EXCHANGE AGREEMENT
SERIES
C TO COMMON STOCK
THIS EXCHANGE AGREEMENT (this
“Agreement”) is between
SMF Energy Corporation, a Delaware corporation (“Company”), and the undersigned
holder (“Purchaser” and,
together with Company, the “Parties”) of shares of
Company’s $0.01 par value Series C Convertible Preferred Stock (the “Series C Preferred Stock”) and
shall be effective on the date it is accepted by Company as noted on the
signature page hereto (the “Effective Date”).
WHEREAS, Company’s current
revolving line of credit with Wachovia Bank expires on July 1, 2009, and in
order to replace or renew this line of credit and obtain a new term loan,
Company must restructure its current non-bank debt and outstanding Preferred
Stock (the “Recapitalization
Plan”);
WHEREAS, in connection with
the Recapitalization Plan, Company’s Board of Directors has determined that it
is in the best interests of Company to restructure its existing debt and
outstanding preferred stock as follows: (1) exchange the outstanding
shares of Company’s Series A Preferred, Series B Preferred and Series C
Preferred Stock for shares of Company’s $0.01 par value Common Stock (“Common Stock”) or shares of a
new dividend-bearing $0.01 par value Series D Convertible Preferred Stock
(“Series D Preferred”)
and exchange any accrued but unpaid dividends thereon for shares of Common
Stock; (2) exchange the outstanding principal of, and the accrued but unpaid
interest on, Company’s September 2008 12% Unsecured Convertible Promissory Notes
(“Existing Unsecured
Notes”) for shares of Common Stock; and (3) use a portion of the proceeds
of the new term loan to pay down 50% of the principal balance of the August 2007
11½% Senior Secured Convertible Promissory Notes (the “Secured Notes”), exchange the
remaining principal balance for shares of Common Stock, shares of Series D
Preferred or new 5.5% Unsecured Promissory Notes (“New Unsecured Notes”) and
exchange any accrued but unpaid interest on the Secured Notes for shares of
Common Stock.
WHEREAS, Purchaser holds
shares of Company’s Series C Preferred Stock (the “Preferred Shares”) in the
amount set forth on the signature page hereto; and
WHEREAS, Purchaser desires to
exchange the Preferred Shares and all accrued and unpaid dividends thereon for
the number of shares of the Common Stock set forth on the signature page hereto
(the “Common Shares”) at
the time and in the manner described below (the “Transaction”).
NOW, THEREFORE, in
consideration of the foregoing premises and covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Company and Purchaser agree as follows.
1. OFFER. Purchaser,
by signing this Agreement, offers to exchange the Preferred Shares as of the
Effective Date, and all accrued and unpaid dividends thereon, for the Common
Shares at the price forth on the signature page hereto, which exchange shall
constitute a redemption of such Preferred Shares. Upon execution,
Purchaser shall deliver this signed Agreement and the Preferred Shares
(together, the “Purchaser’s
Deliverables”) to Company. On the Effective Date, Company
shall countersign this Agreement, and shall issue the Common Shares to
Purchaser. Company shall return a fully executed copy of this
Agreement and deliver the Common Shares to Purchaser promptly
thereafter. Unless otherwise agreed by the Parties, if Company has
not countersigned this Agreement on or before July 1, 2009, Purchaser may, by
written notice to Company, withdraw the Offer and the Company shall return the
Purchaser’s Deliverables to Purchaser.
2. RECEIPT OF
DOCUMENTS. Purchaser acknowledges receipt of a copy of this
Agreement and, via Company’s website at xxxx://xxx.xxxxxxxxxxxxx.xxx,
access to: (a) Company’s Annual Report on Form 10-K for the year
ended June 30, 2008 (the “10-K”); (b) Company’s
Quarterly Reports on Form 10-Q for the quarters ended September 30, 2008,
December 31, 2008 and March 31, 2009 (the “10-Qs”); (c) Company’s proxy
statement for its November 20, 2008 shareholders meeting (the “Proxy Statement”) and (d)
Company’s subsequent reports on SEC Form 8-K, if any (the “8-Ks”) (collectively with the
Agreement, the “Documents”).
3. PURCHASER’S DELIVERY
OBLIGATIONS. Company may elect to accept the Offer even if it
has not yet received all of the Purchaser’s Deliverables on the Effective Date,
provided, however, Company may in such a case delay the delivery of the Common
Shares issued to Purchaser until all of the Purchaser’s Deliverables have been
received. Any such delay in delivering the Common Shares by Company
shall not affect the validity or binding effect of this Agreement on the
Effective Date.
4. REGISTRATION OF
SHARES. If any of the Common Shares are “restricted
securities” as defined by Rule 144 promulgated under the Securities Act of 1933,
as amended (the “Act”),
then Company agrees to use reasonable commercial efforts to cause a registration
statement on Form S-3 or similar form (“Registration Statement”)
relating to the resale of such Common Shares to be filed with the Securities and
Exchange Commission (“SEC”) in accordance with the
Registration Rights Agreement attached hereto as Attachment A, the
terms of which are incorporated by reference and made a part of this
Agreement. Subject to the terms in Attachment A, Company
further agrees to make all reasonable commercial efforts to cause the
Registration Statement to be filed within one hundred and five (105) days
following the Effective Date and to cause such Registration Statement to become
effective as soon thereafter as practicable.
5. REPRESENTATIONS AND WARRANTIES OF
PURCHASER. Each Purchaser represents and warrants to Company
as follows:
(a) If
Purchaser is a business entity, such Purchaser (i) is duly organized, validly
existing and in good standing (if applicable) under the laws of the jurisdiction
of its organization, (ii) has the requisite power and authority (and is
permitted under its charter, operating agreement or other governing documents)
to enter into this Agreement and to consummate the transactions contemplated
herein to be performed by it and (iii) has duly authorized the execution and
delivery of this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by an
authorized person on behalf of such Purchaser and constitutes such Purchaser’s
legal, valid and binding obligation, enforceable against it in accordance with
its terms, except to the extent that such validity, binding effect and
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors’ rights generally from
time to time in effect and by general equitable principles.
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(b) If
Purchaser is a natural person, such Purchaser (i) has the requisite capacity to
enter into and deliver this Agreement and to perform the transactions
contemplated hereby and (ii) has executed and delivered this Agreement as his or
her voluntary act. This Agreement constitutes such Purchaser’s legal,
valid and binding obligation, enforceable against such Purchaser in accordance
with its terms, except to the extent that such validity, binding effect and
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors’ rights generally from
time to time in effect and by general equitable principles.
(c) Purchaser,
either alone or through Purchaser’s representative, as that term is defined
under Rule 501(h) of Regulation D (“Regulation D”) under the Act
(the “Purchaser’s
Representative”), if any, has had an opportunity to ask questions of, and
receive answers from, duly designated representatives of Company concerning the
terms and conditions of this Agreement and has been afforded an opportunity to
examine such documents and other information which Purchaser or Purchaser’s
Representative, if any, has requested for the purpose of answering any question
Purchaser or Purchaser’s Representative, if any, may have concerning the
business and affairs of Company.
(d) Purchaser’s
principal residence or domicile is located in the State or other jurisdiction
set forth on the signature page hereto. Purchaser has received and
reviewed this Agreement and the Documents and acknowledges that Company made
available to Purchaser and Purchaser’s Representative, if any, at a reasonable
time prior to the execution of this Agreement, the opportunity to ask questions
and receive answers concerning the business and affairs of Company and the terms
and conditions of the sale of the Common Shares as contemplated by this
Agreement and to obtain any additional information (which Company possesses or
can acquire without unreasonable effort or expense) as may be necessary to
verify the accuracy of information furnished to Purchaser or Purchaser’s
Representative, if any. Purchaser (i) is able to bear the loss of its
entire investment without any material adverse effect on its economic stability,
and (ii) has, alone or together with Purchaser’s Representative, such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of the investment to be made by Purchaser
pursuant to this Agreement.
(e) Purchaser
and Purchaser’s Representative, if any, understand that the Common Shares are
being offered and sold only to “accredited investors” (as that term is defined
under Rule 501(a) of Regulation D), and Purchaser represents that Purchaser is
an accredited investor. Purchaser and Purchaser’s Representative, if
any, understand Company is relying on Purchaser with respect to the accuracy of
this representation. Purchaser has completed and returned a copy of
Attachment B,
and Purchaser represents that the statements made therein are complete and
accurate.
(f) Purchaser
and Purchaser’s Representative, if any, acknowledge that they were encouraged by
Company to request all additional information that might be material or
important in order for Purchaser to make an informed investment decision with
respect to the purchase of the Common Shares.
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(g) The
Common Shares are being acquired for investment purposes only for such
Purchaser’s own account and not with the view to, or for resale in connection
with, any distribution or public offering. Purchaser and Purchaser’s
Representative, if any, understand that the Common Shares have not been
registered under the Act or any state securities laws by reason of their
contemplated issuance in transactions exempt from the registration requirements
of the Act and applicable state securities laws, and that the reliance of
Company and others upon these exemptions is predicated in part upon the
representation by Purchaser.
(h) Purchaser
and Purchaser’s Representative, if any, have carefully read this Agreement, the
Documents and the other information furnished to Purchaser by Company in
connection with this Agreement.
(i) Purchaser
was not solicited to purchase the Common Shares by any means of general
solicitation, including, but not limited to, the following: (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio; or
(ii) any meeting where attendees were invited by any general solicitation or
general advertising.
(j) Purchaser
and Purchaser’s Representative, if any, hereby acknowledge that:
(i) the
Common Shares, will be, when issued, “restricted securities,” as that term is
defined in Rule 144 of the rules and regulations promulgated under the Act unless (A) Purchaser is not an
“affiliate”, as defined by Rule 144, of Company on the Effective Date, and (B) Purchaser has not been
an “affiliate” of Company for the ninety (90) days preceding the Effective Date
and (C) Purchaser has
held the Preferred Shares since at least one (1) year before the Effective
Date;
(ii) if
Purchaser is and has been for ninety (90) days a non-affiliate and has held the
Preferred Shares for more than six (6) months but less than one (1) year as of
the Effective Date, then the Common Shares will be issued as “restricted
securities on the Effective Date but can be submitted for “free trading” shares
at any time thereafter so long as Company continues to file all required reports
with the SEC;
(iii) if
the Preferred Shares have been held by Purchaser for less than six (6) months as
of the Effective Date (including the time held by any predecessor
non-affiliate), then the Common Shares will be issued as “restricted securities”
on the Effective Date until Company is successful in causing the Registration
Statement to become effective or the Common Shares otherwise cease to be
“restricted securities” under Rule 144;
(iv) they
are aware of these and other applicable limitations on the resale of the Common
Shares in the absence of a successful registration of restricted securities,
including but not limited to Rule 144;
(v) while
Company currently meets the public information requirements of Rule 144, there
is no guarantee that it will do so at any time in the future;
and
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(vi) the
trading market for the Common Shares on the Nasdaq Stock Market is volatile, so
that the trading volume and price of the Common Shares are subject to
substantial and unpredictable variations.
(k) Purchaser
and Purchaser’s Representative, if any, acknowledge and warrant that, in making
this investment decision, they have made their own independent assessment of the
merits and risks of an investment in the Common Shares based on their
examination and evaluation of Company, its business, operations, financial
condition, future prospects and the skills and qualifications of its officers,
directors and employees. Purchaser and Purchaser’s Representative, if
any, have consulted Purchaser’s own attorney, business or tax advisors for
legal, business or tax advice concerning an investment in the Common Shares and
have not relied on Company or its respective agents or
representatives.
(l) Purchaser
and Purchaser’s Representative, if any, represent and warrant that, except as
set forth in this Agreement and in the Documents, no representations or
warranties have been made to Purchaser or Purchaser’s Representative, if any, by
Company or any agent, employee, representative or affiliate of Company and that,
in entering into this transaction and subscribing for the Common Shares, neither
Purchaser nor Purchaser’s Representative, if any, is relying on any information
other than that contained in this Agreement, the Documents, and other written
information obtained from Company in the course of the independent investigation
by Purchaser or Purchaser’s Representative, if any.
(m) Purchaser
and Purchaser’s Representative, if any, acknowledge that an investment in
Company involves substantial risks, including, without limitation, those
described in the Documents, including but not limited to the Risk Factors listed
in the 10-K and the 10-Qs.
6. REDEMPTION OF THE PREFERRED
SHARES. Purchaser irrevocably consents to the redemption of
the Preferred Shares. Purchaser waives any and all rights to receive
any dividends or other payments in respect of the Preferred Shares.
7. INDEMNIFICATION. Purchaser
agrees that it shall indemnify and hold harmless Company and its officers,
directors, employees, agents and professional advisors from and against any and
all loss, damage, liability, or expense, including costs and reasonable
attorneys’ fees, that any one or more of the foregoing may incur by reason of,
or in connection with, any (i) misrepresentation, inaccurate statement or
material omission or (ii) breach of any warranties or failure to fulfill any
covenants, agreements or obligations, by Purchaser or Purchaser’s
Representative, if any, in this Agreement. Company agrees that it
shall indemnify and hold harmless Purchaser and Purchaser’s officers, directors,
employees, agents and professional advisors from and against any and all loss,
damage, liability, or expense, including costs and reasonable attorneys’ fees,
that any one or more of the foregoing may incur by reason of, or in connection
with, any (i) misrepresentation, inaccurate statement or material omission or
(ii) breach of any warranties or failure to fulfill any covenants, agreements or
obligations, by Company in this Agreement.
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8. AUTHORIZATION. To
the extent reasonably required by Company to satisfy any applicable law or
regulation, including without limitation the PATRIOT Act, Purchaser hereby
authorizes (i) Company and its officers, employees and agents to investigate
Purchaser’s personal and business background including, without limitation,
communication with any employer, former employer, business associate, government
agency, bank or other credit reference, provided that Company agrees to use any
such information only to the extent required to comply with applicable law or
regulation, and otherwise maintains the confidentiality of any such information
not generally available to the public with at least the same care as Company's
own proprietary and confidential information, and causes each of its officers,
employees and agents to do the same, and (ii) authorizes any person,
organization or entity that may have any knowledge or information concerning
Purchaser’s personal or business background to provide such information to
Company as Company may reasonably request in connection with the
foregoing.
9. MISCELLANEOUS.
(a) This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Delaware. The Parties submit to the exclusive
jurisdiction of the courts located in Broward County, Florida, with respect to
any dispute arising under this Agreement and the transactions contemplated
hereby.
(b) This
Agreement contains the entire agreement between Company and Purchaser with
regard to the subject matter hereof and may not be modified or waived except in
a writing signed by both Company and all parties to each such
agreement.
(c) The
headings of this Agreement are for convenience and reference only, and shall not
limit or otherwise affect the interpretation of any term or provision
hereof.
(d) This
Agreement and the rights, powers, and duties set forth herein shall, except as
otherwise expressly provided, be binding upon and inure to the benefit of, the
heirs, executors, administrators, legal representatives, successors, and assigns
of the Parties.
(e) This
Agreement and the rights and obligations hereunder shall not be assignable or
transferable by Purchaser or Company without the prior written consent of the
other Parties, except (i) in the case of Company, by operation of law in
connection with a merger, consolidation or sale of substantially all of its
assets or (ii) in the case of a Purchaser, (1) to any Affiliates (as
defined below) of Purchaser or (2) to partners, members, beneficiaries or
other equity interest holders of Purchaser; provided, that in
each case referred to in (1) and (2) above, the third party transferee
would have been eligible to be an original purchaser of the Common Shares
pursuant to this Agreement and executes a counterpart signature page hereto
becoming a “Purchaser” hereunder, subject to all of the rights and obligations
of this Agreement. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the Parties
and their respective successors and assigns. “Person” means an individual,
corporation, partnership, association, trust or other entity or organization,
including a government or political subdivision or agency or instrumentality
thereof. “Affiliate”
means, with respect to any Person, any other Person who, directly or indirectly,
owns or controls, is under common ownership or control with, or is owned or
controlled by, such Person.
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(f) This
Agreement is for the sole benefit of the Parties and their permitted assigns and
nothing expressed or implied in this Agreement shall give or be construed to
give to any Person, other than the Parties and such assigns, any legal or
equitable rights hereunder.
(g) If
any legal action or any arbitration or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party or parties shall be entitled to
recover reasonable attorneys’ fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it may be
entitled.
(h) This
Agreement shall be construed in accordance with its intent and without regard to
any presumption or any other rule requiring construction against the party
causing the same to be drafted.
(i) If
any provision of this Agreement, or any portion of any provision, shall be
deemed invalid or unenforceable for any reason whatsoever, such invalidity or
unenforceability shall not affect the enforceability and validity of the
remaining provisions.
(j) This
Agreement may be executed in counterparts, each of which shall be deemed to be
an original but which taken together shall constitute
one agreement. Signatures to this Agreement may be transmitted
by facsimile or other electronic means and such transmission shall be deemed to
be an original.
[Signature
page follows.]
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SIGNATURE PAGE FOR ENTITY
INVESTOR
[FOR
INVESTOR THAT IS A CORPORATION, TRUST, CUSTODIANSHIP,
PARTNERSHIP
OR LIMITED LIABILITY COMPANY]
THE
UNDERSIGNED HEREBY SWEARS AND AFFIRMS THAT HE OR SHE IS DULY AUTHORIZED TO
EXECUTE THIS EXCHANGE AGREEMENT ON BEHALF OF THE ENTITY NAMED BELOW AND THAT HE
OR SHE HAS READ THAT AGREEMENT, UNDERSTANDS ITS CONTENTS, AND AFFIRMS THE
ACCURACY OF THE INVESTOR REPRESENTATIONS CONTAINED HEREIN.
Dated and
signed as of the Effective Date.
Number of
Preferred Shares Exchanged: ____________
Number of
Common Shares Issued at $0.38 per Common Share (in exchange for the Preferred
Shares): ___________
Number of
Common Shares Issued at $0.38 per Common Share (in exchange for the accrued and
unpaid dividends): ___________
The
signature(s) should be of the person(s) with the authority to make the
investment decision on behalf of the corporation, trust, custodianship,
partnership or limited liability company.
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Name
of Corporation, Trust, Custodianship, Partnership or Limited Liability
Company
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Signature
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Signature
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Print
Name
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Print
Name
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Title
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Title
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Tax
I.D. No. of Investor
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Telephone
#
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State
in which principal business office is located:
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SMF
ENERGY CORPORATION
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Investor
Mailing Address:
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ACCEPTED
THIS ___ DAY OF _______, 2009.
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By:
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Name: Xxxxxxx
X. Xxxxxxxxx
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Title: Chief
Executive Officer and President
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SIGNATURE PAGE FOR
INDIVIDUAL INVESTOR(S)
THE
UNDERSIGNED HEREBY SWEARS AND AFFIRMS THAT HE OR SHE HAS READ THIS EXCHANGE
AGREEMENT, UNDERSTANDS ITS CONTENTS, AND AFFIRMS THE ACCURACY OF THE INVESTOR
REPRESENTATIONS CONTAINED HEREIN.
Dated and
signed as of the Effective Date.
Number of
Preferred Shares Exchanged: ____________
Number of
Common Shares Issued at $0.38 per Common Share (in exchange for the Preferred
Shares): ___________
Number of
Common Shares Issued at $0.38 per Common Share (in exchange for the accrued and
unpaid dividends): ___________
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Subscriber
Name (Please Print)
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Tax
ID or Social Security
Number
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Address:
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Telephone No.:
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Fax No.:
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If Joint Ownership (Joint
Tenants or Tenants in Common)
| Signature |
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Second
Subscriber Name (Please Print)
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Second
Subscriber Tax ID or Social Security
No.
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Address:
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Telephone No.:
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Fax No.:
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SMF
ENERGY CORPORATION
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ACCEPTED
THIS ___ DAY OF _______, 2009.
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By:
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Name: Xxxxxxx
X. Xxxxxxxxx
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Title: Chief
Executive Officer and President
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Manner in
which Title is to be Held (Check One):
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_______
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Individual
Ownership
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_______
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Company
(include a copy of Partnership Agreement, and any amendments, as
applicable, and a resolution with authorization
signature)
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_______
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Joint
Tenants with Rights of Survivorship (both parties must
sign)
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_______
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Trust
(include name of the trust, name of trustee and date trust was
formed)
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_______
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Tenants
in Common (both parties must sign)
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_______
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Corporation
(include certified corporate resolution with authorization
signature)
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_______
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Community
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_______
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Other
(please specify)
_____________________________
_____________________________
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ATTACHMENT
A
TO
Registration
Rights Agreement
1. Registration
Rights. This Registration Rights Agreement (the “RRA”), is attached to and made
a part of each Exchange Agreement (the “EA”) between SMF Energy
Corporation, a Delaware corporation (the “Company”) and the various
Purchasers listed on Exhibit 1 to this RRA for the purchase of the Common Shares
under the EA. This RRA provides the terms and conditions governing
Company’s obligation under the EA to use reasonable commercial efforts to
register under the Act the Common Shares that are “restricted securities” as
that term is defined by Rule 144 (the “Registrable
Securities”). All capitalized terms used in the RRA that are
not defined herein have the same meaning as in the EA.
(a) Demand
Registration. After the sale of all the Registrable Securities
pursuant to the EA has been effected, the holders of the Registrable Securities
shall be deemed to have requested registration under the Act for all of the
Registrable Securities upon the terms and conditions set forth in this Section 1(a). Promptly
thereafter Company shall notify each registered holder of the Registrable
Securities (a “Holder”)
in writing of such request for registration. Company shall, as soon
as practicable after the date on which such notice is given, use reasonable
commercial efforts to file a Registration Statement with the SEC covering the
Registrable Securities and will use reasonable commercial efforts to cause the
Registration Statement to become effective. No right to registration
of Registrable Securities under this Section 1(a)
shall be construed to limit any registration required under Section 1(b)
hereof. The obligations of Company under this Section 1(a)
shall expire after Company has afforded the Holders the opportunity to exercise
registration rights under this Section 1(a) for
one registration.
(b) Piggy-back
Registration. If at any time commencing on the date of
issuance of the Registrable Securities (the “Issue Date”) and ending on the
date that a registration statement covering the Registrable Securities has been
declared effective by the SEC Commission, Company shall determine to prepare and
file with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the Act of any securities of Company,
other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with employee benefit
plans, Company shall send to the Holders written notice of such determination
and if, within ten (10) days after receipt of such notice, any Holder shall so
request in writing, Company shall include in such Registration Statement all or
any part of the Registrable Securities that such Holder requests to be
registered, except that if, in connection with any underwritten public offering
for the account of Company, the managing underwriter(s) thereof shall impose a
limitation on the number of Registrable Securities which may be included in the
Registration Statement because, in such underwriter(s)’ judgment, such
limitation is necessary to effect an orderly public distribution, then Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Holder has
requested inclusion. Any exclusion of Registrable Securities shall be
made pro rata among all Holders who have requested that Registrable Securities
be included, in proportion to the number of Registrable Securities specified in
their respective requests; provided, however, that Company shall not exclude any
Registrable Securities unless Company has first excluded all outstanding
securities the holders of which are not entitled by right to inclusion of
securities in such Registration Statement; and provided further, however, that,
after giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement, based
on the number of securities for which registration is requested except to the
extent such pro rata exclusion of such other securities is prohibited under any
written agreement entered into by Company with the holder of such other
securities prior to the Issue Date in which case such other securities shall be
excluded, if at all, in accordance with the terms of such
agreement. No right to registration of Registrable Securities under
this Section 1(b)
shall be construed to limit any registration required under Section 1(a)
hereof. Holders of at least sixty-six and two-thirds percent (66
2/3%) of the Registrable Securities may waive the obligations of Company under
this Section 1(b).
(c) Obligations of
Company. In connection with the registration of the
Registrable Securities, Company shall:
(i) prepare
promptly and file with the SEC the Registration Statement provided in Section 1(a)
with respect to the Registrable Securities and thereafter to use reasonable
commercial efforts to cause such Registration Statement relating to the
Registrable Securities to become effective as soon as possible after such
filing, and keep the Registration Statement effective at all times until two (2)
years from the effective date of the Registration Statement (the “Registration Period”); submit
to the SEC, within three (3) Business Days after Company learns that no review
of the Registration Statement will be made by the staff of the SEC or the staff
of the SEC has no further comments on the Registration Statement, as the case
may be, a request for acceleration of the effectiveness of the Registration
Statement to a time and date not later than forty-eight (48) hours after the
submission of such request; notify the Holders of the effectiveness of the
Registration Statement on the date the Registration Statement is declared
effective; and, Company represents and warrants to, and covenants and agrees
with the Holders that the Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein, at the time it is first
filed with the SEC, at the time it is ordered effective by the SEC and at all
times during which it is required to be effective hereunder) and each such
amendment and supplement at the time it is filed with the SEC and all times
during which it is available for use in connection with the offer and sale of
Registrable Securities shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading;
(ii) prepare
and file with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to keep the Registration
Statement effective at all times during the Registration Period, and during the
Registration Period, comply with the provisions of the Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the Holders as set forth
in the Registration Statement;
(iii) furnish,
upon request, to the Holders (A) promptly after the same is prepared and
publicly distributed, filed with the SEC or received by Company, one copy of the
Registration Statement and any amendment thereto, each preliminary prospectus
and prospectus and each amendment or supplement thereto, each letter written by
or on behalf of Company to the SEC or the staff of the SEC and each item of
correspondence from the SEC or the staff of the SEC relating to such
Registration Statement (other than any portion of any thereof which contains
information for which Company has sought confidential treatment) and
(B) such number of copies of a prospectus, including a preliminary
prospectus and all amendments and supplements thereto and such other documents,
as any Holder reasonably may request in order to facilitate the disposition of
the Registrable Securities;
(iv) use
reasonable commercial efforts to register and qualify the Registrable Securities
covered by the Registration Statement under such securities or blue sky laws of
such jurisdictions as the Holders of at least sixty-six and two-thirds percent
(662/3%) of the
Registrable Securities being offered reasonably request and use reasonable
efforts to (A) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times until the end of the Registration Period, (B) take such other actions
as may be necessary to maintain such registrations and qualifications in effect
at all times during the Registration Period and (C) take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for sale
in such jurisdictions; provided, however, that Company shall not be required in
connection therewith or as a condition thereto (A) to qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 1(c)(iv),
(B) to subject itself to general taxation in any such jurisdiction,
(C) to file a general consent to service of process in any such
jurisdiction or (D) to make any change in its Articles of Incorporation or
Bylaws which the Board of Directors of Company determines to be contrary to the
best interests of Company and its stockholders;
(v) as
promptly as practicable after becoming aware of such event or circumstance,
notify the Holders of any event or circumstance of which Company has knowledge,
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a 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, and use its reasonable commercial efforts promptly to prepare a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission, file such supplement or amendment with the SEC at such
time as shall permit the Holders to sell Registrable Securities pursuant to the
Registration Statement as promptly as practicable, and deliver a number of
copies of such supplement or amendment to any Holder as such Holder may
reasonably request;
(vi) as
promptly as practicable after becoming aware of such event, notify the Holders
(or, in the event of an underwritten offering the managing underwriters) of the
issuance by the SEC of any stop order or other suspension of effectiveness of
the Registration Statement at the earliest possible time;
(vii) permit
one legal counsel designated by the Holders of at least sixty-six and two-thirds
percent (662/3%) of the
Registrable Securities being sold to review and comment on the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing with the SEC and to pay the reasonable fees and costs
incurred by such counsel;
(viii) make
generally available to its security holders as soon as practical, but not later
than one hundred and five (105) days after the close of the period covered
thereby, an earnings statement (in form complying with the provisions of Rule
158 under the Securities Act) covering a twelve (12) month period beginning not
later than the first day of Company’s fiscal quarter next following the
effective date of the Registration Statement;
(ix) during
the period Company is required to maintain effectiveness of the Registration
Statement pursuant to Section 1(c)(i),
Company shall not bid for or purchase any Common Stock or other securities or
any right to purchase Common Stock or other securities or attempt to induce any
person to purchase any such security or right if such bid, purchase or attempt
would in any way limit the right of the Holders to sell Registrable Securities
by reason of the limitations set forth in Regulation M under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”);
and
(x) take
all other reasonable actions necessary to expedite and facilitate disposition by
the Holders of the Registrable Securities pursuant to the Registration
Statement.
(d) Obligations of the
Holders. In connection with the registration of the
Registrable Securities, the Holders shall have the following
obligations:
(i) it
shall be a condition precedent to the obligations of Company to complete the
registration pursuant hereto with respect to any Holder’s Registrable Securities
that the Holder shall furnish to Company such information regarding Holder, the
Registrable Securities held by Holder and the intended method of disposition of
the Registrable Securities held by Holder as shall be reasonably required to
effect the registration of such Registrable Securities and shall execute such
documents in connection with such registration as Company may reasonably
request. At least ten (10) days prior to the first anticipated filing
date of the Registration Statement, Company shall notify the Holders of the
information Company requires from each Holder (the “Requested Information”) if any
of such Holder’s Registrable Securities are eligible for inclusion in the
Registration Statement. If at least two (2) Business Days prior to
the filing date Company has not received the Requested Information from any such
Holder (at such time Holder becoming a “Non-Responsive Holder”), then
Company may file the Registration Statement without including the Non-Responsive
Holder’s Registrable Securities but shall not be relieved of its obligation to
file a Registration Statement with the SEC relating to the Registrable
Securities of Non–Responsive Holder promptly after Non-Responsive Holder
provides the Requested Information;
(ii) by
purchasing or accepting an assignment of the Registrable Securities, each Holder
agrees to cooperate with Company as reasonably requested by Company in
connection with the preparation and filing of the Registration Statement for the
Registrable Securities, unless such Holder has notified Company in writing of
such Holder’s election to exclude all of Holder’s Registrable Securities from
the Registration Statement;
(iii) in
the event Holders of at least sixty-six and two-thirds percent (662/3%) of the
Registrable Securities being registered determine to engage the services of an
underwriter, each Holder agrees to enter into and perform such Holder’s
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of Registrable Securities, unless such Holder has notified Company
in writing of the Holder’s election to exclude all of Holder’s Registrable
Securities from the Registration Statement;
(iv) each
Holder agrees that, upon receipt of any notice from Company of the happening of
any event of the kind described in Section 1(c)(v),
Holder will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until Holder’s receipt of the copies of the supplemented or amended prospectus
contemplated by Section 1(c)(v) and,
if so directed by Company, Holder shall deliver to Company (at the expense of
Company) or destroy (and deliver to Company a certificate of destruction) all
copies in such Holder’s possession of the prospectus covering such Registrable
Securities current at the time of receipt of such notice;
(v) Holders
may not participate in any underwritten registration hereunder unless the Holder
(A) agrees to sell Holder’s Registrable Securities on the basis provided in
any underwriting arrangements approved by the Holders entitled hereunder to
approve such arrangements, (B) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements and
(C) agrees to pay its pro rata share of all underwriting discounts and
commissions and other fees and expenses of investment bankers and any manager or
managers of such underwriting and legal expenses to the underwriters applicable
with respect to its Registrable Securities, in each case to the extent not
payable by Company pursuant to the terms of this Agreement; and
(vi) each
Holder agrees to take all reasonable actions necessary to comply with the
prospectus delivery requirements of the Act applicable to its sales of
Registrable Securities.
Attachment
A to Exchange Agreement
Page 5 of
10
(e) Expenses of
Registration. All costs and expenses, other than underwriting
or brokerage discounts, commissions and other fees related to the distribution
of the Registrable Securities, incurred in connection with registrations,
filings or qualifications for sale of the Registrable Securities, including,
without limitation, all registration, listing and qualifications fees, printers
and accounting fees and the fees and disbursement of counsel for Company shall
be borne by Company, provided, however, that Company shall bear the fees and
out-of-pocket expenses of the one legal counsel selected by the Holders pursuant
to Section 1(c)(vii)
hereof.
(f) Indemnification. In
the event any Registrable Securities are included in a Registration Statement
under this Agreement:
(i) To
the extent permitted by law, Company will indemnify and hold harmless the
Holders, the directors, if any, of Holders, the officers, if any, of Holders,
each person, if any, who controls Holders within the meaning of the Act or the
Exchange Act, any underwriter (as defined in the Act) for Holders, the
directors, if any, of such underwriter and the officers, if any, of such
underwriter, and each person, if any, who controls any such underwriter within
the meaning of the Act or the Exchange Act (each, an “Indemnified Person”), against
any losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, “Claims”)
to which any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such Claims (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement or
any post-effective amendment thereof, or any prospectus included therein:
(A) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any post–effective amendment thereof
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
(B) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the effective date of
such Registration Statement, or contained in the final prospectus (as amended or
supplemented, if Company files any amendment thereof or supplement thereto with
the SEC) or the omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the circumstances
under which the statements therein were made, not misleading or (C) any
violation or alleged violation by Company of the Act, the Exchange Act, any
state securities law or any rule or regulation under the Act, the Exchange Act
or any state securities law (the matters in the foregoing clauses (A) through
(C) being, collectively, “Violations.”) Subject
to the restrictions set forth in Section 1(f)(v)
with respect to the number of legal counsel, Company shall reimburse Holders and
the other Indemnified Persons, promptly as such expenses are incurred and are
due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 1(f)(i): (A) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to Company
by any Indemnified Person or underwriter for such Indemnified Person expressly
for use in connection with the preparation of the Registration Statement, the
prospectus or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by Company pursuant to Section 1(c)(iii)
hereof; (B) with respect to any preliminary prospectus shall not inure to
the benefit of any Indemnified Person if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected in the
prospectus, as then amended or supplemented, if such prospectus was timely made
available by Company pursuant to Section 1(c)(iii)
hereof, and (C) shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of Company,
which consent shall not be unreasonably withheld. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by Holders.
Attachment
A to Exchange Agreement
Page 6 of
10
(ii) In
connection with any Registration Statement in which a Holder is participating,
each Holder agrees to indemnify and hold harmless, to the same extent and in the
same manner set forth in Section 1(f)(i),
Company, each of its directors, each of its officers who signs the Registration
Statement, each person on, if any, who controls Company within the meaning of
the Act or the Exchange Act, any underwriter and any other stockholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any person who controls such stockholder or underwriter within the
meaning of the Act or the Exchange Act (collectively and together with an
Indemnified Person, an “Indemnified Party”), against
any Claim to which any of them may become subject, under the Act, the Exchange
Act or otherwise, insofar as such Claim arises out of or is based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished to Company by such Holder expressly for use in connection with such
Registration Statement, and such Holder will reimburse any legal or other
expenses reasonably incurred by any Indemnified Party, promptly as such expenses
are incurred and are due and payable, in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 1(f)(ii)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Holder, which consent shall
not be unreasonably withheld; provided further, however, that the Holder shall
be liable under this Section 1(f)(ii)
for only that amount of a Claim as does not exceed the amount by which the net
proceeds to the Holder from the sale of Registrable Securities pursuant to such
Registration Statement exceeds the cost of such Registrable Securities to the
Holder. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the
Holder. Notwithstanding anything to the contrary contained herein,
the indemnification agreement contained in this Section 1(f)(ii)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
Attachment
A to Exchange Agreement
Page 7 of
10
(iii) If
the indemnification provided to any Indemnified Party by Section 1(f)(i) is
for any reason (other than the bad faith, willful misconduct or gross negligence
of such Indemnified Party) not available or insufficient to hold an Indemnified
Party harmless, Company will contribute to the Losses involved in such
proportion as is appropriate to reflect the relative benefits received (or
anticipated to be received) by Company, on the one hand, and by the Indemnified
Party, on the other hand, with respect to the transaction or, if such allocation
is determined by a court or arbitral tribunal to be unavailable, in such
proportion as is appropriate to reflect other equitable considerations such as
the relative fault of Company on the one hand and of the Indemnified Party on
the other hand; provided, however, that, to the extent permitted by applicable
law, the Indemnified Parties shall not be responsible for amounts which in the
aggregate are in excess of the amount of all benefits actually received by the
Indemnified Party from the ownership and sale of the Registrable
Securities.
(iv) Company
shall be entitled to receive indemnities from underwriters, selling brokers,
dealer managers and similar securities industry professionals participating in
any distribution, to the same extent as provided above, with respect to
information so furnished in writing by such persons expressly for inclusion in
the Registration Statement.
(v) Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 1(f) of
notice of the commencement of any action (including any governmental action),
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 1(f),
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
selected by the indemnifying party but reasonably acceptable to the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. In such
event, Company shall pay for only one separate legal counsel for the Holders;
such legal counsel shall be selected by the Holders of at least sixty-six and
two-thirds percent (662/3%) of the
Registrable Securities included in the Registration Statement to which the Claim
relates. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 1(f), except
to the extent that the indemnifying party is prejudiced in its ability to defend
such action. The indemnification required by Section 1(f) shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
2. The
agreements, representations and warranties of Company and the Holders set forth
or provided in Section
1 shall survive the execution and delivery of the EA and payment for the
Registrable Securities under the EA and shall remain in full force and effect,
regardless of any investigation made by or on behalf of Company and the
Holder.
Attachment
A to Exchange Agreement
Page 8 of
10
3. In
the EA, Company agrees to make all reasonable commercial efforts to cause the
Registration Statement to be filed within one hundred and five (105) days
following the Effective Date and to cause such Registration Statement to become
effective as soon thereafter as practicable. Such obligation is
subject to the receipt of a demand for such registration from the requisite
number of Holders or from the Placement Agent as their agent
hereunder. The Holders further agree that, so long as Company
proceeds in good faith, it shall not be liable for any financial penalty or
monetary damages resulting from its failure to cause such filing or
effectiveness to occur by the times specified.
4. This
Attachment A is
incorporated by reference into the EA and its terms made a part
thereof.
Attachment
A to Exchange Agreement
Page 9 of
10
Exhibit
1 to Registration Rights Agreement
LIST
OF PURCHASERS
Attachment A
to Exchange Agreement
Page 10
of 10
ATTACHMENT
B
Accredited
Investor and FINRA Affiliation
Representations
As
provided by Rule 501(a) of Regulation D, my representation that I am or
represent an accredited investor is based upon one of the following grounds that
I am or represent (please check one):
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¨
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A
private business development Company as defined in Section 202(a)(22) of
the Investment Advisors Act of
1940;
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¨
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An
organization described in Section 501(c)(3) of the Internal Revenue Code,
corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the securities offered, with
total assets in excess of Five Million Dollars
($5,000,000);
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¨
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A
director or executive officer of
Company;
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¨
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A
natural person whose individual net worth, or joint net worth with that
person’s spouse, exceeds One Million Dollars
($1,000,000);
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¨
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A
natural person who has an individual income in excess of Two Hundred
Thousand Dollars ($200,000) in each of the two (2) most recent years and
has a reasonable expectation of reaching the same income level in the
current year;
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¨
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A
natural person who has a joint income with that person’s spouse in excess
of Three Hundred Thousand Dollars ($300,000) in each of the two (2) most
recent years and has a reasonable expectation of reaching the same income
level in the current year;
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¨
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A
trust, with total assets in excess of Five Million Dollars ($5,000,000),
not formed for the specific purpose of acquiring the securities offered,
whose purchase is directed by a sophisticated person as defined by Rule
506(b)(2)(ii) of the Act; or
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¨
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An
entity in which all of the equity owners are accredited
investors.
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AFFILIATION
WITH A U. S. REGISTERED BROKER-DEALER:
Are you
associated with a FINRA member firm? (Please check one)
YES
_______ NO
_______
Attachment
B to Exchange Agreement
Page 1 of
2
(1) FINRA defines a “person
associated with a member” or “associated person of a member” as being every sole
proprietor, general or limited partner, officer, director or branch manager of
any member, or any natural person occupying a similar status or performing
similar functions, or any natural person engaged in the investment banking or
securities business who is directly or indirectly controlling or controlled by
such member (for example, any employee), whether or not any such person is
registered or exempt from registration with FINRA. Thus, “person
associated with a member” or “associated person of a member” includes a sole
proprietor, general or limited partner, officer, director or branch manager of
an organization of any kind (whether a corporation, partnership or other
business entity) which itself is either a “member” or a “person associated with
a member” or “associated person of a member.” In addition, an organization of
any kind is a “person associated with a member” or “associated person of a
member” if its sole proprietor or any one of its general or limited partners,
officers, directors or branch managers is a “member,” “person associated with a
member” or “associated person of a member.”
(2) FINRA defines a “member”
as being any individual, partnership, corporation or other legal entity that is
a broker or dealer admitted to membership in FINRA.
IF
PURCHASER IS ASSOCIATED WITH A FINRA MEMBER FIRM, THE FOLLOWING ACKNOWLEDGMENT,
OR A SUBSTANTIALLY IDENTICAL ACKNOWLEDGMENT, MUST BE SIGNED AND SUBMITTED BEFORE
PURCHASER’S OFFER TO PURCHASE UNITS WILL BE ACCEPTED BY COMPANY:
The
undersigned FINRA member firm acknowledges receipt of the notice required by
Rule 3050 of the FINRA Rules or any successor rules or regulations.
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NAME
OF FINRA
MEMBER FIRM:
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By:
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Name:
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Title:
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Date:
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I hereby
declare that the foregoing representations concerning my qualifications as an
accredited investor and my affiliations, if any, with any FINRA member firm, are
accurate and complete.
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INDIVIDUAL:
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ENTITY:
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Print Name:
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By:
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Date:
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Name:
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Title:
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Date:
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Attachment
B to Exchange Agreement
Page 2 of
2
