SUBSCRIPTION AGREEMENT
Exhibit 10.2
A completed and originally executed copy of this Subscription Agreement, including all
applicable schedules hereto, must be delivered by no later than 12:00 p.m. (Eastern Standard time)
on December 14, 2007, unless extended by the Company, to Neutron Enterprises, Inc., at 0000 Xx
Xxxxxxxxxxx X., Xxxxx #0000, Xxxxxxxx, Xxxxxx, X0X 0X0, Attention: Xx. Xxxxxxxx Xxxxx, Chief
Financial Officer (Fax: (000) 000-0000; e-mail address: xxxxxx@xxxxxxxxxxxx.xxx).
TO: NEUTRON ENTERPRISES, INC. (the “Company”)
The undersigned (the “Purchaser”), on its own behalf, and, if it is not purchasing as principal, on
behalf of those for whom the undersigned is contracting hereunder as trustee or agent (each a
"Beneficial Purchaser”), hereby irrevocably subscribes for and agrees to purchase the number of
Units (each a “Unit”) of the Company set out below to be issued at a price of U.S.$0.25 (the
"Purchase Price”) per Unit, for the aggregate consideration set out below, subject to the following
terms and conditions. Each Unit consists of one share of Common Stock of the Company and a warrant
(a “Warrant”) in the form attached as Exhibit A hereto. Each Warrant allows the holder thereof to
purchase one share of Common Stock at a price of U.S.$0.35 per share. This agreement, which for
greater certainty includes and incorporates the attached Annexes, Exhibits and Schedules, as each
may be amended, supplemented, replaced and/or restated from time to time, are collectively referred
to herein as the “Subscription Agreement” or the “Agreement”. The Purchaser on its own behalf, and
if not purchasing as principal, on behalf of those on whose behalf it is contracting hereunder as
trustee or agent, agrees to be bound by the terms and conditions set forth in the attached “Terms
and Conditions of Subscription” including without limitation the representations, warranties,
acknowledgements and covenants set forth in the Annexes, Exhibits and Schedules attached thereto.
The Purchaser further agrees on its own behalf, and if not purchasing as principal, on behalf of
those on whose behalf it is contracting hereunder as trustee or agent, without limitation, that the
Company may rely on the Purchaser’s representations, warranties, acknowledgements and covenants
contained in such documents.
Issue: Units
Price Per Unit: U.S.$0.25
Number of Units Purchased:
Total Subscription Price (number of Units purchased x U.S.$0.25): U.S.$
Number of shares of Common Stock of the Company currently owned or over which control and direction
is exercised (directly and indirectly):
DATED this
_____
day of
_____
, 200
_____
..
| Name and Address of Purchaser: | ||||
| (Name of Purchaser — please print) | (Purchaser’s Address) | |||
by: |
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| Authorized Signature | ||||
| (Telephone Number) | ||||
| (Official Capacity or Title — please print) | (Facsimile Number) | |||
| (Please print name of individual whose signature appears above if different from the name of the Purchaser printed above.) | (E-mail Address) | |||
| Details of the Beneficial Purchaser (if any, for whom the undersigned is contracting (the “Beneficial Owner”)): | ||||
| (Name — please print) | (Beneficial Purchaser’s Address) | |||
| (if space is inadequate please attach a schedule containing the necessary information) | ||||
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| Registration Instructions (registration of the certificates representing the shares of Common Stock should be made as follows): | Delivery Instructions (the certificates representing the shares of Common Stock are to be delivered as follows (if different from the address of the Purchaser set forth above)): | |||
| Name | ||||
| Account reference, if applicable | Account reference, if applicable | |||
| Address | Contact Name | |||
| Address | ||||
| Telephone Number | Telephone Number | |||
| Facsimile Number | Facsimile Number | |||
| E-mail Address | E-mail Address | |||
ACCEPTANCE
The foregoing is acknowledged, accepted and agreed to this day of , 200 .
NEUTRON ENTERPRISES, INC.
| Per: | Authorized Signing Officer |
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TERMS AND CONDITIONS OF SUBSCRIPTION
This Subscription Agreement is dated as of the date appearing on the first page hereof
between Neutron Enterprises, Inc. a Nevada corporation (the “Company”), and the Purchaser
identified on the first page hereof and on the signature page hereto;
WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act (as defined below) and/or Regulation D promulgated
thereunder and pursuant to the Securities Laws (as defined below), the Company desires to
issue and sell in a private placement transaction up to 16,000,000 Units, subject to
increase by the Company;
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and
for other good and valuable consideration the receipt and adequacy of which are hereby
acknowledged, the Company and the Purchaser agree as follows:
ARTICLE I.
DEFINITIONS; THE OFFERING
DEFINITIONS; THE OFFERING
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all
purposes of this Agreement, the following terms have the meanings indicated in this Section
1.1:
“Action” shall have the meaning ascribed to such term in Section 3.1(i).
“Affiliate” means any Person that, directly or indirectly, through one or
more intermediaries, controls or is controlled by or is under common control with a
Person as such terms are used in and construed under Rule 144. With respect to a
Purchaser, any investment fund or managed account that is managed on a discretionary
basis by the same investment manager as such Purchaser will be deemed to be an
Affiliate of such Purchaser.
“Business Day” means any day except Saturday, Sunday and any day which shall
be a federal legal holiday or a day on which banking institutions in the State of New
York are authorized or required by law or other governmental action to close.
“Closing” means the closing of the purchase and sale of the Common Stock
and the Warrants pursuant to Section 2.1, on the date this Agreement is accepted by
the Company, which shall be no later than December 14, 2007; provided that the
Company may extend the Closing for an additional 120 days
in its sole discretion. At the Company’s election, the Company may have multiple
Closings, each of which shall be a Closing hereunder.
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“Closing Date” means the date of the Closing.
“Commission” means the Securities and Exchange Commission of the United
States.
“Common Stock” means the common stock of the Company, $0.001 par value per
share, and any securities into which such common stock may hereafter be reclassified.
“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time Common
Stock, including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or exchangeable
for, or otherwise entitles the holder thereof to receive, Common Stock.
“Disclosure Schedules” means the Disclosure Schedules attached as
Annex I hereto.
“Exchange Act” means the Securities Exchange Act of 1934 of the United
States, as amended.
“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal or other restriction.
“Material Adverse Effect” shall have the meaning ascribed to such term in
Section 3.1(a).
“Person” means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability company,
joint stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
“Per Unit Purchase Price” means U.S.$0.25.
“Purchaser” means the purchaser indicated on the first page of this
Subscription Agreement.
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“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same effect
as such Rule.
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(g).
“Securities” means the Shares, the Warrants and the Shares issuable upon
exercise of the Warrant.
“Securities Act” means the Securities Act of 1933 of the United States, as
amended.
“Shares” means the shares of Common Stock issued or issuable to each
Purchaser pursuant to this Agreement, including the Shares issuable upon exercise of
the Warrants.
“Subscription Amount” means the amounts set forth below the Purchaser’s
signature block on the signature page hereto, in United States dollars and in
immediately available funds.
“Subsidiary” means a body corporate that:
| (a) | is controlled by: |
| (i) | the Company; |
||
| (ii) | the Company and one or more bodies
corporate, each of which is controlled by the Company; or |
||
| (iii) | two or more bodies corporate, each
of which is controlled by the Company; or |
| (b) | is a Subsidiary of a body corporate that is a
Subsidiary of the Company. |
“Trading Day” means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a day
on which the Common Stock is traded on the over-the-counter market, as reported by
the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting prices); provided,
that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall
mean a Business Day.
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“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the OTC Bulletin
Board, the American Stock Exchange, the New York Stock Exchange, the Nasdaq National
Market or the Nasdaq SmallCap Market.
“Transaction Documents” means this Agreement and any Annex, Exhibit or
Schedule thereto, the Warrants and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
“United States” means the United States of America.
“United States Securities Laws” means, collectively, the applicable
securities laws of the United States and the regulations and rules made and forms
prescribed thereunder, together with all applicable and legally enforceable published
policy statements, blanket orders, rulings and notices of the Commission.
1.2 The Offering, The Company is offering (the “Offering”) up to 16,000,000
Units, for an aggregate purchase price of $4,000,000 (the “Maximum Amount”) unless increased
by the Company in its sole discretion. The Units will be sold on a reasonable “best
efforts” basis pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and/or Rule 506 of Regulation D thereunder. The Units are being offered
solely to a limited number of “accredited investors” as that term is defined in Rule 501(a)
of the Securities Act during an offering period (the “Offering Period”) commencing November
19, 2007 and terminating December 14, 2007 unless extended by the Company in its sole
discretion for up to an additional 120-day period (the “Termination Date”). The Offering
may be terminated by the Company at any time in its sole discretion. Unless waived by the
Company, subscriptions for less than $25,000 will not be accepted. Assuming the Company
sells the Maximum Amount, the net proceeds to the Company are estimated to be approximately
$3,900,000, after deducting commissions and offering expenses payable by the Company
estimated at $100,000. The Company intends to use the proceeds for general working capital
and other corporate purposes which may include the acquisition of additional assets or
businesses. The Company is not required to raise any minimum amount of proceeds prior to
executing this Agreement or other Agreements with other Purchasers. Because there is no
minimum amount of subscriptions which the Company must receive before accepting funds in the
Offering, Purchaser will not be assured that the Company will have sufficient funds to
operate its business and will bear the risk that the Company will be unable to secure the
funds necessary to meet its current and anticipated financial obligations.
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ARTICLE II.
PURCHASE AND SALE
PURCHASE AND SALE
2.1 Closing. At the Closing, the Purchaser shall purchase, and the Company
shall issue and sell, in the aggregate, a number of Units up to 16,000,000 Units. The
Purchaser shall purchase from the Company, and the Company shall issue and sell to
Purchaser, a number of Units equal to such Purchaser’s Subscription Amount divided by the
Per Unit Purchase Price as set forth on the first page of this Agreement. All funds
tendered by Purchaser will be held by the Company pending acceptance or rejection of this
Agreement by the Company and the Closing of the Purchaser’s purchase of the Units. This
Agreement will either be accepted by the Company, in whole or in part, or rejected by the
Company in its sole discretion as promptly as practicable. If this Agreement is accepted
only in part, Purchaser agrees to purchase such smaller number of Units as the Company
determines to sell to Purchaser. If this Agreement is rejected for any reason, including
the termination of the Offering by the Company, this Agreement and all funds tendered
herewith will be promptly returned to Purchaser, without interest or deduction of any kind,
and this Agreement will be void and of no further force or effect.
2.2 Closing Conditions.
The Closing is conditional upon the following :
(a) At the Closing, the Company shall deliver or cause to be delivered to
the Purchaser this Agreement, duly executed by the Company.
(b) Upon execution of this Agreement, Purchaser shall deliver or cause to be
delivered to the Company the following:
(1) this Agreement, duly executed by the Purchaser; and
(2) the Purchaser’s Subscription Amount by wire transfer to the account
of the Company as provided to the Purchaser in writing prior to the
Closing Date.
(c) All representations and warranties of each of the parties herein shall
remain true and correct as of the Closing Date.
(d) As of the Closing Date, there shall have been no Material Adverse Effect
with respect to the Company since the date hereof.
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(e) From the date hereof to the Closing Date, trading in the Common Stock
shall not have been suspended by the Commission (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any time prior
to the Closing Date, trading in securities generally as reported by the
Trading Market shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported by the
Trading Market, nor shall a banking moratorium have been declared either by
the United States or New York State authorities.
2.3 Delivery and Payment. Upon execution of this Agreement, the Purchaser shall
(on its own behalf and, if applicable, on behalf of each Beneficial Purchaser) deliver to
the Company at the address set out on the first page of this Subscription Agreement, or at
such other time, date or place as the Company may advise:
(a) a completed and duly signed copy of this Subscription Agreement;
(b) any other documents required by the Securities Laws or as the Company may
request.
The Purchaser for and on behalf of itself and each Beneficial Purchaser, if any,
acknowledges and agrees that the documents referred to in this Section 2.3, when executed
and delivered by the Purchaser, will form part of and will be incorporated into this
Subscription Agreement and each shall constitute a representation, warranty or covenant of
the Purchaser and each Beneficial Purchaser, if any, hereunder in favour of the Company. The
Purchaser for and on behalf of itself and each Beneficial Purchaser, if any, consents to the
filing of such documents as may be required to be filed with the Trading Market or the
Securities Commissions in connection with the transactions contemplated hereby. The
Purchaser for and on behalf of itself and each Beneficial Purchaser, if any, acknowledges
and agrees that the irrevocable offer contained in this Subscription Agreement, the Purchase
Price and any other documents delivered in connection herewith will be held by the Company
until such time as the Closing Conditions set out hereinabove are satisfied or have been
duly waived.
2.4 Deliveries by the Company. Within ten Trading Days of the Closing Date, the
Company shall deliver or cause to be delivered to the Purchaser certificates evidencing a
number of Shares equal to the Purchaser’s Subscription Amount divided by the Per Unit
Purchase Price, and certificates evidencing a number of Warrants equal to such Purchaser’s
Subscription Amount divided by the Per Unit Purchase Price, in each case registered in the
name of the Purchaser.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth under the
corresponding section of the Disclosure Schedules delivered concurrently herewith, the
Company hereby makes the following representations and warranties as of the date hereof and
as of the Closing Date to the Purchaser:
(a) Organization and Qualification. The Company is an entity duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as currently
conducted. The Company is not in violation of any of the provisions of its articles
of incorporation or bylaws. The Company is duly qualified to conduct business and is
in good standing as a foreign corporation in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may be,
would not have or reasonably be expected to result in (i) a material adverse effect
on the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business or financial
condition of the Company, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material Adverse Effect”).
(b) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations thereunder.
The execution and delivery of each of the Transaction Documents by the Company and
the consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no further action
is required by the Company in connection therewith. Each Transaction Document has
been (or upon delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of creditors’
rights generally; (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies; and (iii) as limited by
public policy.
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(c) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated thereby do not and will not (i) conflict with or violate any provision
of the Company’s articles of incorporation or bylaws; (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both would
become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of, any
material agreement, credit facility, debt or other instrument (evidencing a Company
debt or otherwise) to which the Company is a party or by which any material property
or asset of the Company is bound or affected; or (iii) result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company is subject (including
federal and state securities laws and regulations), or by which any material property
or asset of the Company is bound or affected; except in the case of each of clauses
(ii) and (iii), such as would not have or reasonably be expected to result in a
Material Adverse Effect.
(d) Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution, delivery and
performance by the Company of the Transaction Documents, other than (a) the filing by
the Company with the Securities Commissions of a report on Form 45-106F1 prepared and
executed in accordance with NI 45-106, which is required to be made by the Company
within 10 days after the date of the issuance of any Securities to a Canadian
Purchaser together with the requisite filing fees; (b) such as have already been
obtained or such exemptive filings as are required to be made under applicable
securities laws; and (c) such other filings as may be required following the Closing
Date under the Securities Act, the Exchange Act, the Securities Laws or corporate
law.
(e) Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the Transaction Documents, will be duly and
validly issued, fully paid and non-assessable, and free and clear of all Liens
imposed by the Company.
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(f) Capitalization. Except for the issuance of Securities pursuant to this
Agreement and other similar agreements entered into in connection with the Offering
of which this Agreement is a part and except as set forth below, as of November 19,
2007, the Company is authorized to issue 200,000,000 shares of Common Stock, of which
55,114,749 are issued and outstanding, and 10,000,000 shares of preferred stock none
of which are outstanding. No
Person has any right of first refusal, preemptive right, right of participation, or
any similar right to participate in the transactions contemplated by the Transaction
Documents. Except as a result of the purchase and sale of the Securities, except for
employee stock options under the Company’s stock option plans and except as set forth
below, there are no outstanding options, warrants, script rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities, rights
or obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. The issue and sale of the
Securities will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchaser) and will not result in a right of
any holder of Company securities to adjust the exercise, conversion, exchange or
reset price under such securities.
As of November 19, 2007, the Company has outstanding or is obligated to issue:
| (i) | options to purchase 15,720,000 shares
of Common Stock; |
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| (ii) | a warrant to Creata Promotions (USA),
Inc. to purchase 250,000 shares of Common Stock; |
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| (iii) | 100,000 shares of Common Stock
pursuant to a consulting agreement; |
||
| (iv) | 50,000 shares of Common Stock in
exchange for 50,000 Class E Exchangeable Shares in the capital
stock of Neutron Media Inc.; and |
||
| (v) | at the option of Caledonia Corporate
Management Group Limited (“Caledonia”) one share of Common Stock
for every $2.50 of principal and interest outstanding under the
terms of a secured convertible note payable to Caledonia in the
principal amount of $2,100,000. |
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The Company has agreed to issue to Dresden Capital Inc. (“Dresden”), as partial
consideration for fees payable to it in respect to the transactions contemplated by
this Agreement, a number of warrants equal to five percent (5%) of the total number
of Units subscribed for as contemplated by this
Agreement sold by Dresden (collectively, the “Agent’s Warrants”), on substantially
the same terms as the Warrants.
(g) SEC Reports; Financial Statements. The Company has filed all periodic
reports required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) of the Exchange Act, for the one year
preceding the date hereof (the foregoing materials, including the exhibits thereto,
being collectively referred to herein as the “SEC Reports” and, together with
the Disclosure Schedules to this Agreement, the “Disclosure Materials”). As
of their respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and regulations
of the Commission promulgated thereunder, as applicable, and none of the SEC Reports,
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 light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with generally
accepted accounting principles applicable in the United States on a consistent basis
during the periods involved (“GAAP”), except as may be otherwise specified in
such financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements, to
normal, immaterial, year-end audit adjustments.
(h) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as disclosed in the SEC Reports,
or in Schedule 3.1 (h): (i) there has been no event, occurrence or development that
has had or that could reasonably be expected to result in a Material Adverse Effect;
(ii) the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission; (iii) the Company has not altered its
method of accounting; (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased, redeemed or
made any agreements to purchase or redeem any shares of its capital stock; and (v)
the Company has
not issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans disclosed in Section 3(f) or as
disclosed in the SEC Reports. The Company does not have pending before the Commission
any requests for confidential treatment of information.
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(i) Litigation. Except as disclosed in the SEC Reports, there is no action,
suit, inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened in writing against the Company, or any of its
properties before or by any court, arbitrator, governmental or administrative agency
or regulatory authority (federal, state, county, local or foreign) (collectively, an
“Action”) which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities; or (ii) could,
if there were an unfavorable decision, have or reasonably be expected to result in a
Material Adverse Effect. The Company is not, and has not been, the subject of any
Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been, and to
the knowledge of the Company, there is not pending or contemplated, any investigation
by the Commission involving the Company or any current or former director or officer
of the Company. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company or
any Subsidiary under the Exchange Act or the Securities Act.
(j) Labour Relations. No material labour dispute exists or, to the knowledge
of the Company, is imminent with respect to any of the employees of the Company which
could reasonably be expected to result in a Material Adverse Effect.
(k) Compliance. Except as disclosed in the SEC Reports, the Company is not
(i) in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by the
Company), and the Company has not received notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit agreement or any
other material agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has been
waived); (ii) in violation of any order of any court, arbitrator or governmental
body; or (iii) in violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and local laws
applicable to its business; except in the case of clauses (i), (ii) and (iii) as
would not have or reasonably be expected to result in a Material Adverse Effect.
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(l) Certain Fees. No brokerage or finder’s fees or commissions are or will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement, other than a fee payable to Dresden
equal to five percent (5%) of the gross proceeds from the subscription for Units
contemplated by this Agreement sold by Dresden plus the Agent’s Warrants. The
Purchaser shall have no obligation with respect to any fees or with respect to any
claims made by or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by this
Agreement.
(m) Private Placement. Assuming the accuracy of the Purchaser’s
representations and warranties set forth in Section 3.2, no registration under the
Securities Act is required for the offer and sale of the Securities by the Company to
the Purchaser as contemplated hereby. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the Trading Market.
(n) Investment Company. The Company is not, and is not an Affiliate of, an
“investment company” within the meaning of the Investment Company Act of 1940, as
amended.
(o) Listing and Maintenance Requirements. The Company has not, in the 12
months preceding the date hereof, received notice from any Trading Market on which
the Common Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such Trading
Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.
The Purchaser acknowledges and agrees that the Company does not make or has not made
any representations or warranties with respect to the transactions contemplated hereby other
than those specifically set forth in this Section 3.1.
3.2 Representations and Warranties of the Purchaser. Each Purchaser hereby
represents and warrants as of the date hereof and as of the Closing Date to the Company as
follows:
(a) Organization; Authority. The Purchaser is legally competent natural
person or an entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, with full right, corporate or
partnership power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution, delivery and performance by the
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part of the Purchaser.
Each Transaction Document to which it is a party has been duly executed by the
Purchaser, and, when delivered by the Purchaser in accordance with the terms hereof,
will constitute the valid and legally binding obligation of the Purchaser,
enforceable against it in accordance with its terms.
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(b) Investment Intent. The Purchaser understands that (i) the Securities are
“restricted securities” and have not been registered under the Securities Act or any
applicable state or other securities law; and (ii) the Purchaser has not received a
prospectus, an offering memorandum, sales or advertising literature or similar
document in connection with the purchase of the Securities, and the Purchaser has not
requested, nor does the Purchaser need to receive, any such document. The Purchaser
is acquiring the Securities as principal for its own account for investment purposes
only and not with a view to or for distributing or reselling such Securities or any
part thereof, has no present intention of distributing any of such Securities and has
no arrangement or understanding with any other persons regarding the distribution of
such Securities. The Purchaser is acquiring the Securities hereunder in the ordinary
course of its business. The Purchaser does not have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the Securities. The
Purchaser understands and acknowledges that the Securities are subject to certain
resale restrictions under applicable securities laws. The Purchaser also acknowledges
that it has been advised to consult its own legal advisers with respect to applicable
resale restrictions and that it is solely responsible for complying with such
restrictions (and that the Company is not in any manner responsible for ensuring
compliance by the Purchaser with such restrictions).
(c) Experience of Such Purchaser. The Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and risks
of the prospective investment in the Securities, and has so evaluated the merits and
risks of such investment. The Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to afford a complete
loss of such investment.
(d) General Solicitation. The Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding the
Securities published in any newspaper, magazine or similar media or broadcast over
television, radio or the internet or presented at any seminar or any other general
solicitation or general advertisement.
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(e) Compliance with the Securities Laws. The Purchaser agrees to comply with
the requirements of Regulation M of the Exchange Act, if applicable, with respect to
the sale of the Shares by the Purchaser. The Purchaser hereby confirms its
understanding that it may not cover short sales made prior to the date hereof, nor
may it pledge, hypothecate, lend or otherwise facilitate short sales of Company
Shares. The Purchaser acknowledges that it does not intend to cover short positions
made by it before the Effective Date with Shares purchased by it hereunder.
(f) No Government Review. The Purchaser understands that neither the
Commission nor any securities commission or other governmental authority of any
state, country or other jurisdiction has approved the issuance of the Securities or
passed upon or endorsed the merits of the Securities, this Agreement or the Warrant,
or confirmed the accuracy of, determined the adequacy of, or reviewed this Agreement
or the Warrant.
(g) Restrictions on Transfer. The Purchaser understands that the Securities
are “restricted securities” as such term is defined in Rule 144 under the Securities
Act and have not been registered under the Securities Act or registered or qualified
under any state securities law, and may not be, directly or indirectly, sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act and registration or qualification under
applicable state securities laws or the availability of an exemption therefrom.
(h) Access to Information. The Purchaser acknowledges that it has had access
to and has reviewed all documents and records relating to the Company that it has
deemed necessary in order to make an informed investment decision with respect to an
investment in the Securities, including, but not limited to, the SEC Reports; that it
has had the opportunity to ask representatives of the Company certain questions and
request certain additional information regarding the terms and conditions of such
investment and the finances, operations, business and prospects of the Company and
has had any and all such questions and requests answered to its satisfaction; and
that it understands the risks and other considerations relating to such investment.
(i) Certain Investment Risks. Purchaser understands that purchasing Units in
the Offering will subject Purchaser to certain risks, including, but not limited to,
each of the following:
(A) The offering price of the Units offered hereby has been determined
solely by the Company and does not necessarily bear any relationship to the
value of the Company’s assets, current or potential
earnings of the Company, or any other recognized criteria used for
measuring value and, therefore, there can be no assurance that the offering
price of the Units is representative of the actual value of the Units.
-17-
(B) In order to capitalize the Company, execute its business plan, and
for other corporate purposes, the Company has issued, and expects to issue
additional shares of Common Stock, securities exercisable or convertible into
shares of Common Stock, or debt. Such securities have been and may be issued
for a purchase price consisting of cash, services or other consideration that
may be materially different than the purchase price of the Units. The
issuance of any such securities may result in substantial dilution to the
relative ownership interests of the Company’s existing shareholders and
substantial reduction in net book value per share. Additional equity
securities may have rights, preferences and privileges senior to those of the
holders of Common Stock, and any debt financing may involve restrictive
covenants that may limit the Company’s operating flexibility.
(C) There is no minimum amount required to be raised in this Offering
and, therefore, the Company may not generate enough net proceeds from this
Offering to execute its business plan and satisfy its working capital
requirements.
(j) Reliance on Representations. The Purchaser understands that the
Securities are being offered and sold to it in reliance on specific exemptions from
the registration requirements of the federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and such Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgments and
understandings of such Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of such Purchaser to acquire the
Securities. The Purchaser represents and warrants to the Company that any
information that the Purchaser has heretofore furnished or furnishes herewith to the
Company is complete and accurate, and further represents and warrants that it will
notify and supply corrective information to the Company immediately upon the
occurrence of any change therein occurring prior to the Company’s issuance of the
Securities. Within five (5) days after receipt of a request from the Company, the
Purchaser will provide such information and deliver such documents as may reasonably
be necessary to comply with any and all laws and regulations to which the Company is
subject.
(k) Purchaser Status. At the time the Purchaser was offered the Securities,
it was, and at the date hereof it is, an “accredited investor” as defined in Rule
501(a) under the Securities Act, and shall be an “accredited investor” as of the date
of any exercise of the Warrants. The Purchaser is not required to be registered as a
broker dealer under Section 15 of the Exchange Act.
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(l) Broker. Other than as contemplated by this Subscription Agreement, there
is no person acting or purporting to act in connection with the transactions
contemplated herein who is entitled to any brokerage or finder’s fee, and if any
person establishes a claim that any fee or other compensation is payable in
connection with this subscription for the Purchaser’s Securities, the Purchaser
covenants to indemnify and hold harmless the Company with respect thereto and with
respect to all costs reasonably incurred in the defence thereof.
(m) Residence. If Purchaser is an entity, the address of its principal
place of business is as set forth on the signature page hereto, and if Purchaser is
an individual, the address of its principal residence is as set forth on the
signature page hereto.
(n) Restrictions on Transfer. Purchaser understands that the Securities are
“restricted securities” as such term is defined in Rule 144 under the Securities Act
and have not been registered under the Securities Act or registered or qualified
under any state securities law, and may not be, directly or indirectly, sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act and registration or qualification under
applicable state securities laws or the availability of an exemption therefrom. In
any case where such an exemption is relied upon by Purchaser from the registration
requirements of the Securities Act and the registration or qualification requirements
of such state securities laws, Purchaser shall furnish the Company with an opinion of
counsel stating that the proposed sale or other disposition of such securities may be
effected without registration under the Securities Act and will not result in any
violation of any applicable state securities laws relating to the registration or
qualification of securities for sale, such counsel and opinion to be satisfactory to
the Company.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than (i)
pursuant to an effective registration statement; or (ii) to the Company, the
Company may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the Securities Act. As a
condition of transfer, any such transferee shall agree in writing to be bound by the
terms of this Agreement and shall have the rights of a Purchaser under this
Agreement.
-19-
(b) The Purchaser agrees to the imprinting, so long as is required by this Section
4.1(b), of a legend on any of the Securities in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION
OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY.
4.2 Furnishing of Information. As long as the Purchaser owns Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act. As long as the Purchaser owns Securities, if the
Company is not required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchaser and make available in accordance with Rule 144(c) such information
as is required for the Purchaser to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time, to enable such Person to sell such
Securities without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.
4.3 Integration. The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a manner that
would require the registration under the Securities Act of the sale of the Securities to the
Purchaser or that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Trading Market.
-20-
4.4 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder for (i) general working capital purposes, (ii) to finance acquisitions,
and (iii) to finance software development and marketing.
4.5 Indemnification of Purchaser. The Company will indemnify and hold each Purchaser
and its directors, officers, shareholders, partners, employees and agents (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts paid in
settlements, court costs and reasonable attorneys’ fees and costs of investigation, that any
such Purchaser Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other Transaction Documents.
The Company will reimburse the Purchaser for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred.
4.6 Indemnification of Company. Purchaser agrees to indemnify, defend and hold
harmless the Company and its respective affiliates and agents from and against any and all
demands, claims, actions or causes of action, judgments, assessments, losses, liabilities,
damages or penalties and reasonable attorneys’ fees and related disbursements incurred by
the Company that arise out of or result from a breach of any representations or warranties
made by Purchaser herein, and Purchaser agrees that in the event of any breach of any
representations or warranties made by Purchaser herein, the Company may, at its option,
forthwith rescind the sale of the Units to Purchaser.
4.7 Prohibition of Short Sales. Prior to the termination of this Offering, each
Purchaser shall not effect any “short sale” of the Company’s common stock. Each Purchaser
acknowledges and agrees that, in the event of an actual or threatened breach of any of the
provisions of this Agreement by such party, the harm to the others will be immediate,
substantial and irreparable and the monetary damages will be inadequate. Accordingly, each
Purchaser agrees that, in such event, the others will be entitled to equitable relief,
including an injunction and an order of specific performance, in addition to any and all
other remedies at law or in equity.
4.8 Confidentiality. Purchaser acknowledges and agrees that:
(a) All of the information contained in the Transaction Documents is of a confidential
nature and may be regarded as material non-public information under Regulation FD of the
Securities Act.
-21-
(b) The Transaction Documents have been furnished to Purchaser by the Company for the
sole purpose of enabling Purchaser to consider and evaluate an investment in the Company,
and will be kept confidential by Purchaser and not used for any other purpose.
(c) The existence of the Transaction Documents and the information contained therein
shall not, without the prior written consent of the Company, be disclosed by Purchaser to
any person or entity, other than Purchaser’s personal financial and legal advisors for the
sole purpose of evaluating an investment in the Company, and Purchaser will not, directly or
indirectly, disclose or permit Purchaser’s personal financial and legal advisors to
disclose, any of such information without the prior written consent of the Company.
(d) Purchaser shall make its representatives aware of the terms of this Section 4.8 and
to be responsible for any breach of this Agreement by such representatives.
(e) Purchaser shall not, without the prior written consent of the Company, directly or
indirectly, make any statements, public announcements or release to trade publications or
the press with respect to the subject matter of the Transaction Documents .
(f) If Purchaser decides to not pursue further investigation of the Company or to not
participate in the Offering, Purchaser will promptly return this Agreement and any
accompanying documentation to the Company.
4.9 Non-Public Information. Purchaser acknowledges that information concerning the
matters that are the subject matter of the Transaction Documents constitutes material
non-public information under United States federal securities laws, and that United States
federal securities laws prohibit any person who has received material non-public information
relating to the Company from purchasing or selling securities of the Company, or from
communicating such information to any person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell securities of the Company.
Accordingly, until such time as any such non-public information has been adequately
disseminated to the public, Purchaser shall not purchase or sell any securities of the
Company, or communicate such information to any other person.
ARTICLE V.
MISCELLANEOUS
MISCELLANEOUS
5.1 Fees and Expenses. Except as otherwise set forth in this Agreement, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company shall pay
all stamp and other taxes and duties levied in connection with the sale of the Securities.
-22-
5.2 Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules.
5.3 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified on the signature pages attached
hereto prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day
after the date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number on the signature pages attached hereto on a day that is not a
Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading
Day following the date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as set forth on the
signature pages attached hereto.
5.4 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the Company and the
Purchaser or, in the case of a waiver, by the party against whom enforcement of any such
waiver is sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right.
5.5 Construction. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will be applied
against any party.
5.6 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns.
-23-
5.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
5.8 Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of the Transaction Documents shall be governed by and construed and
enforced in accordance with the internal laws of the State of Nevada, without regard to the
principles of conflicts of law thereof. If any party shall commence an action or proceeding
to enforce any provisions of a Transaction Document, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its attorney’s fees and
other costs and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.
5.9 Survival. The representations, warranties, agreements and covenants contained
herein shall survive the Closing and delivery of the Units.
5.10 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party,
it being understood that both parties need not sign the same counterpart. In the event that
any signature is delivered by facsimile transmission, 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 signature page were an
original thereof.
5.11 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and
provisions of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a reasonable
substitute therefore, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
5.12 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation thereof, or in lieu of and
substitution therefore, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. The applicants for a new certificate or instrument under
such circumstances shall also pay any reasonable third-party costs associated with the
issuance of such replacement Securities.
-24-
5.13 Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Purchaser and the
Company will be entitled to specific performance under the Transaction Documents. The
parties agree that monetary damages may not be adequate compensation for any loss incurred
by reason of any breach of obligations described in the foregoing sentence and hereby agrees
to waive in any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.14 Currency. Save as otherwise set forth herein, all amounts expressed in dollars
or “$” shall refer to the lawful currency of the United States in immediately available
funds.
5.15 Language. The parties have requested that this document and all related
documents be drafted in the English language only. Les parties ont demandé que ce document
et tous documents y afférent soient rédigés en anglais seulement.
(Signature Page Follows)
-25-
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date first
indicated above.
Address for Notice:
|
Xxxx Xxxxx Chief Executive Officer Neutron Enterprises, Inc. 0000 xx Xxxxxxxxxxx Xxxx Xxxxx 0000 Xxxxxxxx, Xxxxxx X0X 0X0 Xxxxxx |
|
| Tel: (000) 000-0000 | ||
With copy to (which shall not
constitute notice):
|
Neutron Enterprises Inc. c/o Xxxxxxxx Xxxxxxx Corporate Secretary 0 Xxxxx Xxxxx Xxxxx Xxxxx 0000 Xxxxxxxx, Xxxxxx X0X 0X0 |
|
| Tel: (000) 000-0000 Fax: (000) 000-0000 E-mail: xxxxxxxx@xxxxxxxxxxxxx.xxx |
[SIGNATURE PAGE CONTINUES]
-26-
(PURCHASER’S SIGNATURE PAGE)
[ ]
By:
Name:
Title:
Address:
Name:
Title:
Address:
Subscription Amount: U.S.$
[ ]
-27-
ANNEX I
DISCLOSURE SCHEDULE 3.1
EXHIBIT A
WARRANT
