SUBSCRIPTION AGREEMENT
EXHIBIT
10.2
THIS
SUBSCRIPTION AGREEMENT (the “Agreement”)
is made
as of this 19th day of June, 2006, by and among Alternative Energy Sources,
Inc., a Delaware corporation (the “Company”),
Xxxxxx
Energy, Inc., a Delaware corporation (“Xxxxxx”)
and
the investor identified on the signature page to this Agreement (the
“Investor”).
RECITALS:
WHEREAS,
the Company and Xxxxxx have agreed to enter into an Agreement and Plan of Merger
and Reorganization, pursuant to which Xxxxxx Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of the Company, will merge with and
into Xxxxxx, with Xxxxxx being the surviving entity and a wholly-owned
subsidiary of the Company (the “Merger”),
upon
the effective date of the Merger (the “Merger Effective
Date”);
WHEREAS,
as a condition to the consummation of the Merger, and to provide the capital
required by Xxxxxx for working capital purposes, the Company is offering in
compliance with Rule 506 of Regulation D of the Securities Act of 1933, as
amended (the “Securities Act”), to accredited investors in a private placement
transaction (the “Offering”),
a
minimum (the “Minimum”)
of
5,000,000 units (the “Units”)
and a
maximum (the “Maximum”)
of
10,000,000 Units, each Unit consisting of one share of the Company’s common
stock, par value $0.0001 per share (“Common
Stock”)
and a
warrant (the “Investor
Warrants”)
to
purchase one share of Common Stock for five years at the exercise price of
$2.00
per share of Common Stock; par value $0.0001 per share;
WHEREAS,
in the event the Offering is over subscribed and the Maximum amount is sold
to
Investors on the Closing Date, the Company shall have the right, in its
discretion, to sell an additional 2,000,000 Units at the Purchase Price (as
defined below) in the 30 day period following the Closing Date;
WHEREAS,
the Investor desires to subscribe for, purchase and acquire from the Company
and
the Company desires to sell and issue to the Investor the number of Units,
set
forth on the signature page of this Agreement (the “Investor’s
Units”)
upon
the terms and conditions and subject to the provisions hereinafter set
forth;
WHEREAS,
in connection with the purchase of the Investor’s Units, the Company and the
Investor will execute a Registration Rights Agreement dated as of the same
date
as this Agreement pursuant to which the Company will provide certain
registration rights to the Investor (the “Registration
Rights Agreement”);
and
WHEREAS,
the Company, Xxxxxx and McGuireWoods
LLP
(the
“Escrow
Agent”)
have
entered into an Escrow Agreement (the “Escrow
Agreement”)
to
provide for the safekeeping of funds received and documents executed in
connection with the Offering.
NOW,
THEREFORE, for and in consideration of the mutual premises contained herein
and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby, the parties hereto agree as follows:
1. Purchase
and Sale of the Units.
Subject
to the terms and conditions of this Agreement and the satisfaction of the
Closing Conditions, the Investor subscribes for and agrees to purchase and
acquire from the Company and the Company agrees to sell and issue to the
Investor the Investor’s Units at the purchase price of $1.00 per share (the
“Purchase
Price”).
2. The
Closing.
The
Offering will terminate upon the earlier of i) the receipt of acceptable
subscriptions totaling $10,000,000 or such greater amount as the Company may
determine, or ii) the election of the Company upon receipt of subscriptions
totaling at least $5,000,000; provided however, that the initial closing of
the
Offering shall be concurrent with the close of the Merger
(the
“Closing
Date”)
at the
offices of the Escrow Agent. On the Closing Date, the Escrow Agent shall deliver
the funds and Transaction Documents (as defined herein) held in escrow as of
the
Closing Date pursuant to the terms of the Escrow Agreement. As soon as
practicable after the Closing Date, the Company shall issue and deliver, or
shall cause the issuance and delivery of, a stock certificate, registered in
the
name of the Investor and representing the shares of Common Stock underlying
the
Investor’s Units and an Investor Warrant registered in the name of the Investor
representing the Investor’s right to purchase the number of shares of Common
Stock underlying the Investor’s Warrant.
3. Subscription
Procedure.
To
complete a subscription for Units, the Investor must fully comply with the
subscription procedure provided in this Section on or before 5:00 p.m. eastern
time on the Closing Date.
(a) Transaction
Documents.
Prior
to 5:00 p.m. eastern time on the Closing Date, the Investor shall review,
complete and execute this Agreement, the Investor Questionnaire attached hereto
as Appendix A and the Registration Rights Agreement, and deliver such agreements
and questionnaire to the Escrow Agent at the address provided below. Executed
agreements and questionnaires may be delivered to the Escrow Agent by facsimile
using the facsimile number provided below if the Investor immediately thereafter
confirms receipt of such transmission with the Escrow Agent and delivers the
original copies of the agreements and questionnaire to the Escrow Agent as
soon
as practicable thereafter.
Escrow
Agent - Mailing Address and Facsimile Number:
McGuireWoods
LLP
00
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx,
XX 00000-0000
Facsimile
Number: (000) 000-0000
Attention:
Xxxxxxxx Xxxxx
Telephone
Number: (000) 000-0000
(b) Purchase
Price.
Simultaneously with the delivery of the Transaction Documents to the Escrow
Agent as provided herein, and in any event on or prior to 5:00 p.m. eastern
time
on the Closing Date, the Investor shall deliver to the Escrow Agent the full
Purchase Price for the Investor’s Units by wire transfer of immediately
available funds pursuant to wire transfer instructions provided
below:
2
Escrow
Agent - Wire Transfer Instructions:
BANK
OF
AMERICA - Jacksonville, FL
ABA:
000000000 (Domestic Wires)
Swift
Code: XXXXXX0X (International Wires)
Credit:
McGuireWoods LLP IOLTA Account
Account
Number: 2101206537
Reference:
Xxxxx Xxxxx -Alternative
Energy Sources, Inc. Escrow - 2048362-0001
McGuireWoods
Accounting Contact: Xxxxx Xxxxx (000) 000-0000
Bank
Contact: Xxxxxxx Xxxxx (000) 000-0000, Opt. 2, Ext. 2160
(c) Purchaser
Representative.
If the
Investor has retained the services of a purchaser representative to assist
in
evaluating the merits and risks associated with investing in the Units, the
Investor must deliver along with the Transaction Documents a purchaser
representative certificate in a form acceptable to the Company.
4. Representations
and Warranties of the Company and Xxxxxx.
In
order to induce the Investor to enter into this Agreement, the Company and,
as
applicable, Xxxxxx represent and warrant to the Investor the
following:
(a) Authority.
The
Company and Xxxxxx each is an entity duly organized, validly existing, and
in
good standing under the laws of the state in which it was incorporated or
otherwise formed, and has all requisite right, power, and authority to execute,
deliver and perform this Agreement.
(b) Subsidiaries.
The
Company has no direct or indirect subsidiaries (each a “Subsidiary”
and
collectively the “Subsidiaries”)
other
than those set forth in the Exchange Act Documents (as defined in Section 3(f)),
or as are necessary or desirable to consummate the Merger and the transactions
contemplated in the Merger Agreement. Except as disclosed in the Exchange Act
Documents, the Company owns, directly or indirectly, all of the capital stock
of
each Subsidiary free and clear of any and all liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights.
(c) Enforceability.
The
execution, delivery, and performance of this Agreement by the Company have
been
duly authorized by all requisite corporate action. This Agreement has been
duly
executed and delivered by each of the Company and Xxxxxx, and, upon its
execution by the Investor, shall constitute the legal, valid, and binding
obligation of each of the Company and Xxxxxx, enforceable in accordance with
its
terms, except to the extent that its enforceability is limited by bankruptcy,
insolvency, reorganization, or other laws relating to or affecting the
enforcement of creditors’ rights generally and by general principles of
equity.
(d) No
Violations.
The
execution, delivery, and performance of this Agreement by the Company or by
Xxxxxx does not, and will not, violate or conflict with any provision of the
Company’s or Xxxxxx’x respective Certificate of Incorporation or Bylaws, or
other charter documents, and does not and will not, with or without the passage
of time or the giving of notice, result in the breach of, or constitute a
default, cause the acceleration of performance, or require any consent under,
or
result in the creation of any lien, charge or encumbrance upon any property
or
assets of the Company, or as applicable of Xxxxxx, pursuant to, any material
instrument or agreement to which the Company, or Xxxxxx, is a party or by which
the Company, or Xxxxxx, or its properties are bound.
3
(e) Capitalization.
The
authorized capital stock of the Company consists of: 75,000,000
shares
of Common Stock, of which 38,437,500 shares were issued and outstanding as
of
May 22, 2006. Upon issuance in accordance with the terms of this Agreement
against payment of the Purchase Price therefore, the shares of Common Stock
underlying the Investor’s Units will be duly and validly issued, fully paid, and
nonassessable and free and clear of all liens imposed by or through the Company,
and, assuming the accuracy of the representations and warranties of the Investor
and all other purchasers of Units in the Offering, will be issued in accordance
with a valid exemption from the registration or qualification provisions of
the
Securities Act, and any applicable state securities laws (the “State Acts”).
(f) Exchange
Act Filing.
During
the 12 calendar months immediately preceding the date of this Agreement, all
reports and statements required to be filed by the Company with the Securities
and Exchange Commission (the “Commission”)
under
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
and
the rules and regulations thereunder, have been timely filed. Such filings,
together with all documents incorporated by reference therein, are referred
to
as “Exchange
Act Documents.”
Each
Exchange Act Document, as amended, conformed in all material respects to the
requirements of the Exchange Act and the rules and regulations thereunder,
and
no Exchange Act Document, as amended, at the time each such document was filed,
included any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(g) Company
Financial Statements. The
audited financial statements, together with the related notes of the Company
at
December 31, 2005, included in the Company’s Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2005 as filed with the Commission (the
“Company
Financial Statements”),
fairly present in all material respects, on the basis stated therein and on
the
date thereof, the financial position of the Company at the respective dates
therein specified and its results of operations and cash flows for the periods
then ended. Such statements and related notes have been prepared in accordance
with generally accepted accounting principles in the United States applied
on a
consistent basis except as expressly noted therein.
(h) No
Material Liabilities.
Except
for liabilities or obligations not individually in excess of $100,000.00, or
as
set forth in the Exchange Act Documents, since December 31, 2005, the Company
has not incurred any material liabilities or obligations, direct or contingent,
except in the ordinary course of business and except for liabilities or
obligations reflected or reserved against on the Company’s balance sheet as of
December 31, 2005, and there has not been any change, or to the knowledge of
the
Company, development or effect (individually or in the aggregate) that is or
is
reasonably likely to be, materially adverse to the condition (financial or
otherwise), business, prospects, or results of operations of the Company and
the
Subsidiaries considered as a whole (a “Material
Adverse Effect”)
or any
change in the capital or material increase in the long-term debt of the Company,
nor has the Company declared, paid, or made any dividend or distribution of
any
kind on its capital stock.
4
(i) No
Disputes Against Company.
There is
no material pending or, to the knowledge of the Company, threatened (i) action,
suit, claim, proceeding, or investigation against the Company, at law or in
equity, or before or by any Federal, state, municipal, or other governmental
department, commission, board, bureau, agency or instrumentality, domestic
or
foreign, (ii) arbitration proceeding against the Company, (iii) governmental
inquiry against the Company or (iv) any action or suit by or on behalf of the
Company pending or threatened against others.
(j) Approvals.
The
execution, delivery, and performance by the Company of this Agreement and the
offer and sale of the Units require no consent of, action by or in respect
of,
or filing with, any person, governmental body, agency, or official other than
those consents that have been obtained prior to the Closing and those filings
required to be made pursuant to the Securities Act and any State Acts which
the
Company undertakes to file within the applicable time period.
(k) Compliance.
Neither
the Company nor Xxxxxx, nor any their respective Subsidiaries, (i) is in default
under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a default by the
Company nor Xxxxxx, or any of their respective Subsidiaries under), nor has
the
Company nor Xxxxxx, or any of their respective Subsidiaries received notice
of a
claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement, or any other agreement or instrument to which it
is a
party or by which it or any of its properties is bound (whether or not such
default or violation has been waived), (ii) is in violation of any order of
any
Court, arbitrator, or governmental body or (iii) is or has been in violation
of
any statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect. The Company is in compliance with the applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules and
regulations thereunder, except where such noncompliance could not have or
reasonably be expected to result in a Material Adverse Effect.
(l) Patents
and Trademarks.
The
Company and Xxxxxx, or any of their respective Subsidiaries have, or have rights
to use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses, and other similar rights
that
are necessary or material for use in connection with their respective businesses
as described in the Exchange Act Documents and which the failure to so have
could, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect (collectively, the “Intellectual
Property Rights”).
Neither the Company nor Xxxxxx, or any of their respective Subsidiaries, has
received a written notice that the Intellectual Property Rights used by the
Company or Xxxxxx, or any of their respective Subsidiaries, violates or
infringes upon the rights of any person. Except as set forth in the Exchange
Act
Documents, to the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another person
of any of the Intellectual Property Rights, except where such infringement
could
not have or reasonably be expected to result in a Material Adverse
Effect.
(m) Transactions
With Affiliates and Employees.
Except
as set forth in the Exchange Act Documents, none of the officers or directors
of
the Company and, to the knowledge of the Company, none of the employees of
the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers, and directors),
including any contract, agreement, or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director, or such employee or, to the knowledge of the Company, any entity
in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee, or partner.
5
(n) Internal
Accounting Controls.
The
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to
maintain asset accountability, (iii) access
to
assets is permitted only in accordance with management’s general or specific
authorization,
and
(iv) the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures
(as
defined in Exchange Act rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that material
information relating to the Company and its Subsidiaries is made known to the
Company’s certifying officers by others within those entities, particularly
during the period in which the Company’s Form 10-KSB or 10-QSB, as the case may
be, are being prepared. The Company’s certifying officers have evaluated the
effectiveness of the Company’s controls and procedures as of the end of the
reporting period covered by the Company’s Form 10-KSB and each of the Company’s
Forms 10-QSB filed with the Commission (each such date, the “Evaluation
Date”)
and
presented in each such report their conclusions about the effectiveness of
the
Company’s disclosure controls and procedures based on their evaluations as of
the applicable Evaluation Date. Since the Evaluation Date of the Company’s most
recently filed Form 10-KSB or Form 10-QSB, there have been no significant
changes in the Company’s disclosure controls and procedures, the Company’s
internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) or 15d-15(f) or, to the Company’s knowledge, in other factors that
could significantly affect the Company’s internal controls over financial
reporting.
(o) Solvency.
Based
on the financial condition of the Company as of the Closing Date (and assuming
that the Closing shall have occurred), (i) the Company’s fair saleable value of
its assets exceeds the amount that will be required to be paid on or in respect
of the Company’s existing debts and other liabilities (including known
contingent liabilities) as they mature; (ii) the Company’s assets do not
constitute unreasonably small capital to carry on its business for the current
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate
all
of its assets, after taking into account all anticipated uses of the cash,
would
be sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid. The Company does not intend to incur debts beyond
its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).
6
(p) Certain
Fees.
Other
than (i) the cash commission payable on the closing and (ii) the 600,000 shares
of Common Stock to be issued on the closing, no brokerage or finder’s fees or
commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank, or
other person with respect to the transactions contemplated by this Agreement.
The Investor shall have no obligation with respect to any claims (other than
such fees or commissions owed by an Investor pursuant to written agreements
executed by the Investor which fees or commissions shall be the sole
responsibility of such Investor) made by or on behalf of other persons for
fees
of a type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.
(q) Certain
Registration Matters.
Assuming the accuracy of the Investor’s representations and warranties set forth
in this Agreement and the Transaction Documents and the representations and
warranties made by all other purchasers of Units in the Offering, no
registration under the Securities Act is required for the offer and sale of
the
Investor’s Units by the Company to the Investor hereunder.
(r) Listing
and Maintenance Requirements.
The
Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with the listing and maintenance
requirements for continued listing of the Common Stock on the NASD Over the
Counter Bulletin Board.
(s) Investment
Company.
The
Company and Xxxxxx are not, and are not an “affiliate” of, an “investment
company” within the meaning of the Investment Company Act of 1940, as
amended.
(t) No
Additional Agreements.
The
Company and Xxxxxx do not have any agreement or understanding with any other
purchasers of the Units in the Offering with respect to the transactions
contemplated by this Agreement on terms that differ substantially from those
set
forth in this Agreement.
(u) Disclosure.
The
Company and Xxxxxx confirm that neither they nor any person acting on their
behalf has provided the Investor, or its agents or counsel, with any information
that the Company or Xxxxxx believes would constitute material, non-public
information following the announcement of the Closing and the transactions
contemplated thereby. The Company understands and confirms that the Investor
will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All disclosure provided to the
Investor regarding the Company and Xxxxxx, their respective businesses and
the
transactions contemplated hereby, furnished by or on behalf of the Company
or,
as applicable, Xxxxxx (including the Company’s and Xxxxxx’x representations and
warranties set forth in this Agreement) are true and correct and do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
5. Representations
and Warranties of the Investor.
In
order to induce the Company to enter into this Agreement, the Investor
represents and warrants to the Company and Xxxxxx the following:
7
(a) Authority.
If a
corporation, partnership, limited partnership, limited liability company, or
other form of entity, the Investor is duly organized or formed, as the case
may
be, validly existing, and in good standing under the laws of its jurisdiction
of
organization or formation, as the case may be. The Investor has all requisite
individual or entity right, power, and authority to execute, deliver, and
perform this Agreement.
(b) Enforceability.
The
execution, delivery, and performance of this Agreement by the Investor have
been
duly authorized by all requisite partnership, corporate or other entity action,
as the case may be. This Agreement has been duly executed and delivered by
the
Investor, and, upon its execution by the Company, shall constitute the legal,
valid, and binding obligation of the Investor, enforceable in accordance with
its terms, except to the extent that its enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium, or other laws relating
to or
affecting the enforcement of creditors’ rights generally and by general
principles of equity.
(c) No
Violations.
The
execution, delivery, and performance of this Agreement by the Investor do not
and will not, with or without the passage of time or the giving of notice,
result in the breach of, or constitute a default, cause the acceleration of
performance, or require any consent under, or result in the creation of any
lien, charge or encumbrance upon any property or assets of the Investor pursuant
to, any material instrument or agreement to which the Investor is a party or
by
which the Investor or its properties may be bound or affected, and, do not
or
will not violate or conflict with any provision of the articles of incorporation
or bylaws, partnership agreement, operating agreement, trust agreement, or
similar organizational or governing document of the Investor, as applicable.
(d) Knowledge
of Investment and its Risks.
The
Investor has knowledge and experience in financial and business matters as
to be
capable of evaluating the merits and risks of Investor’s investment in the
Units. The Investor understands that an investment in the Company represents
a
high degree of risk and there is no assurance that the Company’s business or
operations will be successful. The Investor has considered carefully the risks
attendant to an investment in the Company, and that, as a consequence of such
risks, the Investor could lose Investor’s entire investment in the
Company.
(e) Investment
Intent.
The
Investor hereby represents and warrants that (i) the Investor’s Units are being
acquired for investment for the Investor’s own account, and not as a nominee or
agent and not with a view to the resale or distribution of all or any part
of
the Investor’s Units, and the Investor has no present intention of selling,
granting any participation in, or otherwise distributing any of the Investor’s
Units within the meaning of the Securities Act, (ii) the Investor’s Units are
being acquired in the ordinary course of the Investor’s business, and (iii) the
Investor does not have any contracts, understandings, agreements, or
arrangements, directly or indirectly, with any person and/or entity to
distribute, sell, transfer, or grant participations to such person and/or entity
with respect to, any of the Investor’s Units. The Investor is not purchasing the
Investor’s Units as a result of any advertisement, article, notice or other
communication regarding the Investor’s Units published in any newspaper,
magazine or similar media or broadcast over television or radio or presented
at
any seminar or any other general solicitation or general
advertisement.
8
(f) Investor
Status.
The
Investor is an “accredited investor” as that term is defined by Rule 501 of
Regulation D promulgated under the Securities Act and the information provided
by the Investor in the Investor Questionnaire, attached hereto as Appendix
A,
is
truthful, accurate, and complete. The Investor is not registered as a
broker-dealer under Section 15 of the Exchange Act or an affiliate of such
broker-dealer.
(g) Disclosure.
The
Investor has reviewed the information provided to the Investor by the Company
in
connection with the Investor’s decision to purchase the Investor’s Units,
including the Company’s publicly available filings with the Commission and the
information contained therein. The Company has provided the Investor with all
the information that the Investor has requested in connection with the decision
to purchase the Investor’s Units. The Investor further represents that the
Investor has had an opportunity to ask questions and receive answers from the
Company regarding the business, properties, prospects, and financial condition
of the Company. All such questions have been answered to the full satisfaction
of the Investor. Neither such inquiries nor any other investigation conducted
by
or on behalf of the Investor or its representatives or counsel shall modify,
amend, or affect the Investor’s right to rely on the truth, accuracy, and
completeness of the disclosure materials and the Company’s representations and
warranties contained herein.
(h) No
Registration.
The
Investor understands that Investor may be required to bear the economic risk
of
Investor’s investment in the Company for an indefinite period of time. The
Investor further understands that (i) neither the offering nor the sale of
the Investor’s Units has been registered under the Securities Act or any
applicable State Acts in reliance upon exemptions from the registration
requirements of such laws, (ii) the Investor’s Units must be held by the
Investor indefinitely unless the sale or transfer thereof is subsequently
registered under the Securities Act and any applicable State Acts, or an
exemption from such registration requirements is available, (iii) except as
set
forth in the Registration Rights Agreement, dated as of the date hereof, between
the Company and the Investor, the Company is under no obligation to register
any
of the shares of Common Stock underlying the Investor’s Units on the Investor’s
behalf or to assist the Investor in complying with any exemption from
registration, and (iv) the Company will rely upon the representations and
warranties made by the Investor in this Agreement and the Transaction Documents
in order to establish such exemptions from the registration requirements of
the
Securities Act and any applicable State Acts.
(i) Transfer
Restrictions.
The
Investor will not transfer any of the Investor’s Units or the shares of Common
Stock underlying the Investor’s Units or the Investor Warrants unless such
transfer is registered or exempt from registration under the Securities Act
and
such State Acts, and, if requested by the Company in the case of an exempt
transaction, the Investor has furnished an opinion of counsel reasonably
satisfactory to the Company that such transfer is so exempt. The Investor
understands and agrees that (i) the certificates evidencing the shares of Common
Stock underlying the Investor’s Units and the Investor’s Warrants will bear
appropriate legends indicating such transfer restrictions placed upon the Units
and shares of Common Stock and Investor Warrants, (ii) the Company shall have
no
obligation to honor transfers of any of the Investor’s Units, Investor Warrants
or shares of Common Stock underlying the Investor’s Units or Investor Warrants
in violation of such transfer restrictions, and (iii) the Company shall be
entitled to instruct any transfer agent or agents for the securities of the
Company to refuse to honor such transfers.
9
(j) No
Solicitation.
The
Investor (i) did not 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, with respect to the Units or (ii) was not solicited by any person,
other than by representatives of the Company, with respect to a purchase of
the
Units.
(k) Principal
Address.
The
Investor’s principal residence, if an individual, or principal executive office,
if an entity, is set forth on the signature page of this Subscription
Agreement.
6. Independent
Nature of Investor’s Obligations and Rights.
The
obligations of the Investor under this Agreement and the Transaction Documents
are several and not joint with the obligations of any other purchaser of Units
in the Offering, and the Investor shall not be responsible in any way for the
performance of the obligations of any other purchaser of Units in the Offering
under any Transaction Document. The decision of the Investor to purchase the
Investor’s Units pursuant to the Transaction Documents has been made by the
Investor independently of any other purchaser of Units in the Offering. Nothing
contained herein or in any Transaction Document, and no action taken by any
purchaser of Units pursuant thereto, shall be deemed to constitute such
purchasers as a partnership, an association, a joint venture, or any other
kind
of entity, or create a presumption that the purchasers of Units are in any
way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Investor
acknowledges that no other purchaser of Units has acted as agent for the
Investor in connection with making its investment hereunder and that no other
purchaser of Units will be acting as agent of the Investor in connection with
monitoring its investment in the Units or enforcing its rights under the
Transaction Documents. The Investor shall be entitled to independently protect
and enforce its rights, including without limitation the rights arising out
of
this Agreement or out of the other Transaction Documents, and it shall not
be
necessary for any other purchaser of Units to be joined as an additional party
in any proceeding for such purpose.
7. Prospectus
Delivery Requirement.
The
Investor hereby covenants with the Company not to make any sale of the
Investor’s Units without complying with the provisions hereof and of the
Registration Rights Agreement, and without effectively causing the prospectus
delivery requirement under the Securities Act to be satisfied (unless the
Investor is selling in a transaction not subject to the prospectus delivery
requirement).
8. Shareholder
Approval.
The
Company represents and warrants to the Investor that a vote of the stockholders
of the Company will not be required to approve the issuance of the Investor’s
Units.
9. Indemnification
of Investor.
In
addition to the indemnity provided in the Registration Rights Agreement, the
Company will indemnify and hold the Investor and its directors, officers,
shareholders, members, managers, partners, employees and agents (each, an
“Investor
Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs, and reasonable attorneys’ fees and costs of
investigation (collectively, “Losses”)
that
any such Investor Party may suffer or incur as a result of or relating to any
misrepresentation, breach, or inaccuracy of any representation, warranty,
covenant, or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation, and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.
10
10. Non-Public
Information.
Subsequent to the Closing, the Company covenants and agrees that neither it
nor
any other person acting on its behalf will provide Investor or its agents or
counsel with any information that the Company believes constitutes material
non-public information, unless prior thereto Investor shall have executed a
written agreement regarding the confidentiality and use of such information.
11. Further
Assurances.
The
parties hereto will, upon reasonable request, execute and deliver all such
further assignments, endorsements and other documents as may be necessary in
order to perfect the purchase by the Investor of the Investor’s Units. In
addition, the Company agrees that it will do all such acts necessary to ensure
that Canadian residents holding shares will be able to trade such securities
without resale restrictions under Canadian securities legislation within four
months from the Merger Effective Date, including, if necessary, all acts in
order for the Company to become a reporting issuer in a Canadian province or
territory, which may include the filing and receipting of a prospectus by
Canadian securities regulatory authorities.
12. Entire
Agreement; No Oral Modification.
This
Agreement and the other Transaction Documents contain the entire agreement
among
the parties hereto with respect to the subject matter hereof and supersede
all
prior agreements and understandings with respect thereto and this Agreement
may
not be amended or modified except in a writing signed by both of the parties
hereto.
13. Binding
Effect; Benefits.
This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, successors and assigns; however, nothing in this
Agreement, expressed or implied, is intended to confer on any other person
other
than the parties hereto, or their respective heirs, successors or assigns,
any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
14. Counterparts.
This
Agreement may be executed in any number of counterparts, for each of which
shall
be deemed to be an original and all of which together shall be deemed to be
one
and the same instrument. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
15. Governing
Law.
This
Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the United States of America and the State of New York, both
substantive and remedial, without regard to New York conflicts of law
principles. Any
judicial proceeding brought against either of the parties to this agreement
or
any dispute arising out of this Agreement or any matter related hereto shall
be
brought in the courts of the State of New York, New York County, or in the
United States District Court for the Southern District of New York and, by
its
execution and delivery of this agreement, each party to this Agreement accepts
the jurisdiction of such courts.
11
16. Prevailing
Parties.
In any
action or proceeding brought to enforce any provision of this Agreement, or
where any provision hereof is validly asserted as a defense, the prevailing
party shall be entitled to receive and the nonprevailing party shall pay upon
demand reasonable attorneys’ fees in addition to any other remedy.
17. Notices.
All
communication hereunder shall be in writing and shall be mailed, delivered,
telegraphed or sent by facsimile or electronic mail, and such delivery shall
be
confirmed to the addresses as provided below:
if
to the
Investor:
to
the
address set forth on the signature page of this Agreement
if
to the
Company:
Alternative
Energy Sources, Inc.
00
Xxxx
00xx Xxxxxx
Xxxxxxxxx,
Xxxxxxx Xxxxxxxx, Xxxxxx X0X 0X0
Attention:
Xxxxxxx Xxxxxxx, President and Chief Executive Officer
Facsimile:
(000) 000-0000
with
copy
to:
Gottbetter
& Partners, LLP
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxx X. Xxxxxxx, Esq.
Facsimile:
(000) 000-0000
if
to
Xxxxxx, to:
Xxxxxx
Energy, Inc.
c/o
McGuireWoods LLP
1345
Avenue of the Xxxxxxxx, 0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxx Xxxxxx, President and Chief Executive Officer
Facsimile:
(000) 000-0000
with
a
copy to:
McGuireWoods
LLP
1345
Avenue of the Xxxxxxxx, 0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxx X. Xxxxx
Facsimile:
(000) 000-0000
12
18. Headings.
The
section headings herein are included for convenience only and are not to be
deemed a part of this Agreement.
[SIGNATURE
PAGES FOLLOW]
13
IN
WITNESS WHEREOF, the parties hereto have executed this Subscription Agreement
as
of the date first written above.
ALTERNATIVE
ENERGY SOURCES, INC.
By:
_______________________
Name:
Xxxxxxx Xxxxxxx
Its:
President
and Chief Executive Officer
[SIGNATURE
PAGES OF XXXXXX AND INVESTOR FOLLOW]
14
IN
WITNESS WHEREOF, the parties hereto have executed this Subscription Agreement
as
of the date first written above.
XXXXXX
ENERGY, INC.
By:
______________________________
Name:
Xxxx Xxxxxx
Its:
President
and Chief Executive Officer
[SIGNATURE
PAGE OF INVESTOR FOLLOWS]
15
IN
WITNESS WHEREOF, the parties hereto have executed this Subscription Agreement
as
of the date first written above.
| INVESTOR (individual) | INVESTOR (entity) | |
| Signature | Name of Entity | |
| Print Name | Signature | |
| Address of Principal Residence: | Print Name: ________________________________________ | |
| Title: _______________________________________ | ||
| Address of Executive Offices: | ||
| Social Security Number: | ||
| Telephone Number: | IRS Tax Identification Number: | |
| Facsimile Number: | Telephone Number: | |
| Facsimile Number: | ||
|
____________
X
$1.00
=
|
$ | |
|
Number
of Units Price per
Unit
|
Purchase Price | |
16
APPENDIX
A
Investor
Questionnaire
(See
Attached)
17
CONFIDENTIAL
INVESTOR
QUESTIONNAIRE
Alternative
Energy Sources, Inc.
00
Xxxx
00xx Xxxxxx
Xxxxxxxxx,
Xxxxxxx Xxxxxxxx, Xxxxxx X0X 0X0
Attention:
Xxxxxxx Xxxxxxx, President and Chief Executive Officer
Xxxxxx
Energy, Inc.
c/o
McGuireWoods LLP
1345
Avenue of the Xxxxxxxx, 0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxx Xxxxxx, President and Chief Executive Officer
The
information contained herein is being furnished to Alternative Energy Sources,
Inc. (the “Company”)
and
Xxxxxx Energy, Inc. (“Xxxxxx”),
to
determine whether the undersigned’s subscription to purchase units (the
“Units”)
of the
Company’s securities consisting of shares of the Company’s common stock, $0.0001
par value per share (the “Common
Stock”)
and
warrants to acquire Common Stock (the “Securities”),
may
be accepted by the Company and Xxxxxx in compliance with the requirements of
Sections 3(b), 4(2) and 4(6) of the Securities Act of 1933, as amended (the
“Securities
Act”),
and
Regulation D promulgated thereunder (“Regulation
D”).
The
undersigned acknowledges and understands that (i) the Company and Xxxxxx will
rely on the information provided by the undersigned contained herein for
purposes of determining compliance with and the availability of exemptions,
provided under Regulation D, from the registration requirements of the
Securities Act and (ii) the issuance of the Securities will not be registered
under the Securities Act in reliance upon such exemptions.
All
information provided by the undersigned is furnished for the sole use of the
Company and Xxxxxx for the purposes described above and will be held in
confidence by the Company and Xxxxxx, except that this Investor Questionnaire
and/or the information may be furnished to such other parties as the Company
or
Xxxxxx, or each of their respective counsel or other authorized representatives,
deem necessary or desirable to establish compliance with federal or state
securities laws. For further information, or if you have questions concerning
the Company, Xxxxxx, or the sale of Securities, please contact: Xxxxx X. Xxxxx,
McGuireWoods LLP, (000) 000-0000.
In
accordance with the foregoing, the undersigned makes the following
representations and warranties:
18
PART
ONE
INVESTMENT
EXPERIENCE AND PURPOSE
TO
BE COMPLETED BY EVERY PROSPECTIVE INVESTOR
|
1.
|
Investment
Experience.
This item is presented in alternative form. Please initial, in the
space
provided below, the alternative that applies to
you.
|
|
ALTERNATIVE
ONE:
The undersigned has such knowledge and experience in financial and
business matters so as to be capable of evaluating the relative merits
and
risks of an investment in the Securities; the undersigned is not
using an
Investor Representative (as defined below) in connection with such
evaluation. The undersigned offers as evidence of knowledge and experience
in these matters the information requested in this Investor
Questionnaire.
|
|
|
ALTERNATIVE TWO*:
The undersigned will use an investor representative (“Investor
Representative”)
acceptable to the Company and Xxxxxx in connection with evaluating
a
potential investment in the Securities. The undersigned acknowledges
that
the following person will be acting as Investor Representative
in
connection with evaluating the merits and risks of an investment
in the
Securities.
|
|
|
Name
of Investor Representative: ________________________________
The
undersigned represents and warrants that the
above-named Investor Representative has furnished the undersigned
with an
investor representative questionnaire and that the undersigned and
the
above-named Investor Representative together have such knowledge
and
experience in financial and business matters that they are capable
of
evaluating the merits and risks of an investment in the Securities.
|
|
(*IF
YOU
HAVE INITIALED ALTERNATIVE TWO, THE INVESTOR QUESTIONNAIRE MUST BE ACCOMPANIED
BY A COMPLETED AND SIGNED INVESTOR REPRESENTATIVE QUESTIONNAIRE.)
|
2.
|
Purpose
of Investment.
Except as indicated below, any purchase of the Securities will be
solely
for the account of the undersigned, and not for the account of any
other
person or with a view to any resale, division or distribution thereof.
|
EXCEPTIONS
(If
exceptions provide details and attach additional pages if necessary)
19
PART
TWO
GENERAL
INFORMATION
TO
BE COMPLETED BY EVERY PROSPECTIVE INVESTOR
|
1.
|
Name:
|
||||||
|
(exact
name as it should appear in the records of the Company and any
registration statement in which you are a named “selling
stockholder”)
|
|||||||
|
2.
|
Address
of record:
|
||||||
|
3.
|
Telephone
number:
|
Fax:
|
|||||
|
4.
|
Social
Security or
Taxpayer
ID number:
|
||||||
|
5.
|
Describe
any preexisting business or personal relationship between the prospective
investor and any director or officer of Xxxxxx or the Company:
|
PART
THREE
INDIVIDUAL
INVESTOR
TO
BE COMPLETED ONLY BY PROSPECTIVE INVESTORS WHO ARE
INDIVIDUALS
1. Select
the representation provided below that applies:
|
___
|
(a)
|
My
individual net worth, or joint net worth with my spouse, exceeds
$1,000,000.
|
|
___
|
(b)
|
My
individual income (without my spouse) was in excess of $200,000 in
each of
the two most recent years or joint income with my spouse was in excess
of
$300,000 in each of those years, and I reasonably expect an income
reaching the same income level in the current year. For purposes
of this
Investor Questionnaire, individual income means adjusted gross income,
as
reported for federal income tax purposes, less any income attributable
to
a spouse or to property owned by a spouse, increased by the following
amounts (but not including any amounts attributable to a spouse or
to
property owned by a spouse): (i) the amount of any tax exempt interest
income received, (ii) the amount of losses claimed as a limited partner
in
a limited partnership, (iii) any deduction claimed for depletion,
(iv)
deductions for alimony paid, (v) amounts contributed to an XXX or
Xxxxx
retirement plan, and (vi) any amount by which income from long-term
capital gains has been reduced in arriving at adjusted gross income
pursuant to the provisions of Section 1202 of the Internal Revenue
Code.
|
20
|
2.
|
Educational
background of prospective investor:
|
|
3.
|
Professional
licenses or registrations, including bar admissions, accounting
certification, real estate brokerage licenses, and SEC or state
broker-dealer registrations:
|
|
4.
|
Employment,
during the past five years (and the inclusive dates of
each):
|
|
Employment/
Occupation:
|
|
|
Nature
of Responsibility:
|
|
|
From
- To:
|
|
Employment/
Occupation:
|
|
|
Nature
of Responsibility:
|
|
|
From
- To:
|
|
Employment/
Occupation:
|
|
|
Nature
of Responsibility:
|
|
|
From
- To:
|
|
Employment/
Occupation:
|
|
|
Nature
of Responsibility:
|
|
|
From
- To:
|
21
|
5.
|
The
prospective investor has previously purchased securities sold in
reliance
on the exemption from registration under the Securities Act provided
by
Regulation D:
|
|
Yes
|
No
|
|
6.
|
Investor’s
investment objectives:
|
|
Income
|
Other,
please state:
|
|||
|
Appreciation
|
|
7.
|
Prior
investments made by prospective investor which evidence prospective
investors investing experience in transactions similar to this offering:
|
|
Nature
of Investment:
|
|
|
Amount
Invested:
|
|
Nature
of
Investment:
|
|
|
Amount
Invested:
|
|
Nature
of Investment:
|
|
|
Amount
Invested:
|
22
PART
FOUR
CORPORATE
INVESTOR
TO
BE COMPLETED BY PROSPECTIVE INVESTORS
WHO
ARE CORPORATIONS (AND OTHER ENTITIES)
|
1. Type
of organization (partnership, corporation, etc.):
|
|
|
2. Date
and State of organization:
|
|
|
3. Select
the representation provided below that applies:
|
| (a) |
(___)
a bank as defined in Section 3(a)(2) of the Securities Act, or any
savings
and loan association or other institution as defined in Section 3(a)(5)(A)
of the Securities Act acting in either an individual or fiduciary
capacity;
|
| (___) a broker or dealer registered pursuant to Section 15 of the Securities and Exchange Act of 1934; |
| (___) 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; |
| (___) 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; or |
| (___) an insurance company as defined in Section 2(13) of the Securities Act; |
| (b) |
(___)
a private business development company as defined in Section 202(a)(22)
of
the Investment Advisers Act of
1940;
|
| (c) |
(___)
a corporation, partnership, limited liability company, Massachusetts
or
similar business trust, or an organization described in Section 501(c)(3)
of the Internal Revenue Code, not formed for the specific purpose
of
acquiring the securities offered with total assets in excess of
$5,000,000;
|
| (d) |
(___)
any 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 such term is described in
Rule
506(b)(2)(ii) of Regulation D;
|
23
|
(e)
|
(___)
an employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974 with investment decisions made by a plan
fiduciary, as defined in Section 3(21) of such act, which is a bank,
an
insurance company, a savings and loan association, or a registered
investment advisor;
|
| (___) an employee benefit plan with total assets in excess of $5,000,000; or |
| (___) an employee benefit plan that is a self-directed plan (such as a self-directed individual retirement account, Xxxxx or SEP plan) with investment decisions made solely by persons that are “accredited investors” as such term is defined in Rule 501(a) of Regulation D; or |
| (f) |
(___)
an entity in which all of the equity owners are “accredited investors” as
such term is defined in Rule 501(a) of Regulation D. Note: prospective
investor must submit an individual Investor Questionnaire for each
equity
owner.
|
|
List
all equity owners of the entity:
|
||
|
4.
|
Attach
a copy of the following documents of the prospective investor’s: (a)
Articles of Incorporation, Certificate of Incorporation, or other
applicable formation document and (b) consent or resolutions of the
prospective investor’s Board of Directors, or other applicable document,
authorizing the investment by the organization in the Securities
and
providing the signatory hereto authority to execute on behalf of
the
prospective investor.
|
PART
FIVE
REGISTRATION
STATEMENT INFORMATION
TO
BE COMPLETED BY EVERY PROSPECTIVE INVESTOR
|
1.
|
Are
you, or is your organization, a broker-dealer registered under Section
15
of the Securities Exchange Act of
1934?
|
YES NO
2. Are
you,
or is your organization, an affiliate of a broker-dealer?
YES NO
If
the
answer is yes, please explain the nature of any such relationship:
24
|
3.
|
Have
you had any position, office or other material relationship, or has
your
organization has any material relationship, within the past three
years
with the Company or its affiliates?
|
YES NO
If
the
answer is yes, please explain the nature of any such relationship:
|
4.
|
Please
describe all other securities of the Company that you beneficially
own or
that your organization beneficially
owns.
|
|
5.
|
Have
you made or are you aware of any arrangements relating to the distribution
of the shares of the Company’s Common Stock under any registration
statement?
|
YES NO
If
the
answer is yes, please describe the nature and amount of such arrangements:
|
6.
|
If
investing as an entity, please list all natural persons with the
power to
vote or dispose of the shares Common Stock underlying the Units being
purchased.
|
PART
SIX
REPRESENTATIONS
AND WARRANTIES
TO
BE COMPLETED BY EVERY PROSPECTIVE INVESTOR
|
1.
|
The
undersigned understands and acknowledges that Xxxxxx and the Company
will
be relying on the accuracy and completeness of the information provided
by
the prospective investor in this Investor Questionnaire and the
undersigned represents and warrants to Xxxxxx and the Company as
follows:
|
25
|
(a)
|
The
information is complete and correct and may be relied upon by Xxxxxx
and
the Company in determining whether the offer and sale of Securities
in
this offering in which the undersigned proposes to participate is
exempt
from the registration requirements of the Securities
Act;
|
|
(b)
|
The
undersigned will notify Xxxxxx and the Company immediately of any
material
change in any information provided by the prospective investor in
this
Investor Questionnaire occurring prior to the completion of the Offering;
and
|
|
(c)
|
The
undersigned has adequate means of providing for the undersigned’s current
needs and personal contingencies, has no need for liquidity in its
investment in the Securities, and is able to bear the economic risk
of an
investment the undersigned in the Securities of the size contemplated
by
the prospective investor. In making this statement, the undersigned
represents that at the present time has sufficient means to provide
for
its needs in the event of a complete loss of such
investment.
|
IN
WITNESS WHEREOF, the undersigned prospective investor has executed this Investor
Questionnaire this ___ day of __________, 2006.
INDIVIDUALS: ENTITIES:
|
Print
Name
|
Print
Name of Entity
|
|||
|
Signature
|
Print
Name of Authorized Signatory
|
|||
|
Signature
of Authorized Signatory
|
||||
|
Signature
(if Joint Tenants
or
Tenants in Common)
|
Capacity
in which Authorized Signatory has Signed on Behalf of
Entity
|
|||
26
SUPPLEMENT
TO INVESTOR QUESTIONNAIRE
TO
BE COMPLETED BY CANADIAN INVESTORS
I
understand that Canaccord will be paid a finder’s fee of 5% of the gross
proceeds raised as a result of the introduction. I understand that in making
this introduction Canaccord is not in any way representing that it recommends
to
me the Issuer or an investment in its Securities. I understand that Canaccord
has not made any assessment of the suitability for me of an investment in
Securities of the Issuer.
I
understand that Canaccord has only made limited investigations into the business
or affairs of the Issuer and has conducted limited “due diligence” in connection
with any offering of securities of the Issuer. I understand that the proceeds
from the sale of the Securities will be utilized by the Issuer in connection
with its contemplated merger (the “Merger”)
with
Xxxxxx Energy, Inc. (“Xxxxxx”),
and
that all funds I invest will be returned to me if the Merger is not consummated.
I
understand that the Issuer is a corporation based in the United States and
therefore, U.S. securities laws will impose hold periods on the Securities
I
purchase. I understand that I may not resell or otherwise dispose of the
Securities I purchase unless the Securities are subsequently registered under
the U.S. Securities Act of 1933, of which there is no guarantee, or unless
the
Issuer receives an opinion of legal counsel that an exemption from registration
is available. I also acknowledge that the Issuer is not a “reporting issuer” in
Canada and under Canadian law, I will not be able to resell the Securities,
unless a prospectus is filed with the relevant securities commissions or an
exemption to the prospectus requirement is available at the time of resale.
Therefore, I acknowledge that I may not be able to resell the Securities in
a
timely manner.
I
further
understand that the Issuer requires that I will not engage in any short sale
or
any hedging transactions with respect to the Securities of the Issuer for a
period of up to three years from the issuance of the Securities.
I
acknowledge that Canaccord and its investment advisors have not provided me
with
any information or made any representations about the Issuer. I acknowledge
that
I must make my own investigations.
I
acknowledge that this is a risky investment, and that I could lose all the
money
I invest. However, I have assumed full responsibility for making a risk
assessment and I am investing entirely at my own risk.
I
further
acknowledge that the Issuer may disclose personal information about me to
securities regulatory authorities. The securities regulatory authorities may
indirectly collect the personal information under the authority granted to
them
by securities legislation and the collection is for the purposes of the
administration and enforcement of the securities legislation of the jurisdiction
of each such regulatory authority.
27
I
understand that my subscription for the Issuer’s Securities is being made under
an exemption to the prospectus requirements contained in Canadian securities
legislation, in particular the “accredited investor” exemption found in National
Instrument 45-106 Prospectus
and Registration Exemptions.
As
such, I represent and warrant to the Issuer and Canaccord that I satisfy at
least one of the following categories, indicated by my initial:
|
____________
|
An
individual whose net income before taxes exceeded CDN $200,000 in
each of
the two most recent calendar years or whose net income before taxes
combined with that of a spouse exceeded CDN $300,000 in each of the
two
most recent calendar years and who, in either case, reasonably expects
to
exceed that net income level in the current calendar
year
|
|
____________
|
an
individual who, either alone or with a spouse, beneficially owns,
directly
or indirectly, financial assets having an aggregate realizable value
that
before taxes, but net of any related liabilities, exceeds CDN
$1,000,000
|
|
____________
|
an
individual who, either alone or with a spouse, has net assets of
at least
CDN $5,000,000
|
|
____________
|
a
person, other than an individual or investment fund, that has net
assets
of at least CDN $5,000,000 as shown on its most recently prepared
financial statements
|
|
____________
|
a
registered charity under the Income
Tax Act
(Canada) that, in regard to the trade, has obtained advice from an
eligibility adviser or an adviser registered under the securities
legislation of the jurisdiction of the registered charity to give
advice
on the securities being traded
|
|
____________
|
a
person in respect of which all of the owners of interests, direct,
indirect or beneficial, except the voting securities required by
law to be
owned by directors, are persons that are accredited
investors
|
28
By
signing below, I confirm that I have read and understood the statements above
and I agree to the representations and warranties above.
Dated
_____________, ____ 2006.
INDIVIDUALS: ENTITIES:
|
Print
Name
|
Print
Name of Entity
|
|||
|
Signature
|
Print
Name of Authorized Signatory
|
|||
|
Signature
of Authorized Signatory
|
||||
|
Capacity
in which Authorized Signatory has Signed on Behalf of
Entity
|
||||
For
the
purposes of this Supplement:
| (a) |
“accredited
investor” means a person who meets the criteria in any of the above
categories;
|
| (b) |
“eligibility
adviser” means
|
| (i) |
person
that is registered as an investment dealer or in an equivalent category
of
registration under the securities legislation of the jurisdiction
of a
purchaser and authorized to give advice with respect to the type
of
security being a distributed; and
|
| (ii) |
in
Saskatchewan or Manitoba, also means a lawyer who is a practicing
member
in good standing with a law society of a jurisdiction of Canada or
a
public accountant who is a member in good standing of an institute
or
association of chartered accountants, certified general accountants
or
certified management accountants in a jurisdiction of Canada provided
that
the lawyer or public accountant must not:
|
| (A) |
a
professional, business or personal relationship with the issuer,
or any of
its directors, executive officers, founders or control persons, and
have
|
29
| (B) |
acted
for or been retained personally or otherwise as an employee, executive
officer, director, associate or partner of a person that has acted
for or
been retained by the issuer or any of its directors, executive officers,
founders or have control persons within the previous 12
months;
|
| (c) |
“financial
assets” means
|
| (i) |
cash,
|
| (ii) |
securities,
or
|
| (iii) |
a
contract of insurance, a deposit or an evidence of a deposit that
is not a
security for the purposes of securities
legislation;
|
| (d) |
“person”
includes
|
| (i) |
an
individual;
|
| (ii) |
a
corporation;
|
| (iii) |
a
partnership, trust, fund and an association, syndicate, organization
or
other organized group of persons, whether incorporated or not;
and
|
| (iv) |
an
individual or other person in that person’s capacity as a trustee,
executor, administrator or personal or other legal
representative;
|
| (e) |
“personal
information” means any information about an identifiable individual, and
includes information provided in the subscription agreement to be
entered
into with the Issuer;
|
| (f) |
“related
liabilities” means
|
| (i) |
liabilities
incurred or assumed for the purpose of financing the acquisition
or
ownership of financial assets, or
|
| (ii) |
liabilities
that are secured by financial
assets;
|
| (g) |
“spouse”
means, an individual who,
|
| (i) |
is
married to another individual and is not living separate and apart
within
the meaning of the Divorce
Act
(Canada), from the other
individual,
|
| (ii) |
is
living with another individual in a marriage-like relationship, including
a marriage-like relationship between individuals of the same gender,
or
|
| (iii) |
in
Alberta, is an individual referred to in paragraph (i) or (ii), or
is an
adult interdependent partner within the meaning of the Adult
Interdependent Relationships Act (Alberta).
|
30
