SUBSCRIPTION AGREEMENT
Exhibit
10.17 Common Stock Purchase
Agreement of Xxxxxxx Xxxxxxx
July
12,
2007
Bluegate
Corporation
000
Xxxxx
Xxxx Xxx Xxxx, Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Ladies
and Gentlemen:
1.
Private Placement
The
undersigned (the “Investor”) is writing to advise you of the following terms and
conditions under which the Investor hereby offers to subscribe (the "Offer")
for
the securities of this offering which are offered by Bluegate Corporation,
a
Nevada corporation (the "Company”). There is no placement agent for the offering
as it is being offered directly by management. The Company is issuing
securities consisting of its Common Stock, par value $.001 with warrants to
acquire additional shares of the Company’s Common Stock, par value
$.001(“Warrants”) (collectively, the “Securities”) at $200,000 per
Security. Each Security contains 400,000 shares of Common Stock and a
warrant to purchase 1,000,000 shares of Common Stock at $0.17 per
share. The undersigned understands that the Securities are being
issued pursuant to the exemption from registration requirements of the
Securities Act of 1933, as amended (the “Act”), provided by Section 4(2) of the
Act. As such, the Common Stock, the Warrants, and the underlying
shares of Common Stock into which the Warrants may be converted (the “Underlying
Shares”) are "restricted securities".
All
proceeds received from subscribers for the Securities in the offering will
be
paid directly to the Company against delivery by the Company of certificates
representing the Common Stock and Warrants.
2.
Subscription.
Subject
to the terms and conditions hereinafter set forth in this Subscription
Agreement, the undersigned hereby offers to purchase the Securities as set
forth
in the Investor Signature Page attached hereto.
If
the
Offer is accepted by the Company, the Securities shall be paid for by the
delivery of such amount by wire transfer, check or money order payable to the
order of Bluegate Corporation Common Stock Purchase which is being delivered
contemporaneously herewith.
Certificates
of Common Stock and Warrants will be delivered as directed by the
undersigned.
3.
Conditions to Offer.
The
undersigned acknowledges that the Company may accept or reject the Offer, in
whole or in part, for any reason whatsoever. Acceptance of this Offer
shall be deemed given by the countersigning of this Subscription Agreement
on
behalf of the Company.
4.
Representations and Warranties of the Investor.
The
undersigned, in order to induce the Company to accept this Offer, hereby
warrants and represents as follows:
(A) The
undersigned has sufficient liquid assets to sustain a loss of the undersigned's
entire investment.
(B) The
undersigned represents that he (she or it) is an Accredited Investor as that
term is defined in Regulation D promulgated under the Securities Act of 1933,
as
amended (the "Act"). In general, an "Accredited Investor" is deemed
to be an institution with assets in excess of $5,000,000 or individuals with
net
worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000
jointly with their spouse.
(C) The
Company has not made any other representations or warranties to the Investor
with respect to the Company except as contained herein. The
Company has not rendered any investment advice to the Investor with respect
to
the Company.
(D) The
undersigned has not authorized any person or institution to act as his Purchaser
Representative (as that term is defined in Regulation D of the General Rules
and
Regulations under the Act) in connection with this transaction. The
undersigned has such knowledge and experience in financial, investment and
business matters that he is capable of evaluating the merits and risks of the
prospective investment in the Securities. The undersigned has
consulted with such independent legal counsel or other advisers as he has deemed
appropriate to assist the undersigned in evaluating his proposed investment
in
the Securities.
(E) The
undersigned understands that the Securities involve a high degree of risk and
represents that he (i) has adequate means of providing for his current financial
needs and possible personal contingencies, and has no need for liquidity of
investment in the Securities; (ii) can afford (a) to hold unregistered
securities for an indefinite period of time as required and (b) sustain a
complete loss of the entire amount of the subscription; and (iii) has not made
an overall commitment to investments which are not readily marketable which
is
disproportionate so as to cause such overall commitment to become
excessive.
(F) The
undersigned has also been afforded the opportunity to ask questions of, and
receive answers from, the officers and/or directors of the Company concerning
the terms and conditions of the offering and to obtain any additional
information, to the extent that the Company possesses such information or can
acquire it without unreasonable effort or expense, necessary to verify the
accuracy of the information furnished; and has availed himself of such
opportunity to the extent he considers appropriate in order to permit him to
evaluate the merits and risks of an investment in the Securities. It
is understood that all documents, records and books pertaining to this
investment have been made available for inspection, and that the books and
records of the Company will be available upon reasonable notice for inspection
by investors during reasonable business hours at its principal place of
business.
(G) The
undersigned acknowledges that the Securities including Underlying Shares have
not been registered under the Act in reliance on an exemption for transactions
by an issuer not involving a public offering, and further understands that
the
Investor is purchasing the Securities without being furnished any prospectus
setting forth all of the information that would be required to be furnished
under the Act.
(H) The
undersigned further acknowledges that this offering has not been passed upon
or
the merits thereof endorsed or approved by any state or federal
authorities.
(I) The
Securities being subscribed for are being acquired solely for the account of
the
undersigned and not with a view to, or for resale in connection with, any
distribution in any jurisdiction where such sale or distribution would be
precluded. By such representation, the Investor means that no other
person has a beneficial interest in the Securities (or Underlying Shares)
subscribed for hereunder, and that no other person has furnished or will furnish
directly or indirectly, any part of or guarantee the payment of any part of
the
consideration to be paid to the Company in connection therewith. The
undersigned does not intend to dispose of all or any part of the Securities
(or
Warrant or Common Stock issuable upon any exercise of the Warrant) except in
compliance with the provisions of the Act and applicable state securities laws
and understands that the Securities are being offered pursuant to a specific
exemption under the provisions of the Act, which exemption(s) depends, among
other things, upon compliance with the provisions of the Act.
(J) The
undersigned further represents and agrees that the undersigned will not sell,
transfer, pledge or otherwise dispose of or encumber the Securities (including
the Underlying Shares) prior to registration, or the undersigned will, if
requested, furnish the Company and its transfer agent with an opinion of counsel
satisfactory to the Company in form and substance that registration under the
Act or applicable state securities laws is not required.
(K) The
undersigned hereby agrees that the Company may insert the following or similar
legend on the face of the certificates evidencing the Securities and the
Underlying Shares, if required in compliance with federal and state securities
laws:
"These
securities have not been registered under Act or under the securities laws
of
any state. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such act or an opinion of counsel reasonably
satisfactory to the company that such registration is not required pursuant
to a
valid exemption under the Act”
(L) Neither
the Company nor any person acting on its behalf has offered or sold the
undersigned the Securities by means of any form of general solicitation or
general advertising and the Securities were not offered or sold to the Investor
by means of publicly disseminated advertisements or sales
literature.
(M) The
undersigned represents that during the 30 days prior to the date hereof, the
undersigned has not, directly or indirectly, made any short sales of, or granted
any option for the purchase of or entered into any hedging or similar
transaction with the same economic effect as a net short sale, in the Common
Stock.
The
undersigned certifies that each of the foregoing representations and warranties
set forth in subsection (A) through (M) inclusive of this Section 4 are true
as
of the date hereof and shall survive such date.
5.
Representations and Warranties of the Company.
The
Company hereby makes the following representations and warranties to the
Investor:
(A) Subsidiaries. The
Company has no direct or indirect subsidiaries (each a “Subsidiary,” and
collectively, “Subsidiaries”) except as described in SEC
Reports.. 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, and the Company owns
all of the issued and outstanding shares of capital stock of each Subsidiary,
except as described in such the SEC Reports.
(B) Organization
and Qualification. Each of the Company and the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of
any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents.
(C) Authorization;
Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the offering. The execution
and delivery of this Subscription Agreement by the Company and the consummation
by it of the transactions contemplated hereby have been duly authorized by
all
necessary action on the part of the Company and no further consent or action
is
required by the Company, other than the Required Approvals (as
defined below). This Subscription Agreement, when executed and
delivered in accordance with the terms hereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally and general principles of equity.
(D) No
Conflicts. The execution, delivery and performance of this
Subscription Agreement by the Company and the consummation by the Company of
the
offering do not and will not: (i) conflict with or violate any provision of
the
Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) subject to obtaining
the
Required Approvals, conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give
to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or
by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority as currently in effect to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which
any
property or asset of the Company or a Subsidiary is bound or affected; except
in
the case of each of clauses (ii) and (iii), such as could not, individually
or
in the aggregate (a) adversely affect the legality, validity or enforceability
of the offering, (b) have or result in or be reasonably likely to have or result
in a material adverse effect on the results of operations, assets, prospects,
business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (c) adversely impair the Company's ability
to
perform fully on a timely basis its obligations under this Subscription
Agreement (any of (a), (b) or (c), a “Material Adverse
Effect”).
(E) Filings,
Consents and Approvals. Neither the Company nor any Subsidiary is
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection
with
the execution, delivery and performance by the Company of this Subscription
Agreement, other than (i) the filing with the SEC of a Form D pursuant to SEC
Regulation D and (ii) applicable Blue Sky filings (collectively, the
“Required Approvals”). Such “Person” means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or
agency or subdivision thereof) or other entity of any kind.
(F) Issuance
of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with this Subscription Agreement, will be
duly
and validly issued, fully paid and non-assessable, free and clear of all
liens. The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance upon exercise of the
Warrants. The issuance and sale of the Securities hereunder does not contravene
the SEC rules and regulations.
(G) Capitalization. The
number of shares and type of all authorized, issued and outstanding capital
stock of the Company is as set forth in the SEC Reports. No Person has any
right
of first refusal, preemptive right, right of participation, or any similar
right
to participate in the offering. Except as a result of the purchase
and sale of the Securities which may be issued in connection with this offering
and except for (1) options for capital stock issued or issuable under
the Company’s option plans set forth in the SEC Reports and
(2) warrants issued by the Company as set forth in the SEC Reports,
there are no outstanding options, warrants, script rights to subscribe to,
calls
or commitments of any character whatsoever relating to, or securities, rights
or
obligations convertible into or exchangeable for, or giving any Person any
right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock,
or
securities or rights convertible or exchangeable into shares of Common
Stock
(H) SEC
Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Act and the Securities Exchange Act of
1934
(the “Exchange Act”), including pursuant to Section 13(a) of 15(d) thereof, for
the two years preceding the date hereof (or such shorter period as the Company
was required by law to file such material) (the foregoing materials being
collectively referred to herein as the “SEC Reports”). The SEC Reports, when
filed, complied in all material respects with the requirements of the Act and
the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein or necessary in order to make the statements therein, in light
of
the circumstances under which they were made, not misleading. The
financial statements of the Company that have been included in the SEC Reports
comply in all material respects with applicable accounting requirements and
the
rules and regulations of the SEC with respect thereto as in effect at the time
of filing. Such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (“GAAP”), except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present
in all material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case
of
unaudited statements, to normal, immaterial, year-end audit
adjustments.
(I) Material
Changes. Since the date of the latest audited financial statement
dated December 31, 2006 and subsequent quarterly 10Q filings included within
the
SEC Reports: (i) there has been no event, occurrence or development that has
had
a Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or required to be disclosed in filings made with
the
SEC, (iii) the Company has not altered its method of accounting or the identity
of its auditors, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders except in the
ordinary course of business consistent with prior practice, or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock except consistent with prior practice or pursuant to existing Company
stock option or similar plans.
(J) Litigation.
As set forth in the SEC Reports and Company financial statements for March
31,
2007, there is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
or
affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) (collectively,
an “Action”) which: (i) adversely affects or challenges the legality,
validity or enforceability of this Subscription Agreement or the Securities
or
(ii) would, if there were an unfavorable decision, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary is or has been the subject of
any
Action involving a claim of violation of or liability under federal or state
securities laws. The Company does not have pending before the SEC any
request for confidential treatment of information. There has not
been, and to the knowledge of the Company, there is not pending or contemplated,
any investigation by the SEC involving the Company. The SEC has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.
(K) Compliance. Neither
the Company nor any Subsidiary: (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 or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is
in
default under or that it is in violation of, any material indenture, loan or
credit agreement or any other material 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), which default or violation would have
or
result in a Material Adverse Effect, (ii) is in violation of any order of any
court, arbitrator or governmental body, or (iii) is in violation of any statute,
rule or regulation of any governmental authority, except in each case as would
not, individually or in the aggregate, have or result in a Material Adverse
Effect.
(L) Regulatory
Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any Material
Permit.
(M) Listing
and Maintenance Requirements. The Company is currently quoted on
the OTC Bulletin Board under the symbol “BGAT”. The Company is, and
has no reason to believe that it will not in the foreseeable future to be in
compliance with all requirements to be quoted on the OTC Bulletin
Board.
(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-14 and 15d-14)
for
the Company and designed such disclosures controls and procedures to ensure
that
material information relating to the Company, including its Subsidiaries, is
made known to the certifying officers by others within those
entities. The Company's certifying officers have evaluated the
effectiveness of the Company's disclosure controls and procedures as of the
date
immediately prior to the filing of the Company’s most recent periodic report
under the Exchange Act (such date, the "Evaluation Date"). The
Company presented in such report the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on
their
evaluations as of the Evaluation Date. Since the Evaluation Date,
there have been no significant changes in the Company's internal controls (as
such term is defined in Item 307(b) of Regulation S-K under the Exchange
Act).
(O) Disclosure. The
disclosure provided to the Investor regarding the Company, its business and
the
transactions contemplated hereby, furnished by or on behalf of the Company,
including all of the SEC Reports, does 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. The Company acknowledges and agrees that the Investor
makes or has made no representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
this
Subscription Agreement.
6. Covenants
of the Company.
(A) Registration
Rights. The Company grants to the Investor registration rights
relating to the Underlying Shares under the following terms and
conditions:
(1) The
Company will prepare and file, at its own expense, within 90 days from its
Final
Closing a registration statement under the Act (the “Registration Statement”)
with the SEC sufficient to permit the non-underwritten public offering and
resale of the Underlying Shares (the “Registrable Securities”) through the
facilities of all appropriate securities exchanges, if any, on which the Common
Stock is being sold or on the over-the-counter market if the Common Stock is
traded thereon.
(2) The
Company will use its reasonable best efforts to cause such Registration
Statement to become effective within one hundred and fifty (150) days from
its
filing or, if earlier, within twenty (20) business days of Commission clearance
to request acceleration of effectiveness. The number of shares
designated in the Registration Statement to be registered shall include all
of
the Registrable Securities and shall include appropriate language regarding
reliance upon Rule 416 to the extent permitted by the SEC. The
Company will notify the Investors of the effectiveness of the Registration
Statement within five (5) business days of such event.
(3) Except
as otherwise provided in Section 6(C) below, the Company will use its reasonable
best efforts to maintain effectiveness under the Act of the Registration
Statement or any post-effective amendment thereto filed under the terms of
this
Agreement until the earlier of (i) the date that none of the Registrable
Securities covered by such Registration Statement are or may become issued
and
outstanding, (ii) the date that all of the Registrable Securities have been
sold
pursuant to such Registration Statement, (iii) the date that all Registrable
Securities have been otherwise transferred to persons who may trade such shares
without restriction under the Securities Act, and the Company has delivered
a
new certificate or other evidence of ownership for such securities not bearing
a
restrictive legend, or (iv) the date that all Registrable Securities
may be sold at any time, without volume or manner of sale limitations, pursuant
to Rule 144(k) or any similar provision then in effect under the Securities
Act
in the opinion of counsel to the Company, which counsel shall be reasonably
acceptable to the Investor.
(4) If,
at any time during which the Registration Statement required by Section 6(A)(1)
and 6(A)(2) above is not effective, the Company shall determine to proceed
with
the preparation and filing of a separate registration statement pursuant to
the
Act in connection with the proposed offer and sale of any securities by it
or
any of its securities holders (other than a registration statement on Form
X-0,
X-0, or other limited purpose Form), the Company will give written notice of
its
determination to do so to the Investor. Upon receipt of a written
request from Investor, within twenty (20) days after receipt of any such notice
from the Company, the Company will cause all such Registrable Securities
requested by the Investor to be included in such registration statement, all
to
the extent required to permit the sale or other disposition by the Investor
of
such shares. The obligation of the Company under this Section 6(A)
(4) shall be unlimited as to the number of registration statements to which
it
applies, unless the Effectiveness Period has ended. Notwithstanding
the foregoing, the Company shall have the right to postpone or withdraw any
registration effect pursuant to this Section 6(A) (4) without obligation to
the
Investor. In addition, if any registration effected pursuant to this
Section 6(A)(4) is a registered public offering involving an underwriting,
the
Company shall so advise the Investor as a part of the written notice given
pursuant to this Section 6(A)(4). In such event, the right of the
Investor to include Registrable Securities in such registration pursuant to
this
Section 6(A)(4) shall be conditioned upon Investor’s execution of an
underwriting agreement upon customary terms with the underwriter or underwriters
selected for the underwriting by the Company. If the managing
underwriter advises the Company in writing that marketing factors require a
limitation in the number of shares held by selling stockholders to be
underwritten, the number of Registrable Securities that may be included in
such
Registration Statement and underwriting shall be allocated among all investors,
including the Investor, requesting registration in proportion, as nearly as
practicable, to the respective number of shares of Registrable Securities held
by them on the date the Company gives the notice specified in this Section
6(A)(4).
(5) All
fees, disbursements and out-of-pocket expenses and costs incurred by the Company
in connection with the preparation and filing of the Registration Statement
and
in complying with applicable federal securities and Blue Sky laws (including,
without limitation, all attorneys' fees of the Company) shall be borne by the
Company. The Investor and the other investors in the offering shall
bear the cost of underwriting and/or brokerage discounts, fees and commissions,
if any, applicable to the Registrable Securities being registered and the fees
and expenses of their counsel. The Company shall use its reasonable
best efforts to qualify any of the Securities for sale in such states as any
Investor reasonably designates. However, the Company shall not be
required to qualify in any state which will require an escrow or other
restriction relating to the Company and/or the sellers, or which will require
the Company to qualify to do business in such state or require the Company
to
file therein any general consent to service of process. If NASDR Rule
2710 requires any broker-dealer to make a filing prior to executing a sale
by a
Purchaser of the Securities, make an issuer filing with the NASDR, Inc.
Corporate Financing Department pursuant to NASDR Rule 2710(b) (10) (A) (i)
and
respond within five (5) Trading
Days to any comments received from NASDR in connection therewith, and pay the
filing fee required in connection therewith. The Company, at its expense, will
supply the Investor with copies of the applicable Registration Statement and
any
prospectus included therein and other related documents in such quantities
as
may be reasonably requested by the Investor.
(6) In
the event that (i) the Registration Statement to be filed by the Company
pursuant to Section 6(A)(2) is not declared effective by the SEC within the
earlier of one hundred and fifty (150) days from its filing or twenty
(20) days of clearance by the SEC to request effectiveness, (ii) such
Registration Statement is not maintained as effective by the Company for the
period set forth in Section 6(A)(2) above (each a “Registration Default”) then
the Company will pay Investor (pro rated on a daily basis), as partial
compensation for such failure and not as a penalty, in the form of Common Stock,
one and one-half percent (1.5%) of the purchase price of the Registrable
Securities purchased from the Company and held by the Investor for each month
(or portion thereof) until such Registration Statement has been filed or
declared effective or lapsed effectiveness (in the case of clause (ii) above),
one and one-half percent (1.5%) of the purchase price of the Registrable
Securities purchased from the Company and held by the Investor each month (or
portion thereof) (regardless of whether one or more such Registration Defaults
are then in existence, but without duplication of such partial compensatory
payments) until such Registration Statement has been declared effective. Such
compensatory payments shall be made to the Investor in cash,
within thirty (30) calendar days of demand, provided, however, that
the payment of such amounts shall not relieve the Company from its obligations
to register the Securities pursuant to this Section. For
purposes of this calculation, the value of the common stock will be computed
using the average of the closing price for the five preceding trading
days.
If
the
Company does not remit the payment to the Investor as set forth above, the
Company will pay the Investor reasonable costs of collection, including
attorneys’ fees, in addition to the liquidated damages. The registration of the
Securities pursuant to this provision or payment of such compensatory amounts
shall not affect or limit the Investor’s other rights or remedies as set forth
in this Agreement or at law.
(B) The
Company shall be entitled to suspend the availability of any Registration
Statement, by providing notice thereof to the Investors, without incurring
or
accruing any obligation to pay liquidated damages pursuant to Section 6(A)(4),
no more than one (1) time in any three month period or three (3) times in any
twelve month period, and any such period during which the availability of the
Registration Statement is suspended (the “Deferral Period”) shall, without
incurring any obligation to pay liquidated damages pursuant to Section 6(A)(4),
not exceed 30 days; provided that the aggregate duration of any
Deferral Periods shall not exceed 15 days in any three month period or 40 days
in any twelve (12) month period; provided that in the case of a
Material Event relating to an acquisition or a probable acquisition or
financing, recapitalization, business combination or other similar transaction,
the Company may, without incurring any obligation to pay liquidated damages
pursuant to Section 6(A)(4), deliver to the Holders a second notice to the
effect set forth above, which shall have the effect of extending the Deferral
Period by up to an additional 30 days, or such shorter period of time as is
specified in such second notice. As used herein, “Material Event”
shall mean the occurrence of any event or the existence of any fact as a result
of which any Registration Statement shall contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
(C) In
the case of each registration affected by the Company pursuant to any section
herein, the Company will keep each shareholder advised in writing as to the
initiation of each registration and as to the completion thereof. At its
expense, the Company will:
(1) Keep
such registration effective at least until such time as the Underlying Shares
are eligible to have the restrictive legend removed pursuant to SEC Rule
144(k);
(2) Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Securities Act with
respect to a disposition of all securities covered by such registration
statement;
(3) Notify
the shareholders at any time when a prospectus relating thereto is required
to
be delivered under the Act, of 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 a material
fact required to be stated therein or necessary to make the statements therein
not misleading or incomplete in light of the circumstances then existing, and
at
the request of the shareholders, prepare and furnish to them 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 shareholders, 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 or incomplete in light of the circumstances then
existing;
(4) Use
its commercially reasonable best efforts to prevent the issuance of any stop
order or other suspension of effectiveness of a registration statement, and,
if
such an order is issued, to obtain the withdrawal of such order at the earliest
possible moment and to notify Investor (and, in the event of an underwritten
offering, the managing underwriter) of the issuance of such order and the
resolution thereof;
(5) Cause
all shares which are registered in accordance with the provisions herein, to
be
listed or included for quotation on each exchange on which the shares of Common
Stock are then listed or included for quotation;
(6) Provide
a transfer agent and registrar for all such shares and CUSIP number for all
such
shares of Common Stock in each case not later than the effective date of such
registration statement; and
(7) Otherwise
use its commercially reasonable best efforts to comply with all applicable
rules
and regulations of the SEC.
(D) To
the extent Investor includes any Underlying Shares in a Registration Statement
pursuant to the terms hereof, Investor will indemnify and hold harmless the
Company, its directors and officers and any controlling person from and against,
and will reimburse the Company, its directors and officers and any controlling
person with respect to, any and all loss, damage, liability, cost or expense
to
which the Company, its directors and officers or such controlling person may
become subject under the Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was so
made in reliance upon and in conformity with written information furnished
by or
on behalf of the Investor specifically for use in the preparation thereof and
provided further, that the maximum amount that may be recovered from Investor
shall be limited to the amount of proceeds received by Investor from the sale
of
such shares of Common Stock.
(E) To
the extent any indemnification by an indemnifying party is prohibited or limited
by law, the indemnifying party agrees to make the maximum contribution with
respect to any amounts for which it would otherwise be liable hereunder to
the
extent permitted by law, provided that (i) no contribution shall be made under
circumstances where the indemnifying party would not have been liable for
indemnification pursuant to the provisions hereof, (ii) no seller of securities
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of
the Act) shall be entitled to contribution from any seller of securities who
was
not guilty of such fraudulent misrepresentation, and (iii) the amount of the
contribution together with any other payments made in respect of such loss,
damage, liability or expense, by any seller of securities shall be limited
to
the net amount of proceeds received by such seller from the sale of such
securities.
(F) The
Investor will cooperate with the Company in connection with this Subscription
Agreement, including timely supplying all information reasonably requested
by
the Company (which shall include all information regarding the Investor and
proposed manner of sale of securities required to be disclosed in any
registration statement filed in accordance with this Section 6 and executing
and
returning all documents reasonably requested in connection with the registration
and sale of any securities being registered hereunder and entering into and
performing their obligations under any underwriting agreement, if the offering
is an underwritten offering, in usual and customary form, with the managing
underwriter or underwriters of such underwritten offering.
(G) Transfer
Restrictions.
(5) The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an affiliate of an Investor or in connection with a pledge as contemplated
in Section 6(H)(2), the Company may require the transferor thereof to provide
to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the
Act. As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Subscription Agreement and shall have
the rights of an Investor under this Subscription Agreement.
(6) The
Investors agree to the imprinting, so long as is required by this Section 6(H)
(2) of a legend on any of the Securities in the following form:
THIS
[COMMON STOCK] [WARRANT] AND THE SHARES ISSUABLE UPON [EXERCISE OF
THE [WARRANT] HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE SOLD,
ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH COMMON STOCK MAY BE SOLD,
ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
(7) Certificates
evidencing the Underlying Shares shall not contain any legend (including the
legend set forth in Section 6(H)(2) hereof): (i) while a registration statement
(including the Registration Statement) covering the resale of such security
is
effective under the Act, or (ii) following any sale of such Underlying Shares
pursuant to Rule 144, or (iii) if such Underlying Shares are eligible for sale
under Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Act (including judicial interpretations and pronouncements
issued by the staff of the SEC); provided, however, in connection
with the issuance of the Underlying Shares, each Investor, severally and not
jointly with the other Investors, hereby agrees to adhere to and abide by all
prospectus delivery requirements under the Act and rules and regulations of
the
SEC. The Company shall cause its counsel to issue a legal opinion to the
Company’s transfer agent promptly after the Effective Date if required by the
Company’s transfer agent to effect the removal of the legend
hereunder. If all or any portion of Warrant is
exercised at a time when there is an effective registration statement to cover
the resale of the Underlying Shares, or if such Underlying Shares may be sold
under Rule 144(k) or if such legend is not otherwise required under applicable
requirements of the Act (including judicial interpretations thereof) then such
Underlying Shares shall be issued free of all legends. The Company
agrees that following the Effective Date or at such time as such legend is
no
longer required under this Section 6(H)(3), it will, no later
than ten (10) days following the delivery by an Investor to the
Company or the Company's transfer agent of a certificate representing Underlying
Shares, as applicable, issued with a restrictive legend (such third (3rd) day, the
“Legend Removal Date”), deliver or cause to be delivered to such Investor
a certificate representing such shares that is free from all restrictive and
other legends. The Company may not make any notation on its records
or give instructions to any transfer agent of the Company that enlarge the
restrictions on transfer set forth in this Section.
(8) Each
Investor, severally and not jointly with the other Investors, agrees that the
removal of the restrictive legend from certificates representing Securities
as
set forth in this Section 6(H) is predicated upon the Company’s reliance that
the Investor will sell any Securities pursuant to either the registration
requirements of the Act, including any applicable prospectus delivery
requirements, or an exemption there from.
(I) Material
Non-Public Information. The Company covenants and agrees that
neither it nor any other person or entity acting on its behalf will provide
the
Investor or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Investor
shall have executed a written agreement regarding confidentiality and use of
such information. The Company understands and confirms that the
investor shall be relying on the foregoing representations in effecting
transactions in securities of the Company.
7. No
Waiver.
Notwithstanding
any of the
representations, warranties, acknowledgments or agreements made herein by the
Investor, the Investor does not thereby or in any manner waive any rights
granted to the Investor under federal or state securities laws.
8. Revocation.
The
Investor agrees that he shall not cancel, terminate or revoke this Subscription
Agreement or any agreement of the Investor made hereunder other than as set
forth herein, and that this Subscription Agreement shall survive the death
or
disability of the Investor.
9. Termination
of Subscription Agreement.
If
the
Company elects to cancel this Subscription Agreement, provided that it returns
to the Investor, without interest and without deduction, all sums paid by the
Investor, this Offer shall be null and void and of no further force and effect,
and no party shall have any rights against any other party
hereunder.
10. Miscellaneous.
(A) All
notices or other communications given or made hereunder shall be in writing
and
shall be mailed by registered or certified mail, return receipt requested,
postage prepaid, or by overnight courier service to the Investor at his address
set forth below and to the Company at the addresses set forth
herein.
(B) This
Subscription Agreement constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof and may be amended only by a writing
executed by all parties.
(C) The
provisions of this Subscription Agreement shall survive the execution
thereof.
(D) The
Subscription Agreement shall be governed by the laws of the State of
Texas and the Investor consents to the exclusive jurisdiction of, and
venue in, the state courts in Xxxxxx County in the State of Texas (or
in the event of exclusive federal jurisdiction, the courts of
the Southern District of Texas).
11. Certification.
The
Investor certifies that he has read this entire Subscription Agreement and
that
every statement on the part of the Investor made and set forth herein is true
and complete.
INVESTOR
SIGNATURE PAGE FOR BLUEGATE CORPORATION SUBSCRIPTION
AGREEMENT
Please
print or type, Use ink only.(All Parties Must
Sign)
The
undersigned investor hereby certifies that
he (i) agrees to all the terms and conditions
of this Subscription Agreement, (ii) meets the suitability standards set forth
herein and (iii) is a resident of the state or foreign jurisdiction indicated
below.
Dollar
Amount of Securities Subscribed for: $50,000
|
Xxxxxxx
X. Xxxxxxx
|
If
other than individual check one and indicate
|
||||
|
Name
of Investor (Print)
|
capacity
of signatory under the signature:
|
||||
|
o Trust
|
|||||
|
|
o Estate
|
||||
|
Name
of Joint Investor (if any) (Print)
|
o Uniform
Gifts to Minors Act, State of __________
|
||||
|
o Attorney-in-fact
|
|||||
|
o
Corporation
|
|||||
|
|
o Other
|
||||
|
Signature
of Investor
|
|||||
|
If
Joint Ownership, Check one:
|
|||||
|
o Joint
Tenants with Right of Survivorship
|
|||||
|
|
o Tenants
in Common
|
||||
|
Signature
of Joint Investor (if any)
|
o Tenants
by the Entirety
|
||||
|
o Community
by Property
|
|||||
|
|
|||||
|
Capacity
of Signatory (if applicable)
|
Backup
Withholding Statement:
|
||||
|
o Please
check this box only if the investor is subject to
|
|||||
|
|
backup
withholding
|
||||
|
Social
Security or Taxpayer Identification Number
|
|||||
|
Foreign
Person:
|
|||||
|
Investor
Mail Address:
|
o Please
check this box only if the investor is a
|
||||
|
nonresident
alien, foreign corporation, foreign
|
|||||
|
|
partnership,
foreign trust or foreign estate
|
||||
|
Street
Address
|
|||||
|
|
|||||
|
City
|
State
|
Zip
Code
|
Share
and Warrant Registration Name(s) and Amounts:
|
||
|
Telephone:
|
Fax:
( )
|
Name
|
Amount
|
||
|
1.
|
|||||
|
Email:
|
|
2.
|
|||
|
3.
|
|||||
|
Address
for Delivery of Shares (if different from above):
|
|||||
|
4.
|
|||||
|
|
|||||
|
Street
Address
|
|||||
|
|
|||||
|
City
|
State
|
Zip
Code
|
|||
|
Customer Account No.
|
|
||||
Broker:
|
o
NASD Firm Reg.Rep.
|
No.
|
o
Other Investor Representative
|
The
investor agrees to the terms of this Agreement and, as required by the
Regulations pursuant to the Internal Revenue Code, certifies under penalty
of
perjury that (1) the Social Security Number or Taxpayer Identification Number
and address provided above is correct, (2) the investor is not subject to backup
withholding (unless the Backup Withholding Statement box is checked) either
because he has not been notified that he is subject to backup withholding as
a
result of a failure to report all interest or dividends or because the Internal
Revenue Service has notified him that he is no longer subject to backup
withholding and (3) the investor (unless, the Foreign Person box above is
checked) is not a nonresident alien, foreign partnership, foreign trust or
foreign estate.
THE
SUBSCRIPTION FOR SECURITIES OF BLUEGATE CORPORATION. BY THE ABOVE NAMED
INVESTOR(S) IS ACCEPTED THIS ________ DAY OF July______________________,
2007.
|
BLUEGATE
CORPORATION
|
||
|
By:
|
|
|
|
Name:
Xxxxxxx X. Xxxxxxx
|
||
|
Title: Chief
Financial Officer
|
||
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