SUBSCRIPTION AGREEMENT
NAME
OF SUBSCRIBER:
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SUBSCRIPTION
AMOUNT:
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$
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To:
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Derycz
Scientific, Inc.
00000
Xxxxxxxx Xxxx., Xxxxx 0000
Xxx
Xxxxxxx, XX 00000
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Attn: |
Xx.
Xxxxx Xxxxxx
President
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This
Subscription Agreement (this “Agreement”) is being delivered to you in
connection with your investment in Derycz Scientific, Inc. (the “Company”). X.
X. Xxxxxxx & Company, LLC (the “Placement Agent”) shall serve as the
placement agent of the Company in conducting a private placement (the
“Offering”) of Securities, consisting of 1 share of common stock of the Company
(the “Shares”) and, for every 2 shares purchased, a Warrant to purchase 1 share
of common stock of the Company (the “Warrants”, the Shares and Warrants are
collectively referred to as the “Securities”), at a purchase price of
$1.25 per
share. The Offering is being conducted on a “best efforts” basis with a maximum
of 2,500,000 Shares being offered, subject to an over-allotment option of 20%
(500,000 Shares).
1. Subscription
and Purchase Price
(a) Subscription.
Subject
to the conditions set forth in Section 2 hereof, the undersigned hereby
subscribes for and agrees to purchase the number of Shares and Warrants
indicated on page 13 hereof on the terms and conditions described herein. The
minimum amount of Shares and Warrants that may be purchased is $50,000.
Subscriptions for lesser amounts may be accepted at the discretion of the
Company and the Placement Agent.
(b) Purchase
of Securities.
The
undersigned understands and acknowledges that the purchase price to be remitted
to the Placement Agent in exchange for the Securities shall be $1.00 per Share,
for an aggregate purchase price as set forth on page 13 hereof (the “Aggregate
Purchase Price”). The undersigned’s delivery of this Agreement to the Placement
Agent shall be accompanied by payment for the Securities subscribed for
hereunder, payable in United States dollars, by check made payable to the order
of “Xxxxxxxxxx
& Xxxxx LLP Client Trust Account f/b/o Derycz Scientific, Inc.”
or
by
wire transfer of immediately available funds delivered contemporaneously with
the undersigned’s delivery of this Agreement to the Placement Agent. The
undersigned understands and agrees that, subject to Section 2 and applicable
laws, by executing this Agreement, he, she or it is entering into a binding
agreement.
2. Acceptance,
Offering Term and Closing Procedures
(a) Acceptance
or Rejection.
The
obligation of the undersigned to purchase the Securities shall be irrevocable,
and the undersigned shall be legally bound to purchase the Securities subject
to
the terms set forth in this Agreement. The undersigned understands and agrees
that the Company and the Placement Agent reserve the right to reject this
subscription for the Securities in whole or part in any order at any time prior
to the closing (the “Closing”) of the purchase and sale of the Securities if, in
their reasonable judgment, they deem such action to be in the best interest
of
the Company, notwithstanding the undersigned’s prior receipt of notice of
acceptance of the undersigned’s subscription. In the event of rejection of this
subscription by the Company or the Placement Agent in accordance with this
Section 2, or the sale of the Securities 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.
(b) Offering
Term.
The
subscription period for the Offering will begin as of the date of the
Memorandum, and will terminate upon the occurrence of the earlier of (a) the
30th
day
thereafter, unless extended by the Company and the Placement Agent for up to
two
successive 30-day periods, or (b) the Company’s acceptance of subscriptions for
3,000,000 Shares offered and the receipt of payment therefor.
(c) Placement
Agent.
The
Company has retained the Placement Agent to coordinate the offering as the
Company’s exclusive placement agent. See the Memorandum for a description of the
compensation payable to the Placement Agent and other terms of the
Offering.
(d) Closing.
Each
Closing shall take place at such times as determined by the Company (each
closing date referred to as a “Closing Date”), or such other date as is mutually
agreed to by the parties and the undersigned. The Common Stock and the Warrants
purchased by the Subscriber will be delivered by the Company promptly following
a Closing.
3. Investor’s
Representations and Warranties
The
undersigned hereby acknowledges, agrees with and represents and warrants to
the
Company 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 Common Stock, the Warrants and the common stock issuable upon
exercise of the Warrants (the “Securities”) are 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 the Company 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 Securities 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 Securities solely for the undersigned’s own
beneficial account, for investment purposes, and not with a view to, or resale
in connection with, any distribution of the Securities.
(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
the Company;
(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 December 4, 2006, together
with
all appendices thereto (as such documents may be amended or supplemented, the
“Memorandum”), relating to the private placement by the Company of the
Securities, 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
(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 Securities. If other
than an individual, the undersigned also represents it has not been organized
solely for the purpose of acquiring the Shares.
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(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,
her or its Advisors. Each Advisor, if any, is capable of evaluating the merits
and risks of an investment in the Shares 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 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 in Section 5 hereof, the Company 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 the Company
or the Placement Agent, or any of their respective officers, employees, agents,
sub-agents, affiliates or subsidiaries, other than any representations of the
Company or the Placement Agent contained herein and in the Memorandum, and
in
subscribing for the Securities 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
Securities 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
the Company has a limited operating history and is engaged in a highly
competitive business.
(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
Securities 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 the Company 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.
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(k) Neither
the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities
commission has approved 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 the Company concerning the offering of the Securities and
the business, financial condition, results of operations and prospects of the
Company, 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 Securities 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 or radio, or electronic
mail over the Internet, in connection with the offering and sale of the
Securities and is not subscribing for the Securities and did not become aware
of
the offering of the Securities 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
the Company to the Placement Agent, its sub-agents or as otherwise described
in
the Memorandum).
(o) The
undersigned is not relying on the Company, 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 Securities, 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 management of the
Company in good faith, but that the attainment of any such projections,
estimates or forward-looking statements cannot be guaranteed by the Company
or
its management and should not be relied upon.
(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 Securities 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 Securities predates the
Placement Agent’s or such sub-agents’ contact with the undersigned regarding an
investment in the Securities.
(s) (For
ERISA plans only) The fiduciary of the ERISA plan (the “Plan”) represents that
such fiduciary has been informed of and understands the Company’s investment
objectives, policies and strategies, and that the decision to invest “plan
assets” (as such term is defined in ERISA) in the Company is consistent with the
provisions of ERISA that require diversification of plan assets and impose
other
fiduciary responsibilities. The Subscriber or Plan fiduciary (a) is responsible
for the decision to invest in the Company; (b) is independent of the Company
and
any of its affiliates; (c) is qualified to make such investment decision; and
(d) in making such decision, the Subscriber or Plan fiduciary has not relied
primarily on any advice or recommendation of the Company or any of its
affiliates.
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(t) The
foregoing representations, warranties and agreements shall survive the
Closing.
4. The
Company’s Representations, Warranties and Covenants
The
Company hereby acknowledges, agrees with and represents, warrants and covenants
to each of the undersigned, as follows:
(a) The
Company 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 the Company and is valid, binding and
enforceable against the Company in accordance with its terms.
(b) The
Securities to be issued to the undersigned pursuant to this Agreement, when
issued and delivered in accordance with the terms of this Agreement, will be
duly and validly issued and will be fully paid and non-assessable.
(c) Neither
the execution and delivery nor the performance of this Agreement by the Company
will conflict with the Company’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 the Company is a party or by which the Company is bound.
(d) After
giving effect to the transactions contemplated by this Agreement and immediately
after the Closing, the Company will have the outstanding capital stock as
described in the Memorandum.
(e) The
information contained in the Memorandum is true and correct in all material
respects as of its date.
5. Registration
Rights
(a) The
Company shall prepare and file a registration statement (the “Registration
Statement”) with the SEC covering the resale of the Common Stock and shares of
Common Stock issuable upon the exercise of the Warrants (“Registrable
Securities”) by no later than 60 days after the final Closing Date. The Company
shall use its best efforts to have the Registration Statement declared effective
by the SEC as soon as possible after the initial filing. The Company will
maintain the effectiveness of the Registration Statement from the date of the
effectiveness of the Registration Statement until 12 months after that date;
provided,
however,
that,
if at any time or from time to time after the date of effectiveness of the
Registration Statement, the Company 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 Registrable Securities, or engage in any
other transaction involving or relating to the Registrable Securities, from
the
time of the giving of notice with respect to a Potential Material Event until
the Company 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,
the Company may not suspend the right of the undersigned pursuant to this
Section 5(a) for more than 60 days in the aggregate. “Potential Material Event”
means the possession by the Company 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
the Company that disclosure of such information in the registration statement
would be detrimental to the business and affairs of the Company.
(b) The
Company 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,
the
Company 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.
5
(c) The
Company may request the undersigned to furnish the Company such information
with
respect to the undersigned and the undersigned’s proposed distribution of the
Registrable Securities pursuant to the Registration Statement as the Company
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
the
Company with such information.
(d) Each
of
the Company and the Subscriber shall indemnify the other party hereto and their
respective officers, directors, employees and agents against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) by the indemnifying party
of a material fact contained in any prospectus or other document (including
any
related registration statement, notification or the like) incident to any
registration of the type described in this Section 5, or any omission (or
alleged omission) by the indemnifying party to state in any such document a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse such indemnified party for any
legal
and any other expenses reasonably incurred in connection with investigating
and
defending any such claim, loss, damage, liability or action; provided
that no
party will be eligible for indemnification hereunder to the extent that any
such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission based upon written information furnished by such
party for use in connection with such registration.
(e) In
the
event the Company receives a Rule 415 comment from the SEC pertaining to the
shares included for registration, and determines that in connection with
responding thereto removal of some of the shares for registration would be
appropriate, the Company shall use the following order of cutback: first, shares
of officers or directors; second, shares of existing shareholders; third, shares
underlying the warrants issued to the placement agent; fourth, shares underlying
the warrants issued to the investors in this Offering; and last, the shares
issued to the investors in this Offering.
6. Use
of Proceeds
The
net
proceeds of the Offering will be used in a manner consistent with the plan
described in “Use of Proceeds” in the Memorandum.
7. Indemnity;
Escrow Release
(a) The
undersigned agrees to indemnify and hold harmless the Company, 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 the Company, 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 Offering.
(b) The
Subscriber acknowledges that the Placement Agent may act on behalf of the
Subscribers, solely for the sake of convenience, in connection with confirmation
to the Escrow Agent that the Closing has occurred and thereby direct the Escrow
Agent to disburse the Subscribers’ subscription funds held in escrow to the
Company at such time. In doing so, however, the Placement Agent makes no
representation or warranty to the Subscribers as to the satisfaction of all
conditions precedent to the closing or with respect to any due diligence
investigations concerning the Company, all of which shall be and remain the
Subscriber’s own responsibility.
6
8. Conditions
to Acceptance of Subscription
The
Company’s right to accept the subscription of the undersigned is conditioned
upon satisfaction of the following conditions precedent on or before the date
the Company accepts such subscription (any or all of which may be waived by
the
undersigned in his, her or its sole discretion):
(a) 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.
(b) The
representations and warranties of the Company 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.
9. Notices
to Subscribers
(a) 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.
(b) 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
(a) 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.
(b) Survival.
The
undersigned’s representations and warranties made in this Agreement shall
survive the execution and delivery of this Agreement and the delivery of the
Securities.
(c) 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 the Company 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.
(d) 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. This Agreement
sets forth the entire agreement and understanding between the parties as to
the
subject matter thereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
7
(e) Assignability.
This
Agreement is not transferable or assignable by the undersigned. This Agreement
shall be transferable or assignable by the Company to a proposed publicly-traded
successor company.
(f) Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of California, without giving effect to conflicts of law
principles.
(g) 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.
11. U.S.A.
Patriot Act Representations.
(a) Subscriber
represents, warrants and covenants that Subscriber:
(i)(a)
is
subscribing for the Securities for Subscriber’s own account, own risk and own
beneficial interest, (b) is not acting as an agent, representative,
intermediary, nominee or in a similar capacity for any other person or entity,
nominee account or beneficial owner, whether a natural person or entity (each
such natural person or entity, an “Underlying Beneficial Owner”) and no
Underlying Beneficial Owner will have a beneficial or economic interest in
the
Securities being purchased by Subscriber (whether directly or indirectly,
including without limitation, through any option, swap, forward or any other
hedging or derivative transaction), (c) if it is an entity, including, without
limitation, a fund-of-funds, trust, pension plan or any other entity that is
not
a natural person (each, an “Entity”), has carried out thorough due diligence as
to and established the identities of such Entity’s investors, directors,
officers, trustees, beneficiaries and grantors (to the extent applicable, each
a
“Related Person” of such Entity), holds the evidence of such identities, will
maintain all such evidence for at least five years from the date of Subscriber’s
resale or other disposition of all the Common Stock underlying the Securities
and Warrants, will request such additional information as the Company may
require to verify such identities as may be required by applicable law, and
will
make such information available to the Company upon its request, and (d) does
not have the intention or obligation to sell, pledge, distribute, assign or
transfer all or a portion of the Common Stock and Warrants to any Underlying
Beneficial Owner or any other person; or
(ii)(a)
is subscribing for the Securities as a record owner and will not have a
beneficial ownership interest in the Securities, (b) is acting as an agent,
representative, intermediary, nominee or in a similar capacity for one or more
Underlying Beneficial Owners (as defined in (A)(i)(a) above), and understands
and acknowledges that the representations, warranties and agreements made in
this Agreement are made by Subscriber with respect to both Subscriber and the
Underlying Beneficial Owner(s), (c) has all requisite power and authority from
the Underlying Beneficial Owner(s) to execute and perform the obligations under
the Subscription Agreement, (d) has carried out thorough due diligence as to
and
established the identities of all Underlying Beneficial Owners (and, if an
Underlying Beneficial Owner is not a natural person, the identities of such
Underlying Beneficial Owner’s Related Persons (to the extent applicable)), holds
the evidence of such identities, will maintain all such evidence for at least
five years from the date of Subscriber’s resale or other disposition of all the
Common Stock and Warrants, and will make such information available to the
Company upon its request and (e) does not have the intention or obligation
to
sell, pledge, distribute, assign or transfer all or a portion of the Common
Stock and Warrants to any person other than the Underlying Beneficial
Owner(s).
(b) Subscriber
hereby represents and warrants that the proposed investment in the Company
that
is being made on its own behalf or, if applicable, on behalf of any Underlying
Beneficial Owners does not directly or indirectly contravene United States
federal, state, local or international laws or regulations applicable to
Subscriber, including anti-money laundering laws (a “Prohibited
Investment”).
(c) Federal
regulations and Executive Orders administered by the U.S. Treasury Department’s
Office of Foreign Assets Control (“OFAC”) prohibit, among other things, the
engagement in transactions with, and the provision of services to, certain
foreign countries, territories, entities and individuals. The lists of OFAC
prohibited countries, territories, persons and entities can be found on the
OFAC
website at xxx.xxxxx.xxx/xxxx. Subscriber hereby represents and warrants that
neither Subscriber nor, if applicable, any Underlying Beneficial Owner or
Related Person, is a country, territory, person or entity named on an OFAC
list,
nor is Subscriber nor, if applicable, any Underlying Beneficial Owner or Related
Person, a natural person or entity with whom dealings are prohibited under
any
OFAC regulations.
8
(d) Subscriber
represents and warrants that neither Subscriber nor, if applicable, any
Underlying Beneficial Owner or Related Person, is a senior foreign political
figure, or any immediate family member or close associate of a senior foreign
political figure within the meaning of, and applicable guidance issued by the
Department of the Treasury concerning, the U.S. Bank Secrecy Act (31 U.S.C.
§5311 et seq.), as amended, and any regulations promulgated
thereunder.
(e) Subscriber
agrees promptly to notify the Company should Subscriber become aware of any
change in the information set forth in paragraphs (a) through (d).
(f) Subscriber
agrees to indemnify and hold harmless the Company, its affiliates, their
respective directors, officers, shareholders, employees, agents and
representatives (each, an “Indemnitee”) from and against any and all losses,
liabilities, damages, penalties, costs, fees and expenses (including legal
fees
and disbursements) (collectively, “Damages”) which may result, directly or
indirectly, from Subscriber’s misrepresentations or misstatements contained
herein or breaches hereof relating to paragraphs (a) through (d).
(g) Subscriber
understands and agrees that, notwithstanding anything to the contrary contained
in any document (including any side letters or similar agreements), if,
following Subscriber’s investment in the Company, it is discovered that the
investment is or has become a Prohibited Investment, such investment may
immediately be redeemed by the Company or otherwise be subject to the remedies
required by law, and Subscriber shall have no claim against any Indemnitee
for
any form of Damages as a result of such forced redemption or other
action.
(h) Upon
the
written request from the Company, Subscriber agrees to provide all information
to the Company to enable the Company to comply with all applicable anti-money
laundering statutes, rules, regulations and policies, including any policies
applicable to a portfolio investment held or proposed to be held by the Company.
Subscriber understands and agrees that the Company may release confidential
information about Subscriber and, if applicable, any Underlying Beneficial
Owner(s) or Related Person(s) to any person, if the Company, in its sole
discretion, determines that such disclosure is necessary to comply with
applicable statutes, rules, regulations and policies.
9
ALL
SUBSCRIBERS MUST COMPLETE THIS PAGE
IN
WITNESS WHEREOF, the undersigned has executed this Agreement on the ____ day
of
____________ 2006.
________________________
|
x
$1.00 for each Share
|
=
$_____________________.
|
Shares
subscribed for
|
Aggregate
Purchase Price
|
The
number of Warrants issuable will be equal to the number of Shares subscribed
for
divided by 2, without giving effect to any fractional warrants.
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
|
ALTERNATIVE
DISTRIBUTION INFORMATION
To
direct
distribution to a party other than the registered owner, complete the
information below. YOU MUST COMPLETE THIS SECTION IF THIS IS AN XXX
INVESTMENT.
Name
of Firm (Bank, Brokerage, Custodian):
|
Account
Name:
|
Account
Number:
|
Representative
Name:
|
Representative
Phone Number:
|
Address:
|
City,
State, Zip:
|
IF
MORE
THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN.
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 _________ 2006, on behalf of the Company.
|
|
|
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 __________ 2006, on behalf of the Company.
|
|
|
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 the Securities,
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
Securities 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 Securities 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 Securities and with total assets in excess of
$5,000,000.
|
|
o
|
You
are a director or executive officer of Reprints Desk, Inc. or Derycz
Scientific, Inc.
|
|
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 Securities.
|
|
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 Securities, whose subscription
for and
purchase of the Securities 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
Check
all boxes below which correctly describe you.
With
respect to this investment in Securities of the Company, your:
Investment
Objectives:
|
x Aggressive
Growth
|
x Speculation
|
|
Risk
Tolerance:
|
o Low
Risk
|
o Moderate
Risk
|
x High
Risk
|
Are
you associated with a NASD Member Firm?
|
o Yes
|
o No
|
Your
initials (purchaser and co-purchaser, if applicable) are required for each
item
below:
____
|
____
|
I/We
have received a copy of the offering Memorandum.
|
____
|
____
|
I/We
have reviewed the risk sections of the offering Memorandum.
|
____
|
____
|
I/We
understand that this investment is not guaranteed.
|
____
|
____
|
I/We
are aware that this investment is not liquid.
|
____
|
____
|
I/We
meet the suitability standards listed in the offering Memorandum.
|
____
|
____
|
I/We
are sophisticated in financial and business affairs and are able
to evaluate the risks and merits of an investment in
this offering.
|
____
|
____
|
I/We
confirm that this investment is considered “high risk.” (This type of
investment is considered high risk due to the inherent risks
including lack
of liquidity and lack of diversification. Success or failure
of private placements such as this is dependent on the corporate
issuer
of these
securities and is outside the control of the investors. While potential
loss is limited to the amount invested, such
loss is possible.)
|
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 Securities of the
Company.
Name
of Purchaser [please print]
|
Name
of Co-Purchaser [please print]
|
|
Signature
of Purchaser (Entities please provide signature of Purchaser’s duly
authorized signatory.)
|
Signature
of Co-Purchaser
|
|
Name
of Signatory (Entities only)
|
||
Title
of Signatory (Entities only)
|
14