SUBSCRIPTION AGREEMENT
EXHIBIT
10.4
NAME
OF SUBSCRIBER:_____________________________
|
To:
|
VirtualScopics
000
Xxxxxx Xxxx
Xxxxxxxxx,
Xxx Xxxx 00000
|
This
Subscription Agreement (this “Agreement”) is being delivered to you in
connection with your investment in a publicly-traded company, which will
subsequently change its name to VirtualScopics, Inc. (“Pubco”), and the
anticipated acquisition by exchange offer (the “Acquisition”) by Pubco of all of
the outstanding membership interests and business of VirtualScopics, LLC,
a New
York limited liability company. Xxxxxxxxxx Securities Corporation (the
“Placement Agent”) shall serve as the placement agent of Pubco in conducting a
private placement (the “Private Placement”) of units (“Units”), each Unit
consisting of (i) one share of Pubco’s Series A Convertible Preferred Stock
(“Preferred Stock”), convertible into 400 shares of Pubco’s common stock
(“Common Stock”), and (ii) a detachable, four-year warrant to purchase 200
shares of Common Stock (“Warrant”), at an exercise price of $4.00 per
share. The purchase price per Unit is $1,000. The Private Placement is being
conducted on a “best efforts - 3,000 Units or none” basis with a maximum of
6,000 Units being offered, subject to a 1,000 Unit oversubscription option.
All
funds received in the Private Placement prior to the initial closing of the
Private Placement (the “Initial Closing”) shall be held in escrow by Signature
Bank (the “Escrow Agent”) and, upon fulfillment of the other conditions
precedent set forth herein, shall be released from escrow and delivered to
Pubco
at which time the securities subscribed for as further described below shall
be
delivered, subject to Section 8 hereof, to you. The Company and the Placement
Agent may continue to offer and sell Units and conduct additional closings
(each, a “Closing”) for the sale of additional Units after the Initial Closing
until the termination of the Offering.
1. SUBSCRIPTION
AND PURCHASE PRICE
1.1 Subscription.
Subject
to the conditions set forth in Section 2 hereof, the undersigned hereby
subscribes for and agrees to purchase the number of Units indicated on page
F-10
hereof on the terms and conditions described herein. The minimum number of
Units
that may be purchased is fifty (50). Subscriptions for lesser amounts may
be
accepted at the discretion of Pubco and the Placement Agent.
1.2 Purchase
of Securities.
The
undersigned understands and acknowledges that the purchase price to be remitted
to the Placement Agent in exchange for the Units shall be $1,000 per Unit,
for
an aggregate purchase price as set forth on page F-10 hereof (the “Aggregate
Purchase Price”). The undersigned’s delivery of this Agreement to the Placement
Agent shall be accompanied by payment for the Units subscribed for hereunder,
payable in United States dollars, by check or wire transfer, to “Signature Bank,
as Escrow Agent for VirtualScopics,” with the undersigned’s delivery of this
Agreement to the Placement Agent. The undersigned understands and agrees
that,
subject to Sections 2.1(a) and applicable laws, by executing this Agreement,
he,
she or it is entering into a binding agreement.
2. ACCEPTANCE
AND CLOSING PROCEDURES
2.1 Acceptance
or Rejection.
(a) The
obligation of the undersigned to purchase the Units shall be irrevocable,
and
the undersigned shall be legally bound to purchase the Units subject to the
terms set forth in this Agreement.
(b) The
undersigned understands and agrees that Pubco and the Placement Agent reserve
the right to reject this subscription for the Units in whole or part in any
order at any time prior to the closing (the “Closing”) of the purchase and sale
of the Units if, in their reasonable judgment, they deem such action to be
in
the best interest of Pubco, notwithstanding the undersigned’s prior receipt of
notice of acceptance of the undersigned’s subscription.
(c) In
the
event of rejection of this subscription by Pubco or the Placement Agent in
accordance with Section 2.1(b), or the sale of the Units is not consummated
by
the Placement Agent for any reason, this Agreement and any other agreement
entered into between the undersigned and the Placement Agent relating to
this
subscription shall thereafter have no force or effect, and the Placement
Agent
shall promptly return or cause to be returned to the undersigned the purchase
price remitted to the Escrow Agent, without interest thereon or deduction
therefrom.
2.2 Closing.
Each
Closing shall take place at the offices of Xxxxxxxxx Xxxxxxx, LLP, counsel
to
Pubco, at 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such
other
place as determined by the Placement Agent. The Initial Closing shall take
place
on a Business Day promptly following the satisfaction of the conditions set
forth in Section 8 below. Each subsequent Closing shall take place at such
times
as determined by Pubco (each closing date referred to as a “Closing Date”), or
such other date as is mutually agreed to by the parties and the undersigned.
“Business Day” shall mean from the hours of 9:00 a.m. (E.S.T.) through 5:00 p.m.
(E.S.T.) of a day other than a Saturday, Sunday or other day on which commercial
banks in New York, New York are authorized or required to be
closed.
3. INVESTOR’S
REPRESENTATIONS AND WARRANTIES
The
undersigned hereby acknowledges, agrees with and represents and warrants
to
Pubco and the Placement Agent and its affiliates, as follows:
(a) The
undersigned has full power and authority to enter into this Agreement, the
execution and delivery of which has been duly authorized, if applicable,
and
this Agreement constitutes a valid and legally binding obligation of the
undersigned.
(b) The
undersigned acknowledges his, her or its understanding that the offering
and
sale of the Units is intended to be exempt from registration under the
Securities Act of 1933, as amended (the “Securities Act”), by virtue of Section
4(2) of the Securities Act and the provisions of Regulation D promulgated
thereunder (“Regulation D”). In furtherance thereof, the undersigned represents
and warrants to Pubco and the Placement Agent and its affiliates as
follows:
(i) The
undersigned realizes that the basis for the exemption from registration may
not
be available if, notwithstanding the undersigned’s representations contained
herein, the undersigned is merely acquiring the Units for a fixed or
determinable period in the future, or for a market rise, or for sale if the
market does not rise. The undersigned does not have any such
intention.
(ii) The
undersigned is acquiring the Units solely for the undersigned’s own beneficial
account, for investment purposes, and not with view to, or resale in connection
with, any distribution of the shares of Preferred Stock, or shares of Common
Stock into which the Preferred Stock is convertible and the Warrants are
exercisable.
(iii) The
undersigned has the financial ability to bear the economic risk of his, her
or
its investment, has adequate means for providing for their current needs
and
contingencies, and has no need for liquidity with respect to the investment
in
Pubco;
(iv) The
undersigned and the undersigned’s attorney, accountant, purchaser representative
and/or tax advisor, if any (collectively, “Advisors”), have received the
Confidential Private Placement Memorandum, dated October 3, 2005, together
with
all appendices thereto (as such documents may be amended or supplemented,
the
“Memorandum”), relating to the private placement by Pubco of the Units, and all
other documents requested by the undersigned or Advisors, if any, have carefully
reviewed them and understand the information contained therein, prior to
the
execution of this Agreement; and
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(v) The
undersigned (together with his, her or its Advisors, if any) has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of the prospective investment in the Units. If other
than
an individual, the undersigned also represents it has not been organized
solely
for the purpose of acquiring the Units.
(c) The
information in the Investor Questionnaire completed and executed by the
undersigned (the “Investor Questionnaire”) is true and accurate in all respects,
and the undersigned is an “accredited investor,” as that term is defined in Rule
501(a) of Regulation D.
(d) The
undersigned (and his, her or its Advisors, if any) has been furnished with
a
copy of the Memorandum.
(e) The
undersigned is not relying on the Placement Agent or its affiliates or
sub-agents with respect to economic considerations involved in this investment.
The undersigned has relied on the advice of, or has consulted with, only
his
Advisors. Each Advisor, if any, is capable of evaluating the merits and risks
of
an investment in the Units as such are described in the Memorandum, and each
Advisor, if any, has disclosed to the undersigned in writing (a copy of which
is
annexed to this Agreement) the specific details of any and all past, present
or
future relationships, actual or contemplated, between the Advisor and the
Placement Agent or any affiliate or sub-agent thereof.
(f) The
undersigned represents, warrants and agrees that he, she or it will not sell
or
otherwise transfer the shares of Preferred Stock or Warrants (including such
shares of Common Stock into which the Preferred Stock is convertible and
Warrants are exercisable, and collectively with the Preferred Stock and
Warrants, the “Securities”) without registration under the Securities Act or an
exemption therefrom, and fully understands and agrees that the undersigned
must
bear the economic risk of his, her or its purchase because, among other reasons,
the Securities have not been registered under the Securities Act or under
the
securities laws of any state and, therefore, cannot be resold, pledged, assigned
or otherwise disposed of unless they are subsequently registered under the
Securities Act and under the applicable securities laws of such states, or
an
exemption from such registration is available. In particular, the undersigned
is
aware that the Securities are “restricted securities,” as such term is defined
in Rule 144 promulgated under the Securities Act (“Rule 144”), and they may not
be sold pursuant to Rule 144 unless all of the conditions of Rule 144 are
met.
The undersigned also understands that, except as otherwise provided herein,
Pubco is under no obligation to register the Securities on his, her or its
behalf or to assist them in complying with any exemption from registration
under
the Securities Act or applicable state securities laws. The undersigned
understands that any sales or transfers of the Securities are further restricted
by state securities laws and the provisions of this Agreement.
(g) No
representations or warranties have been made to the undersigned by Pubco,
VirtualScopics, LLC or the Placement Agent, or any of their respective officers,
employees, agents, sub-agents, affiliates or subsidiaries, other than any
representations of Pubco or the Placement Agent contained herein and in the
Memorandum, and in subscribing for Units the undersigned is not relying upon
any
representations other than those contained herein or in the
Memorandum.
(h) The
undersigned understands and acknowledges that his, her or its purchase of
the
Units is a speculative investment that involves a high degree of risk and
the
potential loss of their entire investment and has carefully read and considered
the matters set forth in the Memorandum and in particular the matters under
the
caption “Cautionary Language Regarding Forward-Looking Statements and Industry
Data” and “Risk Factors” therein, and, in particular, acknowledges that
VirtualScopics has a limited operating history and is engaged in a highly
regulated business, including required compliance with the Food, Drug and
Cosmetic Act and the rules and regulations of the Food and Drug Administration.
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(i) The
undersigned’s overall commitment to investments that are not readily marketable
is not disproportionate to the undersigned’s net worth, and an investment in the
Units will not cause such overall commitment to become excessive.
(j) The
undersigned understands and agrees that the certificates for the Securities
shall bear substantially the following legend until (i) such Securities shall
have been registered under the Securities Act and effectively disposed of
in
accordance with a registration statement that has been declared effective
or
(ii) in the opinion of counsel for Pubco such Securities may be sold without
registration under the Securities Act, as well as any applicable “blue sky” or
state securities laws:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE
STATE SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FILED BY THE ISSUER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION
COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
(k) Neither
the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities
commission has approved the Units or the Securities, or passed upon or endorsed
the merits of the Offering or confirmed the accuracy or determined the adequacy
of the Memorandum. The Memorandum has not been reviewed by any Federal, state
or
other regulatory authority.
(l) The
undersigned and his, her or its Advisors, if any, have had a reasonable
opportunity to ask questions of and receive answers from a person or persons
acting on behalf of Pubco and VirtualScopics, LLC concerning the offering
of the
Units and the business, financial condition, results of operations and prospects
of Pubco, and all such questions have been answered to the full satisfaction
of
the undersigned and his, her or its Advisors, if any.
(m) The
undersigned is unaware of, is in no way relying on, and did not become aware
of
the offering of the Units through or as a result of, any form of general
solicitation or general advertising including, without limitation, any article,
notice, advertisement or other communication published in any newspaper,
magazine or similar media or broadcast over television, radio or electronic
mail
through the Internet, in connection with the offering and sale of the Units
and
is not subscribing for Units and did not become aware of the offering of
the
Units through or as a result of any seminar or meeting to which the undersigned
was invited by, or any solicitation of a subscription by, a person not
previously known to the undersigned in connection with investments in securities
generally.
(n) The
undersigned has taken no action which would give rise to any claim by any
person
for brokerage commissions, finders’ fees or the like relating to this Agreement
or the transactions contemplated hereby (other than commissions to be paid
by
Pubco to the Placement Agent, its sub-agents or as otherwise described in
the
Memorandum) and, in turn, to be paid to other selected dealers.
(o) The
undersigned is not relying on Pubco, the Placement Agent or any of their
respective employees, agents or sub-agents with respect to the legal, tax,
economic and related considerations of an investment in the Units, and the
undersigned has relied on the advice of, or has consulted with, only his,
her or
its own Advisors.
(p) The
undersigned acknowledges that any estimates or forward-looking statements
or
projections included in the Memorandum were prepared by the future management
of
Pubco in good faith, but that the attainment of any such projections, estimates
or forward-looking statements cannot be guaranteed by Pubco or its management
and should not be relied upon.
4
(q) No
oral
or written representations have been made, or oral or written information
furnished, to the undersigned or his, her or its Advisors, if any, in connection
with the offering of the Units which are in any way inconsistent with the
information contained in the Memorandum.
(r) The
undersigned’s substantive relationship with the Placement Agent or sub-agents
through which the undersigned is subscribing for Units predates the Placement
Agent’s or such sub-agents’ contact with the undersigned regarding an investment
in the Units.
(s) The
foregoing representations, warranties and agreements shall survive the
Closing.
4. PUBCO’S
REPRESENTATIONS AND WARRANTIES
Pubco
hereby acknowledges, agrees with and represents and warrants to each of the
undersigned, as follows:
(a) Pubco
has
the corporate power and authority to execute and deliver this Agreement and
to
perform its obligations hereunder. This Agreement has been duly authorized,
executed and delivered by Pubco and is valid, binding and enforceable against
Pubco in accordance with its terms.
(b) The
Preferred Stock and Warrants to be issued to the undersigned pursuant to
this
Agreement, when issued and delivered in accordance with the terms thereof
and
this Agreement, will be duly and validly issued and will be fully paid and
non-assessable.
(c) Pubco
has
duly and validly reserved, out of its authorized and unissued Common Stock,
for
issuance upon conversion of the Preferred Stock and exercise of the Warrants,
a
number of shares sufficient for such purpose. The Common Stock to be issued
to
the undersigned upon conversion of the Preferred Stock and exercise of the
Warrants pursuant to this Agreement, when issued and delivered in accordance
with this Agreement, the Warrant and the Certificate of Designation, Preferences
and Rights pertaining to the Preferred Stock, will, upon receipt by Pubco
of the
applicable cash conversion or exercise price therefor, be validly issued
and
fully paid and non-assessable.
(d) Neither
the execution and delivery nor the performance of this Agreement by Pubco
will
conflict with Pubco’s Certificate of Incorporation or By-laws, as amended to
date, or result in a breach of any terms or provisions of, or constitute
a
default under, any material contract, agreement or instrument to which Pubco
is
a party or by which Pubco is bound.
(e) After
giving effect to the transactions contemplated by this Agreement and immediately
after the Closing, Pubco will have the outstanding capital stock as described
in
the Memorandum.
(f) The
information contained in the Memorandum is true and correct in all material
respects as of its date.
5. COVENANTS
5.1 Registration
Rights.
(a) Pubco
shall file a registration statement (the “Registration Statement”) with the SEC
covering the resale of the shares of Common Stock into which the Preferred
Stock
is convertible and the Warrants are exercisable on or around, but no later
than,
one hundred eighty (180) days after the Closing Date. Pubco shall use its
best
efforts to have the Registration Statement declared effective by the SEC
as soon
as possible after the initial filing, and agrees to use its commercially
reasonable best efforts to respond to any SEC comments or questions regarding
the Registration Statement on or prior to the date which is twenty (20) business
days from the date such comments or questions are received, but in any event
not
later than thirty (30) business days from the date such comments or questions
are received. Pubco will maintain the effectiveness of the Registration
Statement from the date of the effectiveness of the Registration Statement
until
one (1) year after that date; provided,
however,
that,
if at any time or from time to time after the date of effectiveness of the
Registration Statement, Pubco notifies the undersigned in writing of the
existence of a Potential Material Event (as defined below), the undersigned
shall not offer or sell any of the Securities, or engage in any other
transaction involving or relating to the Securities, from the time of the
giving
of notice with respect to a Potential Material Event until Pubco notifies
the
undersigned that such Potential Material Event either has been disclosed
to the
public or no longer constitutes a Potential Material Event; provided,
further
that,
Pubco may not suspend the right of the undersigned pursuant to this Section
5.1(a) for more than sixty (60) days in the aggregate. “Potential Material
Event” means the possession by Pubco of material information regarding a
potential transaction not ripe for disclosure in a registration statement,
which
shall be evidenced by determinations in good faith by the Board of Directors
of
Pubco that disclosure of such information in the registration statement would
be
detrimental to the business and affairs of Pubco.
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(b) If
Pubco
fails to file the Registration Statement with the SEC on or prior to one
hundred
eighty (180) days after the Closing Date, Pubco shall be obligated to issue
to
the undersigned additional shares of Preferred Stock computed as follows:
on the
first day that Pubco has failed to file the Registration Statement (the “First
Determination Date”), Pubco shall determine the number of shares of Preferred
Stock entitled (by virtue of the underlying shares of Common Stock to be
registered) to the benefit of the registration rights set forth in this Section
5.1 that are held by the undersigned (the “Subject Securities”). Within sixty
(60) days following the First Determination Date, Pubco shall issue to the
undersigned such number of shares of Preferred Stock equal to 2% of number
of
shares of Subject Securities (the “Penalty Shares”). Penalty Shares shall also
be issuable upon the expiration of each 30-day period following the First
Determination Date during which Pubco has continued to fail to file the
Registration Statement (the expiration date of each such 30-day period being
a
“Subsequent Determination Date”). The number of Penalty Shares issuable
following each Subsequent Determination Date shall be determined and issued
in
accordance with this section on the same basis applicable to the First
Determination Date; provided,
however,
that
Penalty Shares previously issued to the undersigned shall be excluded from
the
calculation of Subject Securities. Notwithstanding the foregoing, Pubco shall
not be obligated to issue to the undersigned pursuant to this paragraph an
aggregate number of Penalty Shares greater than 20% of the number of shares
of
Subject Securities originally subscribed for and held by the
undersigned.
(c) If
Pubco
fails to respond to the SEC, within thirty (30) days after receipt, to any
questions and comments from the SEC regarding the Registration Statement,
Pubco
shall be obligated to issue Penalty Shares to the undersigned. The thirty-first
(31st)
day
that Pubco has failed to respond to the SEC is termed the “Response
Determination Date.” Within sixty (60) days following the Response Determination
Date, Pubco shall issue to the undersigned Penalty Shares (which are equal
to 2%
of the number of shares of Subject Securities). Penalty Shares shall also
be
issuable upon the expiration of each 30-day period following the Response
Determination Date during which Pubco has continued to fail to respond to
the
SEC (the expiration date of each such 30-day period being a “Subsequent Response
Determination Date”). The number of Penalty Shares issuable following each
Subsequent Response Determination Date shall be determined and issued in
accordance with this section on the same basis applicable to the Response
Determination Date; provided,
however,
that
Penalty Shares previously issued to the undersigned shall be excluded from
the
calculation of Subject Securities. Notwithstanding the foregoing, Pubco shall
not be obligated to issue to the undersigned pursuant to this paragraph an
aggregate number of Penalty Shares greater than 20% of the number of shares
of
Subject Securities originally subscribed for and held by the
undersigned.
(d) Pubco
shall notify the undersigned at any time when a prospectus relating thereto
is
required to be delivered under the Securities Act, upon discovery that, or
upon
the happening of any event as a result of which, the prospectus included
in such
registration statement, as then in effect, includes an untrue statement of
a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing. At the request of the undersigned, Pubco shall
also
prepare, file and furnish to the undersigned a reasonable number of copies
of a
supplement to or an amendment of such prospectus as may be necessary so that,
as
thereafter delivered to the purchasers of such shares, such prospectus shall
not
include an untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements therein
not
misleading in light of the circumstances then existing. The undersigned agrees
not to offer or sell any shares covered by the Registration Statement after
receipt of such notification until the receipt of such supplement or
amendment.
(e) Pubco
may
request the undersigned to furnish Pubco such information with respect to
the
undersigned and the undersigned’s proposed distribution of Securities pursuant
to the Registration Statement as Pubco may from time to time reasonably request
in writing or as shall be required by law or by the SEC in connection therewith,
and the undersigned agrees to furnish Pubco with such information.
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6. USE
OF PROCEEDS
The
net
proceeds of the Private Placement will be used in a manner consistent with
the
plan described in “Use of Proceeds” in the Memorandum and based upon periodic
budget authorization by Pubco’s Board of Directors. Pubco will use $250,000
following the closing of this Private Placement towards the establishment
of a
capital markets plan, with such funds to be held in escrow for such limited
purpose.
7. XXXXXXX
XXXXXXX PROHIBITION; INDEMNITY
(a) Until
the
filing by Pubco of its Current Report on Form 8-K with the SEC describing
the
Acquisition and the Private Placement, the undersigned hereby agrees to (i)
refrain from (a) engaging in any transactions with respect to the capital
stock
of Pubco or securities exercisable or convertible into or exchangeable for
any
shares of capital stock of Pubco, and (b) entering into any transaction which
would have the same effect, or entering into any swap, hedge or other
arrangement that transfers, in whole or in part, any of the economic
consequences of ownership of the capital stock of Pubco and (ii) indemnify
and
hold harmless Pubco, the Placement Agent, and their respective officers and
directors, employees, agents, sub-agents and affiliates and each other person,
if any, who controls any of the foregoing, against any loss, liability, claim,
damage and expense whatsoever (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any litigation commenced or threatened or any claim whatsoever) arising
out of or based upon any violation of this Section 7 by the
undersigned.
(b) The
undersigned agrees to indemnify and hold harmless Pubco, the Placement Agent,
the Escrow Agent and their respective officers and directors, employees,
agents,
sub-agents and affiliates and each other person, if any, who controls any
of the
foregoing, against any loss, liability, claim, damage and expense whatsoever
(including, but not limited to, any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any litigation
commenced or threatened or any claim whatsoever) arising out of or based
upon
any false representation or warranty by the undersigned, or the undersigned’s
breach of, or failure to comply with, any covenant or agreement made by the
undersigned herein or in any other document furnished by the undersigned
to
Pubco, the Placement Agent, the Escrow Agent and their respective officers
and
directors, employees, agents, sub-agents and affiliates and each other person,
if any, who controls any of the foregoing in connection with the Private
Placement.
8. CONDITIONS
TO ACCEPTANCE OF SUBSCRIPTION
Pubco’s
right to accept the subscription of the undersigned is conditioned upon
satisfaction of the following conditions precedent on or before the date
Pubco
accepts such subscription (the “Closing Date”) (any or all of which may be
waived by the undersigned in his, her or its sole discretion):
8.1 On
the
Closing Date, no legal action, suit or proceeding shall be pending which
seeks
to restrain or prohibit the transactions contemplated by this
Agreement.
8.2 The
closing of the Acquisition shall occur concurrently with the acceptance of
this
subscription.
8.3 The
Board
of Directors of Pubco shall have approved the issuance of the Preferred Stock
and Warrants pursuant to this Agreement in accordance with the applicable
laws
of the jurisdiction of Pubco’s incorporation and expressly approved the
assumption of this Agreement.
8.4 Pubco
shall have expressly assumed this Agreement and the other subscription documents
in the Private Placement for a minimum of 3,000 Units and shall have indicated
such assumption by executing and delivering a counterpart of this executed
Agreement and the other subscription documents.
8.5 The
representations and warranties of Pubco contained in this Agreement shall
have
been true and correct on the date of this Agreement and shall be true and
correct on the Closing Date as if made on the Closing Date.
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9. NOTICES
TO SUBSCRIBERS
9.1 THE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES
LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS
FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE
SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING
OR THE
ACCURACY OR ADEQUACY OF THE MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY
IS
UNLAWFUL.
9.2 THE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT, AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. SUBSCRIBERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR
THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF
TIME.
10. MISCELLANEOUS
PROVISIONS
10.1 Modification.
Neither
this Agreement, nor any provisions hereof, shall be waived, modified, discharged
or terminated except by an instrument in writing signed by the party against
whom any waiver, modification, discharge or termination is sought.
10.2 Survival.
The
undersigned’s representations and warranties made in this Subscription Agreement
shall survive the execution and delivery of this Agreement and the delivery
of
the Preferred Stock and the Warrant.
10.3 Notices.
Any
party may send any notice, request, demand, claim or other communication
hereunder to the undersigned at the address set forth on the signature page
of
this Agreement or to Pubco at the address set forth above using any means
(including personal delivery, expedited courier, messenger service, fax,
ordinary mail or electronic mail), but no such notice, request, demand, claim
or
other communication will be deemed to have been duly given unless and until
it
actually is received by the intended recipient. Any party may change the
address
to which notices, requests, demands, claims and other communications hereunder
are to be delivered by giving the other parties written notice in the manner
herein set forth.
10.4 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
10.5 Binding
Effect.
Except
as otherwise provided herein, this Agreement shall be binding upon, and inure
to
the benefit of, the parties to this Agreement and their heirs, executors,
administrators, successors, legal representatives and assigns. If the
undersigned is more than one person or entity, the obligation of the undersigned
shall be joint and several and the agreements, representations, warranties
and
acknowledgments contained herein shall be deemed to be made by, and be binding
upon, each such person or entity and his or its heirs, executors,
administrators, successors, legal representatives and assigns.
10.6 Assignability.
This
Agreement is not transferable or assignable by the undersigned. This Agreement
shall be transferable or assignable by the Placement Agent to
Pubco.
10.7 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of New York, without giving effect to conflicts of law
principles.
8
ANTI-MONEY
LAUNDERING REQUIREMENTS
|
The
USA PATRIOT Act
|
What
is money laundering?
|
How
big is the problem and why is it important?
|
||
|
The
USA PATRIOT Act is designed to detect, deter, and punish terrorists
in the
United States and abroad. The Act imposes new anti-money laundering
requirements on brokerage firms and financial institutions. Since
April
24, 2002, all brokerage firms have been required to have new,
comprehensive anti-money laundering programs.
To
help you understand theses efforts, we want to provide you with
some
information about money laundering and our steps to implement the
USA
PATRIOT Act.
|
Money
laundering is the process of disguising illegally obtained money
so that
the funds appear to come from legitimate sources or activities.
Money
laundering occurs in connection with a wide variety of crimes,
including
illegal arms sales, drug trafficking, robbery, fraud, racketeering,
and
terrorism.
|
The
use of the U.S. financial system by criminals to facilitate terrorism
or
other crimes could taint our financial markets. According to the
U.S.
State Department, one recent estimate puts the amount of worldwide
money
laundering activity at $1 trillion a
year.
|
|
What
are we required to do to eliminate money
laundering? |
||
|
Under
new rules required by the USA PATRIOT Act, our anti-money laundering
program must designate a special compliance officer, set up employee
training, conduct independent audits, and establish policies
and
procedures to detect and report suspicious transactions and ensure
compliance with the new laws.
|
As
part of our required program, we may ask you to provide various
identification documents or other information. Until you provide
the
information or documents we need, we may not be able to effect
any
transactions for you.
|
|
PRIVACY
POLICY
It
is the
policy of Xxxxxxxxxx Securities Corporation (BSC) to respect the privacy
of
customers who subscribe to transactions underwritten by BSC.
Whether
its own brokers introduce Customers to BSC or the introduction was made through
Selling Agents, (hereinafter referred to as “Subscribers”) nonpublic personal
information is protected by BSC.
BSC
does
not disclose any nonpublic personal information about Subscribers to anyone,
except as required or permitted by law and to effect, administer, or enforce
transactions requested by Subscribers in the ordinary processing, servicing
or
maintaining their accounts. Furthermore, BSC does not reserve the right to
disclose Subscriber’s nonpublic personal information in the future without first
notifying the Subscriber of a change in privacy policy and providing a
convenient opportunity for Subscriber to opt out of information sharing with
nonaffiliated third parties.
Under
the
USA PATRIOT Act of 2001 (Public Law 107-56)(together with all rules and
regulations promulgated hereunder, the “Patriot Act”), BSC and/or your broker
may be required or requested to disclose to one or more regulatory and/or
law
enforcement bodies certain information regarding transactions relating to
your
account involving transactions with foreign entitles and individuals, other
transactions in your account as required in the Patriot Act and other activities
described in the Patriot Act as “suspicious activities”. Neither BSC nor your
broker shall have any obligation to advise you of any such disclosures or
reports made in compliance with the Patriot Act.
9
ALL
SUBSCRIBERS MUST COMPLETE THIS PAGE
IN
WITNESS WHEREOF, the undersigned has executed this Agreement on the ____
day of
____________ 2005.
|
________________________
Units
subscribed for
|
X
$1,000 for each Unit
|
=
$_____________________.
Aggregate Purchase Price
|
Manner
in
which Title is to be held (Please Check One):
|
1.
|
___
|
Individual
|
7.
|
___
|
Trust/Estate/Pension
or Profit sharing Plan
Date
Opened:___
___________
|
|
2.
|
___
|
Joint
Tenants with Right of Survivorship
|
8.
|
___
|
As
a Custodian for
________________________________
Under
the Uniform Gift to Minors Act of the State of
________________________________
|
|
3.
|
___
|
Community
Property
|
9.
|
___
|
Married
with Separate Property
|
|
4.
|
___
|
Tenants
in Common
|
10.
|
___
|
Xxxxx
|
|
5.
|
___
|
Corporation/Partnership/
Limited Liability Company
|
11.
|
___
|
Tenants
by the Entirety
|
|
6.
|
___
|
XXX
|
IF
MORE
THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN.
INDIVIDUAL
SUBSCRIBERS MUST COMPLETE PAGE F-11.
SUBSCRIBERS
WHICH ARE ENTITIES MUST COMPLETE PAGE F-12.
10
EXECUTION
BY NATURAL PERSONS
|
_____________________________________________________________________________
Exact
Name in Which Title is to be Held
|
||
|
_________________________________
Name
(Please Print)
|
_________________________________
Name
of Additional Purchaser
|
|
|
_________________________________
Residence:
Number and Street
|
_________________________________
Address
of Additional Purchaser
|
|
|
_________________________________
City,
State and Zip Code
|
_________________________________
City,
State and Zip Code
|
|
|
_________________________________
Social
Security Number
|
_________________________________
Social Security Number
|
|
|
_________________________________
Telephone
Number
|
_________________________________
Telephone
Number
|
|
|
_________________________________
Fax
Number (if available)
|
________________________________
Fax
Number (if available)
|
|
|
_________________________________
E-Mail
(if available)
|
________________________________
E-Mail
(if available)
|
|
|
__________________________________
(Signature)
|
________________________________
(Signature
of Additional Purchaser)
|
|
|
ACCEPTED
this ___ day of _________ 2005, on behalf of Pubco.
|
||
|
By: _________________________________
Name:
Title:
|
||
11
EXECUTION
BY SUBSCRIBER WHICH IS AN ENTITY
(Corporation,
Partnership, LLC, Trust, Etc.)
|
_____________________________________________________________________________
Name
of Entity (Please Print)
|
||
|
Date
of Incorporation or Organization:
_______________________________________________________________
|
||
|
State
of Principal Office:
__________________________________________________________________________
|
||
|
Federal
Taxpayer Identification Number:
_____________________________________________________________
____________________________________________
Office
Address
____________________________________________
City,
State and Zip Code
____________________________________________
Telephone
Number
____________________________________________
Fax
Number (if available)
____________________________________________
E-Mail
(if available)
|
||
|
By:
_________________________________
Name:
Title:
|
||
|
[seal]
Attest:
_________________________________
(If
Entity is a Corporation)
|
_________________________________
_________________________________
Address
|
|
|
ACCEPTED
this ____ day of __________ 2005, on behalf of Pubco.
|
||
|
By:
_________________________________
Name:
Title:
|
||
12
INVESTOR
QUESTIONNAIRE
Instructions:
Check all boxes below which correctly describe you.
| o |
You
are (i)
a
bank, as defined in Section 3(a)(2) of the Securities Act of 1933,
as
amended (the “Securities
Act”),
(ii)
a
savings and loan association or other institution, as defined in
Section
3(a)(5)(A) of the Securities Act, whether acting in an individual
or
fiduciary capacity, (iii)
a
broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”),
(iv)
an insurance company as defined in Section 2(13) of the Securities
Act,
(v)
an investment company registered under the Investment Company Act
of 1940,
as amended (the “Investment
Company Act”),
(vi)
a
business development company as defined in Section 2(a)(48) of
the
Investment Company Act, (vii)
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, as amended, (viii)
a
plan established and maintained by a state, its political subdivisions,
or
an agency or instrumentality of a state or its political subdivisions,
for
the benefit of its employees and you have total assets in excess
of
$5,000,000, or (ix)
an employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”)
and (1)
the decision that you shall subscribe for and purchase units consisting
of
one (1) share of Series A Convertible Preferred Stock and a three-year
detachable warrant to purchase shares of common stock (the “Units”), is
made by a plan fiduciary, as defined in Section 3(21) of ERISA,
which is
either a bank, savings and loan association, insurance company,
or
registered investment adviser, (2) you have total assets in excess
of
$5,000,000 and the decision that you shall subscribe for and purchase
the
Units is made solely by persons or entities that are accredited
investors,
as defined in Rule 501 of Regulation D promulgated under the Securities
Act (“Regulation
D”)
or (3)
you are a self-directed plan and the decision that you shall subscribe
for
and purchase the Units is made solely by persons or entities that
are
accredited investors.
|
| o |
You
are a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940, as
amended.
|
| o |
You
are an organization described in Section 501(c)(3) of the Internal
Revenue
Code of 1986, as amended (the “Code”),
a corporation, Massachusetts or similar business trust or a partnership,
in each case not formed for the specific purpose of making an investment
in the Units and with total assets in excess of
$5,000,000.
|
| o |
You
are a director or executive officer of VirtualScopics,
LLC.
|
| o |
You
are a natural person whose individual net worth, or joint net worth
with
your spouse, exceeds $1,000,000 at the time of your subscription
for and
purchase of the Units.
|
| o |
You
are a natural person who had an individual income in excess of
$200,000 in
each of the two most recent years or joint income with your spouse
in
excess of $300,000 in each of the two most recent years, and who
has a
reasonable expectation of reaching the same income level in the
current
year.
|
| o |
You
are a trust, with total assets in excess of $5,000,000, not formed
for the
specific purpose of acquiring the Units, whose subscription for
and
purchase of the Units is directed by a sophisticated person as
described
in Rule 506(b)(2)(ii) of Regulation
D.
|
| o |
You
are an entity in which all of the equity owners are persons or
entities
described in one of the preceding
paragraphs.
|
13
The
undersigned hereby represents and warrants that all of its answers to this
Investor Questionnaire are true as of the date of its execution of the
Subscription Agreement pursuant to which it purchased Units of
Pubco.
|
_______________________________________
Name
of Purchaser [please print]
___________________________
Signature
of Purchaser (Entities please
provide
signature of Purchaser’s duly
authorized
signatory.)
___________________________
Name
of Signatory (Entities only)
___________________________
Title
of Signatory (Entities only)
|
________________________________________
Name
of Co-Purchaser [please print]
____________________________
Signature
of Co-Purchaser
|
14
