereon, are paid in full. The partial
liquidated damages pursuant to the terms hereof shall apply on a daily pro-rata
basis for any portion of a month prior to the cure of an Event.
14
6.4 All
Registration Expenses incurred in connection with any registration,
qualification, exemption or compliance pursuant to Section 6.3 shall be borne
by
the Company. All Selling Expenses relating to the sale of securities registered
by or on behalf of Holders shall be borne by such Holders.
6.5 In
the
case of the registration, qualification, exemption or compliance effected by
the
Company pursuant to this Agreement, the Company shall, upon reasonable request,
inform each Holder as to the status of such registration, qualification,
exemption and compliance. At its expense the Company shall:
(a) use
its
best efforts to keep such registration, and any qualification, exemption or
compliance under state or federal securities laws which the Company determines
to obtain, continuously effective until the termination of the Registration
Period; and
(b) advise
the Holders as soon as practicable:
(i) when
the
Registration Statement or any amendment thereto has been filed with the SEC
and
when the Registration Statement or any post-effective amendment thereto has
become effective;
(ii) of
any
request, following the effectiveness of the Registration Statement, by the
SEC
for amendments or supplements to the Registration Statement or the prospectus
included therein or for additional information;
15
(iii) of
the
issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for such
purpose;
(iv) of
the
receipt by the Company of any notification with respect to the suspension of
the
qualification of the Registrable Securities included therein for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and
(v) of
the
happening of any event that requires the making of any changes in the
Registration Statement or the prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the prospectus, in the light of the circumstances under which they
were made) not misleading (which notice will be accompanied by an instruction
to
suspend the use of the prospectus until such changes have been
made);
(c) make
every commercially reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of any Registration Statement at the earliest
possible time;
(d) furnish
to each Holder, without charge, at least one copy of such Registration Statement
and any post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits (including
those incorporated by reference) in the form filed with the SEC;
(e) during
the Registration Period, deliver to each Holder, without charge, as many copies
of the prospectus included in such Registration Statement and any amendment
or
supplement thereto as such Holder may reasonably request; and the Company
consents to the use, consistent with the provisions hereof, of the prospectus
or
any amendment or supplement thereto by each of the selling Holders of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the prospectus or any amendment or supplement
thereto. In addition, upon the reasonable request of the Holder and subject
in
all cases to confidentiality protections reasonably acceptable to the Company,
the Company will meet with a Holder or a representative thereof at the Company’s
principal office to discuss all information relevant for disclosure in the
Registration Statement covering the Registrable Securities, and will otherwise
cooperate with any Holder conducting an investigation for the purpose of
reducing or eliminating such Holder’s exposure to liability under the Securities
Act, including the reasonable production of information at the Company’s
principal office;
(f) prior
to
any public offering of Registrable Securities pursuant to any Registration
Statement, register or qualify or obtain an exemption for offer and sale under
the securities or blue sky laws of such jurisdictions as any such Holders
reasonably request in writing and do any and all other acts or things reasonably
necessary or advisable to enable the offer and sale in such jurisdictions of
the
Registrable Securities covered by such Registration Statement; provided that
the
Company shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it is
not
so qualified or to consent to general service of process in any such
jurisdiction;
16
(g) upon
the
occurrence of any event contemplated by Section 6.5(b)(v) above, the Company
shall promptly prepare a post-effective amendment to the Registration Statement
or a supplement to the related prospectus, or file any other required document
so that, as thereafter promptly delivered to purchasers of the Registrable
Securities included therein, the prospectus will not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which
they
were made, not misleading;
(h) upon
the
submission by any Holder to the Company, its counsel or as instructed by Company
counsel of (i) certificates representing Registrable Securities, (ii) a
statement of such Holder that it intends to sell the Registrable Securities
evidenced by such certificates in accordance with the plan of distribution
set
forth in the Registration Statement, and (iii) a request that the Registrable
Securities evidenced by such certificates be issued free of restrictive legend
then, subject to the continued effectiveness of the Registration Statement
in
accordance with the terms hereof, cause Company counsel to deliver to the
Company’s transfer agent instructions to issue certificates evidencing such
Registrable Securities free of restrictive legend;
(i) comply
in
all material respects with all applicable rules and regulations of the SEC,
and
make generally available to its security holders not later than 45 days (or
90
days if the fiscal quarter is the fourth fiscal quarter) after the end of its
fiscal quarter in which the first anniversary date of the effective date of
the
Registration Statement occurs, an earnings statement satisfying the provisions
of Section 11(a) of the Securities Act; and
(j) cause
the
Registrable Securities to be included for listing and trading on the Nasdaq
Stock Market or any other exchange on which the Company’s Common Stock is then
listed for trading.
6.6 (a) To
the
extent permitted by law, the Company shall indemnify each Holder, each
underwriter of the Registrable Securities and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, with respect
to
which any registration, qualification or compliance has been effected pursuant
to this Agreement, against all claims, losses, damages and liabilities (or
action in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened (subject to Section 6.6(c)
below), arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in the Registration Statement, or any
amendment or prospectus relating thereto, incident to any such registration,
qualification or compliance, or based on 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, in light of the circumstances in which
they were made, and will reimburse each Holder, each underwriter of the
Registrable Securities and each person controlling such Holder, for reasonable
legal and other expenses reasonably incurred in connection with investigating
or
defending any such claim, loss, damage, liability or action as incurred;
provided that the Company will not be liable in any such case to the extent
that
any untrue statement or omission or allegation thereof is made in reliance
upon
and in conformity with written information furnished to the Company by or on
behalf of such Holder and stated to be specifically for use in preparation
of
such registration statement or prospectus; provided, further, that the Company
will not be liable in any such case where the claim, loss, damage or liability
arises out of or is related to the failure of the Holder to comply with its
covenants and agreements contained in this Agreement respecting sales of
Registrable Securities.
17
(b) Each
Holder will severally, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors
and
officers, each underwriter of the Registrable Securities and each person who
controls the Company within the meaning of Section 15 of the Securities
Act, against all claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened (subject to Section 6.6(c) below), arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, or any amendment or
prospectus relating thereto, incident to any such registration, qualification
or
compliance, or based on 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, in light of the circumstances in which they were made,
and will reimburse the Company, such directors and officers, each underwriter
of
the Registrable Securities and each person controlling the Company for
reasonable legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action
as
incurred, in each case to the extent, but only to the extent, that such untrue
statement or omission or allegation thereof is made in reliance upon and in
conformity with written information furnished to the Company by or on behalf
of
the Holder and stated to be specifically for use in preparation of such
registration statement or prospectus; provided that the indemnity shall not
apply to the extent that such claim, loss, damage or liability results from
the
fact that a current copy of the prospectus was not made available to the Holder
and such current copy of the prospectus would have cured the defect giving
rise
to such loss, claim, damage or liability. Notwithstanding the foregoing, in
no
event shall a Holder be liable for any such claims, losses, damages or
liabilities in excess of the net proceeds received by such Holder in the
offering, except in the event of fraud by such Holder.
(c) Each
party entitled to indemnification under this Section 6.6 (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 (i) counsel for the Indemnifying Party,
who
shall conduct the defense of such claim or litigation, shall be approved by
the
Indemnified Party (whose approval shall not unreasonably be withheld); (ii)
there shall not, in the reasonable opinion of counsel for the Indemnified Party,
exist a material conflict on a material issue between the position of the
Indemnified Party and the Indemnifying Party; and (iii) the Indemnifying Party
shall provide reasonable assurance to the Indemnified Party of its financial
capacity to defend and provide indemnification with respect to such claim.
The
Indemnified Party may participate in such defense at such Indemnified Party’s
expense. Failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Agreement, unless such failure is materially prejudicial to the Indemnifying
Party in defending such claim or litigation. An Indemnifying Party shall not
be
liable for any settlement of an action or claim effected without its written
consent (which consent will not be unreasonably withheld).
18
(d) If
the
indemnification provided for in this Section 6.6 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 therein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party thereunder, 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 which 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. Notwithstanding the foregoing, in no event
shall a Holder be liable for any such claims, losses, damages or liabilities
pursuant to this Section 6.6(d) in excess of the net proceeds received by such
Holder in the Offering, except in the event of fraud by such
Holder.
6.7 (a) Each
Holder agrees that, upon receipt of any notice from the Company of the happening
of any event requiring the preparation of a supplement or amendment to a
prospectus relating to Registrable Securities so that, as thereafter delivered
to the Holders, such prospectus shall not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, each Holder will
forthwith discontinue disposition of Registrable Securities pursuant to the
registration statement contemplated by Section 6.3 until its receipt of copies
of the supplemented or amended prospectus from the Company, such prospectus
to
be forwarded promptly to the Holder by the Company, and, if so directed by
the
Company, each Holder shall deliver to the Company all copies, other than
permanent file copies then in such Holder’s possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
(b) Each
Holder shall suspend, upon request of the Company, any disposition of
Registrable Securities pursuant to the Registration Statement and prospectus
contemplated by Section 6.3 during (i) any period, not to exceed
one
30-day period within any one 12-month period, the Company requires in connection
with a primary underwritten offering of equity securities and (ii) any
period, not to exceed two 30-day periods within any one 12-month period, when
the Company determines in good faith that offers and sales pursuant thereto
should not be made by reason of the presence of material undisclosed
circumstances or developments with respect to which the disclosure that would
be
required in such a prospectus is premature, would have an adverse effect on
the
Company or is otherwise inadvisable and provided that all Holders and all
holders of registration rights in respect of capital stock of the Company are
similarly bound.
19
(c) As
a
condition to the inclusion of its Registrable Securities, each Holder shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request
in
writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Article 6, including the
information required by the Registration Questionnaire attached hereto as
Appendix A.
(d) Each
Holder hereby covenants with the Company that it will (i) not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 6.5(e) and notice from the Company that such Registration Statement
and
any post-effective amendments thereto have become effective, and (ii) not make
any sale of the Registrable Securities without effectively causing the
prospectus delivery requirements under the Securities Act to be
satisfied.
(e) Each
Holder agrees not to take any action with respect to any distribution deemed
to
be made pursuant to such Registration Statement which would constitute a
violation of Regulation M under the Exchange Act or any other applicable rule,
regulation or law.
(f) At
the
end of the Registration period, the Holders of Registrable Securities included
in the Registration Statement shall discontinue sales of shares pursuant to
such
Registration Statement and shall be eligible to sell such shares pursuant to
Rule 144(k).
6.8 With
a
view to making available to the Holders the benefits of certain rules and
regulations of the SEC which at any time permit the sale of the Registrable
Securities to the public without registration, the Company shall use its
reasonable best efforts to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144 under the Securities Act, at all times;
(b) file
with
the SEC in a timely manner all reports and other documents required of the
Company under the Exchange Act; and
(c) so
long
as a Holder owns any unregistered Registrable Securities, furnish to such
Holder, upon any reasonable request, a written statement by the Company as
to
its compliance with Rule 144 under the Securities Act, and of the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents of the Company as such Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing a
Holder to sell any such securities without registration.
6.9 The
rights to cause the Company to register Registrable Securities granted to the
Holders by the Company under Section 6.2 may be assigned in full or
in part
by a Holder in connection with a transfer by such Holder of its Registrable
Securities, provided, however, that (i) such transfer may otherwise
be
effected in accordance with applicable securities laws (and the Company may
require an opinion of Holder’s counsel with respect thereto); (ii) such
Holder gives prior written notice to the Company; and (iii) such transferee
(x)
delivers to the Company a Registration Questionnaire in the form attached as
Appendix A, (y) agrees to comply with the terms and provisions of this
Agreement, and (z) such transfer is otherwise in compliance with this
Agreement.
20
6.10 The
Company shall use commercially reasonable best efforts to cause all Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange, interdealer quotation system or other market on which similar
securities issued by the Company are then listed.
6.11 With
the
written consent of the Company and the Holders holding at least a majority
of
the Registrable Securities that are then outstanding, any provision of this
Article 6 may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely) or amended provided that such waiver or amendment shall apply
to
all Holders similarly. Upon the effectuation of each such waiver or amendment,
the Company shall promptly give written notice thereof to the Holders, if any,
who have not previously received notice thereof or consented thereto in
writing.
7. MISCELLANEOUS.
7.1 All
notices, requests and other communications under this Agreement shall be in
writing, and shall be deemed given if delivered to the addressees in person
or
by recognized overnight courier, mailed by certified or registered mail, return
receipt requested, or by facsimile or e-mail transmission, as follows:
|
If
to the Company:
|
Netsmart
Technologies, Inc.
|
|
|
0000
Xxxxxxx Xxxxxxx, Xxxxx X000
|
||
|
Xxxxx
Xxxxx, XX 00000
|
||
|
Attention:
Xxxxx X. Xxxxxx, Chief Executive Officer
|
||
|
Facsimile:
000-000-0000
|
||
|
Email:
xxxxxxx@xxxxxxx.xxx
|
If
to a
Subscriber, at such address as such Subscriber shall have provided in writing
to
the Company or such other addresses as such Subscriber furnishes by notice
given
in accordance with this Section 7.1 or
such
other address as may be designated in writing hereafter, in the same manner,
by
such person.
7.2 Except
as
provided in Section 6.10 above, this Agreement shall not be changed, modified
or
amended except by a writing signed by the parties to be charged, and this
Agreement may not be discharged except by performance in accordance with its
terms or by a writing signed by the party to be charged.
21
7.3 Subject
to the provisions of Section 6.9, 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.
7.4 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
the Securities as herein provided; subject, however, to the right hereby
reserved to the Company to reject this subscription in accordance with Section
2.15, enter into the same agreements with other subscribers and to add and/or
delete other persons as subscribers.
7.5 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 New York
without regard to principles of conflicts of law.
7.6 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. If any provision of
this
Agreement shall be declared by a court of competent jurisdiction to be invalid,
illegal or incapable of being enforced in whole or in part, such provision
shall
be interpreted so as to remain enforceable to the maximum extent permissible
consistent with applicable law and the remaining conditions and provisions
or
portions thereof shall nevertheless remain in full force and effect and
enforceable to the extent they are valid, legal and enforceable, and no
provisions shall be deemed dependent upon any other covenant or provision unless
so expressed herein.
7.7 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.
7.8 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.
7.9 This
Agreement may be executed in two or more counterparts each of which shall be
deemed an original, but all of which shall together constitute one and the
same
instrument.
7.10 (a) The
Subscribers severally agree not to issue any public statement with respect
to
the Subscribers’ investment or proposed investment in the Company or the terms
of any agreement or covenant between them and the Company without the Company’s
prior written consent, except such disclosures as may be required under
applicable law or under any applicable order, rule or regulation.
22
(b) The
Company agrees not to issue any public statement with respect to the
Subscribers’ investment or proposed investment in the Company or the terms of
any agreement or covenant between them and the Company or to disclose the names,
addresses or any other information about the Subscribers, except as required
by
applicable law or under any applicable order, rule or regulation and to satisfy
its obligations under Section 6.
7.11 The
Subscriber represents and warrants that it has not engaged, consented to nor
authorized any broker, finder or intermediary to act on its behalf, directly
or
indirectly, as a broker, finder or intermediary in connection with the
transactions contemplated by this Agreement. Subscriber hereby severally agrees
to indemnify and hold harmless the Company from and against all fees,
commissions or other payments owing to any such person or firm acting on behalf
of such Subscriber hereunder.
7.12 Nothing
in this Agreement shall create or be deemed to create any rights in any person
or entity not a party to this Agreement, except for the holders of Registrable
Securities.
[REMAINDER
OF PAGE LEFT BLANK - ARTICLE 8 FOLLOWS]
23
8. CONFIDENTIAL INVESTOR QUESTIONNAIRE.
8.1 The
Subscriber represents and warrants that he, she or it comes within one category
marked below, and that for any category marked, he, she or it has truthfully
set
forth, where applicable, the factual basis or reason the Subscriber comes within
that category. ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY
CONFIDENTIAL except as otherwise required by law. The undersigned agrees to
furnish any additional information which the Company deems necessary in order
to
verify the answers set forth below.
|
Category
A ___
|
The
undersigned is an individual (not a partnership, corporation, etc.)
whose
individual net worth, or joint net worth with his or her spouse,
presently
exceeds $1,000,000.
|
|
Explanation:
In calculating net worth you may include equity in personal property
and
real estate, including your principal residence, cash, short-term
investments, stock and securities. Equity in personal property
and real
estate should be based on the fair market value of such property
less debt
secured by such property.
|
|
|
Category
B ___
|
The
undersigned is an individual (not a partnership, corporation, etc.)
who
had an income in excess of $200,000 in each of the two most recent
years,
or joint income with his or her spouse in excess of $300,000 in
each of
those years (in each case including foreign income, tax exempt
income and
full amount of capital gains and losses but excluding any income
of other
family members and any unrealized capital appreciation) and has
a
reasonable expectation of reaching the same income level in the
current
year.
|
|
Category
C ___
|
The
undersigned is a director or executive officer of the Company which
is
issuing and selling the Securities.
|
|
Category
D ___
|
The
undersigned is a bank; a savings and loan association; insurance
company;
registered investment company; registered business development
company;
licensed small business investment company (“SBIC”); or employee benefit
plan within the meaning of Title 1 of ERISA and (a) the investment
decision is made by a plan fiduciary which is either a bank, savings
and
loan association, insurance company or registered investment advisor,
or
(b) the plan has total assets in excess of $5,000,000 or (c) is
a self
directed plan with investment decisions made solely by persons
that are
accredited investors. (describe entity)
|
24
|
Category
E ___
|
The
undersigned is a private business development company as defined
in
section 202(a)(22) of the Investment Advisors Act of 1940. (describe
entity)
|
|
|
|
|
|
|
|
Category
F ___
|
The
undersigned is either a corporation, partnership, Massachusetts
business
trust, or non-profit organization within the meaning of Section
501(c)(3)
of the Internal Revenue Code, in each case not formed for the specific
purpose of acquiring the Securities and with total assets in excess
of
$5,000,000.(describe entity)
|
|
|
|
|
Category
G ___
|
The
undersigned is a trust with total assets in excess of $5,000,000,
not
formed for the specific purpose of acquiring the Securities, where
the
purchase is directed by a “sophisticated investor“ as defined in
Regulation 506(b)(2)(ii) under the Securities Act.
|
|
Category
H ___
|
The
undersigned is an entity (other than a trust) in which all of the
equity
owners are “accredited investors” within one or more of the above
categories. If relying upon this Category alone, each equity owner
must
complete a separate copy of this Agreement. (describe
entity)
|
|
|
The
undersigned agrees that the undersigned will notify the Company at any time
on
or prior to the Closing Date in the event that the representations and
warranties in this Section 8 shall cease to be true, accurate and
complete.
8.2 SUITABILITY
(please
answer each question)
(a) For
an individual
Subscriber, please describe your current employment, including the company
by
which you are employed and its principal business:
25
(b) For
an
individual Subscriber, please describe any college or graduate degrees held
by
you:
(c) For
all
Subscribers, please state whether you have you participated in other private
placements:
YES_______ NO_______
(d) If
your
answer to question (d) above was “YES”, please indicate frequency of such prior
participation in private placements of:
|
Public
|
Private
|
|
|
Companies
|
Companies
|
|
|
Frequently
|
___________ | ___________ |
|
Occasionally
|
___________ | ___________ |
(e) For
individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:
YES_______ NO_______
(f) For
trust,
corporate, partnership and other institutional Subscribers, do you expect your
total assets to significantly decrease in the foreseeable future:
YES_______ NO_______
(g) For
all
Subscribers, do you have any other investments or contingent liabilities which
you reasonably anticipate could cause you to need sudden cash requirements
in
excess of cash readily available to you:
YES_______ NO_______
(h) For
all
Subscribers, are you familiar with the risk aspects and the non-liquidity of
investments such as the securities for which you seek to subscribe?
YES_______ NO_______
26
(i) For
all
Subscribers, do you understand that there is no guarantee of financial return
on
this investment and that you run the risk of losing your entire
investment?
YES_______ NO_______
8.3 MANNER
IN WHICH TITLE IS TO BE HELD.
(circle
one)
|
(a)
|
Individual
Ownership
|
|
|
(b)
|
Community
Property
|
|
|
(c)
|
Joint
Tenant with Right of
Survivorship
(both parties
must
sign)
|
|
|
(d)
|
Partnership*
|
|
|
(e)
|
Tenants
in Common
|
|
|
(f)
|
Company*
|
|
|
(g)
|
Trust*
|
|
|
(h)
|
Other
|
*If
Securities are being subscribed for by an entity, the attached Certificate
of
Signatory must also be completed.
8.4 NASD
AFFILIATION.
Are
you
affiliated or associated with an NASD member firm (please check
one):
Yes
_________ No
__________
If
Yes,
please describe:
_________________________________________________________
_________________________________________________________
_________________________________________________________
*If
Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
The
undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
_________________________________
Name
of
NASD Member Firm
By:
______________________________
Authorized
Officer
Date:
____________________________
27
8.5 The
undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in the Confidential Investor Questionnaire
contained in this Section 8 and such answers have been provided under the
assumption that the Company will rely on them.
For
Residents of New York:
THE
UNDERSIGNED NEW YORK STATE RESIDENT UNDERSTANDS THAT THIS OFFERING HAS NOT
BEEN
REVIEWED BY THE ATTORNEY GENERAL OF THE STATE OF NEW YORK BECAUSE OF THE
OFFEROR'S REPRESENTATIONS THAT THIS IS INTENDED TO BE A NON-PUBLIC OFFERING
PURSUANT TO SEC REGULATION D, AND THAT IF ALL OF THE CONDITIONS AND LIMITATIONS
OF THE SEC REGULATION ARE NOT COMPLIED WITH, THE OFFERING WILL BE RESUBMITTED
TO
THE ATTORNEY GENERAL FOR AMENDMENT EXEMPTION. I UNDERSTAND THAT ANY OFFERING
LITERATURE USED IN CONNECTION WITH THIS OFFERING HAS NOT BEEN PRE-FILED WITH
THE
ATTORNEY GENERAL AND HAS NOT BEEN REVIEWED BY THE ATTORNEY GENERAL .
THE
INTERESTS ARE BEING PURCHASED FOR MY OWN ACCOUNT FOR INVESTMENT, AND NOT FOR
DISTRIBUTION OR RESALE TO OTHERS. I AGREE THAT I WILL NOT SELL OR OTHERWISE
TRANSFER THESE SECURITIES UNLESS THEY ARE REGISTERED UNDER THE FEDERAL
SECURITIES ACT OF 1933 OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. I REPRESENT THAT I HAVE ADEQUATE MEANS OF PROVIDING FOR MY CURRENT
NEEDS AND POSSIBLE PERSONAL CONTINGENCIES, AND THAT I HAVE NO NEED FOR LIQUIDITY
OF THIS INVESTMENT.
IT
IS
UNDERSTOOD THAT ALL DOCUMENTS, RECORDS AND BOOKS PERTAINING TO THIS INVESTMENT
HAVE BEEN MADE AVAILABLE FOR INSPECTION BY MY ATTORNEY AND/OR MY ACCOUNTANT
AND/OR MY OFFEREE REPRESENTATIVE AND MYSELF, AND THAT THE BOOKS AND RECORDS
OF
THE ISSUER WILL BE AVAILABLE UPON REASONABLE NOTICE, FOR INSPECTION BY INVESTORS
AT REASONABLE HOURS AT ITS PRINCIPAL PLACE OF BUSINESS.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE TO FOLLOW]
28
[Signature
Page]
$_____________________
Dollars
Invested
|
Signature
|
Signature
(if purchasing jointly)
|
|
|
Name
Typed or Printed
|
Name
Typed or Printed
|
|
|
Entity
Name
|
Entity
Name
|
|
|
Address
|
Address
|
|
|
City,
State and Zip Code
|
City,
State and Zip Code
|
|
|
Telephone-Business
|
Telephone--Business
|
|
|
Telephone-Residence
|
Telephone--Residence
|
|
|
Facsimile-Business
|
Facsimile--Business
|
|
|
Facsimile-Residence
|
Facsimile—Residence
|
|
|
Email
Address
|
Email
Address
|
|
|
Tax
ID # or Social Security #
|
Tax
ID # or Social Security #
|
|
|
Name
in which securities should be issued:
|
||
Dated:
__________________, 2005
|
INVESTORS:
|
PLEASE
COMPLETE THE REGISTRATION QUESTIONNAIRE ATTACHED HERETO AS APPENDIX
A.
|
This Subscription Agreement is agreed to and accepted by the Company as of _____________, 2005.
NETSMART
TECHNOLOGIES, INC.
By:____________________________________
Name:
Title:
29
CERTIFICATE
OF SIGNATORY
(To
be
completed if Securities are
being
subscribed for by an entity)
I,____________________________,
am the____________________________ of __________________________________________
(the “Entity”).
I
certify
that I am empowered and duly authorized by the Entity to execute and carry
out
the terms of the Subscription Agreement and to purchase and hold the Securities,
and certify further that the Subscription Agreement has been duly and validly
executed on behalf of the Entity and constitutes a legal and binding obligation
of the Entity.
IN
WITNESS WHEREOF, I have set my hand this ______ day of _________________,
2005.
________________________________________________________
(Signature) 30
APPENDIX
A
Netsmart
Technologies, Inc.
REGISTRATION
QUESTIONNAIRE
FOR
SELLING
STOCKHOLDERS
Name:
________________________________
(Please
Print)
This
questionnaire is intended to provide information for a registration statement
(the “Registration Statement”) to be filed by Netsmart Technologies, Inc. (the
“Company”) covering the resale of the Shares and Warrant Shares acquired by you
as contemplated by the accompanying Subscription Agreement. Please complete
(attaching separate sheets if additional space is needed), date and sign this
questionnaire and return it together with your completed subscription agreement.
YOU
MUST
ANSWER EVERY QUESTION. If a question is inapplicable to you or your answer
is in
the negative, please so state by inserting “N/A.” If you are in doubt whether a
particular question requires an affirmative response from you, please furnish
full particulars so that those persons responsible for preparing the
Registration Statement and Prospectus can determine whether any disclosure
based
on your answer is required. Information requested in this questionnaire is
as of
the date you complete the questionnaire, unless otherwise indicated. Your
furnishing such information does not necessarily mean that such information
will
be disclosed.
DEFINITIONS
Your
answers to this questionnaire should be made upon the basis of the following
definitions of terms used in this questionnaire:
The
term
“beneficial
owner”
of a
security includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has or shares
(1) voting
power,
which
includes the power to vote, or direct the voting of, such security or
(2) investment
power,
which
includes the power to dispose or direct the disposition of such security. A
person may be regarded as having voting power of a security which is owned
(i)
by his spouse or minor children or by any of his relatives or his spouse’s
relatives who share the same home with him, (ii) a partnership
of
which he is a partner or (iii) a corporation of which he is a substantial
shareholder. A person is also deemed to be the beneficial owner of shares which
that person has the right to acquire within 60 days, including but not limited
to any right to acquire through the exercise of an option, through conversion
of
a security, pursuant to the power to revoke a trust or pursuant to the automatic
termination of a trust.
A-1
The
term
“material,”
when
used to qualify a requirement for the furnishings of information as to any
subject, limits the information required to those matters about which the
average prudent investor should reasonably be informed before buying or selling
the securities of the Company. If you are in doubt as to the materiality of
certain information, you should relate sufficient facts to enable the Company
and its advisors to reach a conclusion as to its materiality.
QUESTIONS
QUESTION
1:
State
your present position or positions with the Company (if any), including
membership on any audit, personnel, compensation or similar committee or
committees; any positions held by you during the previous three years; and
any
positions to which you have been elected or appointed but the duties of which
you have not yet assumed. For each position, list the term or expected term
of
office.
ANSWER:
QUESTION
2:
Other
than Shares and Warrant Shares that you will acquire in connection with the
Offering,
provide
below information regarding the equity securities of the Company of which you
are the “beneficial owner.”Please
refer to the definition of “beneficial owner,” above.
Under
the column “Nature of Ownership,” please indicate amounts of securities for
which you have (a) sole voting power, (b) shared voting power, (c) sole
investment power, or (d) shared investment power. Also, if you hold more than
5%
of the Company’s securities pursuant to a voting trust or similar agreement,
please separately state the amount of such securities held or to be held
pursuant to the trust or agreement, the duration of the agreement and the names
and addresses of the voting trustees, outlining briefly their voting rights
and
other powers under the trust or agreement.
ANSWER
(attach additional pages if necessary):
|
Number
of
|
Nature
of
|
|
|
Shares
|
Ownership
|
Title
of Securities
|
A-2
QUESTION
3:
If
you
plan to offer your shares of Common Stock through the selling efforts of brokers
or dealers, describe the terms (and attach copies) of any agreement,
arrangement, or understanding entered into with broker(s) or dealer(s),
including volume limitations on sales, parties to the agreement and the
conditions under which the agreement may be terminated. If known, identify
the
broker(s) or dealer(s), which will participate in the offering and state the
amount to be offered through each.
ANSWER:
QUESTION
4:
Describe
below any information known to you, and if none state “none,” pertaining to
underwriting compensation and arrangements or any dealings between any
underwriter or related person, member of the NASD or a person associated with
a
member of the NASD, and the Company or any controlling stockholder thereof
since
January 1, 2000.
ANSWER:
QUESTION
5:
State
below whether you or any of your associates are a member of NASD, a controlling
shareholder of a member, a person associated or affiliated with a member or
an
underwriter or related person with respect to the proposed offering. If you
responded “yes,” describe such relationship:
ANSWER:
QUESTION
6:
Are
you a
broker-dealer or affiliated with a broker-dealer?
ANSWER:
Yes
______ No______
A-3
QUESTION
7:
If
you
are a broker-dealer or are affiliated with a broker-dealer, did you purchase
the
securities in the ordinary course of business?
ANSWER:
Yes
______ No______
QUESTION
8:
If
you
are affiliated with a broker-dealer, did you have any agreements or
understandings, directly or indirectly, with any person to distribute the
securities at the time that you purchased the securities?
ANSWER:
Yes
______ No______
Please
note that the SEC takes the position that if you are a broker-dealer, you are
to
be identified in the Registration Statement as an underwriter. In the “Plan of
Distribution,” the Registration Statement will provide substantially as
follows:
“The
selling stockholders and any broker-dealers, agents or underwriters that
participate with the selling stockholders in the distribution of the issued
and
outstanding shares of common stock or the shares of stock issuable upon exercise
of warrants may be deemed to be "underwriters" within the meaning of the
Securities Act, in which event any commissions received by these broker-dealers,
agents or underwriters and any profits realized by the selling stockholders
on
the resales of the securities may be deemed to be underwriting commissions
or
discounts under the Securities Act. If the selling stockholders are deemed
to be
underwriters, the selling stockholders may be subject to certain statutory
and
regulatory liabilities, including liabilities imposed pursuant to Sections
11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange
Act.”
A-4
QUESTION
9:
Are
there
specific individuals who have voting or investment control over the securities?
If you are an entity, you must answer “yes” to this question and identify such
individual(s) by name below.
ANSWER:
Yes
______ No______
If
you
answered “yes”, please list the names of such individuals:
The
answers to the foregoing questions are true and correct to the best of the
undersigned’s knowledge, information and belief. The undersigned agrees to
promptly notify the Company in writing of (a) any transfer by you of your Shares
or Warrants, (b) sales of common stock of the Company (giving the number of
shares sold and the name of the broker-dealer used) and (c) any other changes
in
the answers to this questionnaire that should be made as a result of any
material development occurring subsequent to the date hereof.
Dated:
___________, 2005.
____________________________________
Signature
X-0
XXXXXXXX
X
Form
of Opinion of Counsel
Counsel’s
opinion shall be based on a customary review of the transaction documents,
the
Company’s charter and by-laws, all material contracts filed as exhibits to the
Company’s filings with the Commission and the provisions of applicable law and
shall be subject only to customary limitations and qualification. Such opinion
shall be to substantially the following effect:
1. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the Delaware and has the requisite corporate power and
authority to carry on its business as now conducted and to own its properties.
The Company is duly qualified to do business as a foreign corporation and is
in
good standing in the State of New York
2. The
Company has the corporate power and authority and has taken all requisite
corporate action necessary for (i) the authorization, execution and delivery
of
the Subscription Agreements, (ii) the authorization of the performance of all
obligations of the Company under the Subscription Agreements, and (iii) the
authorization, issuance (or reservation for issuance) and delivery of the
Securities. The Subscription Agreements constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors’ rights generally and equitable
principles.
3. The
Shares have been duly authorized and are validly issued, fully paid and
nonassessable. Upon the due exercise of the Warrants, the Warrant Shares
issuable upon such exercise will be duly authorized, validly issued, fully
paid
and non-assessable. The Company has reserved a sufficient number of shares
of
Common Stock for issuance upon the full exercise of the Warrants.
4. To
our
knowledge, no person is entitled to any preemptive right or right of first
refusal with respect to the issuance of the Securities and to our knowledge,
there are no outstanding preemptive or similar rights relating to the purchase
of the Securities.
5. The
execution, delivery and performance by the Company of the Subscription
Agreements and the offer, issuance and sale of the Securities require no consent
of, action by or in respect of, or filing with, any Person, governmental body,
agency, or official known to us other than those that have been made or obtained
which are in full force and effect and post-sale filings pursuant to applicable
state and federal securities laws.
6. The
execution, delivery and performance of the Subscription Agreements by the
Company and the issuance and sale of the Securities does not and will not
conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under (i) the Company’s Certificate of
Incorporation or Bylaws, (ii) any material statute, rule, regulation or order
of
any governmental agency or body or any court, domestic or foreign, known to
us
and having jurisdiction over the Company or any of its respective assets or
properties, or (iii) any of the material agreements and instruments listed
as an
Exhibit to the Company’s SEC Reports.
B-1
7. Except
as
described in the SEC Reports, to our knowledge there are no pending material
actions, suits or proceedings against or affecting the Company.
8. Assuming
the representations made by the Subscribers contained in Articles 2 and 8 of
the
Subscription Agreements are true and correct, the initial sale of the Securities
and the issuance of the Warrant Shares as contemplated by the Subscription
Agreements is exempt from the registration and prospectus delivery requirements
of the Securities Act of 1933, as amended.
B-2
EXHIBIT
W
NETSMART
TECHNOLOGIES, INC.
COMMON
STOCK WARRANT
THIS
WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”),
OR
UNDER THE SECURITIES LAWS OF ANY STATE. THIS WARRANT IS SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THIS WARRANT
MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE
ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
This
certifies that [
] (the
“Holder”),
or
assigns, for value received, is entitled to purchase from Netsmart Technologies,
Inc., a Delaware corporation (the “Company”),
subject to the terms set forth below, a maximum of [
]
fully-paid and nonassessable shares (subject to adjustment as provided herein)
(the “Warrant
Shares”)
of the
Company’s Common Stock, $.01 par value per share (the “Common
Stock”),
for
cash at a price of $11.00 per share (subject to adjustment as provided herein)
(the “Exercise
Price”)
at any
time or from time to time up to and including 5:00 p.m. (Eastern Time) on
[
],
2010
(the “Expiration
Date”),
subject to the Company’s right to redeem this Warrant as described in Section 4
hereof, upon surrender to the Company at its principal office (or at such other
location as the Company may advise the Holder in writing) of this Warrant
properly endorsed with the Form of Subscription attached hereto duly completed
and signed and upon payment of the aggregate Exercise Price for the number
of
shares for which this Warrant is being exercised determined in accordance with
the provisions hereof. The Exercise Price is subject to adjustment as provided
in Section 3 of this Warrant. This Warrant is issued subject to the following
terms and conditions:
1. Exercise,
Issuance of Certificates.
Subject
to Section 4 hereof, the Holder may exercise this Warrant at any time or from
time to time on or prior to the Expiration Date for all or any part of the
Warrant Shares (but not for a fraction of a share) that may be purchased
hereunder, as that number may be adjusted pursuant to Section 3 of this Warrant.
The Company agrees that the Warrant Shares purchased under this Warrant shall
be
and are deemed to be issued to the Holder hereof as the record owner of such
Warrant Shares as of the close of business on the date on which this Warrant
shall have been surrendered, properly endorsed, the completed and executed
Form
of Subscription delivered, and payment made for such Warrant Shares (such date,
a “Date
of Exercise”).
Certificates for the Warrant Shares so purchased, together with any other
securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company’s expense as soon as practicable after the rights represented by this
Warrant have been so exercised, but in any event not later than three business
days following the Date of Exercise. In case of a purchase of less than all
the
Warrant Shares which may be purchased under this Warrant, the Company shall
cancel this Warrant and execute and deliver to the Holder hereof within a
reasonable time a new Warrant or Warrants of like tenor for the balance of
the
Warrant Shares purchasable under the Warrant surrendered upon such purchase.
Each stock certificate so delivered shall be registered in the name of such
Holder and issued with a legend in substantially the form of the legend placed
on the front of this Warrant.
W-1
(a) Subject
to the Holder’s valid exercise of this Warrant in accordance with the preceding
terms of this Section 1, the Company’s obligations to issue and deliver Warrant
Shares in accordance with the terms hereof are absolute and unconditional,
irrespective of any subsequent action or inaction by the Holder to enforce
the
same. Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation,
a
decree of specific performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing shares of Common
Stock upon exercise of the Warrant as required pursuant to the terms
hereof.
(b) Payment
of Exercise Price.
The
Holder shall pay the Exercise Price by delivering immediately available funds
to
the Company.
2. Shares
to be Fully Paid; Reservation of Shares.
The
Company covenants and agrees that all Warrant Shares, will, upon issuance,
be
duly authorized, validly issued, fully paid and nonassessable, and free of
all
preemptive rights, liens and encumbrances, except for restrictions on transfer
provided for herein. The Company shall at all times reserve and keep available
out of its authorized and unissued Common Stock, solely for the purpose of
providing for the exercise of the rights to purchase all Warrant Shares granted
pursuant to this Warrant, such number of shares of Common Stock as shall, from
time to time, be sufficient therefor.
3. Adjustment
of Exercise Price and Number of Shares.
The
Exercise Price and the total number of Warrant Shares shall be subject to
adjustment from time to time upon the occurrence of certain events described
in
this Section 3.
(a) Subdivision
or Combination of Stock.
In the
event the outstanding shares of the Company’s Common Stock shall be increased by
a stock dividend payable in Common Stock, stock split, subdivision, or other
similar transaction occurring after the date hereof into a greater number of
shares of Common Stock, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Warrant Shares
issuable hereunder proportionately increased. Conversely, in the event the
outstanding shares of the Company’s Common Stock shall be decreased by reverse
stock split, combination, consolidation, or other similar transaction occurring
after the date hereof into a lesser number of shares of Common Stock, the
Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of Warrant Shares issuable hereunder
proportionately decreased.
W-2
(b) Reclassification.
If any
reclassification of the capital stock of the Company or any reorganization,
consolidation, merger, or any sale, lease, license, exchange or other transfer
(in one transaction or a series of related transactions) of all or substantially
all of the business and/or assets of the Company (the “Reclassification
Events”)
shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities, or other assets or property, then, as a condition
of
such Reclassification Event, lawful and adequate provisions shall be made
whereby the Holder hereof shall thereafter have the right to purchase and
receive (in lieu of the shares of Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby) such shares of stock, securities, or other assets or
property as may be issued or payable with respect to or in exchange for, the
number of shares of such Common Stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby. Upon any
Reclassification Event, appropriate provision shall be made with respect to
the
rights and interests of the Holder of this Warrant to the end that the
provisions hereof (including, without limitation, provisions for adjustments
of
the Exercise Price and of the number of Warrant Shares), shall thereafter be
applicable, as nearly as practicable, to any shares of stock, securities, or
assets thereafter deliverable upon the exercise hereof.
(c) Notice
of Adjustment.
Upon
any adjustment of the Exercise Price or any increase or decrease in the number
of Warrant Shares, the Company shall give written notice thereof, by first
class
mail postage prepaid, addressed to the registered Holder of this Warrant at
the
address of such Holder as shown on the books of the Company. The notice shall
be
prepared and signed by the Company’s Chief Financial Officer and shall state the
Exercise Price resulting from such adjustment and the increase or decrease,
if
any, in the number of Warrant Shares purchasable at such adjusted Exercise
Price
upon the exercise of this Warrant, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
(d) Other
Notices.
In case
at any time:
(i) any
taking by the Company of a record of the holders of any class of securities
for
the purpose of determining the holders thereof who are entitled to receive
any
dividend on, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right;
(ii) any
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company or any transfer of all or substantially
all
the assets of the Company to or consolidation or merger of the Company with
or
into any other Person;
(iii) any
voluntary or involuntary dissolution, liquidation or winding-up of the Company;
or
(iv) any
offer
by the Company for subscription to the holders of the Common Stock of any
additional shares of stock of any class or other rights;
W-3
then
and
in each such event the Company will mail or cause to be mailed to the Holder
of
this Warrant a notice specifying (i) the date on which any such record is to
be
taken for the purpose of such dividend, distribution or right, and stating
the
amount and character of such dividend, distribution or right, (ii) the date
on
which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock shall be entitled to exchange their Common Stock for securities or other
property deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up, and
(iii) the amount and character of any stock or other securities, or rights
or
options with respect thereto, proposed to be issued or granted, the date of
such
proposed issue or grant and the persons or class of persons to whom such
proposed issue or grant is to be offered or made. Such notice shall also state
that the action in question or the record date is subject to the effectiveness
of a registration statement under the Securities Act or a favorable vote of
stockholders, if either is required. Such notice shall be delivered at least
20
days prior to the date specified in such notice on which any such action is
to
be taken or the record date, whichever is earlier.
4. Redemption
of Warrants.
(a) Redemption.
This
Warrant may be redeemed at the option of the Company, at any time after one
(1)
year from the date hereof, following a period of twenty (20) consecutive trading
days during which the per share volume weighted average price (“VWAP”) of the
Common Stock equals or exceeds $30 per share, upon notice as set forth in
Section 4(b) hereof, and at a redemption price equal to one-tenth of one cent
($0.001) (the “Redemption
Price”)
for
each Warrant Share purchasable under this Warrant; provided,
however,
that
this Warrant may not be redeemed by the Company unless the resale of the Warrant
Shares purchasable hereunder has been registered under the Securities Act of
1933, as amended (the “Act”)
or are
otherwise freely tradable. For purposes of this Section, VWAP shall be
determined with reference to the volume weighted closing sale price on the
primary market on which the Common Stock is traded, as reported by UBS. This
Warrant may be redeemed only if all Warrants of the Company issued
contemporaneously with this Warrant in the Offering (as defined in the
Subscription Agreement dated September ______, 2005 are concurrently redeemed).
(b) Notice
of Redemption.
In the
case of any redemption of this Warrant, the Company shall give written notice
of
such redemption to the Holder hereof by first-class mail, postage prepaid,
to
the Holder’s last address of record with the Company, not less than thirty (30)
days prior to the date fixed by the Company for redemption (such date, the
“Redemption Date”). Any notice which is given in the manner herein provided
shall be conclusively presumed to have been duly given, whether or not the
Holder receives the notice. Each such notice shall specify the Redemption Date,
the place of redemption and the aggregate Redemption Price, and shall state
that
payment of the Redemption Price will be made up on surrender of this Warrant
at
the place of redemption specified in such notice, and that if not exercised
by
the close of business on the Redemption Date, the exercise rights of the Warrant
shall expire unless extended by the Company. Such notice shall also state the
current Exercise Price and the Expiration Date of the Warrant, unless extended
by the Company.
W-4
(c) Payment
of Redemption Price.
If
notice of redemption shall have been given as provided in Section 4(b), the
Redemption Price shall, unless the Warrant is theretofore exercised pursuant
to
the terms hereof, become due and payable on the Redemption Date and at the
place
stated in such notice. After 5:00 p.m. (Eastern Time) on such Redemption Date,
the exercise rights of this Warrant shall expire and this Warrant shall be
null
and void.
5. No
Voting or Dividend Rights.
Nothing
contained in this Warrant shall be construed as conferring upon the Holder
the
right to vote or to consent to receive notice as a stockholder of the Company
on
any other matters or any rights whatsoever as a stockholder of the Company.
No
dividends or interest shall be payable or accrued in respect of this Warrant
or
the interest represented hereby or the Warrant Shares or other securities
purchasable hereunder until, and only to the extent that, this Warrant shall
have been exercised.
6. No
Impairment. The
Company shall not by any action including, without limitation, amending its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may
be
necessary or appropriate to protect the rights of Holder against impairment.
Without limiting the generality of the foregoing, the Company will (a) not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such actions
as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, and (c) use its reasonable best efforts to obtain
all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant. Upon the request of Holder, the Company
will
at any time during the period this Warrant is outstanding acknowledge in
writing, in form satisfactory to Holder, the continuing validity of this Warrant
and the obligations of the Company hereunder.
7. Modification
and Waiver.
This
Warrant and any provision hereof may be changed, waived, discharged, or
terminated only by an instrument in writing signed by the party against whom
enforcement of the same is sought.
8. Notices.
Any
notice, request, or other document required or permitted to be given or
delivered to the Holder hereof or the Company shall be delivered by hand or
messenger or shall be sent by certified mail, postage prepaid, or by overnight
courier to the Holder at its address as shown on the books of the Company or
to
the Company at its principal place of business or such other address as either
may from time to time provide to the other. Each such notice or other
communication shall be treated as effective or having been given: (i) when
delivered if delivered personally, (ii) if sent by registered or certified
mail, at the earlier of its receipt or three business days after the same has
been registered or certified as aforesaid, or (iii) if sent by overnight
courier, on the next business day after the same has been deposited with a
nationally recognized courier service.
W-5
9. Governing
Law.
This
Warrant shall be construed and enforced in accordance with, and the rights
of
the parties shall be governed by, the laws of the State of New York applicable
to contracts to be performed entirely within such State.
10. Lost
or Stolen Warrant.
Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction, or mutilation of this Warrant and, in the case of any such loss,
theft or destruction, upon receipt of an indemnity reasonably satisfactory
to
the Company, or in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company, at its expense, will make and deliver
a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant.
11. Fractional
Shares.
No
fractional shares shall be issued upon exercise of this Warrant. The Company
shall, in lieu of issuing any fractional share, pay the Holder entitled to
such
fraction a sum in cash equal to such fraction (calculated to the nearest 1/100th
of a share) multiplied by the then effective Exercise Price on the date the
Form
of Subscription is received by the Company.
12. Acknowledgement.
Upon
the request of the Holder, the Company will at any time during the period this
Warrant is outstanding, acknowledge in writing, in form reasonably satisfactory
to the Holder, the continued validity of this Warrant and the Company’s
obligations hereunder.
13. Successors
and Assigns.
This
Warrant and the rights evidenced hereby shall inure to the benefit of and be
binding upon the successors of the Company and, subject to the terms of Section
13, the successors and assigns of the Holder. The provisions of this Warrant
are
intended to be for the benefit of all Holders from time to time of this Warrant,
and shall be enforceable by any such Holder.
14. Transfer.
This
Warrant shall be transferable only on the books of the Company maintained at
its
principal place of business, upon delivery thereof duly endorsed by the Holder
or by its duly authorized attorney or representative or accompanied by proper
evidence of succession, assignment or authority to transfer. Upon any
registration of transfer, the Company shall execute and deliver a new Warrant
to
the person entitled thereto.
15. Payment
of Taxes.
The
Company shall not be required to pay any tax or taxes which may be payable
with
respect to any transfer of the Warrant or the Warrant Shares.
16. Severability
of Provisions.
In case
any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
W-6
* * *
IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its
officer, thereunto duly authorized as of this [
]
day of
[
],
2005.
Netsmart
Technologies, Inc.,
By:
______________________________________
Name:
____________________________________
Title:
_____________________________________
W-7
FORM
OF
SUBSCRIPTION
(To
be
signed only upon exercise of Warrant)
To: Netsmart
Technologies, Inc.
The
undersigned, the holder of the attached Common Stock Warrant, hereby elects
to
exercise the purchase right represented by such Warrant for, and to purchase
thereunder, 1
shares
of Common Stock of Netsmart Technologies, Inc. and
such
holder herewith
makes payment of $_________.
The
undersigned requests that certificates for such shares be issued in the name
of,
and delivered to:
______________________________________________________________________________
whose
address
is:________________________________________________________________.
DATED:
_____________________
__________________________________________
(Signature
must conform in all respects to name of
Holder
as
specified on the face of the Warrant)
Name:
_____________________________________
Title:
______________________________________
______________________________________
1 Insert
here the number of shares called for on the face of the Warrant (or, in
the case
of a partial exercise, the portion thereof as to which the Warrant is being
exercised), in either case without making any adjustment for any stock
or other
securities or property or cash which, pursuant to the adjustment provisions
of
the Warrant, may be deliverable upon exercise.
W-8
AMENDMENT
TO SUBSCRIPTION AGREEMENT
THIS
AMENDMENT TO SUBSCRIPTION AGREEMENT (this “Agreement”) made as of the date set
forth on the signature page hereof between Netsmart Technologies, Inc., a
Delaware corporation, having its principal office at 0000 Xxxxxxx Xxxxxxx,
Xxxxx
X000, Xxxxx Xxxxx, XX 00000 (the “Company”), and the undersigned (the
“Subscriber”).
W
I T N E
S S E T H:
WHEREAS,
the Company offered (the “Offering”) to a limited number of “accredited
investors,” as such term is defined in Rule 501 of Regulation D under the
Securities Act of 1933, as amended (the “Securities Act”), shares (the “Shares”)
of its Common Stock, par value $.01 per share (“Common Stock”), and, in addition
to the Shares, a 5-year warrant (the “Warrant”) to purchase, for an initial
exercise price of $11 per share, 1 share of Common Stock for every 4 Shares
purchased in the Offering (the “Warrant Shares”). (The Shares and the Warrant to
be purchased, sometimes collectively referred to as a “Unit” and such Shares,
Warrants and the Warrant Shares are collectively referred to herein as the
“Securities”); and
WHEREAS,
pursuant to a subscription agreement dated as of September 19, 2005 (the
“Subscription Agreement”), the Subscriber subscribed for Securities in the
Offering, which subscription was accepted by the Company;
WHEREAS,
the Company now desires that Subscriber reduce the number of Units for which
it
subscribed in the Offering and, in consideration for a reduction in the price
of
the Units and the execution and delivery of a Participation Agreement of
even
date, Subscriber has agreed to so reduce its prior subscription.
NOW,
THEREFORE, in consideration of the mutual promises and the representations
and
covenants hereinafter set forth, the parties hereto agree as
follows:
1. The
Subscriber hereby subscribes for the number of Units set forth on the signature
page hereof, at a price of $9.1696 per Unit.
2. Except
as
specifically provided in this Agreement, the Subscription Agreement is in
all
other respects hereby ratified and confirmed without amendment.
3. Miscellaneous
(a) This
Agreement shall not be changed, modified or amended except by a writing signed
by the parties to be charged, and this Agreement may not be discharged except
by
performance in accordance with its terms or by a writing signed by the party
to
be charged.
(b) 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, together with the Subscription 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.
1
(c) 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 New
York
without regard to principles of conflicts of law.
(d) 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.
(e) This
Agreement may be executed in two or more counterparts each of which shall
be
deemed an original, but all of which shall together constitute one and the
same
instrument.
2
[Signature
Page]
|
$_____________________
Dollars
Invested
|
Number of Units Purchased ________ | |
|
Signature
|
Signature
(if purchasing jointly)
|
|
|
Name
Typed or Printed
|
Name
Typed or Printed
|
|
|
Entity
Name
|
Entity
Name
|
|
|
Address
|
Address
|
|
|
City,
State and Zip Code
|
City,
State and Zip Code
|
|
|
Telephone-Business
|
Telephone--Business
|
|
|
Telephone-Residence
|
Telephone--Residence
|
|
|
Facsimile-Business
|
Facsimile--Business
|
|
|
Facsimile-Residence
|
Facsimile—Residence
|
|
|
Email
Address
|
Email
Address
|
|
|
Tax
ID # or Social Security #
|
Tax
ID # or Social Security #
|
|
|
Name
in which securities should be issued:
|
||
Dated:
______________________,
2005
|
INVESTORS:
|
PLEASE
CONFIRM THAT THE PREVIOUSLY SUBMITTED REGISTRATION QUESTIONNAIRE
IS TRUE,
COMPLETE AND CORRECT.
Yes_____
No_____
|
IF
NOT, PLEASE COMPLETE THE QUESTIONAIRE
ATTACHED AS EXHIBIT A.
This
Amendment to Subscription Agreement is agreed to and accepted by the Company
as
of _____________, 2005.
NETSMART
TECHNOLOGIES, INC.
By:____________________________________
Name:
Title:
3
CERTIFICATE
OF SIGNATORY
(To
be
completed if Securities are
being
subscribed for by an entity)
I,____________________________,
am the____________________________ of __________________________________________
(the “Entity”).
I
certify
that I am empowered and duly authorized by the Entity to execute and carry
out
the terms of the Amendment to Subscription Agreement and to purchase and
hold
the Securities, and certify further that the Amendment to Subscription Agreement
has been duly and validly executed on behalf of the Entity and constitutes
a
legal and binding obligation of the Entity.
IN
WITNESS WHEREOF, I have set my hand this ______ day of _________________,
2005.
__________________________________________________
(Signature)
4
APPENDIX
A
Netsmart
Technologies, Inc.
REGISTRATION
QUESTIONNAIRE
FOR
SELLING
STOCKHOLDERS
Name:
________________________________
(Please
Print)
This
questionnaire is intended to provide information for a registration statement
(the “Registration Statement”) to be filed by Netsmart Technologies, Inc. (the
“Company”) covering the resale of the Shares and Warrant Shares acquired by you
as contemplated by the accompanying Subscription Agreement. Please complete
(attaching separate sheets if additional space is needed), date and sign
this
questionnaire and return it together with your completed subscription agreement.
YOU
MUST
ANSWER EVERY QUESTION. If a question is inapplicable to you or your answer
is in
the negative, please so state by inserting “N/A.” If you are in doubt whether a
particular question requires an affirmative response from you, please furnish
full particulars so that those persons responsible for preparing the
Registration Statement and Prospectus can determine whether any disclosure
based
on your answer is required. Information requested in this questionnaire is
as of
the date you complete the questionnaire, unless otherwise indicated. Your
furnishing such information does not necessarily mean that such information
will
be disclosed.
DEFINITIONS
Your
answers to this questionnaire should be made upon the basis of the following
definitions of terms used in this questionnaire:
The
term
“beneficial
owner”
of a
security includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has or shares
(1) voting
power,
which
includes the power to vote, or direct the voting of, such security or
(2) investment
power,
which
includes the power to dispose or direct the disposition of such security.
A
person may be regarded as having voting power of a security which is owned
(i)
by his spouse or minor children or by any of his relatives or his spouse’s
relatives who share the same home with him, (ii) a partnership
of
which he is a partner or (iii) a corporation of which he is a substantial
shareholder. A person is also deemed to be the beneficial owner of shares
which
that person has the right to acquire within 60 days, including but not limited
to any right to acquire through the exercise of an option, through conversion
of
a security, pursuant to the power to revoke a trust or pursuant to the automatic
termination of a trust.
5
The
term
“material,”
when
used to qualify a requirement for the furnishings of information as to any
subject, limits the information required to those matters about which the
average prudent investor should reasonably be informed before buying or selling
the securities of the Company. If you are in doubt as to the materiality
of
certain information, you should relate sufficient facts to enable the Company
and its advisors to reach a conclusion as to its materiality.
QUESTIONS
QUESTION
1:
State
your present position or positions with the Company (if any), including
membership on any audit, personnel, compensation or similar committee or
committees; any positions held by you during the previous three years; and
any
positions to which you have been elected or appointed but the duties of which
you have not yet assumed. For each position, list the term or expected term
of
office.
ANSWER:
QUESTION
2:
Other
than Shares and Warrant Shares that you will acquire in connection with the
Offering,
provide
below information regarding the equity securities of the Company of which
you
are the “beneficial owner.”Please
refer to the definition of “beneficial owner,” above.
Under
the column “Nature of Ownership,” please indicate amounts of securities for
which you have (a) sole voting power, (b) shared voting power, (c) sole
investment power, or (d) shared investment power. Also, if you hold more
than 5%
of the Company’s securities pursuant to a voting trust or similar agreement,
please separately state the amount of such securities held or to be held
pursuant to the trust or agreement, the duration of the agreement and the
names
and addresses of the voting trustees, outlining briefly their voting rights
and
other powers under the trust or agreement.
ANSWER
(attach additional pages if necessary):
|
Number
of
|
Nature
of
|
|
|
Shares
|
Ownership
|
Title
of Securities
|
6
QUESTION
3:
If
you
plan to offer your shares of Common Stock through the selling efforts of
brokers
or dealers, describe the terms (and attach copies) of any agreement,
arrangement, or understanding entered into with broker(s) or dealer(s),
including volume limitations on sales, parties to the agreement and the
conditions under which the agreement may be terminated. If known, identify
the
broker(s) or dealer(s), which will participate in the offering and state
the
amount to be offered through each.
ANSWER:
QUESTION
4:
Describe
below any information known to you, and if none state “none,” pertaining to
underwriting compensation and arrangements or any dealings between any
underwriter or related person, member of the NASD or a person associated
with a
member of the NASD, and the Company or any controlling stockholder thereof
since
January 1, 2000.
ANSWER:
QUESTION
5:
State
below whether you or any of your associates are a member of NASD, a controlling
shareholder of a member, a person associated or affiliated with a member
or an
underwriter or related person with respect to the proposed offering. If you
responded “yes,” describe such relationship:
ANSWER:
QUESTION
6:
Are
you a
broker-dealer or affiliated with a broker-dealer?
ANSWER:
Yes
______ No______
7
QUESTION
7:
If
you
are a broker-dealer or are affiliated with a broker-dealer, did you purchase
the
securities in the ordinary course of business?
ANSWER:
Yes
______ No______
QUESTION
8:
If
you
are affiliated with a broker-dealer, did you have any agreements or
understandings, directly or indirectly, with any person to distribute the
securities at the time that you purchased the securities?
ANSWER:
Yes
______ No______
Please
note that the SEC takes the position that if you are a broker-dealer, you
are to
be identified in the Registration Statement as an underwriter. In the “Plan of
Distribution,” the Registration Statement will provide substantially as
follows:
“The
selling stockholders and any broker-dealers, agents or underwriters that
participate with the selling stockholders in the distribution of the issued
and
outstanding shares of common stock or the shares of stock issuable upon exercise
of warrants may be deemed to be "underwriters" within the meaning of the
Securities Act, in which event any commissions received by these broker-dealers,
agents or underwriters and any profits realized by the selling stockholders
on
the resales of the securities may be deemed to be underwriting commissions
or
discounts under the Securities Act. If the selling stockholders are deemed
to be
underwriters, the selling stockholders may be subject to certain statutory
and
regulatory liabilities, including liabilities imposed pursuant to Sections
11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange
Act.”
8
QUESTION
9:
Are
there
specific individuals who have voting or investment control over the securities?
If you are an entity, you must answer “yes” to this question and identify such
individual(s) by name below.
ANSWER:
Yes
______ No______
If
you
answered “yes”, please list the names of such individuals:
The
answers to the foregoing questions are true and correct to the best of the
undersigned’s knowledge, information and belief. The undersigned agrees to
promptly notify the Company in writing of (a) any transfer by you of your
Shares
or Warrants, (b) sales of common stock of the Company (giving the number
of
shares sold and the name of the broker-dealer used) and (c) any other changes
in
the answers to this questionnaire that should be made as a result of any
material development occurring subsequent to the date hereof.
Dated:
___________, 2005.
____________________________________
Signature
9
