SUBSCRIPTION AGREEMENT
SUBSCRIPTION
AGREEMENT (this “Agreement”) made as
of the last date set forth on the signature page hereof between STW RESOURCES
HOLDING CORP., a Nevada corporation (the “Company”), and the
undersigned (the “Subscriber”).
WITNESSETH:
WHEREAS,
the Company is conducting a private offering (the “Offering”) for which
Viewpoint Securities, LLC (the “Placement Agent”) is
acting as placement agent and any other NASD Member firms which the Placement
Agent may choose to engage (the “Select Dealer”), consisting of up to a maximum
of $1,500,000 (the “Maximum Offering”) in
the aggregate face amount of 12% Convertible Notes (the “Notes”), pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and
Rule 506 promulgated thereunder; and
WHEREAS,
the Subscriber desires to purchase that number of Notes set forth on the
signature page hereof on the terms and conditions hereinafter set forth;
and
WHEREAS,
for each Note purchased, each Subscriber will receive a warrant to purchase such
number of shares of common stock (the “Common Stock”) of the
Company equal to one-half of the aggregate face amount of their Note divided by
the conversion price of the Note (the “Warrants” and
collectively with the Note, the “Securities”).
NOW,
THEREFORE, in consideration of the premises and the mutual representations and
covenants hereinafter set forth, the parties hereto do hereby agree as
follows:
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I.
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SUBSCRIPTION FOR
SHARES AND REPRESENTATIONS AND COVENANTS BY
SUBSCRIBER
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1.1 Subject
to the terms and conditions hereinafter set forth, the Subscriber hereby
irrevocably subscribes for and agrees to purchase from the Company, and the
Company agrees to sell to the Subscriber, such aggregate face amount of the
Notes as is set forth on the signature page hereof. The purchase
price is payable by wire transfer, to be sent directly to the
Company:
TD Bank,
N.A
ABA#
BNF:
DDA#
FFC:
1.2
Offering Period;
Maximum. The Securities will be offered for sale until the
closing on the Maximum Offering (the “Termination
Date”). The Offering is being conducted on a best-efforts
basis.
1.3
Closings. The
Company may hold closings with respect to any Securities at any time prior to
the Termination Date as determined by the Company, with respect to subscriptions
accepted prior to the Termination Date (each such closing being referred to as a
“Closing”). The
last Closing of the Offering, occurring on or prior to the Termination Date,
shall be referred to as the “Final
Closing”. Any subscription documents or funds received after
the Final Closing will be returned, without interest or deduction.
1.4
The Subscriber recognizes that the purchase of the Securities involves a high
degree of risk including, but not limited to, the following: (a) the Company has
limited operating history and requires substantial funds in addition to the
proceeds of the Offering; (b) an investment in the Company is highly
speculative, and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Securities; (c) the
Subscriber may not be able to liquidate its investment; (d) transferability of
the Securities is extremely limited; (e) in the event of a disposition, the
Subscriber could sustain the loss of its entire investment; and (f) the Company
has not paid any dividends since its inception and does not anticipate paying
any dividends. Without limiting the generality of the representations
set forth in Section 1.5 below, the Subscriber represents that the Subscriber
has carefully reviewed the Company’s business plan including “Risk
Factors.”
1.5
The Subscriber represents that the Subscriber is an “accredited investor” as
such term is defined in Rule 501 of Regulation D (“Regulation D”)
promulgated under the Securities Act, as indicated by the Subscriber’s responses
to the questions contained in Article VII hereof, and that the Subscriber is
able to bear the economic risk of an investment in the Securities.
1.6
The Subscriber hereby acknowledges and represents that (a) the Subscriber has
knowledge and experience in business and financial matters, prior investment
experience, including investment in securities that are non-listed, unregistered
and/or not traded on a national securities exchange nor on the National
Association of Securities Dealers, Inc. automated quotation system (“NASDAQ”), or the
Subscriber has employed the services of a “purchaser representative” (as defined
in Rule 501 of Regulation D), attorney and/or accountant to read all of the
documents furnished or made available by the Company both to the Subscriber and
to all other prospective investors in the Securities to evaluate the merits and
risks of such an investment on the Subscriber’s behalf; (b) the Subscriber
recognizes the highly speculative nature of this investment; and (c) the
Subscriber is able to bear the economic risk that the Subscriber hereby
assumes.
1.7
The Subscriber hereby acknowledges receipt and careful review of this Agreement,
the business plan (which includes the “Risk Factors”), including the Warrant and
the Note and all other exhibits thereto, and any documents which may have been
made available upon request as reflected therein (collectively referred to as
the “Offering
Materials”) and hereby represents that the Subscriber has been furnished
by the Company during the course of the Offering with all information regarding
the Company, the terms and conditions of the Offering and any additional
information that the Subscriber has requested or desired to know, and has been
afforded the opportunity to ask questions of and receive answers from duly
authorized officers or other representatives of the Company concerning the
Company and the terms and conditions of the Offering.
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1.8
(a) In making the decision to invest in the Securities the Subscriber has
relied solely upon the information provided by the Company in the Offering
Materials. To the extent necessary, the Subscriber has retained, at
its own expense, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement and the
purchase of the Securities hereunder. The Subscriber disclaims
reliance on any statements made or information provided by any person or entity
in the course of Subscriber’s consideration of an investment in the Securities
other than the Offering Materials.
(b)
The Subscriber represents that (i) the Subscriber was contacted regarding the
sale of the Securities by the Company (or an authorized agent or representative
thereof) with whom the Subscriber had a prior substantial pre-existing
relationship and (ii) no Securities were offered or sold to it by means of any
form of general solicitation or general advertising, and in connection
therewith, the Subscriber did not (A) receive or review any advertisement,
article, notice or other communication published in a newspaper or magazine or
similar media or broadcast over television or radio, whether closed circuit, or
generally available; or (B) attend any seminar meeting or industry investor
conference whose attendees were invited by any general solicitation or general
advertising.
1.9
The Subscriber hereby represents that the Subscriber, either by reason of the
Subscriber’s business or financial experience or the business or financial
experience of the Subscriber’s professional advisors (who are unaffiliated with
and not compensated by the Company or any affiliate or selling agent of the
Company, directly or indirectly), has the capacity to protect the Subscriber’s
own interests in connection with the transaction contemplated
hereby.
1.10 The
Subscriber hereby acknowledges that the Offering has not been reviewed by the
United States Securities and Exchange Commission (the “SEC”) nor any state
regulatory authority since the Offering is intended to be exempt from the
registration requirements of Section 5 of the Securities Act, pursuant to
Regulation D. The Subscriber understands that the Securities have not
been registered under the Securities Act or under any state securities or “blue
sky” laws and agrees not to sell, pledge, assign or otherwise transfer or
dispose of the Securities unless they are registered under the Securities Act
and under any applicable state securities or “blue sky” laws or unless an
exemption from such registration is available.
1.11 The
Subscriber understands that the Securities have not been registered under the
Securities Act by reason of a claimed exemption under the provisions of the
Securities Act that depends, in part, upon the Subscriber’s investment
intention. In this connection, the Subscriber hereby represents that
the Subscriber is purchasing the Securities for the Subscriber’s own account for
investment and not with a view toward the resale or distribution to
others. The Subscriber, if an entity, further represents that it was
not formed for the purpose of purchasing the Securities.
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1.12 The
Subscriber understands that the Common Stock issuable upon conversion of the
Notes (the “Conversion
Shares”) and upon exercise of the Warrants (the “Warrant Shares” and
collectively with the Conversion Shares, the “Common Shares”) is
not listed on any national securities exchange or quoted on any over-the-counter
market or the Pink Sheets, LLC and that there is no market for the Common
Stock. The Subscriber understands that even if a public market
develops for the Common Shares, Rule 144 (“Rule 144”) promulgated under the
Securities Act requires for non-affiliates, among other conditions, a \ holding
period prior to the resale (subject to certain limitations) of securities
acquired in a non-public offering without having to satisfy the registration
requirements under the Securities Act. The Subscriber understands and
hereby acknowledges that the Company is under no obligation to register any of
the Securities or the Common Shares under the Securities Act or any state
securities or “blue sky” laws.
1.13 The
Subscriber consents to the placement of a legend on any certificate or other
document evidencing the Securities and the Common Shares that such securities
have not been registered under the Securities Act or any state securities or
“blue sky” laws and setting forth or referring to the restrictions on
transferability and sale thereof contained in this Agreement. The
Subscriber is aware that the Company will make a notation in its appropriate
records with respect to the restrictions on the transferability of such
Securities. The legend to be placed on each certificate shall be in form
substantially similar to the following:
“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES OR “BLUE
SKY LAWS,” AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”
1.14 It
is agreed that the Company, at its sole discretion, reserves the unrestricted
right, without further documentation or agreement on the part of the Subscriber,
to reject or limit any subscription, to accept subscriptions for fractional
Shares and to close the Offering to the Subscriber at any time and that the
Company will issue stop transfer instructions to its transfer agent with respect
to such Securities.
1.15 The
Subscriber hereby represents that the address of the Subscriber furnished by
Subscriber on the signature page hereof is the Subscriber’s principal residence
if Subscriber is an individual or its principal business address if it is a
corporation or other entity.
1.16 The
Subscriber represents that the Subscriber has full power and authority
(corporate, statutory and otherwise) to execute and deliver this Agreement and
to purchase the Securities. This Agreement constitutes the legal,
valid and binding obligation of the Subscriber, enforceable against the
Subscriber in accordance with its terms.
1.17 If
the Subscriber is a corporation, partnership, limited liability company, trust,
employee benefit plan, individual retirement account, Xxxxx Plan, or other
tax-exempt entity, it is authorized and qualified to invest in the Company and
the person signing this Agreement on behalf of such entity has been duly
authorized by such entity to do so.
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1.18 The
Subscriber acknowledges that if he or she is a Registered Representative of a
FINRA member firm, he or she must give such firm the notice required by the
FINRA’s Rules of Fair Practice, receipt of which must be acknowledged by such
firm in Section 7.4 below.
1.19 The
Subscriber acknowledges that at such time, if ever, as the Securities or the
Common Shares are registered, sales of the Securities and the Common Shares will
be subject to state securities laws.
1.20 The
Subscriber agrees not to issue any public statement with respect to the
Subscriber’s investment or proposed investment in the Company or the terms of
any agreement or covenant between them and the Company without the Company’s
prior written consent, except such disclosures as may be required under
applicable law or under any applicable order, rule or regulation.
1.21 The
Subscriber agrees to hold the Company and its directors, officers, employees,
affiliates, controlling persons and agents and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses incurred by them as a result of (a) any sale
or distribution of the Securities by the Subscriber in violation of the
Securities Act or any applicable state securities or “blue sky” laws; or (b) any
false representation or warranty or any breach or failure by the Subscriber to
comply with any covenant made by the Subscriber in this Agreement (including the
Confidential Investor Questionnaire contained in Article VII herein) or any
other document furnished by the Subscriber to any of the foregoing in connection
with this Agreement.
1.22
To effectuate the terms and provisions hereof, the Subscriber hereby
appoint the Placement Agent as its attorney-in-fact (and the Placement Agent
hereby accepts such appointment) for the purpose of carrying out the provisions
of the Escrow Agreement by and between the Company, the Placement Agent and Law
Offices of Xxxxxxx X. Xxxxxxx PLLC (the “Escrow Agreement”)
including, without limitation, taking any action on behalf of, or at the
instruction of, the Subscribers and executing any release notices required under
the Escrow Agreement and taking any action and executing any instrument that the
Placement Agent may deem necessary or advisable (and lawful) to accomplish the
purposes hereof. All acts done under the foregoing authorization are hereby
ratified and approved and neither the Placement Agent nor any designee nor agent
thereof shall be liable for any acts of commission or omission, for any error of
judgment, for any mistake of fact or law except for acts of gross negligence or
willful misconduct. This power of attorney, being coupled with an interest,
is irrevocable while the Escrow Agreement remains in effect.
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II.
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REPRESENTATIONS BY AND
COVENANTS OF THE COMPANY
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The
Company hereby represents and warrants to the Subscriber that:
2.1
Organization, Good
Standing and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has full corporate power and authority to own and use its properties
and its assets and conduct its business as currently conducted. Each
of the Company’s subsidiaries (the “Subsidiaries”) is
an entity duly
organized, 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 conduct its business
as currently conducted. Neither the Company, nor any of its Subsidiaries is in
violation of any of the provisions of their respective articles of
incorporation, by-laws or other organizational or charter documents (as defined
below). Each of the Company and its Subsidiaries 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 result in a direct and/or indirect
(i) material adverse effect on the legality, validity or enforceability of
any of the Securities and/or this Agreement, (ii) material adverse effect
on the results of operations, assets, business or financial condition of the
Company or its Subsidiaries, or (iii) material adverse effect on the Company’s
ability to perform in any material respect on a timely basis its obligations
under this Agreement, the Warrants and the Notes.
2.2
Capitalization and
Voting Rights. The authorized, issued and outstanding capital
stock of the Company is as set forth on Schedule 2.2 hereto and all issued and
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable. Except as set forth on Schedule 2.2 hereto, (i) there
are no outstanding securities of the Company or any of its Subsidiaries which
contain any preemptive, redemption or similar provisions, nor is any holder of
securities of the Company or any Subsidiary entitled to preemptive or similar
rights arising out of any agreement or understanding with the Company or any
Subsidiary by virtue of any of the Offering Materials, and there are no
contracts, commitments, understandings or arrangements by which the Company or
any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (ii) the Company does not have any stock
appreciation rights or "phantom stock" plans or agreements or any similar plan
or agreement; and (iii) there are no outstanding options, warrants, agreements,
convertible securities, preemptive rights or other rights to subscribe for or to
purchase or acquire, any shares of capital stock of the Company or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue any shares of capital stock of the
Company, or securities or rights convertible or exchangeable into shares of
capital stock of the Company. Except as set forth on the Schedule 2.2
and as otherwise required by law, there are no restrictions upon the voting or
transfer of any of the shares of capital stock of the Company pursuant to the
Company’s Charter Documents or other governing documents or any agreement or
other instruments to which the Company is a party or by which the Company is
bound.
2.3
Authorization;
Enforceability. The Company has all corporate right, power and
authority to enter into, execute and deliver this Agreement and each other
agreement, document, instrument and certificate to be executed by the Company in
connection with the consummation of the transactions contemplated hereby,
including, but not limited to the Offering Materials and to perform fully its
obligations hereunder and thereunder. All corporate action on the
part of the Company, its directors and stockholders necessary for the (a)
authorization execution, delivery and performance of this Agreement and the
Offering Materials by the Company; and (b) authorization, sale, issuance and
delivery of the Securities and the Common Shares contemplated hereby and the
performance of the Company’s obligations under this Agreement and the Offering
Materials has been taken. This Agreement and the Offering Materials
have been duly executed and delivered by the Company and each constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its respective terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy. The
Securities and Common Shares, when issued and fully paid for in accordance with
the terms of this Agreement, will be validly issued, fully paid and
nonassessable. The issuance and sale of the Securities and Common
Shares contemplated hereby will not give rise to any preemptive rights or rights
of first refusal on behalf of any person.
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2.4
No Conflict;
Governmental Consents.
(a) The
execution and delivery by the Company of this Agreement and the Offering
Materials and the consummation of the transactions contemplated hereby will not
(i) result in the violation of any material law, statute, rule, regulation,
order, writ, injunction, judgment or decree of any court or governmental
authority to or by which the Company is bound, (ii) conflict with or violate any
provision of the Company’s Articles of Incorporation (the “Articles”), as
amended or the Bylaws, (and collectively with the Articles, the “Charter Documents”) of
the Company, and (iii) will not conflict with, or result in a material breach or
violation of, any of the terms or provisions of, or constitute (with or without
due notice or lapse of time or both) a default or give to others any rights of
termination, amendment, acceleration or cancellation (with or without
due notice, lapse of time or both) under any agreement, credit facility, lease,
loan agreement, mortgage, security agreement, trust indenture or other agreement
or instrument to which the Company is a party or by which it is bound or to
which any of its properties or assets is subject, nor result in the creation or
imposition of any lien upon any of the properties or assets of the
Company.
(b) No
approval by the holders of Common Stock, or other equity securities of the
Company is required to be obtained by the Company in connection with the
authorization, execution and delivery of this Agreement or the Offering
Materials or in connection with the authorization, issue and sale of the
Securities, except as has been previously obtained,
(c) No
consent, approval, authorization or other order of any governmental authority is
required to be obtained by the Company in connection with the authorization,
execution and delivery of this Agreement or the Transaction Documents or in
connection with the authorization, issue and sale of the Securities, except such
filings as may be required to be made with the SEC, FINRA, NASDAQ and with any
state or foreign blue sky or securities regulatory authority.
2.5
Privacy. The
Company agrees not to disclose the names, addresses or any other information
about the Subscribers, except as required by law.
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2.6
No Additional
Agreements. The Company does not have any agreement or
understanding with any Subscribers with respect to the transactions contemplated
by this Agreement other than as specified in this Agreement.
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III.
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TERMS OF
SUBSCRIPTION
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3.1
All funds shall be submitted directly to the Company’s account identified in
Section 1.1 hereof.
3.2
The Notes and Warrants purchased by the Subscriber pursuant to this Agreement
will be prepared for delivery to the Subscriber as soon as practicable following
the Closing at which such purchase takes place. The Subscriber hereby authorizes
and directs the Company to deliver the Notes and Warrants purchased by the
Subscriber pursuant to this Agreement directly to the Subscriber’s residential
or business or brokerage house address indicated on the signature page
hereto.
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IV.
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CONDITIONS TO
OBLIGATIONS OF THE
SUBSCRIBERS
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4.1
The Subscriber’s obligation to purchase the Securities at the Closing at which
such purchase is to be consummated is subject to the fulfillment on or prior to
such Closing of the following conditions, which conditions may be waived at the
option of each Subscriber to the extent permitted by law:
(a) Covenants. All
covenants, agreements and conditions contained in this Agreement to be performed
by the Company on or prior to the date of such Closing shall have been performed
or complied with in all material respects.
(b) No Legal Order
Pending. There shall not then be in effect any legal or other
order enjoining or restraining the transactions contemplated by this
Agreement.
(c) No Law Prohibiting or
Restricting Such Sale. There shall not be in effect any law,
rule or regulation prohibiting or restricting such sale or requiring any consent
or approval of any person, which shall not have been obtained, to issue the
Securities (except as otherwise provided in this Agreement).
(d) Adverse
Changes. Since the date of execution of this Agreement, no
event or series of events shall have occurred that reasonably could have or
result in a material adverse effect.
(e) Blue
Sky. The Company shall have completed qualification for the
Securities and the Common Shares under applicable Blue Sky laws.
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V.
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COVENANTS OF THE
COMPANY
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5.1
Integration. The Company shall not, and shall ensure that no
affiliate of the Company shall, 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 Subscribers, or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any trading market in a manner that would require stockholder
approval of the sale of the securities to the Subscribers.
5.2
Reservation of
Shares. The Company shall at all times while the Securities
are outstanding maintain a reserve from its duly authorized shares of Common
Stock of a number of shares of Common Stock sufficient to allow for the issuance
of all Conversion Shares and Warrant Shares.
5.3
Conversion and
Exercise Procedures. The conversion procedures described in
and the form of Notice of Conversion included in the Notes set forth the
totality of the procedures required by the Subscribers in order to convert the
Shares. The exercise procedures described in and the form of Form of
Subscription included in the Warrant set forth the totality of the procedures
required by the Subscribers in order to exercise the warrants. The
Company shall honor conversions of Shares and exercises of Warrants and shall
deliver Common Stock in accordance with the terms, conditions and time periods
set forth in this Agreement and the Certificate of Designation or Warrant (as
applicable).
5.4
Rescission and
Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) this Agreement,
whenever any Subscriber exercises a right, election, demand or option under this
Agreement and the Company does not timely perform its related obligations within
the periods therein provided, then such Subscriber may rescind or withdraw, in
its sole discretion from time to time upon written notice to the Company, any
relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights.
5.5
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 therefor, 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. If
a replacement certificate or instrument evidencing any Securities is requested
due to a mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
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5.6 Indemnification.
(a) The
Company agrees to indemnify and hold harmless the Subscriber, its affiliates and
their respective officers, directors, employees, agents and controlling persons
(collectively, the “Indemnified
Parties”) from and against , any and all loss, liability, damage or
deficiency suffered or incurred by any Indemnified Party by reason of any
misrepresentation or breach of warranty by the Company or nonfulfillment of any
covenant or agreement to be performed or complied with by the Company under this
Agreement, the Transaction Documents; and will promptly reimburse the
Indemnified Parties for all expenses (including reasonable fees and expenses of
legal counsel) as incurred in connection with the investigation of, preparation
for or defense of any pending or threatened claim related to or arising in any
manner out of any of the foregoing, or any action or proceeding arising
therefrom (collectively, “Proceedings”),
whether or not such Indemnified Party is a formal party to any such
Proceeding.
(b) If
for any reason (other than a final non-appealable judgment finding any
Indemnified Party liable for losses, claims, damages, liabilities or expenses
for its gross negligence or willful misconduct) the foregoing indemnity is
unavailable to an Indemnified Party or insufficient to hold an Indemnified Party
harmless, then the Company shall contribute to the amount paid or payable by an
Indemnified Party as a result of such loss, claim, damage, liability or expense
in such proportion as is appropriate to reflect not only the relative benefits
received by the Company on the one hand and the Advisor on the other, but also
the relative fault by the Company and the Indemnified Party, as well as any
relevant equitable considerations.
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VI.
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MISCELLANEOUS
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6.1 Any
notice or other communication given hereunder shall be deemed sufficient if in
writing and sent by registered or certified mail, return receipt requested, or
delivered by hand against written receipt therefore, addressed as
follows:
if to the
Company, to it at:
000 Xxxx
Xxxxx Xxxxxx Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Attn: Xxxx
Xxxxxx, CEO
if to the
Subscriber, to the Subscriber’s address indicated on the signature page of this
Agreement.
Notices
shall be deemed to have been given or delivered on the date of
receipt.
6.2 No
provision of this Agreement may be waived, modified, supplemented or amended
except in a written instrument signed, in the case of an amendment, by the
Company and the Purchasers holding at least 50% in interest of the Securities
then outstanding or, in the case of a waiver, by the party against whom
enforcement of any such waived provision 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 any party to exercise any
right hereunder in any manner impair the exercise of any such right
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6.3 This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and to their respective heirs, legal representatives, successors and
assigns. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter hereof and merges and
supersedes all prior discussions, agreements and understandings of any and every
nature among them.
6.4 Upon
the execution and delivery of this Agreement by the Subscriber and the Company,
this Agreement shall become a binding obligation of the Subscriber with respect
to the purchase of Securities as herein provided, subject, however, to the right
hereby reserved by the Company to enter into the same agreements with other
subscribers and to reject any subscription, in whole or in part, provided the
Company returns to Subscriber any funds paid by Subscriber with respect to such
rejected subscription or portion thereof, without interest or
deduction.
6.5 NOTWITHSTANDING
THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE
PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO SUCH STATE’S PRINCIPLES OF CONFLICTS OF LAW. IN THE
EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR RESOLVING
DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE COURTS STATE OF NEW
YORK IN AND FOR THE COUNTY OF NEW YORK OR THE FEDERAL COURTS FOR SUCH STATE AND
COUNTY, AND ALL RELATED APPELLATE COURTS, THE PARTIES HEREBY IRREVOCABLY CONSENT
TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE. IN ANY ACTION, SUIT, OR PROCEEDING IN
ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY
6.6 In
order to discourage frivolous claims the parties agree that unless a claimant in
any proceeding arising out of this Agreement succeeds in establishing his claim
and recovering a judgment against another party (regardless of whether such
claimant succeeds against one of the other parties to the action), then the
other party shall be entitled to recover from such claimant all of its/their
reasonable legal costs and expenses relating to such proceeding and/or incurred
in preparation therefor.
11
6.7 The
holding of any provision of this Agreement to be invalid or unenforceable by a
court of competent jurisdiction shall not affect any other provision of this
Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.
6.8 The
Company agrees to execute and deliver all such further documents, agreements and
instruments and take such other and further action as may be necessary or
appropriate to carry out the purposes and intent of this Agreement.
6.9 Nothing
in this Agreement shall create or be deemed to create any rights in any person
or entity not a party to this Agreement, except for the holders of Registrable
Securities.
6.10 In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Subscribers and the Company will
be entitled to specific performance under this Agreement. 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.
6.11 The
obligations of each Subscriber under this Agreement are several and not joint
with the obligations of any other Subscriber, and no Subscriber shall be
responsible in any way for the performance of the obligations of any other
Subscriber under this Agreement. The decision of each Subscriber to
purchase Securities pursuant to this Agreement has been made by such Subscriber
independently of any other Subscriber. Nothing contained herein, and
no action taken by any Subscriber pursuant thereto, shall be deemed to
constitute the Subscribers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Subscribers are in
any way acting in concert or as a group with respect to such obligations or the
transactions contemplated herein. Each Subscriber acknowledges that
no other Subscriber has acted as agent for such Subscriber in connection with
making its investment hereunder and that no Subscriber will be acting as agent
of such Subscriber in connection with monitoring its investment in the
Securities or enforcing its rights under this Agreement. Each
Subscriber shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement, and it
shall not be necessary for any other Subscriber to be joined as an additional
party in any proceeding for such purpose. The Company acknowledges
that each of the Subscribers has been provided with this same Agreement for the
purpose of closing a transaction with multiple Subscribers and not because it
was required or requested to do so by any Subscriber.
12
6.12 The parties
agree that each of them and/or their respective counsel has reviewed and had an
opportunity to revise the Offering Materials and, therefore, the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of the Offering
Materials or any amendments hereto.
6.13 Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and,
without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate.
6.14 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.
6.15 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.
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VII.
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CONFIDENTIAL INVESTOR
QUESTIONNAIRE
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7.1
The Subscriber represents and warrants that he, she or it comes within one
category marked below, and that for any category marked, he, she or it has
truthfully set forth, where applicable, the factual basis or reason the
Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO
THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned
agrees to furnish any additional information which the Company deems necessary
in order to verify the answers set forth below.
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Category
A __
|
The
undersigned is an individual (not a partnership, corporation, etc.) whose
individual net worth, or joint net worth with his or her spouse, presently
exceeds $1,000,000.
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Explanation. In
calculating net worth you may include equity in personal property and real
estate, including your principal residence, cash, short-term investments, stock
and securities. Equity in personal property and real estate should be
based on the fair market value of such property less debt secured by such
property.
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Category
B __
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The
undersigned is an individual (not a partnership, corporation, etc.) who
had an income in excess of $200,000 in each of the two most recent years,
or joint income with his or her spouse in excess of $300,000 in each of
those years (in each case including foreign income, tax exempt income and
full amount of capital gains and losses but excluding any income of other
family members and any unrealized capital appreciation) and has a
reasonable expectation of reaching the same income level in the current
year.
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Category
C __
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The
undersigned is a director or executive officer of the Company which is
issuing and selling the Securities.
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13
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Category
D __
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The
undersigned is a bank; a savings and loan association; insurance company;
registered investment company; registered business development company;
licensed small business investment company (“SBIC”); or employee benefit
plan within the meaning of Title 1 of ERISA and (a) the investment
decision is made by a plan fiduciary which is either a bank, savings and
loan association, insurance company or registered investment advisor, or
(b) the plan has total assets in excess of $5,000,000 or (c) is a self
directed plan with investment decisions made solely by persons that are
accredited investors. (describe entity)
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Category
E __
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The
undersigned is a private business development company as defined in
section 202(a)(22) of the Investment Advisors Act of 1940. (describe
entity)
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Category
F __
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The
undersigned is either a corporation, partnership, Massachusetts business
trust, or non-profit organization within the meaning of Section 501(c)(3)
of the Internal Revenue Code, in each case not formed for the specific
purpose of acquiring the Securities and with total assets in excess of
$5,000,000. (describe entity)
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Category
G __
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The
undersigned is a trust with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the Securities, where the
purchase is directed by a “sophisticated investor” as defined in
Regulation 506(b)(2)(ii) under the
Act.
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Category
H __
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The
undersigned is an entity (other than a trust) in which all of the equity
owners are “accredited investors” within one or more of the above
categories. If relying upon this Category alone, each equity
owner must complete a separate copy of this
Agreement. (describe entity)
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|
Category
I
|
The
undersigned is not within any of the categories above and is therefore not
an accredited investor.
|
The
undersigned agrees that the undersigned will notify the Company at any time on
or prior to the Closing in the event that the representations and warranties in
this Agreement shall cease to be true, accurate and complete.
14
7.2 SUITABILITY (please
answer each question)
(a) For
an individual Subscriber, please describe your current employment, including the
company by which you are employed and its principal business:
(b) For
an individual Subscriber, please describe any college or graduate degrees held
by you:
(c) For
all Subscribers, please list types of prior investments:
(d) For
all Subscribers, please state whether you have participated in other private placements
before:
YES_______ NO_______
(e) If
your answer to question (d) above was “YES”, please indicate frequency of such
prior participation in private placements
of:
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Public
Companies
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Private
Companies
|
Public or Private Companies
with no, or insignificant,
assets and operations
|
||||
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Frequently
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||||||
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Occasionally
|
||||||
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Never
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(f) For
individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:
YES_______ NO_______
(g) For
trust, corporate, partnership and other institutional Subscribers, do you expect
your total assets to significantly decrease in the foreseeable
future:
YES_______ NO_______
(h) For
all Subscribers, do you have any other investments or contingent liabilities
which you reasonably anticipate could cause you to need sudden cash requirements
in excess of cash readily available to you:
YES_______ NO_______
15
(i) For
all Subscribers, are you familiar with the risk aspects and the non-liquidity of
investments such as the securities for which you seek to subscribe?
YES_______ NO_______
(j)
For all Subscribers, do you understand that there is no guarantee of financial
return on this investment and that you run the risk of losing your entire
investment?
YES_______ NO_______
7.3 MANNER IN WHICH TITLE IS TO
BE HELD. (circle one)
(a) Individual
Ownership
(b) Common
Share Property
(c) Joint
Tenant with Right of
Survivorship (both
parties
must sign)
(d) Partnership*
(e) Tenants
in Common
(f) Company*
(g) Trust*
(h) Other*
*If
Securities are being subscribed for by an entity, the attached Certificate of
Signatory must also be completed.
7.4 FINRA
AFFILIATION.
Are you
affiliated or associated with an FINRA member firm (please check
one):
Yes
_________ No
__________
If Yes,
please describe:
*If
Subscriber is a Registered Representative with an FINRA member firm, have the
following acknowledgment signed by the appropriate party:
The
undersigned FINRA member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
_________________________________
Name of
NASD Member Firm
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By:
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|
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Authorized
Officer
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16
Date:
____________________________
7.5 The
undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in the Confidential Investor Questionnaire
contained in this Article VII and such answers have been provided under the
assumption that the Company will rely on them.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
17
AGGREGATE
FACE AMOUNT OF THE NOTE = $_________ (the “Purchase Price”)
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Signature
|
Signature
(if purchasing jointly)
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|
|
Name
Typed or Printed
|
Name
Typed or Printed
|
|
|
Title
(if Subscriber is an Entity)
|
Title
(if Subscriber is an Entity)
|
|
|
Entity
Name (if applicable)
|
Entity
Name (if applicable
|
|
|
Xxxxxxx
|
Xxxxxxx
|
|
|
Xxxx,
Xxxxx xxx Xxx Xxxx
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Xxxx,
Xxxxx and Zip Code
|
|
|
Telephone-Business
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Telephone-Business
|
|
|
Telephone-Residence
|
Telephone-Residence
|
|
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Facsimile-Business
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Facsimile-Business
|
|
|
Facsimile-Residence
|
Facsimile-Residence
|
|
|
Tax
ID # or Social Security #
|
Tax
ID # or Social Security
#
|
Name in
which securities should be issued:
Dated:
, 2010
This
Subscription Agreement is agreed to and accepted as of ________________ ,
2010.
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By:____________________________________
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||
| Name: | ||
| Title: |
18
CERTIFICATE OF
SIGNATORY
(To be
completed if Securities are
being
subscribed for by an entity)
I,
____________________________, am the ____________________________ of
__________________________________________ (the “Entity”).
I certify
that I am empowered and duly authorized by the Entity to execute and carry out
the terms of the Subscription Agreement and to purchase and hold the Notes, and
certify further that the Subscription Agreement has been duly and validly
executed on behalf of the Entity and constitutes a legal and binding obligation
of the Entity.
IN
WITNESS WHEREOF, I have set my hand this ________ day of _________________,
2010
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(Signature)
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19
