SUBSCRIPTION AGREEMENT and LETTER OF INVESTMENT INTENT
Exhibit 10.4
and
LETTER OF
INVESTMENT INTENT
0000 X.
Xxxxxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxxxxx,
Xxxxxxxx 00000
Gentlemen:
The
undersigned (the "Subscriber") hereby
tenders this subscription for the purchase of the number of shares of common
stock, par value $0.001 per share ("Common Stock" or
"Securities"),
of Verecloud, Inc., a Nevada corporation (the "Company"), set forth
herein. The Subscriber understands that a subscription for the
Securities may be rejected for any reason and that, in the event that this
subscription is rejected, the funds delivered herewith will be promptly
returned, without interest thereon or deduction therefrom. By
execution below, the Subscriber acknowledges that the Company is relying upon
the accuracy and completeness of the representations contained herein in
complying with its obligations under applicable U.S. federal and state
securities laws.
1. Subscription
Commitment. The Subscriber hereby commits to subscribe for the
purchase of the number of Securities as specified on the Subscriber's signature
page attached hereto, and, as full payment therefor, agrees to pay in cash in
U.S. Dollars the amount set forth on the Subscriber's signature page by wire
transfer, to the Company's bank account in accordance with the wire transfer
instructions attached hereto as Exhibit
A. The subscription price for the Common Stock is $0.02 per
share, based upon a valuation of the Company of $1,308,860 with 65,443,000
shares of Common Stock issued and outstanding prior to this
financing.
2. Representations and
Warranties of the Company. In order to induce the Subscriber
to enter into this Subscription Agreement and Letter of Investment Intent, the
Company hereby represents and warrants to the Subscriber as
follows:
(a) The
Company is a corporation, duly organized, validly existing and in good standing
under the laws of the State of Nevada and has all requisite corporate power and
authority to carry on its business as now conducted.
(b) The
Company has all requisite legal and corporate power and authority to enter into
this Subscription Agreement and Letter of Investment Intent and consummate the
transactions contemplated hereby. This Subscription Agreement and
Letter of Investment Intent is a valid and binding obligation of the Company,
enforceable in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, moratorium, and other laws of general application
affecting the enforcement of creditors' rights and general principles of
equity.
(c) The
compliance and fulfillment of the terms and conditions hereof will not conflict
with, or result in a breach of, the terms, conditions or provisions of, or
constitute a default under, any contract to which the Company is a party or by
which the Company is otherwise bound, or the Company's articles of incorporation
and bylaws, which conflict, breach or default would have a material adverse
affect on the Company's ability to consummate the transaction contemplated by
this subscription.
(d) The
Company has not used any broker or finder in connection with the transaction
contemplated hereby, and the Company shall have no liability as a result of or
in connection with any brokerage or finder's fee or other commission of any
person or entity retained by the Company in connection with the transactions
contemplated by this subscription.
(e) When
issued, sold, and delivered in accordance with the terms of this subscription
and for consideration expressed therein, the Securities will be duly and validly
issued, fully paid and non-assessable and, based upon the representations of the
Subscriber in this subscription, will be issued in compliance with all federal
and state securities laws.
3. Representations, Warranties
and Covenants of the Subscriber. In order to induce the
Company to accept this subscription, the Subscriber hereby represents and
warrants to, and covenants with, the Company as follows:
(a) The
Subscriber has been given access to full and complete information regarding the
Company and has utilized such access to the Subscriber's satisfaction for the
purpose of obtaining such information regarding the Company as the Subscriber
has reasonably requested; and, particularly, the Subscriber has been given
reasonable opportunity to ask questions of, and receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and to obtain any additional information, to the
extent reasonably available.
(b) The
Subscriber acknowledges and agrees that, except as set forth herein, no
representations or warranties have been made to the Subscriber by the Company,
any selling agent of the Company, or any agent, employee, or affiliate of the
Company or such selling agent.
(c) The
Subscriber believes that an investment in the Securities is suitable for the
Subscriber based upon the Subscriber's investment objectives and financial
needs. The Subscriber: (i) has adequate means for providing for the
Subscriber's current financial needs and personal contingencies; (ii) has no
need for liquidity in this investment; (iii) at the present time, can afford a
complete loss of such investment; and (iv) does not have an overall commitment
to investments which are not readily marketable that is disproportionate to the
Subscriber's net worth, and the Subscriber's investment in the Securities will
not cause such overall commitment to become excessive.
(d) The
Subscriber, in reaching a decision to subscribe, has such knowledge and
experience in financial and business matters that the Subscriber is capable of reading
and interpreting financial statements, evaluating the merits and risk of an
investment in the Securities and has the net worth to undertake such
risks.
(e) The
Subscriber has not used any broker or finder in connection with the transaction
contemplated hereby, and the Subscriber shall have no liability as a result of
or in connection with any brokerage or finder's fee or other commission of any
person or entity retained by the Subscriber in connection with the transactions
contemplated by this subscription.
(f) The
Subscriber was not offered or sold the Securities, directly or indirectly, by
means of any form of general advertising or general solicitation, including, but
not limited to, the following: (i) any advertisement, article, notice
or other communication published in any newspaper, magazine, or similar medium
of or broadcast over television or radio; or (ii) any seminar or meeting whose
attendees had been invited by any general solicitation or general
advertising.
(g) The
Subscriber does not desire to utilize the services of any other person, or has
obtained, to the extent the Subscriber deems necessary, the Subscriber's own
personal professional advice, in connection with evaluating the risks inherent
in the investment in the Securities and the suitability of an investment in the
Securities in light of the Subscriber's financial condition and investment
needs.
(h) The
information contained in this Subscription Agreement and Letter of Investment
Intent is true, complete and correct as of the date hereof; the Subscriber
understands that the Company's determination that the exemption from the
registration provisions of the Securities Act of 1933, as amended (the "Act"), which is based
upon non-public offerings and applicable to the offer and sale of the
Securities, is based, in part, upon the representations, warranties, and
agreements made by the Subscriber herein; and subject to paragraph 5 of this
Subscription Agreement and Letter of Investment Intent, the Subscriber consents
to the disclosure of any such information, and any other information furnished
to the Company, to any governmental authority, self-regulatory organization, or,
to the extent required by law, to any other person.
(i) The
Subscriber realizes that: (i) the purchase of the Securities is a long-term
investment; (ii) the Subscriber must bear the economic risk of investment for an
indefinite period of time because the Securities have not been registered under
the Act or under the securities laws of any state and, therefore, the Securities
cannot be resold unless they are subsequently registered under said laws, or
exemptions from such registrations are available; (iii) there is presently
no public market for the Securities and the Subscriber may be unable to
liquidate the Subscriber's investment in the event of an emergency, or pledge
the Securities as collateral for a loan; and (iv) the transferability of the
Securities is restricted and (A) requires conformity with the restrictions
contained in paragraph 8 below and (B) legends will be placed on the
certificate(s) representing the Securities referring to the applicable
restrictions on transferability.
(j) The
Subscriber certifies, under penalties of perjury, that the Subscriber is NOT
subject to the backup withholding provisions of Section 3406(a)(i)(C) of the
Internal Revenue Code of 1986, as amended (the "Code").
(k) The
Subscriber has been advised and understands that: (i) the Securities have not
been registered under the Act or applicable state securities laws and that the
Securities are being offered and sold pursuant to exemptions from such laws;
(ii) the offering may not have been filed with or reviewed by certain state
securities administrators because of the limited nature of the offering; and
(iii) if at any time on or after the date hereof, and for a period of six (6)
months thereafter, the Company proposes to file a registration statement under
the Act with respect to an offering of equity securities, or securities or other
obligations exercisable or exchangeable for, or convertible into, equity
securities, by the Company for its own account or any of its security holders
for their account, other than a registration statement (i) filed in connection
with any employee stock option or other benefit plan, (ii) for an offering of
debt that is convertible into equity securities of the Company or (iiii) for a
dividend reinvestment plan, then the Company shall (x) give written notice of
such proposed filing to the Subscriber as soon as practicable, but in no event
less than 10 days before the anticipated filing date, which notice shall
describe the amount and type of securities to be included in such offering, the
intended method(s) of distribution, and the name of the proposed managing
underwriter or underwriters, if any, of the offering, and (y) offer to the
Subscriber in such notice the opportunity to register the sale of such number of
shares of Common Stock as the Subscriber may request in writing within five days
following receipt of such notice (a "Piggy-Back
Registration"). The Company shall cause such Securities to be
included in such registration and shall use its best efforts to cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit Securities requested to be included in a Piggy-Back Registration on the
same terms and conditions as any similar securities of the Company and to permit
the sale or other disposition of such Securities in accordance with the intended
method(s) of distribution thereof. If the Subscriber distributes its
Securities through a Piggy-Back Registration that involves an underwriter or
underwriters, it shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such Piggy-Back
Registration.
(l) The
Securities are being purchased for the Subscriber's own account and for
investment purposes only, and without the intention of reselling or
redistributing the same. The Subscriber has made no agreement with
others regarding any of the Securities. The Subscriber is aware that,
in the view of the Securities and Exchange Commission, a purchase of such
Securities with an intent to resell by reason of any foreseeable specific
contingency or anticipated change in market value, or any change in the
condition of the Company, or in connection with a contemplated liquidation
settlement of any loan obtained for the acquisition of such Securities and for
which such Securities were pledged, would represent an intent inconsistent with
the representations set forth above. The Subscriber further
represents and agrees that if, contrary to the foregoing intentions, the
Subscriber should later desire to dispose of or transfer any of such Securities
in any manner, the Subscriber shall not do so unless and until: (i) said
Securities shall have first been registered under the Act and all applicable
securities laws; or (ii) the Subscriber shall have first delivered to the
Company a written notice declaring such holder's intention to effect such
transfer and describe in sufficient detail the manner and circumstances of the
proposed transfer, which notice shall be accompanied either by a written opinion
of legal counsel who shall be reasonably satisfactory to the Company, which
opinion shall be addressed to the Company and reasonably satisfactory in form
and substance to the Company's counsel, to the effect that the proposed sale or
transfer is exempt from the registration provisions of the Act and all
applicable state securities laws, or by a "no action" letter from the Securities
and Exchange Commission to the effect that the transfer of the Securities
without registration will not result in recommendation by the staff of the
Commission that action be taken with respect thereto.
(m) Stop
transfer instructions will be placed with the transfer agent for the Securities,
and a legend will be placed on any certificate representing the Securities
substantially to the following effect:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE
SECURITIES OR BLUE SKY LAWS. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED FOR SALE, TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE ENCUMBERED OR DISPOSED OF (A "TRANSFER") EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND UNDER ANY
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS OR (B) UPON RECEIPT BY THE ISSUER
OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE ISSUER, THAT SUCH
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT PURSUANT TO REGULATIONS
PROMULGATED THEREUNDER AND UNDER ANY APPLICABLE STATE SECURITIES OR BLUE SKY
LAWS.
4. Preemptive
Rights.
(a) Prior to
the termination date of that certain Loan Agreement, of even date herewith, by
and between the Company and TMG Holdings Colorado, LLC, an affiliate of the
Subscriber, and except for the issuance of Common Stock by the Company (i)
pursuant to the Company's equity incentive plan, approved by the Company's Board
of Directors, (ii) pursuant to options, warrants or rights to acquire capital
stock or other securities of the Company that are outstanding as of the date
hereof, or (iii) as consideration for the acquisition of all or any substantial
portion of the assets of all or any portion of the capital stock of any person
or entity (whether by sale of stock, merger or otherwise), if the Company sells
any Common Stock (the "Issuance"), the
Company will offer to sell to the Subscriber, and the Subscriber shall be
entitled to purchase, all or part of any Common Stock at the same price and on
the same terms as such Common Stock is sold by the Company pursuant to this
Section 4.
(b) The
Company will cause to be given to the Subscriber a written notice setting forth
the terms and conditions upon which the Subscriber may purchase Common Stock
from the Company pursuant to this Section 4 (the "Preemptive
Notice"). After receiving the Preemptive Notice, the
Subscriber may irrevocably agree to purchase the Common Stock offered to the
Subscriber by the Company pursuant to this Section 4, on the date specified by
the Company in the Preemptive Notice, by deliver of a written notice to the
Company within 10 days of the date the Company delivered or caused to be
delivered the Preemptive Notice to the Subscriber (the "Preemptive
Reply").
5. Residence. The
Subscriber represents and warrants that the Subscriber is a bona fide resident
of, is domiciled in and received the offer and made the decision to invest in
the Securities in the state and/or country set forth on the signature page
hereof, and the Securities are being purchased by the Subscriber in the
Subscriber's name solely for the Subscriber's own beneficial interest and not as
nominee for, or on behalf of, or for the beneficial interest of, or with the
intention to transfer to, any other person, trust or organization, except as
specifically set forth in paragraph 12 of this Subscription Agreement and Letter
of Investment Intent.
6. Investor
Qualification. The Subscriber represents and warrants that the
Subscriber or the purchaser of the Securities named in paragraph 12 comes within
at least one category marked below, and that for any category marked the
Subscriber has truthfully set forth the factual basis or reason the Subscriber
comes within that category. ALL INFORMATION IN RESPONSE TO THIS
PARAGRAPH WILL BE KEPT STRICTLY CONFIDENTIAL. The Subscriber agrees
to furnish any additional information which the Company deems necessary in order
to verify the answers set forth below.
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Category
I
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The
Subscriber is an individual (not a partnership, corporation, etc.) whose
individual net worth, or joint net worth with the Subscriber's spouse,
presently exceeds $1,000,000.
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Explanation. In
calculation of net worth, the Subscriber may include equity in personal
property and real estate, including the Subscriber's principal residence,
cash, short term investments, stocks and securities. Equity in
personal property and real estate should be based on the fair market value
of such property less debt secured by such property.
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Category
II
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The
Subscriber is an individual (not a partnership, corporation, etc.) who had
an individual net income in excess of $200,000 in each of the last two
years, or joint income with his/her spouse in excess of $300,000 in each
of the last two years, and has a reasonable expectation of reaching the
same income level in the current
year.
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Category
III
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The
Subscriber is an executive officer or director of the
Company.
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Category
IV
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The
Subscriber is a bank; savings and loan; insurance company; registered
broker or dealer; registered investment company; registered business
development company; licensed small business investment company ("SBIC"); or
employee benefit plan within the meaning of Title I of ERISA whose plan
fiduciary is either a bank, savings and loan, insurance company or
registered investment advisor or whose total assets exceed $5,000,000; or
a self-directed employee benefit plan with investment decisions made
solely by persons that are accredited
investors.
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(describe entity)
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Category
V
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The
Subscriber is a private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940, as
amended.
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(describe
entity)
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Category
VI
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The
Subscriber is an entity with total assets in excess of $5,000,000 which
was not
formed for the purpose of investing in the Securities and which is one of
the following:
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a corporation;
or
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a partnership;
or
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a business trust;
or
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a tax-exempt organization descrived in Section
501(c)(3) of the
Code.
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(describe entity)
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Category
VII
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The
Subscriber is a trustee for a trust that is revocable by the grantor at
any time (including an XXX) and the grantor qualifies under either
Category I or Category II above. A copy of the declaration of
trust or trust agreement and a representation as to the net worth or
income of the grantor is
enclosed.
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Category
VIII
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X |
The
Subscriber is an entity, all the equity owners of which are "accredited
investors" within one or more of the above categories, other than Category
IV or Category V. If relying upon this category
alone, each equity owner must complete a separate copy of this
Agreement.
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Subscriber is a Texas limited liability company,
owned equally by Xxxxx X. Xxxxxxxx and Xxxxxxx X. Xxxxxxxx
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(describe entity)
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Category
IX
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The
Subscriber is a trust with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the Securities, whose
purchase is directed by a person who has such knowledge and experience in
financial and business matters that he or she is capable of evaluating the
merits and risks of the prospective
investment.
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7. Additional
Representations. The Subscriber makes the following additional
representations:
(a) The
Subscriber was not organized for the specific purpose of acquiring the
Securities; and
(b) This
Subscription Agreement and Letter of Investment Intent has been duly authorized
by all necessary action on the part of the Subscriber, has been duly executed by
an authorized officer or representative of the Subscriber, and is a legal, valid
and binding obligation of the Subscriber enforceable in accordance with its
terms.
8. Reliance on
Representations.
(a) The
Subscriber understands the meaning and legal consequences of the
representations, warranties, agreements, covenants, and confirmations set out
above, and agrees that the subscription made hereby may be accepted in reliance
thereon. The Subscriber agrees to indemnify and hold harmless the
Company (including for this purpose its employees, and each person who controls
the Company within the meaning of Section 20 of the Securities Exchange Act of
1934, as amended) from and against any and all loss, damage, liability or
expense, including reasonable costs and attorney's fees and disbursements, which
the Company, or such other persons may incur by reason of, or in connection
with, any representation or warranty made herein not having been true when made,
any misrepresentation made by the Subscriber or any failure by the Subscriber to
fulfill any of the covenants or agreements set forth herein or in any other
document provided by the Subscriber to the Company.
(b) The
Company understands the meaning and legal consequences of the representations,
warranties, agreements, covenants, and confirmations set out above, and agrees
that the subscription made hereby may be accepted in reliance
thereon. The Company agrees to indemnify and hold harmless the
Subscriber (including for this purpose its employees, and each person who
controls the Subscriber within the meaning of Section 20 of the Securities
Exchange Act of 1934, as amended) from and against any and all loss, damage,
liability or expense, including reasonable costs and attorney's fees and
disbursements, which the Subscriber, or such other persons may incur by reason
of, or in connection with, any representation or warranty made herein not having
been true when made, any misrepresentation made by the Company or any failure by
the Company to fulfill any of the covenants or agreements set forth herein or in
any other document provided by the Company to the Subscriber.
9. Transferability and
Assignability. Neither this Subscription Agreement and Letter
of Investment Intent nor any of the rights of the Subscriber hereunder may be
transferred or assigned by the Subscriber. The Subscriber agrees that
the Subscriber may not cancel, terminate, or revoke this Subscription Agreement
and Letter of Investment Intent or any agreement of the Subscriber made
hereunder (except as otherwise specifically provided herein) and that this
Subscription Agreement and Letter of Investment Intent shall survive the death
or disability of the Subscriber and shall be binding upon the Subscriber's
heirs, executors, administrators, successors, and assigns.
10. Notices. All
notices or other communications hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally or mailed by certified or
registered mail, return receipt requested, postage prepaid, as
follows: if to the Subscriber, to the address set forth below; and if
to the Company, to the address at the beginning of this Subscription Agreement
and Letter of Investment Intent, or to such other address as the Company or the
Subscriber shall have designated to the other by like notice.
11. Counterparts. This
Subscription Agreement and Letter of Investment Intent may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
IN
NO EVENT WILL THE COMPANY OR ANY OF ITS AFFILIATES OR THE PROFESSIONAL ADVISORS
ENGAGED BY THEM BE LIABLE IF FOR ANY REASON RESULTS OF OPERATIONS OF THE COMPANY
ARE NOT AS PROJECTED IN THE DOCUMENTS. INVESTORS MUST LOOK SOLELY TO,
AND RELY ON, THEIR OWN ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF
INVESTING IN THE SECURITIES.
12. Title. Please
indicate in which manner the Securities are to be held by placing an "X" in one
space below:
| (a) | Individual Ownership | |||
| (b) | Community Property | |||
| (c) | Joint Tenant with Right of Survivorship (both parties must sign) | |||
| (d) | Partnership | |||
| (e) | Tenants in Common | |||
| (f) | Corporation | |||
| (g) | Trust | |||
| (h) | X | Other (Describe): | ||
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A limited liability company.
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| Please print above the exact name(s) in which the Securities are to be held. | ||||
13. State of Residence or
Principal Office. The Subscriber's state of residence, if an
individual, or state in which the principal office is located, if an entity, and
the state in which the Subscriber received the offer to invest and made the
decision to invest in the Securities is: Texas
14. Social Security Number or
Tax I.D. If the Subscriber is a U.S. citizen or entity, the
Subscriber's Social Security Number or federal tax identification number
is: 00-0000000 .
[SIGNATURE
PAGES BEGIN ON NEXT PAGE]
SIGNATURE
PAGE
(ENTITY)
The
Subscriber hereby represents it has read this entire Subscription Agreement and
Letter of Investment Intent dated June 10, 2010.
| Dated: | June 10, 2010 | ||||
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Address
to which Correspondence
Should
be Directed
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TMG HOLDINGS, LLC
Name of Entity
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0000
X. Xxxx, Xxxxx 000
Xx Xxxx, XX
00000
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| By: | /s/ Xxxxx X.Xxxxxxxx | ||||
| Signature | |||||
| Its: | President | 00-0000000 | |||
| Title | Tax
Identification or Social Security Number
(for
U.S. entities)
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| Xxxxx X. Xxxxxxxx | (000) 000-0000 | ||||
| Name Typed or Printed | Telephone Number | ||||
Number of
Shares of Common Stock Subscribed for:
21,800,000
Total
Subscription Amount (at $0.02 per share):
$436,000.00
[Signature
Page—Entity]
CERTIFICATE
OF SIGNATORY
I, Xxxxx X. Xxxxxxxx, am
the President
of
TMG
HOLDINGS, LLC (the "Entity").
I certify
that I am empowered and duly authorized by the Entity to execute and carry out
the terms of the Subscription Agreement and Letter of Investment Intent and to
purchase and hold the Securities, and certify that the Subscription Agreement
and Letter of Investment Intent has been duly and validly executed on behalf of
the Entity and constitutes a legal and binding obligation of the
Entity.
IN
WITNESS WHEREOF, I have hereto set may hand this 10th day of June,
2010.
| /s/ Xxxxx X. Xxxxxxxx | ||
| Signature |
[Certificate
of Signatory Signature Page]
ACCEPTANCE
This
Subscription Agreement and Letter of Investment Intent is accepted as of June
10, 2010.
[Countersignature
Page to Subscription Agreement]
EXHIBIT
A
WIRE
INSTRUCTIONS
Beneficiary
Name:
Beneficiary
Acct:
Beneficiary
Address:
Beneficiary
Bank:
Beneficiary
Bank Address:
ABA#:
FBO:
