EXHIBIT 10.7
SUBSCRIPTION AGREEMENT
NUWAVE Technologies, Inc.
Xxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Ladies and Gentlemen:
1. Subscription.
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(a) The undersigned, intending to be legally bound, hereby
irrevocably subscribes to purchase from NUWAVE Technologies, Inc., a Delaware
corporation (the "Company"), the number of units (the "Units") set forth on the
signature page hereof, for a purchase price of $100,000 per Unit (the "Purchase
Price"). Each Unit consists of (i) a number of shares of common stock, par value
$.01 per share (the "Common Stock"), of the Company, determined by dividing the
Purchase Price per Unit of $100,000 by, for the initial closing of the Offering,
eighty percent (80%) of the "Initial Average Closing Bid Price" which shall be
the average closing bid price for the Common Stock for the eight (8) consecutive
trading days from and including April 28, 1998 to and including May 7, 1998, and
for each subsequent closing, the lesser of (x) $3.20 and (y) eighty percent
(80%) of the "Average Closing Bid Price" which shall be the average closing bid
price for the Common Stock for the eight (8) consecutive trading days
immediately preceding the date of a closing of the Offering described below, and
(ii) Class A Redeemable Warrants (the "Warrants") to purchase seventy-five
percent (75%) of such number of shares of Common Stock of the Company (the
"Warrant Shares"). This subscription is submitted to you in accordance with and
subject to the terms and conditions described in this Agreement and the
Confidential Private Placement Memorandum, dated May 8, 1998, as it may be
supplemented and amended (the "Memorandum"), relating to an offering (the
"Offering") of a minimum of 25 Units and a maximum of 70 Units. If the
undersigned is purchasing a fractional Unit, all components of the Unit and the
Purchase Price will be calculated by multiplying the respective numbers for one
full Unit by the fraction to be purchased.
(b) Subscription payments should be made payable to "Republic
National Bank of New York, as Escrow Agent for NUWAVE Technologies, Inc." and
should be delivered, together with two executed and properly completed copies of
this Agreement (along with an executed and properly completed copy of the
appropriate Confidential Purchaser Questionnaire in the form supplied herewith),
to Xxxxxxx-Xxxxxx Associates, L.P. ("JMA"), 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxxxx. If the subscription is not accepted in whole or in
part by the Company, the full or ratable amount, as the case may be, of any
subscription payment received will be promptly refunded to the subscriber
without deduction therefrom or interest thereon.
(c) If this subscription is accepted by the Company, in whole or in
part, and subject to the conditions set forth in Section 2 of this Agreement,
the Company shall deliver to the undersigned the Common Stock and the Warrants
subscribed for hereby, dated the date of closing of the Offering of such Units
(the "Closing") and a fully executed copy of this Agreement.
(d) The Company has engaged JMA to introduce the Company to persons
who may be interested in purchasing Units and to advise the Company in
connection with the structure, terms and conditions of the Offering. As
consideration for its services, JMA will receive (i) a fee of 10% of the
aggregate gross proceeds from the sale of the Units in the Offering, (ii) a 3%
non-accountable expense allowance, (iii) a warrant to purchase a number of Units
equal to 25% of the Units sold in the Offering and (iv) reimbursement of certain
reasonable expenses, subject to receipt by the Company of appropriate
documentation. JMA, its officers, directors, employees, agents, consultants
and/or affiliates may participate in the Offering. JMA did not prepare any of
the information relating to the Company or its operations to be delivered to
prospective investors in connection with the Offering. Prospective investors are
advised to conduct their own review of the business, properties and affairs of
the Company before subscribing to purchase Units.
(e) The undersigned may not withdraw this subscription or any amount
paid pursuant thereto, except as otherwise provided below.
2. Conditions. It is understood and agreed that this subscription is
made, subject to the following terms and conditions:
(a) The Company shall have the right to accept or reject this
subscription in whole or in part. Unless this subscription is accepted in whole
or in part by the Company prior to the expiration of the Offering Period (as
defined in the Memorandum), this subscription shall be deemed rejected in whole.
Subscriptions accepted in whole or in part by the Company shall be irrevocable,
except as otherwise provided by law. Subscriptions need not be accepted in the
order received.
(b) At the date of the Closing, JMA shall have been furnished with
such information, documents, certificates, and opinions as it may reasonably
require to evidence the accuracy, completeness, or satisfaction of the
representations, warranties, covenants, agreements, and conditions herein
contained or as it otherwise may reasonably request.
3. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with the undersigned as follows, in each
case as of the date hereof and in all material respects as of the date of the
Closing except for any changes resulting solely from the Offering:
(a) The Company is duly organized, validly existing and in good
standing under the laws of the State of Delaware with full power and authority
to own, lease, license and use its properties and assets and to conduct the
business in which it is engaged as described in the Memorandum. The Company is
duly qualified to transact the business in which
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it is engaged as described in the Memorandum and is in good standing as a
foreign corporation in every jurisdiction in which its ownership, leasing,
licensing or use of its property or assets or the conduct of its business make
such qualification necessary, except where the failure to be so qualified would
not have a material adverse effect on the Company. The Company has no
subsidiaries.
(b) The authorized capital stock of the Company consists of
2,000,000 shares of preferred stock, par value $.01 per share (the "Preferred
Stock"), and 20,000,000 shares of Common Stock. There are no outstanding shares
of Preferred Stock. Each outstanding share of Common Stock is duly authorized,
validly issued, fully paid and nonassessable.
(c) The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement, to issue, sell and
deliver the securities underlying the Units. This Agreement has been duly
authorized by the Company, and when executed and delivered by the Company, will
constitute the legal, valid and binding obligation of the Company, enforceable
as to the Company in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent
conveyance or transfer, moratorium or other laws or court decisions, now or
hereinafter in effect, relating to or affecting the rights of creditors
generally and as may be limited by general principles of equity and the
discretion of the court having jurisdiction in an enforcement action (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
(d) Except for Form D filing with the Securities and Exchange
Commission and required "blue sky" filings, no consent, authorization, approval,
order, license, certificate or permit of or from, or declaration or filing with,
any federal, state, local or other governmental authority or any court or any
other tribunal is required by the Company for the execution, delivery or
performance by the Company of this Agreement or the execution, issuance, sale or
delivery of the Units.
(e) No consent of any party to any material contract, agreement,
instrument, lease, license, arrangement or understanding to which the Company is
a party or to which any of its properties or assets are subject is required for
the execution, delivery or performance by the Company of this Agreement, or the
execution, issuance, sale or delivery of the Units, except that under a letter
agreement, dated January 16, 1998 (the "Letter Agreement"), between Trinity
Capital Advisors, Inc. ("Trinity") and the Company, Trinity has a right of first
refusal with respect to any offerings by the Company of Common Stock or any
other securities convertible into Common Stock pursuant to a discounted
transaction. In accordance with the Letter Agreement, the Company offered
Trinity the right to provide financing to the Company which would be comparable
to the Offering of the Units. Because Trinity's proposal for a $5 million
convertible debt offering was unfavorable to the Company and not comparable to
the Offering, the Company decided to proceed with the Offering of the Units.
(f) The execution, delivery and performance of this Agreement will
not violate, result in a breach of, conflict with (with or without the giving of
notice or the passage of time or both) or entitle any party to terminate or call
a default under, any material contract, agreement, instrument, lease, license,
arrangement or understanding or violate or result in a
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breach of any term of the certificate of incorporation or by-laws of, or
conflict with any law, rule, regulation, order, judgment or decree binding upon,
the Company or to which any of its operations, businesses, properties or assets
are subject which individually or in the aggregate do not have a material
adverse effect upon the operations, business, properties or assets of the
Company.
(g) The securities underlying the Units, upon delivery to the
subscriber, will be validly issued, fully paid and nonassessable and will not be
issued in violation of any preemptive or other rights of stockholders known to
the Company except as described in the Memorandum.
4. Representations and Warranties of the Subscriber. The undersigned
hereby represents and warrants to, and agrees with, the Company as follows:
(a) The undersigned is an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D promulgated under the Securities Act of
1933, as amended (the "Act"). Specifically, the undersigned is (check
appropriate items(s)):
___(i) A bank, as defined in Section 3(a)(2) of the Act, or a
savings and loan association or other institution, as defined in Section
3(a)(5)(A) of the Act, whether acting in its individual or fiduciary capacity; a
broker or dealer registered pursuant to Section 15 of the Securities Exchange
Act of 1934, as amended; an insurance company as defined in Section 2(13) of the
Act; an investment company registered under the Investment Company Act of 1940
or a business development company as defined in Section 2(a)(48) of that Act; a
Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958; a plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets in
excess of $5,000,000; an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, as amended, if the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of such Act,
which is either a bank, savings and loan association, insurance company, or
registered investment advisor, or if the employee benefit plan has total assets
in excess of $5,000,000 or, if a self-directed plan, with investment decisions
made solely by persons that are accredited investors;
___(ii) A private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940, as amended;
___(iii) An organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific purpose of acquiring
the securities offered, with total assets in excess in $5,000,000;
___(iv) A director or executive officer of the Company;
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___(v) A natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his or her purchase exceeds
$1,000,000;
___(vi) A natural person who had an individual income in excess
of $200,000 in each of the two most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year;
___(vii) A trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) (i.e., a person who has such knowledge and experience in financial
and business matters that he is capable of evaluating the merits and risks of
the prospective investment); or
___(viii) An entity in which all of the equity owners are
accredited investors. (If this alternative is checked, the undersigned must
identify each equity owner and provide statements signed by each demonstrating
how each is qualified as an accredited investor.)
(b) If a natural person, the undersigned is: a bona fide resident of
the State contained in the address set forth on the signature page of this
Agreement as the undersigned's home address; at least 21 years of age; and
legally competent to execute this Agreement. If an entity, the undersigned is
duly authorized to execute this Agreement and this Agreement constitutes the
legal, valid and binding obligation of the undersigned enforceable against the
undersigned in accordance with its terms.
(c) The undersigned has received, read carefully and is familiar
with this Agreement and the Memorandum. Respecting the Company, the undersigned
is familiar with the Company's business, plans and financial condition, the
terms of the Offering and any other matters relating to the Offering; the
undersigned has received all materials which have been requested by the
undersigned; has had a reasonable opportunity to ask questions of the Company
and its representatives; and the Company has answered all inquiries that the
undersigned or the undersigned's representatives have put to it. The undersigned
has had access to all additional information necessary to verify the accuracy of
the information set forth in this Agreement and the Memorandum and any other
materials furnished herewith or therewith, and has taken all the steps necessary
to evaluate the merits and risks of an investment as proposed hereunder.
(d) The undersigned or the undersigned's purchaser representative
has such knowledge and experience in finance, securities, investments and other
business matters so as to be able to protect the interests of the undersigned in
connection with this transaction, and the undersigned's investment in the
Company hereunder is not material when compared to the undersigned's total
financial capacity.
(e) The undersigned understands the various risks of an investment
in the Company as proposed herein and can afford to bear such risks, including,
without limitation, the risks of losing the entire investment.
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(f) The undersigned understands that JMA does not make any
representation or warranty concerning the accuracy or completeness of any
information, relating to the Company or its operations to be delivered to
prospective investors in connection with the Offering.
(g) The undersigned acknowledges that no market for the Units or
Warrants presently exists and none may develop in the future and that the
undersigned may find it impossible to liquidate the investment at a time when it
may be desirable to do so, or at any other time.
(h) The undersigned has been advised by the Company that none of the
Units, nor the Common Stock and the Warrants underlying the Units nor the
Warrant Shares (collectively, the "Securities") have been registered under the
Act, that the Securities will be issued on the basis of the statutory exemption
provided by Section 4(2) of the Act or Regulation D promulgated thereunder, or
both, relating to transactions by an issuer not involving any public offering
and under similar exemptions under certain state securities laws, that this
transaction has not been reviewed by, passed on or submitted to any federal or
state agency or self-regulatory organization where an exemption is being relied
upon, and that the Company's reliance thereon is based in part upon the
representations made by the undersigned in this Agreement. The undersigned
acknowledges that the undersigned is familiar with the nature of the limitations
imposed by the Act and the rules and regulations thereunder on the transfer of
Securities. In particular, the undersigned agrees that no sale, assignment or
transfer of any of the Securities shall be valid or effective, and the Company
shall not be required to give any effect to such a sale, assignment or transfer,
unless (i) the sale, assignment or transfer of such Securities is registered
under the Act, it being understood that the Securities are not currently
registered for sale and that the Company has no obligation or intention to so
register the Securities except as contemplated by the terms of this Agreement
and the Warrants, or (ii) such Securities are sold, assigned or transferred in
accordance with all the requirements and limitations of Rule 144 under the Act,
it being understood that Rule 144 is not available at the present time for the
sale of the Securities, or (iii) such sale, assignment or transfer is otherwise
exempt from registration under the Act. The undersigned further understands that
an opinion of counsel and other documents may be required to transfer the
Securities. The undersigned acknowledges that the Securities shall be subject to
a stop transfer order and the certificate or certificates evidencing any
Securities shall bear the following or a substantially similar legend or such
other legend as may appear on the form of Warrants and such other legends as may
be required by state blue sky laws:
"The securities represented by this certificate have
not been registered under the Securities Act of 1933,
as amended (the "Act"), or any state securities laws
and neither such securities nor any interest therein
may be offered, sold, pledged, assigned or otherwise
transferred unless (1) a registration statement with
respect thereto is effective under the Act and any
applicable state securities laws or (2) the Company
receives an opinion of counsel to the holder of such
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securities, which counsel and opinion are reasonably
satisfactory to the Company, that such securities may
be offered, sold, pledged, assigned or transferred in
the manner contemplated without an effective
registration statement under the Act or applicable
state securities laws."
(i) The undersigned will acquire the Securities for the
undersigned's own account (or for the joint account of the undersigned and the
undersigned's spouse either in joint tenancy, tenancy by the entirety or tenancy
in common) for investment and not with a view to the sale or distribution
thereof or the granting of any participation therein, and has no present
intention of distributing or selling to others any of such interest or granting
any participation therein.
(j) It never has been represented, guaranteed or warranted by any
broker, the Company, JMA, any of the Company's or JMA's officers, directors,
stockholders, partners, employees or agents, or any other persons, whether
expressly or by implication, that: (i) the Company or the undersigned will
realize any given percentage of profits and/or amount or type of consideration,
profit or loss as a result of the Company's activities or the undersigned's
investment in the Company; or (ii) the past performance or experience of the
management of the Company, or of any other person, will in any way indicate the
predictable results of the ownership of the Securities or of the Company's
activities.
(k) No oral or written representations have been made other than as
stated in the Memorandum and this Agreement, and no oral or written information
furnished to the undersigned or the undersigned's advisor(s) in connection with
the Offering were in any way inconsistent with the information stated in the
Memorandum or this Agreement.
(l) The undersigned is not subscribing for Units as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, or presented at any seminar or meeting, or any solicitation
of a subscription by a person other than a representative of JMA or the Company
with which the undersigned had a pre-existing relationship in connection with
investments in securities generally.
(m) The undersigned is not relying on the Company with respect to
the tax and other economic considerations of an investment.
(n) The undersigned understands that the net proceeds from all
subscriptions paid and accepted pursuant to the Offering (after deduction for
expenses of the Offering, including the fees and expenses payable to JMA) will
be used in all material respects for the purposes set forth in the Memorandum.
(o) Without limiting any of the undersigned's other representations
and warranties hereunder, the undersigned acknowledges that the undersigned has
reviewed and is aware of the risk factors described in the Memorandum.
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(p) The undersigned acknowledges that the representations,
warranties and agreements made by the undersigned herein shall survive the
execution and delivery of this Agreement and the purchase of the Units.
(q) The undersigned has consulted his own financial, legal and tax
advisors with respect to the economic, legal and tax consequences of an
investment in the Units and has not relied on the Memorandum or the Company, its
officers, directors or professional advisors for advice as to such consequences.
5. Registration Rights.
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(a) The Company will use its best efforts to file a registration
statement (the "Registration Statement") under the Act registering the shares of
Common Stock, the Warrants and the Warrant Shares underlying the Units
(together, the "Registrable Securities"), upon demand, after six (6) months of
the Final Closing (as defined in the Memorandum) of the Offering (the "Filing
Date"), and use its best efforts to have the Registration Statement declared
effective by the Securities and Exchange Commission (the "Commission") as soon
as possible thereafter (the "Effective Date"). In the event the Registration
Statement is not declared effective within 60 days after a demand for
registration, the then number of Warrants shall be increased by two percent
(2%), effective as of the end of such 60 day period and by an additional two
percent (2%) on each one month anniversary thereafter, until such time that the
number of Warrants should equal 120% of the original number of Warrants. The
Company agrees to keep the Registration Statement effective until the expiration
period of the Warrants.
(b) In the event of a registration pursuant to the provisions of
this Section 5, the Company shall use its best efforts to cause the Registrable
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the holder or such holders
(the "Eligible Holders") may reasonably request; provided, however, that the
Company shall not by reason of this Section 5(b) be required to qualify to do
business in any state in which it is not otherwise required to qualify to do
business or to file a general consent to service of process.
(c) The Company shall keep effective any registration or
qualification contemplated by this Section 5 and shall from time to time amend
or supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document, and communication for such period of
time as shall be required to permit the Eligible Holders to complete the offer
and sale of the Registrable Securities covered thereby.
(d) In the event of a registration pursuant to the provisions of
this Section 5, the Company shall furnish to each Eligible Holder such
reasonable number of copies of the registration statement and of each amendment
and supplement thereto (in each case, including all exhibits), such reasonable
number of copies of each prospectus contained in such registration statement and
each supplement or amendment thereto (including each preliminary prospectus),
all of which shall conform to the requirements of the Act and the rules and
8
regulations thereunder, and such other documents, as any Eligible Holder may
reasonably request to facilitate the disposition of the Registrable Securities
included in such registration.
(e) In the event of a registration pursuant to the provision of this
Section 5, the Company and each Eligible Holder shall enter into a
cross-indemnity agreement and a contribution agreement, each in customary form,
with each underwriter, if any, and, if requested, enter into an underwriting
agreement containing customary representations, warranties, allocation of
expenses, and customary closing conditions, including, without limitation,
opinions of counsel and accountants' cold comfort letters, with any underwriter
who acquires any Registrable Securities.
(f) The Company agrees that until all the Registrable Securities
have been sold under a registration statement or pursuant to Rule 144 under the
Act, it shall keep current in filing all reports, statements and other materials
required to be filed with the Commission to permit holders of the Registrable
Securities to sell such securities under Rule 144.
6. Indemnification. The undersigned acknowledges that the undersigned
understands the meaning and legal consequences of the representations and
warranties contained in Section 4 hereof, and agrees to indemnify and hold
harmless the Company, JMA, its partners, and each incorporator, officer,
director, partner, employee, agent and controlling person of each thereof, past,
present or future, from and against any and all loss, damage or liability due to
or arising out of a breach of any such representation or warranty.
7. Transferability. Neither this Agreement, nor any interest of the
undersigned herein, shall be assignable or transferable by the undersigned in
whole or in part except by operation of law.
8. Miscellaneous.
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(a) This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, supersedes all existing
agreements among them concerning such subject matter, and may be modified only
by a written instrument duly executed by the party to be charged.
(b) Except as otherwise specifically provided herein, any notice or
other communication required or permitted to be given hereunder shall be in
writing and shall be mailed by certified mail, return receipt requested, or by
Federal Express, Express Mail or similar overnight delivery or courier service
or delivered (in person or by telecopy, telex or similar telecommunications
equipment) against receipt to the party to whom it is to be given, (i) if to the
Company, at the address set forth on the first page hereof, (ii) if to the
undersigned, at the address set forth on the signature page hereof, or (iii) in
either case, to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 8(b). Notice to the estate of
any party shall be sufficient if addressed to the party as provided in this
Section 8(b). Any notice or other communication given by certified mail shall be
9
deemed given at the time of certification thereof, except for a notice changing
a party address which shall be deemed given at the time of receipt thereof. Any
notice given by other means permitted by this Section 8(b) shall be deemed given
at the time of receipt thereof.
(c) This Agreement shall be binding upon and inure to the benefit of
the parties hereto, the successors and assigns of the Company, and the permitted
successors, assigns, heirs and personal representatives of the undersigned
(including permitted transferees of the Securities).
(d) The headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
(e) This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to principles
governing conflicts of law.
(g) This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement
(except as provided in Sections 6, 8(c) and 8(g)); provided, that JMA shall be
entitled to rely on, and shall be a third party beneficiary of, the
representations, warranties and agreements contained in this Agreement.
(h) The parties hereto irrevocably consent to the jurisdiction of
the courts of the State of New York and of any federal court located in such
State in connection with any action or proceeding arising out of or relating to
this Agreement, any document or instrument delivered pursuant to, in connection
with or simultaneously with this Agreement, or a breach of this Agreement or any
such document or instrument. In any such action or proceeding, each party hereto
waives personal service of any summons, complaint or other process and agrees
that service thereof may be made in accordance with Section 8(b). Within 30 days
after such service, or such other time as may be mutually agreed upon in writing
by the attorneys for the parties to such action or proceeding, the party so
served shall appear or answer such summons, complaint or other process.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year this subscription has been accepted by the Company as set
forth below.
Number of Units Print Name of Subscriber:
Being Purchased:
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By:
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($100,000 per Unit) (Signature of Subscriber or Authorized Signatory)
Social security Number or other Taxpayer
Identification Number:
----------------------------------------------------
Address:
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If the Units will be held as joint tenants, tenants
in common, or community property, please complete
the following:
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Print name of spouse or other co-subscriber
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Signature of spouse or other co-subscriber
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Print manner in which Units will be held
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Social Security Number of spouse or other
co-subscriber
ACCEPTED BY:
NUWAVE Technologies, Inc.
By:
-----------------------
Name:
Title:
Date: , 1998
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