Exhibit 10.5
HC INNOVATIONS, INC.
SUBSCRIPTION AGREEMENT FOR THE PURCHASE OF SECURITIES
HC INNOVATIONS, INC., a Delaware corporation (the "COMPANY"), is
offering (the "OFFERING") for sale to "ACCREDITED INVESTORS" as the term is
defined under Regulation D promulgated under the Securities Act of 1933, as
amended (the "ACT"), up to $1,000,000 principal amount of the Company's
Convertible Debentures ("DEBENTURES") for a purchase price of $1,000 for each
$1,000 principal amount of the Debentures.
The minimum investment by any one investor will be for a purchase of
Debentures in the principal amount of $100,000, upon the terms and conditions
described herein, except that a lesser principal amount of the Debentures may be
sold at the discretion of the Company.
The undersigned hereby subscribes to purchase Debentures in the
prinicpal amount of $________ and agrees to pay an aggregate of $______ as the
subscription amount for such Debentures being purchased hereunder (the
"SUBSCRIPTION AMOUNT"). The entire Subscription Amount is due and payable upon
the execution and delivery of this Subscription Agreement, and shall be paid by
check, subject to collection (or by wire transfer according to the instructions
provided by the Company), made payable to the order of "HC INNOVATIONS, INC.").
The Company has the right to reject this subscription in whole or in part.
The Company retains the right to utilize a NASD member firm to act as
placement agent in connection with the Offering in which event the placement
agent may receive a cash commission from the gross proceeds from the Debentures
sold by such placement agent. Any such commission is expected to be at a rate
that is compatible with industry standards.
Unless terminated sooner, by the Company, in its sole discretion, the
Offering is scheduled to terminate on ____ 15, 2005, 5:00 p.m., Eastern Daylight
Savings Time and in the Company's sole discretion may be extended until ____ 15,
2005, 5:00 p.m., Eastern Daylight Savings Time (the "OFFERING PERIOD").
The Company will hold a closing on and issue the Debentures upon the
receipt and acceptance of the Subscription Agreement and the Subcription Amount
(the "CLOSING"). The date of such Closing is referred to herein as the Closing
Date.
Prospective Investors should retain their own professional advisors to
review and evaluate the economic, tax and other consequences of an investment in
the Company.
THE SECURITIES OFFERED HEREBY, HAVE NOT BEEN FILED OR REGISTERED WITH OR
APPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), NOR HAS
THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE
OFFERING MATERIALS. NO STATE SECURITIES LAW ADMINISTRATOR HAS PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR THE ADEQUACY OF THE
OFFERING MATERIALS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
IT IS INTENDED THAT THE SECURITIES OFFERED HEREBY WILL BE MADE AVAILABLE TO
ACCREDITED INVESTORS, AS DEFINED IN REGULATION D AND RULE 501 PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND UP TO THIRTY-FIVE
NON-ACCREDITED INVESTORS. THE SECURITIES OFFERED HEREBY ARE BEING OFFERED
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND
APPLICABLE STATE SECURITIES LAWS FOR NONPUBLIC OFFERINGS. SUCH EXEMPTIONS LIMIT
THE NUMBER AND TYPES OF INVESTORS TO WHICH THE OFFERING WILL BE MADE AND
RESTRICT SUBSEQUENT TRANSFERS OF THE INTERESTS.
THE SECURITIES OFFERED HEREBY SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN
AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. INVESTORS WILL BE REQUIRED
TO REPRESENT THAT THEY ARE FAMILIAR WITH AND UNDERSTAND THE TERMS OF THIS
OFFERING.
NO SECURITIES MAY BE RESOLD OR OTHERWISE DISPOSED OF BY AN INVESTOR UNLESS, IN
THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, REGISTRATION UNDER THE
APPLICABLE FEDERAL OR STATE SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE IS
MADE WITH SUCH REGISTRATION REQUIREMENTS.
THE OFFEREE, BY ACCEPTING DELIVERY OF THE OFFERING MATERIALS, AGREES TO RETURN
THE OFFERING MATERIALS AND ALL ACCOMPANYING OR RELATED DOCUMENTS TO THE COMPANY
UPON REQUEST IF THE OFFEREE DOES NOT AGREE TO PURCHASE ANY OF THE SECURITIES
OFFERED HEREBY.
ANY OFFERING MATERIALS SUBMITTED IN CONNECTION WITH THE PRIVATE PLACEMENT OF THE
SECURITIES DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED. ANY
REPRODUCTION OR DISTRIBUTION OF ANY OFFERING MATERIALS IN WHOLE OR IN PART, OR
THE DIVULGENCE OF ANY OF THEIR CONTENTS, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMPANY, IS PROHIBITED. ANY PERSON ACTING CONTRARY TO THE FOREGOING
RESTRICTIONS MAY PLACE HIM/HERSELF AND THE COMPANY IN VIOLATION OF FEDERAL OR
STATE SECURITIES LAWS.
NASAA UNIFORM LEGEND
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT, AND THE APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS
OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
The undersigned acknowledges that neither (a) the Debentures offered
hereby nor (b) the common stock issuable upon the conversion of the Debentures
will be registered under the Act, or the securities laws of any State, that
absent an exemption from registration contained in those laws, the issuance and
sale of such Debentures or common stock, as applicable, would require
registration, and that the Company's reliance upon such exemption is based upon
the undersigned's representations, warranties, and agreements contained in the
Offering Materials (as defined below).
1. The undersigned represents, warrants, and agrees as follows:
(a) The undersigned agrees that this Subscription Agreement is and
shall be irrevocable.
(b) The undersigned has carefully read this Subscription
Agreement, the Confidential Private Placement Memorandum, and the Confidential
Prospective Purchaser Questionnaire (collectively the "OFFERING MATERIALS"), all
of which the undersigned acknowledges have been provided to the undersigned. The
undersigned has been given the opportunity to ask questions of, and receive
answers from the Company concerning the terms and conditions of this Offering
and the Offering Materials and to obtain such additional written information, to
the extent the Company possesses such information or can acquire it without
unreasonable effort or expense, necessary to verify the accuracy of the same as
the undersigned desires in order to evaluate the investment. The undersigned
further acknowledges that the undersigned fully understands the Offering
Materials, and the undersigned has had the opportunity to discuss any questions
regarding any of the Offering Materials with the undersigned's counsel or other
advisor. Notwithstanding the foregoing, the only information upon which the
undersigned has relied is that set forth in the Offering Materials and the
undersigned's own independent investigation. The undersigned acknowledges that
the undersigned has received no representations or warranties from
the Company or its employees, director or agents in making this investment
decision other than as set forth in the Offering Materials.
(c) The undersigned is aware that the purchase of the Debentures
is a speculative investment involving a high degree of risk and that there is no
guarantee that the undersigned will realize any gain from this investment, and
that the undersigned could lose the total amount of the undersigned's
investment.
(d) The undersigned understands that no federal or state agency
has made any finding or determination regarding the fairness of this Offering of
the Debentures for investment, or any recommendation or endorsement of this
Offering of the Debentures.
(e) The undersigned is purchasing the Debentures for the
undersigned's own account, with the intention of holding the Debentures, with no
present intention of dividing or allowing others to participate in this
investment or of reselling or otherwise participating, directly or indirectly,
in a distribution of the Debentures, and shall not make any sale, transfer, or
pledge thereof without registration under the Act and any applicable securities
laws of any state or unless an exemption from registration is available under
those laws.
(f) The undersigned represents that the undersigned, if an
individual, has adequate means of providing for his or her current needs and
personal and family contingencies and has no need for liquidity in this
investment in the Debentures. The undersigned has no reason to anticipate any
material change in his or her personal financial condition for the foreseeable
future.
(g) The undersigned is financially able to bear the economic risk
of this investment, including the ability to hold the Debentures indefinitely or
to afford a complete loss of the undersigned's investment in the Debentures.
(h) The undersigned represents that the undersigned's overall
commitment to this investment is not disproportionate to the undersigned's net
worth, and the undersigned's investment in the Debentures will not cause such
overall commitment to become excessive. The undersigned understands that the
statutory basis on which the Debentures are being sold to the undersigned and
others would not be available if the undersigned's present intention were to
hold the Debentures for a fixed period or until the occurrence of a certain
event. The undersigned realizes that in the view of the Commission, a purchase
now with a present intent to resell by reason of a foreseeable specific
contingency or any anticipated change in the market value, or in the condition
of the Company, or that of the industry in which the business of the Company is
engaged or in connection with a contemplated liquidation, or settlement of any
loan obtained by the undersigned for the acquisition of the Debentures, and for
which such Debentures may be pledged as security or as donations to religious or
charitable institutions for the purpose of securing a deduction on an income tax
return, would, in fact, represent a purchase with an intent inconsistent with
the undersigned's representations to the Company and the Commission would then
regard such sale as a
sale for which the exemption from registration is not available. The undersigned
will not pledge, transfer or assign this Subscription Agreement.
(i) The undersigned represents that the funds provided for this
investment are either separate property of the undersigned, community property
over which the undersigned has the right of control, or are otherwise funds as
to which the undersigned has the sole right of management.
(j) FOR PARTNERSHIPS, CORPORATIONS, TRUSTS, OR OTHER ENTITIES
ONLY: If the undersigned is a partnership, corporation, trust or other entity,
(i) the undersigned has enclosed with this Subscription Agreement appropriate
evidence of the authority of the individual executing this Subscription
Agreement to act on its behalf (e.g., if a trust, a certified copy of the trust
agreement; if a corporation, a certified corporate resolution authorizing the
signature and a certified copy of the articles of incorporation; or if a
partnership, a certified copy of the partnership agreement), (ii) the
undersigned represents and warrants that it was not organized or reorganized for
the specific purpose of acquiring the Debentures, (iii) the undersigned has the
full power and authority to execute this Subscription Agreement on behalf of
such entity and to make the representations and warranties made herein on its
behalf, and (iv) this investment in the Company has been affirmatively
authorized, if required, by the governing board of such entity and is not
prohibited by the governing documents of the entity.
(k) The address shown under the undersigned's signature at the end
of this Subscription Agreement is the undersigned's principal residence if he or
she is an individual, or its principal business address if a corporation or
other entity.
(l) The undersigned has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of an
investment in the Debentures.
(m) The undersigned acknowledges that the certificates for the
securities comprising the Debentures which the undersigned will receive will
contain a legend substantially as follows:
"THE SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNTIL A REGISTRATION STATEMENT WITH
RESPECT THERETO IS DECLARED EFFECTIVE UNDER SUCH ACT, OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE COMPANY THAT AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE."
The undersigned further acknowledges that (i) if the Company's
Debentures become publicly traded, any necessary stop transfer orders will be
placed upon the Company's Debentures in accordance with the Act, and (ii) the
Company is under no obligation to aid the undersigned in obtaining any exemption
from the registration requirements.
2. The undersigned expressly acknowledges and agrees that the
Company is relying upon the undersigned's representations contained in the
Offering Materials.
3. The undersigned subscriber acknowledges that the undersigned
understands the meaning and legal consequences of the representations and
warranties which are contained herein and hereby agrees to indemnify, save and
hold harmless the Company and its officers, directors and counsel, from and
against any and all claims or actions arising out of a breach of any
representation, warranty or acknowledgment of the undersigned contained in any
of the Offering Materials. Such indemnification shall be deemed to include not
only the specific liabilities or obligations with respect to which such
indemnity is provided, but also all reasonable costs, expenses, counsel fees and
expenses of settlement relating thereto, whether or not any such liability or
obligation shall have been reduced to judgment. In addition, the undersigned's
representations, warranties and indemnification contained herein shall survive
the undersigned's purchase of the Debentures hereunder. The undersigned
specifically acknowledges that he has reviewed the risks set forth in the
Offering Materials, as well as the financial statements included therein.
4. The Company represents that it has been duly and validly
incorporated and is validly existing and in good standing as a corporation under
the laws of the State of Delaware. The Company represents that it has all
requisite power and authority, and all necessary authorizations, approvals and
orders required as of the date hereof to own its properties and conduct its
business and to enter into this Subscription Agreement and the other Offering
Materials and to be bound by the provisions and conditions hereof or therein.
The Company further represents that the securities offered hereby are being
offered pursuant to an exemption from the registration requirements of the Act
and applicable state securities laws for nonpublic offerings.
5. The undersigned agrees and acknowledges that the Company has
the right to utilize the services of a placement agent and if utilized, may
receive a cash commission, at a rate that is compatible with industry standards,
from the Debentures sold by such placement agent.
6. The undersigned's rights to have the shares of Company's
common stock issuable upon the conversion of the Debentures registered are set
forth in a separate Registration Rights Agreement of even date herewith by and
among the Company and the holders of the Debentures.
7. Except as otherwise specifically provided for hereunder, no
party shall be deemed to have waived any of his or her or its rights hereunder
or under any other
agreement, instrument or papers signed by any of them with respect to the
subject matter hereof unless such waiver is in writing and signed by the party
waiving said right. Except as otherwise specifically provided for hereunder, no
delay or omission by any party in exercising any right with respect to the
subject matter hereof shall operate as a waiver of such right or of any such
other right. A waiver on any one occasion with respect to the subject matter
hereof shall not be construed as a bar to, or waiver of, any right or remedy on
any future occasion. All rights and remedies with respect to the subject matter
hereof, whether evidenced hereby or by any other agreement, instrument, or
paper, will be cumulative, and may be exercised separately or concurrently.
8. The parties have not made any representations or warranties
with respect to the subject matter hereof not set forth herein, and this
Subscription Agreement, together with any instruments executed simultaneously
herewith, constitutes the entire agreement between them with respect to the
subject matter hereof. All understandings and agreements heretofore existing
between the parties with respect to the subject matter hereof are merged in this
Subscription Agreement and any such instrument, which alone fully and completely
express their agreement.
9. This Subscription Agreement may not be changed, modified,
extended, terminated or discharged orally, but only by an agreement in writing,
which is signed by all of the parties to this Subscription Agreement.
10. The parties agree to execute any and all such other and
further instruments and documents, and to take any and all such further actions
reasonably required to effectuate this Subscription Agreement and the intent and
purposes hereof.
11. If any provision or any portion of any provision of this
Subscription Agreement or the application of any such provision or any portion
thereof to any person or circumstance, shall be held invalid or unenforceable,
the remaining portion of such provision and the remaining portion of such
provision as is held invalid or unenforceable to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby.
12. This Subscription Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware and the undersigned hereby
consents to the jurisdiction of the courts of the State of New York and/or the
United States District Court for the Southern District of New York.
ALL SUBSCRIBERS MUST COMPLETE A COPY OF THIS PAGE
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(Print Name of Subscriber)
IN WITNESS WHEREOF, the undersigned has executed this
Subscription Agreement on this ____ day of ________, 2005.
Debenture Subscription Amount $______
1. |__| Individual
2. |__| Joint Tenants with Right of Survivorship
3. |__| Community Property
4. |__| Tenants in Common
5. |__| Corporation/Partnership
6. |__| XXX of________________
7. |__| Trust
Date Opened ___________
8. |__| As A Custodian For________________
Under the Uniform Transfer to Minors Act of the
State of ___________
9. |__| Married with Separate
Property
10. |__| Xxxxx of ____________
EXECUTION BY SUBSCRIBER WHO IS A NATURAL PERSON
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Exact Name in Which Title is to be Held
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(Signature)
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Name (Please Print)
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Title of Person Executing Agreement
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Address: Number and Street
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City State Zip Code
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Social Security Number
Accepted this ___ day of _______, 2005, on behalf of HC INNOVATIONS,
INC.
By: ___________________________
Name:
Title:
EXECUTION BY SUBSCRIBER WHICH IS A CORPORATION,
PARTNER, TRUST, ETC.
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Exact Name in Which Title is to be Held
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(Signature)
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Name (Please Print)
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Title of Person Executing Agreement
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Address: Number and Street
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City State Zip Code
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Tax Identification Number
Accepted this ___ day of _______, 2005on behalf of HC INNOVATIONS, INC.
By: ________________________
Name:
Title:
