SUBSCRIPTION AGREEMENT
0000
Xxxxxxxxx Xxxxxxx
Xxxxxxxxxx,
XX 00000
Ladies
and Gentlemen:
1. Subscription. The
undersigned (the “Purchaser”), intending to be legally bound, hereby irrevocably
agrees to purchase from Lightyear Network Solutions, Inc., a
Nevada corporation (the “Company”) the securities
described below (the “Securities”) for a purchase price of $4,000 per
Price-Protected Investment Unit. Each Price-Protected
Investment (each “Unit”) of Securities consists of : (i) one thousand (1,000)
shares of Common Stock of the Company (“Shares”); (ii) a warrant to purchase 500
shares of Common Stock at an exercise price of $4.00 per share (a “Fixed
Warrant”); and (iii) a warrant to purchase up to two thousand (2,000) shares of
Common Stock at an exercise price of $0.01 per share subject to certain
conditions (a “Milestone Warrant”). The Shares, the Fixed
Warrants, the Milestone Warrants and the shares of Common Stock for which the
Fixed Warrants and the Milestone Warrants are exercisable (the “Warrant Shares”)
are collectively referred to herein as the “Securities.” The Fixed
Warrants and the Milestone Warrants are referred to herein as the
“Warrants.”
This
subscription is submitted to you in accordance with and subject to the terms and
conditions described in this Subscription Agreement and the Confidential Private
Placement Memorandum, dated June 2010, and exhibits thereto (collectively
referred to as the “Offering Documents”) and relating to the offering (the
“Offering”) by the Company of up to $5,000,000, with no minimum. The
Securities may be offered through one or more FINRA member selling agents (the
“Selling Agent(s)”), and the Offering shall continue until the earlier of (i)
all Securities are sold or (ii) August 31, 2010, unless extended by the Company
for an additional period expiring September 30, 2010. The Company
retains the right to accept up to an additional $2,000,000 of oversubscriptions
for Securities.
2. Payment. The
Purchaser encloses herewith a check payable to, or will immediately make a wire
transfer payment to, “Signature Bank, Escrow Agent for Lightyear
Network Solutions, Inc.” in the full amount of the purchase price of the
Securities being subscribed for. Such funds will be held for the
Purchaser's benefit, and will be returned promptly, without interest or offset
if this Subscription Agreement is not accepted by the Company or the Offering is
terminated pursuant to its terms or by the Company. Together with a
check for, or wire transfer of, the full purchase price, the Purchaser is
delivering a completed and executed Omnibus Signature Page to this Subscription
Agreement.
3. Deposit of
Funds. All payments made as provided in Section 2 hereof shall
be deposited by the Selling Agent(s) as soon as practicable with the Escrow
Agent, in a non-interest-bearing escrow account (the “Escrow Account”) until the
earliest to occur of (a) the occurrence of an initial closing (the
“First Closing”), (b) the rejection of such subscription, or (c) the termination
of the Offering by the Company or the Selling Agent(s). The Company
may continue to offer and sell the Securities and conduct additional closings
(each, a “Closing”) for the sale of additional Securities after the First
Closing and until the termination of the Offering.
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4. Acceptance of Subscription and
Delivery of Securities. The Purchaser understands and agrees
that the Company in its sole discretion reserves the right to accept or reject
this or any other subscription for Securities, in whole or in part,
notwithstanding prior receipt by the Purchaser of notice of acceptance of this
subscription. The Company shall have no obligation hereunder until
the Company shall execute and deliver to the Purchaser an executed copy of this
Subscription Agreement. If this subscription is rejected in whole, or
the offering of Securities is terminated all funds received from the Purchaser
will be returned without interest or offset, and this Subscription Agreement
shall thereafter be of no further force or effect. If this
subscription is rejected in part, the funds for the rejected portion of this
subscription will be returned without interest or offset, and this Subscription
Agreement will continue in full force and effect to the extent this subscription
was accepted.
The Securities shall be issued and
delivered to the Purchaser upon the date of the Closing.
5. Representations and Warranties of the
Purchaser. The Purchaser hereby acknowledges, represents,
warrants, and agrees as follows:
(a) None
of the Securities offered pursuant to the Offering Documents are registered
under the Securities Act of 1933, as amended (the “Securities Act”), or any
state securities laws. The Purchaser understands that the offering
and sale of the Securities is intended to be exempt from registration under the
Securities Act, by virtue of Section 4(2) thereof and the provisions of
Regulation D promulgated thereunder, based, in part, upon the representations,
warranties and agreements of the Purchaser contained in this Subscription
Agreement;
(b) The
Purchaser and the Purchaser's attorney, accountant, purchaser representative
and/or tax adviser, if any (collectively, the “Advisers”), acknowledges that it
has received the Offering Documents and copies of the SEC Documents (as defined
herein), either in hard copy or electronically through the SEC’s XXXXX system,
and all other documents requested by the Purchaser, has carefully reviewed them
and understands the information contained therein, and the Purchaser and the
Advisers, if any, prior to the execution of this Subscription Agreement, have
had access to the same kind of information as would be available in a
registration statement filed by the Company under the Securities
Act. Purchaser’s decision to enter into this Subscription Agreement
and the other Transaction Documents (as defined herein) has been made based
solely on the independent evaluation of the Purchaser and its Advisors, if
any;
(c) Neither
the Securities and Exchange Commission nor any state securities commission has
approved the Securities, or passed upon or endorsed the merits of the offering
of Securities or confirmed the accuracy or determined the adequacy of the
Offering Documents. The Offering Documents have not been reviewed by
any federal, state or other regulatory authority;
(d) All
documents, records, and books pertaining to the investment in the Securities
(including, without limitation, the Offering Documents) have been made available
for inspection by such Purchaser and its Advisers, if any;
(e) The
Purchaser and its Advisers, if any, have had a reasonable opportunity to ask
questions of and receive answers from a person or persons acting on behalf of
the Company concerning the offering of the Securities and the business,
financial condition, results of operations of the Company, and all such
questions have been answered to the full satisfaction of the Purchaser and its
Advisers, if any;
(f)
In evaluating the suitability of an investment in the Company, the
Purchaser has not relied upon any representation or information (oral or
written) other than as stated in the Offering Documents or in the SEC
Documents.
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(g) The
Purchaser is unaware of, is in no way relying on, and did not become aware of
the offering of the Securities through or as a result of, any form of general
solicitation or general advertising including, without limitation, any article,
notice, advertisement or other communication published in any newspaper,
magazine or similar media or broadcast over television or radio, in connection
with the offering and sale of the Securities and is not subscribing for
Securities and did not become aware of the offering of the Securities through or
as a result of any seminar or meeting to which the Purchaser was invited by, or
any solicitation of a subscription by, a person not previously known to the
Purchaser in connection with investments in securities generally;
(h) The
Purchaser has taken no action that would give rise to any claim by any person
for brokerage commissions, finders' fees or the like relating to this
Subscription Agreement or the transactions contemplated hereby (other than
commissions to be paid by the Company to the Selling Agent(s) or as otherwise
described in the Offering Documents and, in turn, to be paid to its selected
dealers);
(i)
The Purchaser, together with its Advisers, as the case may be,
has such knowledge and experience in financial, tax, and business matters, and,
in particular, investments in securities, so as to enable it to utilize the
information made available to it in connection with the Offering to evaluate the
merits and risks of an investment in the Securities and the Company and to make
an informed investment decision with respect thereto.
(j)
The Purchaser is not relying on the Company, the Selling Agent(s) or
any of their respective employees, counsel or agents with respect to the legal,
tax, economic and related considerations of an investment in the Securities, and
the Purchaser has relied on the advice of, or has consulted with, only its own
Advisers;
(k) The
Purchaser is acquiring the Securities solely for such Purchaser's own account
for investment purposes only and not with a view to or intent of resale or
distribution thereof, in whole or in part. The Purchaser has no
agreement or arrangement, formal or informal, with any person to sell or
transfer all or any part of the Securities, and the Purchaser has no plans to
enter into any such agreement or arrangement;
(l)
The Purchaser must bear the substantial economic risks of the investment
in the Securities indefinitely because none of the Securities may be sold,
hypothecated or otherwise disposed of unless subsequently registered under the
Securities Act and applicable state securities laws or an exemption from such
registration is available. Legends shall be placed on the Securities
to the effect that they have not been registered under the Securities Act or
applicable state securities laws and appropriate notations thereof will be made
in the Company's stock books. Stop transfer instructions will be
placed with the transfer agent of the Securities. There can be no
assurance that there will be any market for resale of the
Securities;
(m) The
Purchaser has adequate means of providing for such Purchaser's current financial
needs and foreseeable contingencies and has no need for liquidity of its
investment in the Securities for an indefinite period of time;
(n) The
Purchaser is aware that an investment in the Securities involves a number of
very significant risks and has carefully read and considered the matters set
forth under the caption “Risk Factors” in the Offering Documents and the SEC
Documents, and, in particular, acknowledges that the Company has a limited
operating history and limited assets and is engaged in a highly competitive
business;
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(o) The
Purchaser meets the requirements of at least one of the suitability standards
for an “accredited investor” as set forth on the Accredited Investor
Certification contained herein;
(p) The
Purchaser (i) if a natural person, represents that the Purchaser has reached the
age of 21 and has full power and authority to execute and deliver this
Subscription Agreement and all other related agreements or certificates and to
carry out the provisions hereof and thereof; (ii) if a corporation, partnership,
or limited liability company or partnership, or association, joint stock
company, trust, unincorporated organization or other entity, represents that
such entity was not formed for the specific purpose of acquiring the Securities,
such entity is duly organized, validly existing and in good standing under the
laws of the state of its organization, the consummation of the transactions
contemplated hereby is authorized by, and will not result in a violation of
state law or its charter or other organizational documents, such entity has full
power and authority to execute and deliver this Subscription Agreement and all
other related agreements or certificates and to carry out the provisions hereof
and thereof and to purchase and hold the securities constituting the Securities,
the execution and delivery of this Subscription Agreement has been duly
authorized by all necessary action, this Subscription Agreement has been duly
executed and delivered on behalf of such entity and is a legal, valid and
binding obligation of such entity; or (iii) if executing this Subscription
Agreement in a representative or fiduciary capacity, represents that it has full
power and authority to execute and deliver this Subscription Agreement in such
capacity and on behalf of the subscribing individual, xxxx, partnership, trust,
estate, corporation, or limited liability company or partnership, or other
entity for whom the Purchaser is executing this Subscription Agreement, and such
individual, partnership, xxxx, trust, estate, corporation, or limited liability
company or partnership, or other entity has full right and power to perform
pursuant to this Subscription Agreement and make an investment in the Company,
and represents that this Subscription Agreement constitutes a legal, valid and
binding obligation of such entity. The execution and delivery of this
Subscription Agreement will not violate or be in conflict with any order,
judgment, injunction, agreement or controlling document to which the Purchaser
is a party or by which it is bound;
(q) The
Purchaser and the Advisers, if any, have had the opportunity to obtain any
additional information, to the extent the Company had such information in its
possession or could acquire it without unreasonable effort or expense, necessary
to verify the accuracy of the information contained in the Offering Documents
and all documents received or reviewed in connection with the purchase of the
Securities and have had the opportunity to have representatives of the Company
provide them with such additional information regarding the terms and conditions
of this particular investment and the financial condition, results of
operations, business of the Company deemed relevant by the Purchaser or the
Advisers, if any, and all such requested information, to the extent the Company
had such information in its possession or could acquire it without unreasonable
effort or expense, has been provided to the full satisfaction of the Purchaser
and the Advisers, if any;
(r) Any
information which the Purchaser has heretofore furnished or is furnishing
herewith the Company or the Selling Agent(s) is complete and accurate and may be
relied upon by the Company and the Selling Agent(s) in determining the
availability of an exemption from registration under federal and state
securities laws in connection with the Offering. The Purchaser
further represents and warrants that it will notify and supply corrective
information to the Company and the Selling Agent(s) immediately upon the
occurrence of any change therein occurring prior to the Company's issuance of
the Securities;
(s) The
Purchaser has significant prior investment experience, including investment in
non-listed and non-registered securities. The Purchaser has a
sufficient net worth to sustain a loss of its entire investment in the Company
in the event such a loss should occur. The Purchaser's overall
commitment to investments which are not readily marketable is not excessive in
view of the Purchaser’s net worth and financial circumstances and the purchase
of the Securities will not cause such commitment to become
excessive. The investment is a suitable one for the
Purchaser;
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(t) The
Purchaser is satisfied that the Purchaser has received adequate information with
respect to all matters which it or the Advisers, if any, consider material to
its decision to make this investment;
(u) The
Purchaser acknowledges that any estimates or forward-looking statements or
projections included in the Offering Documents and/or the SEC Documents were
prepared by the Company in good faith but that the attainment of any such
projections, estimates or forward-looking statements cannot be guaranteed by the
Company and should not be relied upon;
(v) No
oral or written representations have been made, or oral or written information
furnished, to the Purchaser or the Advisers, if any, in connection with the
Offering which are in any way inconsistent with the information contained in the
Offering Documents or in the SEC Documents;
(w) Within
five (5) days after receipt of a request from the Company or the Selling
Agent(s), the Purchaser will provide such information and deliver such documents
as may reasonably be necessary to comply with any and all laws and ordinances to
which the Company or the Selling Agent(s) is subject;
(x) The
Purchaser's substantive relationship with the Selling Agent(s) or subagent
through which the Purchaser is subscribing for Securities predates the Selling
Agent(s)'s or such subagent's contact with the Purchaser regarding an investment
in the Securities;
(y) THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN STATES AND ARE BEING OFFERED
AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID
ACT AND SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY
OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED
UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE
OFFERING DOCUMENTS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL;
(z) The
Purchaser acknowledges that none of the Securities have been recommended by any
federal or state securities commission or regulatory authority. In
making an investment decision investors must rely on their own examination of
the Company and the terms of the Offering, including the merits and risks
involved. Furthermore, the foregoing authorities have not confirmed
the accuracy or determined the adequacy of the Offering
Documents. Any representation to the contrary is a criminal
offense. The Securities, are subject to restrictions on
transferability and resale and may not be transferred or resold except as
permitted under the Securities Act, and the applicable state securities laws,
pursuant to registration or exemption therefrom;
5
(aa) (For ERISA plans
only) The fiduciary of the ERISA plan represents
that such fiduciary has been informed of and understands the Company’s
investment objectives, policies and strategies, and that the decision to invest
“plan assets” (as such term is defined in ERISA) in the Company is consistent
with the provisions of ERISA that require diversification of plan assets and
impose other fiduciary responsibilities. The Purchaser fiduciary or
Plan (a) is responsible for the decision to invest in the Company; (b) is
independent of the Company or any of its affiliates; (c) is qualified to make
such investment decision; and (d) in making such decision, the Purchaser
fiduciary or Plan has not relied primarily on any advice or recommendation of
the Company or any of its affiliates;
(bb) The Purchaser should check the Office
of Foreign Assets Control (“OFAC”) website at <xxxx://xxx.xxxxx.xxx/xxxx>
before making the following representations. The Purchaser represents
that the amounts invested by it in the Company in the Offering were not and are
not directly or indirectly derived from activities that contravene federal,
state or international laws and regulations, including anti-money laundering
laws and regulations. Federal regulations and Executive Orders administered by
OFAC prohibit, among other things, the engagement in transactions with, and the
provision of services to, certain foreign countries, territories, entities and
individuals. The lists of OFAC prohibited countries, territories,
persons and entities can be found on the OFAC website at
<xxxx://xxx.xxxxx.xxx/xxxx>. In addition, the programs
administered by OFAC (the “OFAC Programs”) prohibit dealing with
individuals1 or
entities in certain countries regardless of whether such individuals or entities
appear on the OFAC lists;
(cc) To the best of the Purchaser’s
knowledge, none of: (1) the Purchaser; (2) any person controlling or controlled
by the Purchaser; (3) if the Purchaser is a privately-held entity, any person
having a beneficial interest in the Purchaser; or (4) any person for whom the
Purchaser is acting as agent or nominee in connection with this investment is a
country, territory, individual or entity named on an OFAC list, or a person or
entity prohibited under the OFAC Programs. Please be advised that the
Company may not accept any amounts from a prospective investor if such
prospective investor cannot make the representation set forth in the preceding
paragraph. The Purchaser agrees to promptly notify the Company and
the Selling Agent(s) should the Purchaser become aware of any change in the
information set forth in these representations. The Purchaser
understands and acknowledges that, by law, the Company may be obligated to
“freeze the account” of the Purchaser, either by prohibiting additional
subscriptions from the Purchaser, declining any redemption requests and/or
segregating the assets in the account in compliance with governmental
regulations, and the Selling Agent(s) may also be required to report such action
and to disclose the Purchaser’s identity to OFAC. The Purchaser
further acknowledges that the Company may, by written notice to the Purchaser,
suspend the redemption rights, if any, of the Purchaser if the Company
reasonably deems it necessary to do so to comply with anti-money laundering
regulations applicable to the Company and the Selling Agent(s) or any of the
Company’s other service providers. These individuals include
specially designated nationals, specially designated narcotics traffickers and
other parties subject to OFAC sanctions and embargo programs;
(dd) To the best of the Purchaser’s
knowledge, none of: (1) the Purchaser; (2) any person controlling or controlled
by the Purchaser; (3) if the Purchaser is a privately-held entity, any person
having a beneficial interest in the Purchaser; or (4) any person for whom the
Purchaser is acting as agent or nominee in connection with this investment is a
senior foreign political figure2, or
any immediate family3
member or
close associate4 of a
senior foreign political figure, as such terms are defined in the footnotes
below; and
1 These
individuals include specially designated nationals, specially designated
narcotics traffickers and other parties subject to OFAC sanctions and embargo
programs.
2 A
“senior foreign political figure” is defined as a senior official in the
executive, legislative, administrative, military or judicial branches of a
foreign government (whether elected or not), a senior official of a major
foreign political party, or a senior executive of a foreign government-owned
corporation. In addition, a “senior foreign political figure” includes any
corporation, business or other entity that has been formed by, or for the
benefit of, a senior foreign political figure.
3
“Immediate family” of a senior foreign political figure typically includes the
figure’s parents, siblings, spouse, children and in-laws.
4 A “close
associate” of a senior foreign political figure is a person who is widely and
publicly known to maintain an unusually close relationship with the senior
foreign political figure, and includes a person who is in a position to conduct
substantial domestic and international financial transactions on behalf of the
senior foreign political figure.
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(ee) If
the Purchaser is affiliated with a non-U.S. banking institution (a “Foreign
Bank”), or if the Purchaser receives deposits from, makes payments on behalf of,
or handles other financial transactions related to a Foreign Bank, the Purchaser
represents and warrants to the Company that: (1) the Foreign Bank has a fixed
address, other than solely an electronic address, in a country in which the
Foreign Bank is authorized to conduct banking activities; (2) the Foreign Bank
maintains operating records related to its banking activities; (3) the Foreign
Bank is subject to inspection by the banking authority that licensed the Foreign
Bank to conduct banking activities; and (4) the Foreign Bank does not provide
banking services to any other Foreign Bank that does not have a physical
presence in any country and that is not a regulated affiliate.
6. Representations, Warranties and
Covenants of the Company. The Company hereby represents,
warrants, acknowledges and agrees as follows:
(a) The
Company understands and confirms that the Purchaser will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Company. The Company acknowledges and agrees that the Purchaser makes
or has made no representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Subscription
Agreement. The Offering Documents have been diligently prepared by
the Company, at its sole cost, in conformity with all applicable laws, and is in
compliance with Regulation D, the Act and the requirements of all other rules
and regulations (the “Regulations”) of the Securities and Exchange Commission
(the “SEC”) relating to offerings of the type contemplated by the Offering, and
the applicable securities laws and the rules and regulations of those
jurisdictions wherein the Securities are to be offered and sold, excluding
foreign jurisdictions. The Securities will be offered and sold
pursuant to the registration exemption provided by Regulation D and Section 4(2)
and/or Section 4(6) of the Act as a transaction not involving a public offering
and the requirements of any other applicable state securities laws and the
respective rules and regulations thereunder in those United States jurisdictions
in which the Selling Agent(s) notifies the Company that the Securities are being
offered for sale. The Offering Documents and the SEC Documents
describe all material aspects, including attendant risks, of an investment in
the Company. The Company has not taken nor will it take any action
that conflicts with the conditions and requirements of, or that would make
unavailable with respect to the Offering, the exemption(s) from registration
available pursuant to Regulation D or Section 4(2) and/or Section 4(6) of the
Act and knows of no reason why any such exemption would be otherwise unavailable
to it. Neither the Company nor its affiliates has been subject to any
order, judgment or decree of any court or governmental authority of competent
jurisdiction temporarily, preliminarily or permanently enjoining such person for
failing to comply with Section 503 of Regulation D or any other applicable state
or federal securities laws.
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(b) The
Offering Documents do not include any 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, in light of the circumstances under which they were
made, not misleading. None of the statements, documents, certificates
or other items prepared or supplied by the Company with respect to the
transactions contemplated hereby contains an untrue statement of a material fact
or omits a material fact necessary to make the statements contained therein not
misleading. There is no fact that the Company has not disclosed in
the Offering Documents or in the SEC Documents and of which the Company is aware
that would reasonably be expected to have a material and adverse effect on the
business, condition (financial or otherwise), operations, prospects or property
of the Company or any of its subsidiaries, taken as a whole (“Material Adverse
Effect”).
(c) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada. Except as described in the
Offering Documents or the SEC Documents, the Company has no subsidiaries and
does not have an equity interest in any other firm, partnership, association or
other entity,. The Company is qualified to transact business as a
foreign corporation and is in good standing under the laws of each jurisdiction
where the location of its properties or the conduct of its business makes such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect.
(d) The
Company has all corporate power and authority to: (i) conduct its business as
presently conducted and as proposed to be conducted (as described in the SEC
Documents); (ii) enter into and perform its obligations under this Subscription
Agreement and the Warrants (collectively, the “Transaction Documents”);
(iii) issue, sell and deliver the Securities; and (iv) issue, sell
and deliver the shares of the Common Stock issuable upon exercise of the
Warrants. The execution and delivery of each of the Transaction
Documents has been duly authorized by the necessary corporate
action. This Agreement has been duly executed and when delivered will
constitute, and each of the other Transaction Documents, upon due execution and
delivery, will constitute, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms (i)
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors’ rights generally, including the effect of
statutory and other laws regarding fraudulent conveyances and preferential
transfers, and except that no representation is made herein regarding the
enforceability of the Company’s obligations to provide indemnification and
contribution remedies under the securities laws and (ii) subject to the
limitations imposed by general equitable principles (regardless of whether such
enforceability is considered in a proceeding at law or in equity).
(e) None
of the execution and delivery of, or performance by the Company under, any of
the Transaction Documents or the consummation of the transactions herein or
therein contemplated conflicts with or violates, or will result in the creation
or imposition of any lien, charge or other encumbrance upon any of the assets of
the Company under, any agreement or other instrument to which the Company is a
party or by which the Company or its assets may be bound, any term of the
certificate of incorporation or by-laws of the Company, or any license, permit,
judgment, decree, order, statute, rule or regulation applicable to the Company
or any of its assets.
(f) Except
as set forth in the Offering Documents or the SEC Documents, as of the date of
the each Closing: (i) there will be no outstanding
options, stock subscription agreements, warrants or other rights permitting or
requiring the Company or others to purchase or acquire any shares of capital
stock, or other equity securities of the Company, or to pay any dividend or make
any other distribution in respect thereof; (ii) there will be no securities
issued or outstanding that are convertible into or exchangeable for any of the
foregoing and there are no contracts, commitments or understandings, whether or
not in writing, to issue or grant any such option, warrant, right or convertible
or exchangeable security; (iii) no shares of stock or other securities of the
Company will be reserved for issuance for any purpose; (iv) there will be
no voting trusts or other contracts, commitments, understandings, arrangements
or restrictions of any kind with respect to the ownership, voting or transfer of
shares of stock or other securities of the Company, including without
limitation, any preemptive rights, rights of first refusal, proxies or similar
rights; and (v) no person will hold a right to require the Company to
register any securities of the Company under the Act or to participate in any
such registration.
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(g) When
issued and delivered against payment made as set forth herein, the Securities
shall have been duly authorized and will be validly issued, fully paid and
nonassessable and shall be free and clear of all liens, charges restrictions,
claims and encumbrances imposed by or through the Company other than as provided
in the Transaction Documents. No holder of any of the Securities will
be subject to personal liability solely by reason of being such a holder and
none of the Securities is subject to preemptive or similar rights of any
stockholder or securityholder of the Company or other than as described in the
Offering Documents, an adjustment under the antidilution or exercise rights of
any holders of any outstanding shares of capital stock, options, warrants or
other rights to acquire any securities of the Company. As of each
Closing, a sufficient number of authorized but unissued shares of Common Stock
shall have been reserved for issuance upon the exercise of the
Warrants.
(h)
No consent,
authorization or filing of or with any court or governmental authority is
required in connection with the issuance of the Securities or the consummation
of the transactions contemplated herein or in the other Transaction Documents,
except for required filings with the SEC and applicable “Blue Sky” or state
securities commissions relating specifically to the offering of the Securities
(all of which will be duly made on a timely basis).
(i)
The Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, since February 19, 2010
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Documents”). As of their respective dates of filing with the Commission,
the SEC Documents, together with any amendments thereto, complied in all
material respects with the requirements of the Securities Act and the Exchange
Act, as applicable. None of the SEC Documents, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents, together with
the related notes thereto, are true and complete and present fairly, in all
material respects, the financial position of the Company as of the date
specified and the results of its operations and changes in financial position
for the period covered thereby. Such financial statements and related
notes were prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”) throughout the period indicated except as may be disclosed
in the notes thereto, and except that the unaudited financial statements omit
full notes, and except for normal year-end adjustments. Except as set
forth in such financial statements, the Company has no material liabilities of
any kind, whether accrued, absolute, contingent or otherwise or entered into any
material transactions or commitments.
(j) The
conduct of business by the Company as presently conducted is not subject to
continuing oversight, supervision, regulation or examination by any governmental
official or body of the United States or any other jurisdiction wherein the
Company conducts or proposes to conduct such business, except as such regulation
as is applicable to commercial enterprises generally. The Company has
obtained all requisite licenses, permits and other governmental authorization
necessary to conduct its business as presently, and as proposed to be,
conducted, except where the failure to obtain such license, permit or other
governmental authorization would result in a Material Adverse
Effect.
9
(k) No
default by the Company or, to the best knowledge of the Company, any other party
exists in the due performance under any material agreement to which the Company
is a party or to which any of its assets is subject (collectively, the “Company
Agreements”). The Company Agreements are in full force and effect in
accordance with their respective terms.
(l)
Except as set forth in the Offering
Documents or the SEC Documents, there are no actions, proceedings, claims or
investigations, before or by any court or governmental authority (or any state
of facts which management of the Company has concluded could reasonably be
expected to give rise thereto), pending or, to the best knowledge of the
Company, threatened, against the Company, or involving its assets or, to the
knowledge of the Company, involving any of its officers or directors which, if
determined adversely to the Company or such officer or director, could result in
any Material Adverse Effect or materially and adversely affect the transactions
contemplated by the Transaction Documents or the enforceability
thereof.
(m) The
Company is not in violation of: (i) its certificate of incorporation or by-laws;
(ii) any indenture, mortgage, deed of trust, note or other agreement or
instrument to which the Company is a party or by which it is or may be bound or
to which any of its assets may be subject; (iii) any statute, rule or regulation
currently applicable to the Company; or (iv) any judgment, decree or order
applicable to the Company, which violation or violations individually, or in the
aggregate, would have a Material Adverse Effect.
(n) The
Company owns all right, title and interest in, or possesses adequate and
enforceable rights to use, all patents, patent applications, trademarks, trade
names, service marks, copyrights, rights, licenses, franchises, trade secrets,
confidential information, processes, formulations, software and source and
object codes necessary for the conduct of its business (collectively, the
“Intangibles”). To the knowledge of the Company, it has not infringed
upon the rights of others with respect to the Intangibles and the Company has
not received notice that it has or may have infringed or is infringing upon the
rights of others with respect to the Intangibles, or any notice of conflict with
the asserted rights of others with respect to the Intangibles that could,
individually or in the aggregate, have a Material Adverse Effect.
(o) Neither
the sale of the Securities by the Company nor its use of the proceeds thereof
will violate the Trading with the Enemy Act, as amended, or any of the foreign
assets control regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto. Without limiting the foregoing, the Company is not (a) a
person whose property or interests in property are blocked pursuant to Section 1
of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism
(66 Fed. Reg. 49079 (2001)) or (b) a person who engages in any dealings or
transactions, or be otherwise associated, with any such person. The
Company and its subsidiaries are in compliance, in all material respects, with
the USA Patriot Act of 2001 (signed into law October 26, 2001).
10
(p) At
any time during the period commencing from the six (6) month anniversary of
the First Closing and ending at such time that all of the Shares and Warrant
Shares can be sold either pursuant to a registration statement, or if a
registration statement is not available for the resale of all of such
securities, may be sold without the requirement for the Company to be in
compliance with Rule 144(c)(1) and otherwise without restriction or
limitation pursuant to Rule 144, if the Company shall fail for any reason
to satisfy the current public information requirement under Rule 144(c) (a
“Public Information Failure”) then, as the sole economic remedy for the damages
to any holder of Securities by reason of any such delay in or reduction of its
ability to sell the Common Stock or Warrant Shares (which remedy shall not be
exclusive of any other remedies available in equity, including, without
limitation, specific performance), the Company shall pay to each such holder an
amount in cash equal to two (2%) percent of the aggregate purchase price of such
holder’s Securities on the day of a Public Information Failure and on every
thirtieth day (pro rated for periods totaling less than thirty days) thereafter
until the earlier of (i) the date such Public Information Failure is cured
and (ii) such time that such public information is no longer required
pursuant to Rule 144. The payments to which a holder shall be entitled
pursuant to this Section 6(p) are referred to herein as “Public Information
Failure Payments” Public Information Failure Payments shall be paid on the
earlier of (I) the last day of the calendar month during which such Public
Information Failure Payments are incurred and (II) the fifth Business Day
after the event or failure giving rise to the Public Information Failure
Payments is cured. In the event the Company fails to make Public Information
Failure Payments in a timely manner, such Public Information Failure Payments
shall bear interest at the rate of 1.5% per month (prorated for partial months)
until paid in full.
7.
Indemnification. The
Purchaser agrees to indemnify and hold harmless the Company, the Selling
Agent(s), and their respective officers, directors, employees, agents, control
persons and affiliates from and against all losses, liabilities, claims,
damages, costs, fees and expenses whatsoever (including, but not limited to, any
and all expenses incurred in investigating, preparing or defending against any
litigation commenced or threatened) based upon or arising out of any actual or
alleged false acknowledgment, representation or warranty, or misrepresentation
or omission to state a material fact, or breach by the Purchaser of any covenant
or agreement made by the Purchaser herein or in any other document delivered in
connection with this Subscription Agreement.
8.
Irrevocability; Binding
Effect. The Purchaser hereby acknowledges and agrees that the
subscription hereunder is irrevocable by the Purchaser, except as required by
applicable law, and that this Subscription Agreement shall survive the death or
disability of the Purchaser and shall be binding upon and inure to the benefit
of the parties and their heirs, executors, administrators, successors, legal
representatives, and permitted assigns. If the Purchaser is more than
one person, the obligations of the Purchaser hereunder shall be joint and
several and the agreements, representations, warranties, and acknowledgments
herein shall be deemed to be made by and be binding upon each such person and
such person's heirs, executors, administrators, successors, legal
representatives, and permitted assigns.
9.
Modification. This
Subscription Agreement shall not be modified or waived except by an instrument
in writing signed by the party against whom any such modification or waiver is
sought.
10.
Assignability. This
Subscription Agreement and the rights, interests and obligations hereunder are
not transferable or assignable by the Purchaser and the transfer or assignment
of the Securities shall be made only in accordance with all applicable
laws.
11.
Notices. Any notice
or other communication required or permitted to be given hereunder shall be in
writing and shall be mailed by certified mail, return receipt requested, or
delivered against receipt to the party to whom it is to be given (a) if to the
Company, at the address set forth above, or (b) if to the Purchaser, at the
address set forth on the signature page hereof (or, in either case, to such
other address as the party shall have furnished in writing in accordance with
the provisions of this Section 11). Any notice or other communication
given by certified mail shall be deemed given at the time of certification
thereof, except for a notice changing a party's address which shall be deemed
given at the time of receipt thereof.
11
12. Applicable
Law. This Subscription Agreement shall be governed by and
construed under the laws of the State of New York as applied to agreements
among New York residents entered into and to be performed entirely within
New York. Each of the parties hereto (1) agree that any
legal suit, action or proceeding arising out of or relating to this Agreement
shall be instituted exclusively in New York State Supreme Court, County of
New York, or in the United States District Court for the Southern District
of New York, (2) waive any objection which the Company may have now or
hereafter to the venue of any such suit, action or proceeding, and
(3) irrevocably consent to the jurisdiction of the New York State
Supreme Court, County of New York, and the United States District Court for
the Southern District of New York in any such suit, action or
proceeding. Each of the parties hereto further agrees to accept and
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in the New York State Supreme Court, County of
New York, or in the United States District Court for the Southern District
of New York and agree that service of process upon it mailed by certified
mail to its address shall be deemed in every respect effective service of
process upon it, in any such suit, action or proceeding. THE PARTIES
HERETO AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS SUBSCRIPTION AGREEMENT OR ANY
DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.
13. Blue Sky
Qualification. The purchase of Securities under this
Subscription Agreement is expressly conditioned upon the exemption from
qualification of the offer and sale of the Securities from applicable federal
and state securities laws. The Company shall not be required to
qualify this transaction under the securities laws of any jurisdiction and,
should qualification be necessary, the Company shall be released from any and
all obligations to maintain its offer, and may rescind any sale contracted, in
the jurisdiction. The Company shall make, at its cost, all necessary filings
with the SEC, including the filing of Form D, and in each state in which
securities are sold in this Offering.
14. Use of
Pronouns. All pronouns and any variations thereof used herein
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the person or persons referred to may require.
15. Confidentiality. The
Purchaser acknowledges and agrees that any information or data the Purchaser has
acquired from or about the Company, not otherwise properly in the public domain,
was received in confidence. The Purchaser agrees not to divulge,
communicate or disclose, except as may be required by law or for the performance
of this Agreement, or use to the detriment of the Company or for the benefit of
any other person or persons, or misuse in any way, any confidential information
of the Company, including any scientific, technical, trade or business secrets
of the Company and any scientific, technical, trade or business materials that
are treated by the Company as confidential or proprietary, including, but not
limited to, ideas, discoveries, inventions, developments and improvements
belonging to the Company and confidential information obtained by or given to
the Company about or belonging to third parties.
16. Miscellaneous.
(a)
The Offering Documents, together with the Transaction Documents,
constitute the entire agreement between the Purchaser and the Company with
respect to the subject matter hereof and supersede all prior oral or written
agreements and understandings, if any, relating to the subject matter
hereof. The terms and provisions of this Subscription Agreement may
be waived, or consent for the departure therefrom granted, only by a written
document executed by the party entitled to the benefits of such terms or
provisions.
12
(b) The
representations and warranties of the Company and the Purchaser made in this
Subscription Agreement shall survive the execution and delivery hereof and
delivery of the Securities.
(c)
Each of the parties hereto shall pay its own fees and expenses (including the
fees of any attorneys, accountants, appraisers or others engaged by such party)
in connection with this Subscription Agreement and the transactions contemplated
hereby whether or not the transactions contemplated hereby are
consummated.
(d) This
Subscription Agreement may be executed in one or more counterparts each of which
shall be deemed an original, but all of which shall together constitute one and
the same instrument. In the event that any signature is
delivered by facsimile transmission or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or “.pdf” signature page were an original
thereof. This Agreement shall become effective when one or more
counterparts has been signed and delivered by each of the parties
hereto.
(e)
Each provision
of this Subscription Agreement shall be considered separable and, if for any
reason any provision or provisions hereof are determined to be invalid or
contrary to applicable law, such invalidity or illegality shall not impair the
operation of or affect the remaining portions of this Subscription
Agreement.
(f)
Paragraph titles are for
descriptive purposes only and shall not control or alter the meaning of this
Subscription Agreement as set forth in the text.
(g) The
Purchaser understands and acknowledges that there may be multiple Closings for
the Offering.
17. Omnibus Signature
Page. This Subscription Agreement is intended to be read and
construed in conjunction with the Warrants pertaining to the issuance by the
Company of the Securities to subscribers pursuant to the Offering
Documents. Accordingly, pursuant to the terms and conditions of this
Subscription Agreement and such related agreements it is hereby agreed that the
execution by the Purchaser of this Subscription Agreement, in the place set
forth herein, shall constitute agreement to be bound by the terms and conditions
hereof and the terms and conditions of such other Offering Documents, including
any Warrants and any registration rights agreement.
13
To
subscribe for Securities in the private offering of
|
1.
|
Date and Fill in the
number of Units of the Securities being purchased and Complete and Sign the
Omnibus Subscription Agreement.
|
|
2.
|
Initial the Accredited
Investor Certification page attached to this
letter.
|
|
3.
|
Complete and return the
Investor Profile and, if applicable, Wire Transfer Authorization attached
to this letter.
|
|
4.
|
Fax all forms to
________________ at (_______________) and
then send all signed original documents with check
to:
|
____________________
____________________
____________________
____________________
|
5.
|
Please
make your subscription payment payable to the order of "Signature Bank, Escrow Agent
for LIGHTYEAR
NETWORK SOLUTIONS, INC."
|
For wiring funds directly to
the escrow account,
see the following
instructions:
|
Name:
|
Signature
Bank
|
||
|
ABA
Number:
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000000000
|
||
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A/C
Name:
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Signature
Bank, as Agent for
|
||
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A/C
Number:
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|||
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FBO:
|
Investor Name
|
||
|
Social Security Number
|
|||
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Address
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Thank you
for your interest,
14
|
The USA PATRIOT Act
|
What is money
laundering?
|
How big is the problem
and why is it important?
|
||
|
The
USA PATRIOT Act is designed to detect, deter, and punish terrorists in the
United States and abroad. The Act imposes new anti-money
laundering requirements on brokerage firms and financial
institutions. Since April 24, 2002 all brokerage firms have
been required to have new, comprehensive anti-money laundering
programs.
|
Money
laundering is the process of disguising illegally obtained money so that
the funds appear to come from legitimate sources or
activities. Money laundering occurs in connection with a wide
variety of crimes, including illegal arms sales, drug trafficking,
robbery, fraud, racketeering, and terrorism.
|
The
use of the U.S. financial system by criminals to facilitate terrorism or
other crimes could well taint our financial markets. According
to the U.S. State Department, one recent estimate puts the amount of
worldwide money laundering activity at $1 trillion a
year.
|
||
|
To
help you understand these efforts, we want to provide you with some
information about money laundering and our steps to implement the USA
PATRIOT Act.
|
|
What
are we required to do to eliminate money laundering?
|
||
|
Under
new rules required by the USA PATRIOT Act, our anti-money laundering
program must designate a special compliance officer, set up employee
training, conduct independent audits, and establish policies and
procedures to detect and report suspicious transaction and ensure
compliance with the new laws.
|
As
part of our required program, we may ask you to provide various
identification documents or other information. Until you
provide the information or documents we need, we may not be able to effect
any transactions for
you.
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|
15
OMNIBUS
SIGNATURE PAGE TO
SUBSCRIPTION
AGREEMENT
Subscriber
hereby elects to subscribe under the Subscription Agreement for a total of
______ Units of the Securities at a price of $4,000 per Unit (NOTE: to be
completed by subscriber).
Date
(NOTE: To be completed by subscriber): __________________, 2010
|
If
the Purchaser is an INDIVIDUAL, and if purchased as JOINT TENANTS, as
TENANTS IN COMMON, or as COMMUNITY
PROPERTY:
|
|
Print
Name(s)
|
Social
Security Number(s)
|
|
|
Signature(s)
of Subscriber(s)
|
Signature
|
|
|
Date
|
|
Address
|
If the
Purchaser is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY or
TRUST:
|
Name
of Partnership,
|
Federal
Taxpayer
|
||
|
Corporation,
Limited
|
Identification
Number
|
||
|
Liability
Company or Trust
|
|||
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By:
|
|
||
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Name:
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State
of Organization
|
||
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Title:
|
|||
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Date
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|
Address
|
|
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By:
|
||
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Authorized
Officer
|
16
ACCREDITED
INVESTOR CERTIFICATION
For
Individual Investors Only
(all
Individual Investors must INITIAL where
appropriate):
|
Initial
_______
|
I
have a net worth (including home, furnishings and automobiles) of at least
$1 million either individually or through aggregating my individual
holdings and those in which I have a joint, community property or other
similar shared ownership interest with my
spouse.
|
|
Initial
_______
|
I
have had an annual gross income for the past two years of at least
$200,000 (or $300,000 jointly with my spouse) and expect my income (or
joint income, as appropriate) to reach the same level in the current
year.
|
|
Initial
_______
|
I
am a director or executive officer of Lightyear Network Solutions,
Inc.
|
For
Non-Individual Investors
(all
Non-Individual Investors must INITIAL where
appropriate):
|
Initial
_______
|
The
investor certifies that it is a partnership, corporation, limited
liability company or business trust that is 100% owned by persons who meet
at least one of the criteria for Individual Investors set forth
above.
|
|
Initial
_______
|
The
investor certifies that it is a partnership, corporation, limited
liability company or business trust that has total assets of at least $5
million and was not formed for the purpose of investing the
Company.
|
|
Initial
_______
|
The
investor certifies that it is an employee benefit plan whose investment
decision is made by a plan fiduciary (as defined in ERISA §3(21)) that is
a bank, savings and loan association, insurance company or registered
investment adviser.
|
|
Initial
_______
|
The
investor certifies that it is an employee benefit plan whose total assets
exceed $5,000,000 as of the date of this
Agreement.
|
|
Initial
_______
|
The
undersigned certifies that it is a self-directed employee benefit plan
whose investment decisions are made solely by persons who meet either of
the criteria for Individual
Investors.
|
|
Initial
_______
|
The
investor certifies that it is a U.S. bank, U.S. savings and loan
association or other similar U.S. institution acting in its individual or
fiduciary capacity.
|
|
Initial
_______
|
The
undersigned certifies that it is a broker-dealer registered pursuant to
§15 of the Securities Exchange Act of
1934.
|
|
Initial
_______
|
The
investor certifies that it is an organization described in §501(c)(3) of
the Internal Revenue Code with total assets exceeding $5,000,000 and not
formed for the specific purpose of investing in the
Company.
|
|
Initial
_______
|
The
investor certifies that it is a trust with total assets of at least
$5,000,000, not formed for the specific purpose of investing in the
Company, and whose purchase is directed by a person with such knowledge
and experience in financial and business matters that he is capable of
evaluating the merits and risks of the prospective
investment.
|
|
Initial
_______
|
The
investor certifies that it is a plan established and maintained by a state
or its political subdivisions, or any agency or instrumentality thereof,
for the benefit of its employees, and which has total assets in excess of
$5,000,000.
|
|
Initial
_______
|
The
investor certifies that it is an insurance company as defined in §2(13) of
the Securities Act, or a registered investment
company.
|
17
LIGHTYEAR
NETWORK SOLUTIONS, INC.
Investor
Profile
(Must be completed by each
Investor)
Personal Investor
Information
Investor
Name(s):
_________________________________________________________________________
Individual
executing Profile or Trustee:
________________________________________________________
Social
Security Numbers / Federal I.D. Number:
_________________________________________________
Date of
Birth: _________________ Marital
Status: _______________________
Joint
Party Date of
Birth: _________________ Investment
Experience (Years): __________
Annual
Income: _________________ Liquid
Net Worth: ____________________
Net
Worth: ________________
Home
Street Address:
______________________________________________________________________
Home
City, State & Zip Code:
_______________________________________________________________
Home
Phone: ________________________ Home Fax: _____________________ Home
Email: _________
Employer:
_______________________________________________________________________________
Employer
Street Address:
___________________________________________________________________
Employer
City, State & Zip Code:
____________________________________________________________
Bus.
Phone: __________________________ Bus. Fax: __________________________ Bus.
Email: _______
Type of
Business:
_________________________________________________________________________
Selling
Agent Account Executive:
________________________________________
Certificate Delivery
Instructions
____
Please deposit Certificate in my brokerage Account #
_____________________________________.
____
Please deliver certificate to the Employer Address listed in Section
A.
____
Please deliver certificate to the Home Address listed in Section A.
____
Please deliver certificate to the following address:
___________________________________________.
Form of Payment – Check or
Wire Transfer
____
Check payable to Signature
Bank, As Agent for Lightyear Network Solutions,
Inc.
____ Wire
funds from my outside account according to the "How to subscribe for Securities"
Page.
____ Wire
funds from my brokerage Account - See Following Page.
|
____
The funds for this investment are rolled over, tax deferred from
__________ within the allowed 60 day
window.
|
Please
check if you are a FINRA member or affiliate of a FINRA member firm:
________
|
Investor
Signature
|
Date
|
18
Memorandum
Wire
Transfer Authorization
|
TO:
|
Operations
Manager
|
|
RE:
|
Client
Wire Transfer Authorization
|
LIGHTYEAR NETWORK SOLUTIONS,
INC.
DATE:________________
|
This
memorandum authorizes the transfer of the following listed funds from my
Brokerage Account as
follows:
|
|
Brokerage
Account #
|
|||
|
Wire
Amount
|
$
|
|
BANK
NAME:
|
SIGNATURE
BANK
|
|
ABA
NUMBER:
|
000000000
|
|
A/C
NAME:
|
SIGNATURE
BANK, AS AGENT FOR
|
|
LIGHTYEAR
NETWORK SOLUTIONS, INC.
|
|
|
A/C
Number:
|
|
REFERENCE:
|
|
SUBSCRIBER
LEGAL NAME
|
|
TAX
ID NUMBER
|
|
SUBSCRIBER
ADDRESS
|
|
FBO:
|
||
|
Investment
Title:
|
||
|
Signature:
|
||
|
Signature:
|
||
|
(Joint
Signature)
|
19