SUBSCRIPTION AGREEMENT FOR
Exhibit 10.1
FOR
Dated:
October 13, 2016
00000
X.X. 00xx
Xxxxxx, Xxxxx 000
Xxxxxxxx,
Xxxxxxx 00000
Ladies
and Gentlemen:
1. Subscription. The undersigned (the
“Purchaser”)
will purchase from Orbital Tracking Corp. (the
“Company”) the number of shares of Series H Preferred
Stock of the Company (the “Shares”) as set forth on the
signature page to this Subscription Agreement, at a purchase price
of $4.00 per share (the “Purchase Price”). The shares
of Common Stock underlying the Preferred Stock may hereinafter be
referred to as the “Conversion
Shares”). The Preferred Stock shall have the rights
and preferences as set forth in the Certificate of Designation of
Preferences, Rights and Limitations (the “COD”)
attached as Exhibit A hereto. The Subscription Agreement and the
COD are collectively referred to as the “Transaction
Documents. The Shares are being
offered (the “Offering”)
by the Company pursuant to this Subscription
Agreement.
The
Shares are being offered on a “reasonable efforts all or none”,
basis with respect to the minimum of $300,000 (the
“Minimum
Offering Amount”). The Shares are being offered on a
“reasonable efforts” basis with respect to up to
$800,000 of Shares (the “Maximum Offering Amount”). Any
purchase of Shares by the Company’s officers, directors, or
employees shall be included, and counted towards, the Minimum and
Maximum Offering Amounts.
The
Initial Closing (as defined herein) of this Offering shall be
subject to subscriptions being received from qualified investors
and accepted by the Company for the Minimum Offering Amount. Upon
acceptance by the Company after the date hereof of such
subscriptions, the Company shall have the right at any time
thereafter, prior to the Termination Date (as defined below), to
effect an initial closing with respect to this Offering (the
“Initial
Closing”). Thereafter, the Company shall continue to
accept, and continue to have closings (together with the Initial
Closing, each a “Closing”) for,
additional subscriptions for Securities from investors from time to
time up to Maximum Offering Amount.
The
Shares will be offered for a period (the “Initial Offering
Period”) commencing on the date of this Subscription
Agreement and continue until the earliest of (i) October 18, 2016
(the “Maximum Offering
Deadline”), (ii) the date upon which subscriptions for
the Maximum Offering offered hereunder have been accepted, or (iii)
the date upon which the Company elects to terminate the Offering
(the “Termination
Date”), subject to the right of the Company to extend
the Offering until as late as November 18, 2016 (the
“Final
Termination Date”), without further notice to or
consent by investors, if the Maximum Offering Amount has not been
subscribed by the Offering Deadline. This additional period,
together with the Initial Offering Period, shall be referred to
herein as the “Offering
Period.”
The
minimum investment amount that may be purchased by an investor is
$25,000 (the “Investor Minimum
Investment”); provided however, the Company, in its
discretion, may accept an investor subscription for an amount less
than the Investor Minimum Investment. The subscription for the
Shares will be made in accordance with and subject to the terms and
conditions of this Subscription Agreement.
-1-
In the
event that (i) subscriptions for the Offering are rejected in whole
(at the sole discretion of the Company), (ii) no Shares are
subscribed for prior to October 18, 2016 or, if extended, prior to
November 18, 2016, or (iii) the Offering is otherwise terminated by
the Company prior to the expiration of the Initial Offering Period
or, if extended, prior to the Final Termination Date, then the
Company will refund all subscription funds held by it to the
persons who submitted such funds, without interest, penalty or
deduction. If a subscription is rejected in part (at the sole
discretion of the Company) and the Company accepts the portion not
so rejected, the funds for the rejected portion of such
subscription will be returned without interest, penalty, expense or
deduction.
2.
Payment. The Purchaser encloses herewith
a check payable to, or will immediately make a wire transfer
payment to, “Orbital Tracking
Corp,” in the full amount of the purchase price of the
Shares being subscribed for. Together with the check for, or wire
transfer of, the full purchase price, the Purchaser is delivering a
completed and executed Signature Page to this Subscription
Agreement along with a completed and executed Investor
Questionnaire, which is attached hereto as Schedule
A.
3.
Deposit of Funds. All payments made as
provided in Section
2 hereof will be deposited by the Purchaser to the Company
no later than within two business days. In the event that the
Company does not effect a Closing during the Offering Period, the
Company will refund all subscription funds, without deduction
and/or interest accrued thereon, and will return the subscription
documents to each Purchaser. The Company will notify the Purchaser
within five (5) business days of its intent to reject the
subscription. If the Company rejects a subscription, either in
whole or in part (at the sole discretion of the Company), the
rejected subscription funds or the rejected portion thereof will be
returned promptly to such Purchaser without interest, penalty,
expense or deduction.
4.
Acceptance of Subscription. The
Purchaser understands and agrees that the Company, each in its sole
discretion, reserves the right to accept this or any other
subscription for the Shares, in whole or in part, notwithstanding
prior receipt by the Purchaser of notice of acceptance of this or
any other subscription. The Company will have no obligation
hereunder until the Company executes an executed copy of the
Subscription Agreement. If Purchaser’s subscription is
rejected in whole (at the sole discretion of the Company), the
Offering is terminated or no subscriptions are made and accepted
prior to the expiration of the Initial Offering Period or, if
extended, prior to the Final Termination Date, all funds received
from the Purchaser will be returned without interest, penalty,
expense or deduction, and this Subscription Agreement will
thereafter be of no further force or effect. If Purchaser’s
subscription is rejected in part (at the sole discretion of the
Company) and the Company accepts the portion not so rejected, the
funds for the rejected portion of such subscription will be
returned without interest, penalty, expense or deduction, and this
Subscription Agreement will continue in full force and effect to
the extent such subscription was accepted. The Purchaser may revoke
its subscription and obtain a return of the subscription amount at
any time before the date of the Initial Closing. The Purchaser may
not revoke this subscription or obtain a return of the subscription
amount paid to the Company on or after the date of the Initial
Closing. Any subscription received after the Initial Closing but
prior to the Termination Date shall be irrevocable.
5.
Representations and Warranties of the
Purchaser. The Purchaser hereby acknowledges, represents,
warrants, and agrees as follows:
(a)
None of the
Preferred Stock or the Conversion Shares, (collectively referred to
hereafter as the “Securities”)
are registered under the Securities Act of 1933, as amended (the
“Securities
Act”), or any state securities laws. The Purchaser
understands that the offering and sale of the Securities is
intended to be exempt from registration under the Securities Act,
by virtue of Section 4(a)(2) thereof and the provisions of
Regulation D promulgated thereunder, based, in part, upon the
representations, warranties and agreements of the Purchaser
contained in this Subscription Agreement;
(b)
The Purchaser and
the Purchaser’s attorney, accountant, purchaser
representative and/or tax advisor, if any (collectively,
“Advisors”),
have received and have carefully reviewed this Subscription
Agreement, and each of the Transaction Documents, the
Company’s filings with the US Securities and Exchange
Commission (the “Commission”) under the Securities
Exchange Act of 1934 as amended (the “SEC Documents”)
and all other documents requested by the Purchaser or its Advisors,
if any, and understand the information contained therein, prior to
the execution of this Subscription Agreement;
(c)
Neither the
Commission nor any state securities commission has approved or
disapproved of the Securities or passed upon or endorsed the merits
of the Offering or confirmed the accuracy or determined the
adequacy of this Subscription Agreement. This Subscription
Agreement has not been reviewed by any Federal, state or other
regulatory authority. Any representation to the contrary may be a
criminal offense;
(d)
All SEC Documents,
records, and books pertaining to the investment in the Securities
including, but not limited to, all information regarding the
Company and the Securities, have been made available for inspection
and reviewed by the Purchaser and its Advisors, if
any;
(e)
The Purchaser and
its Advisors, if any, have had a reasonable opportunity to ask
questions of and receive answers from the Company’s officers
and any other persons authorized by the Company to answer such
questions, concerning, among other related matters, the Offering,
the Securities, the Transaction Documents and the business,
financial condition, results of operations and prospects of the
Company and all such questions have been answered by the Company to
the full satisfaction of the Purchaser and its Advisors, if
any;
(f)
In evaluating the
suitability of an investment in the Company, the Purchaser has not
relied upon any representation or other information (oral or
written) other than as stated in this Subscription
Agreement;
-2-
(g)
The Purchaser 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, radio or 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 through or as a result of any seminar or meeting to which
the Purchaser was invited by, or any solicitation of a subscription
by, a person not previously known to the Purchaser in connection
with investments in securities generally;
(h)
The Purchaser 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 Subscription Agreement or the transactions contemplated
hereby;
(i)
The Purchaser,
either alone or together with its Advisors, if any, has such
knowledge and experience in financial, tax, and business matters,
and, in particular, investments in securities, so as to enable it
to utilize the information made available to it in connection with
the Offering to evaluate the merits and risks of an investment in
the Securities and the Company and to make an informed investment
decision with respect thereto;
(j)
The Purchaser is
not relying on the Company, or any of its employees or agents with
respect to the legal, tax, economic and related considerations of
an investment in any of the Securities and the Purchaser has relied
on the advice of, or has consulted with, only its own
Advisors;
(k)
The Purchaser is
acquiring the Securities solely for such Purchaser’s own
account for investment and not with a view to resale or
distribution thereof, in whole or in part. The Purchaser has no
agreement or arrangement, formal or informal, with any person to
sell or transfer all or any part of any of the Securities and the
Purchaser has no plans to enter into any such agreement or
arrangement;
(l)
The Purchaser
understands and agrees that purchase of the Securities is a high
risk investment and the Purchaser is able to afford an investment
in a speculative venture having the risks and objectives of the
Company. The Purchaser must bear the substantial economic risks of
the investment in the Securities indefinitely because none of the
Securities may be sold, hypothecated or otherwise disposed of
unless subsequently registered under the Securities Act and
applicable state securities laws or an exemption from such
registration is available. Legends will be placed on the
certificates representing the Preferred Stock and the Conversion
Shares to the effect that such securities have not been registered
under the Securities Act or applicable state securities laws and
appropriate notations thereof will be made in the Company’s
books;
(m)
The Purchaser has
adequate means of providing for such Purchaser’s current
financial needs and foreseeable contingencies and has no need for
liquidity from its investment in the Securities for an indefinite
period of time;
(n)
The Purchaser is
aware that an investment in the Securities involves a number of
very significant risks and has carefully read and considered the
disclosure in the Company’s Form 10-K for the year ended
December 31, 2015 and its Form 10-Q for the quarter ended June 30,
2016, both of which are available on the Xxxxx System at XXX.xxx
and understands that certain risks may materially adversely affect
the Company’s operations and future prospects;
(o)
At the time such
Purchaser was offered the Securities, it was, and as of the date
hereof it is, and on each date on which it converts any Shares, it
will be an “accredited investor” within the meaning of
Regulation D, Rule 501(a), promulgated by the Securities and
Exchange Commission under the Securities Act and has truthfully and
accurately completed the Investor Questionnaire attached as
Schedule A to this
Subscription Agreement and will submit to the Company such further
assurances of such status as may be reasonably requested by the
Company;
(p)
The Purchaser: (i)
if a natural person, represents that the Purchaser has reached the
age of 21 and has full power and authority to execute and deliver
this Subscription Agreement and all other related agreements or
certificates and to carry out the provisions hereof and thereof;
(ii) if a corporation, partnership, or limited liability company,
or association, joint stock company, trust, unincorporated
organization or other entity, represents that such entity was not
formed for the specific purpose of acquiring the Securities, such
entity is duly organized, validly existing and in good standing
under the laws of the state of its organization, the consummation
of the transactions contemplated hereby is authorized by, and will
not result in a violation of state law or its charter or other
organizational documents, such entity has full power and authority
to execute and deliver this Subscription Agreement and all other
related agreements or certificates and to carry out the provisions
hereof and thereof and to purchase and hold the Securities, the
execution and delivery of this Subscription Agreement has been duly
authorized by all necessary action, this Subscription Agreement has
been duly executed and delivered on behalf of such entity and is a
legal, valid and binding obligation of such entity; or (iii) if
executing this Subscription Agreement in a representative or
fiduciary capacity, represents that it has full power and authority
to execute and deliver this Subscription Agreement in such capacity
and on behalf of the subscribing individual, xxxx, partnership,
trust, estate, corporation, or limited liability company or
partnership, or other entity for whom the Purchaser is executing
this Subscription Agreement, and such individual, partnership,
xxxx, trust, estate, corporation, or limited liability company or
partnership, or other entity has full right and power to perform
pursuant to this Subscription Agreement and make an investment in
the Company, and represents that this Subscription Agreement
constitutes a legal, valid and binding obligation of such entity.
The execution and delivery of this Subscription Agreement will not
violate or be in conflict with any order, judgment, injunction,
agreement or controlling document to which the Purchaser is a party
or by which it is bound;
-3-
(q)
The Purchaser and
its Advisors, if any, have had the opportunity to obtain any
additional information, to the extent the Company had such
information in its possession or could acquire it without
unreasonable effort or expense, necessary to verify the accuracy of
the information contained herein including, but not limited to, the
terms and conditions of the Securities as set forth therein and the
Transaction Documents and all other related documents, received or
reviewed in connection with the purchase of the Securities and have
had the opportunity to have representatives of the Company provide
them with such additional information regarding the terms and
conditions of this particular investment and the financial
condition, results of operations, business and prospects of the
Company deemed relevant by the Purchaser or its Advisors, if any,
and all such requested information, to the extent the Company had
such information in its possession or could acquire it without
unreasonable effort or expense, has been provided by the Company in
writing to the full satisfaction of the Purchaser and its Advisors,
if any;
(r)
The Purchaser has
significant prior investment experience, including investment in
non-listed and unregistered securities. The Purchaser has a
sufficient net worth to sustain a loss of its entire investment in
the Company in the event such a loss should occur. The
Purchaser’s overall commitment to investments which are not
readily marketable is not excessive in view of the
Purchaser’s net worth and financial circumstances and the
purchase of the Securities will not cause such commitment to become
excessive. This investment is a suitable one for the
Purchaser;
(t)
The Purchaser is
satisfied that it has received adequate information with respect to
all matters which it or its Advisors, if any, consider material to
its decision to make this investment;
(u)
No oral or written
representations have been made, or oral or written information
furnished, to the Purchaser or its Advisors, if any, in connection
with the offering of the Securities which are in any way
inconsistent with the information contained in this Subscription
Agreement;
(v)
Within five (5)
days after receipt of a request from the Company, the Purchaser
will provide such information and deliver such documents as may
reasonably be necessary to comply with any and all laws and
ordinances to which the Company is subject;
(w)
In making an
investment decision, Purchasers must rely on their own examination
of Company and the terms of the Offering, including the merits and
risks involved. Purchasers should be aware that they will be
required to bear the financial risks of this investment for an
indefinite period of time;
(y)
(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 Purchaser 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 Purchaser or Plan fiduciary has
not relied on any advice or recommendation of the Company or any of
its affiliates; and
(z)
The Purchaser
represents that (i) the Purchaser was contacted regarding the sale
of the Securities by the Company (or another person whom the
Purchaser believed to be an authorized agent or representative
thereof) with whom the Purchaser had a prior substantial
pre-existing relationship and (ii) it did not learn of the offering
of the Securities by means of any form of general solicitation or
general advertising, and in connection therewith, the Purchaser did
not (A) receive or review any advertisement, article, notice or
other communication published in a newspaper or magazine or similar
media or broadcast over television or radio, whether closed
circuit, or generally available; or (B) attend any seminar meeting
or industry investor conference whose attendees were invited by any
general solicitation or general advertising;
(aa)
The Purchaser
consents to the placement of a legend on any certificate or other
document evidencing the Securities and, when issued, the Conversion
Shares, that such securities have not been registered under the
Securities Act or any state securities or “blue sky”
laws and setting forth or referring to the restrictions on
transferability and sale thereof contained in this Agreement. The
Purchaser is aware that the Company will make a notation in its
appropriate records with respect to the restrictions on the
transferability of such Securities. The legend to be placed on each
certificate shall be in form substantially similar to the
following:
“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”) OR ANY STATE SECURITIES OR “BLUE SKY
LAWS,” AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF
UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH
ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.”
-4-
(bb) The
Purchaser understands, acknowledges and agrees with the Company
that this subscription may be rejected, in whole or in part, by the
Company, in the sole and absolute discretion of the Company, at any
time before any Closing notwithstanding prior receipt by the
Purchaser of notice of acceptance of the Purchaser’s
subscription.
(cc) The
Purchaser acknowledges that the information contained in the
Transaction Documents or otherwise made available to the Purchaser
is confidential and non-public and agrees that all such information
shall be kept in confidence by the Purchaser and neither used by
the Purchaser for the Purchaser’s personal benefit (other
than in connection with this subscription) nor disclosed to any
third party for any reason, notwithstanding that a
Purchaser’s subscription may not be accepted by the Company;
provided, however, that (a) the Purchaser may disclose such
information to its affiliates and advisors who may have a need for
such information in connection with providing advice to the
Purchaser with respect to its investment in the Company so long as
such affiliates and advisors have an obligation of confidentiality,
and (b) this obligation shall not apply to any such information
that (i) is part of the public knowledge or literature and readily
accessible at the date hereof, (ii) becomes part of the public
knowledge or literature and readily accessible by publication
(except as a result of a breach of this provision) or (iii) is
received from third parties without an obligation of
confidentiality (except third parties who disclose such information
in violation of any confidentiality agreements or obligations,
including, without limitation, any subscription or other similar
agreement entered into with the Company).
6.
Representations and Warranties of the
Company. The Company represents and warrants to each of the
Purchasers that the statements made in this Section 6, except as
qualified in any disclosure schedules referenced herein and
attached hereto (the “Schedules”), are true and correct
on the date hereof, as of the Initial Closing and shall be true and
correct as of each Subsequent Closing, all of which qualifications
in the Schedules attached hereto and updated Schedules delivered at
the Subsequent Closing shall be deemed to be representations and
warranties as if made hereunder. The Schedules shall be arranged to
correspond to the numbered paragraphs contained in this Section 6,
and the disclosure in any paragraph of the Schedules shall qualify
other subsections in Section 6 only to the extent that it is
readily apparent from a reading of the disclosure that such
disclosure is applicable to such other subsections. For purposes of
this Section 6, “knowledge” shall mean the personal
knowledge of any of the Company’s officers or directors or
what they would have known upon having made reasonable
inquiry.
6.1
Organization, Good Standing and
Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the
corporate and general laws of the State of Nevada. Each of Orbital
Satcom Corp. and Global Telesat Communications Limited (the
“Subsidiaries”) is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of the Company and its
Subsidiaries has all requisite corporate power and authority to own
and operate its properties and assets. Neither the Company nor any
Subsidiary is in violation nor default of any of the provisions of
its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and
its Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation in each jurisdiction, except
where failure to be so qualified or in good standing, as the case
may be, could not reasonably be expected to result in: (i) a
material adverse effect on the legality, validity or enforceability
of any Transaction Document, (ii) a material adverse effect on the
results of operations, assets, business, prospects or condition
(financial or otherwise) of the Company and its Subsidiaries, taken
as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a
timely basis its obligations under any Transaction Document (any of
(i), (ii) or (iii), a “Material Adverse Effect”) and no
Proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.
6.2
Subsidiaries. The SEC Reports
include a true and complete list of each of the Subsidiaries and
their respective jurisdictions of organization. Neither the Company
nor any Subsidiary owns or controls any ownership interest or
profits interest in any other corporation, limited liability
company, limited partnership or other entity. The Company owns,
directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any liens, and all
of 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 to subscribe for or
purchase securities.
6.3
Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and each of the other Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and each of the other
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and
no further action is required by the Company, the Board of
Directors or the Company’s stockholders in connection
herewith or therewith other than in connection with the required
approvals. This Agreement and each other Transaction Document to
which it is a party has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except: (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
-5-
6.4
No Conflicts. The execution,
delivery and performance by the Company of this Agreement and the
other Transaction Documents to which it is a party, the issuance
and sale of the Securities and the consummation by it of the
transactions contemplated hereby and thereby 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, (ii) conflict
with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the
creation of any lien upon any of the properties or assets of the
Company or any Subsidiary, 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) conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority 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 have or
reasonably be expected to result in a Material Adverse
Effect.
6.5
Filings, Consents and
Approvals. The Company is not 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 the Transaction Documents that has not been obtained or
waived.
6.6
Issuance of the Securities. The
shares of Preferred Stock are duly authorized and, when issued and
paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free
and clear of all liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents.
The Conversion Shares, when issued in accordance with the terms of
the Preferred Stock, will be validly issued, fully paid and
nonassessable, free and clear of all liens imposed by the Company
other than restrictions on transfer provided for in the Transaction
Documents. The Company has reserved from its duly authorized
capital stock a number of shares of Common Stock for issuance upon
the conversion of any Preferred Stock.
6.7
Capitalization. The
capitalization of the Company is as set forth in the SEC Reports,
except as set forth in Schedule 6.7 hereto. Except as disclosed on
the SEC Reports or as disclosed on Schedule 6.7 hereto, there are
no outstanding securities of the Company or any Subsidiary which
contain any right of first refusal, preemptive right, right of
participation, or any similar right which has not been waived. No
Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents which has
not been waived. Except as a result of the purchase and sale of the
Securities, and except as set forth in the SEC Reports, there are
no outstanding options, warrants, scrip rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable
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 common stock equivalents. Except as disclosed on
Schedule 6.7 hereto, the issuance and sale of the Securities will
not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under any of such
securities. There are no proxies, stockholder agreements, or any
other agreements between the Company or any Subsidiary and any
securityholder of such entity or, to the knowledge of the Company,
among any securityholders of the Company or any Subsidiary,
including agreements relating to the voting, transfer, redemption
or repurchase of any securities of such entity. Neither the Company
nor any Subsidiary has any outstanding shareholder purchase rights
or “poison pill” or any similar arrangement in effect
giving any person the right to purchase any equity interest in such
entity upon the occurrence of certain events. All of the
outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws,
and none of such outstanding shares was issued in violation of any
preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any
stockholder, the Board of Directors or others is required for the
issuance and sale of the Securities. There are no
stockholders’ agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to
which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s stockholders. Except as
required by law, including any federal securities rules and
regulations, there are no restrictions upon the voting or transfer
of any of the shares of capital stock of the Company or any
Subsidiary pursuant to its organizational documents or other
governing documents or any agreement or other instruments to which
the Company or any Subsidiary is a party or by which it is
bound.
6.8
Shell Company Status; SEC Reports;
Financial Statements. The Company has not been a
“shell” company as described in Rule 144(i)(1) under
the Securities Act for the last 12 months. The Company has filed
all reports, schedules, forms, statements and other documents
required to be filed by it under the Securities Exchange Act ,
including pursuant to Section 13(a) or 15(d) thereof, for the two
years preceding the date hereof (or such shorter period as the
Company was required by law or regulation to file such material)
(the foregoing materials and any amendments filed through the date
hereof, including the exhibits thereto and documents incorporated
by reference therein, being collectively referred to herein as the
“SEC Reports”) on a timely basis or has received a
valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act,
as applicable, 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 not misleading. The financial
statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in
effect at the time of filing. The financial statements (the
“Financial Statements”) of the Company included in SEC
Reports been prepared in accordance with United States 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 footnotes
thereto except that unaudited financial statements may not contain
all footnotes required by GAAP, and fairly present in all material
respects the financial position of the Company and its Subsidiaries
as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject to normal,
immaterial, year-end audit adjustments. There is no transaction,
arrangement, or other relationship between the Company or any
Subsidiary and an unconsolidated or other off balance sheet entity
that is not disclosed in its financial statements that should be
disclosed in accordance with GAAP and that would be reasonably
likely to have a material adverse effect.
-6-
6.9
Absence of Liabilities. Except
as set forth in the SEC Reports, since the Balance Sheet Date
(hereinafter defined): (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to
result in 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 disclosed in filings made with the
Commission, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock and (v) the Company has not issued
any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans. Except for the
issuance of the Securities contemplated by this Agreement or as set
forth in the SEC Reports no event, liability, fact, circumstance,
occurrence or development has occurred or exists or is reasonably
expected to occur or exist with respect to the Company or its
Subsidiaries or their respective businesses, properties,
operations, assets or financial condition, that would be required
to be disclosed by the Company under applicable securities laws at
the time this representation is made or deemed made. Except as set
forth in the SEC Reports, neither the Company nor any Subsidiary is
a guarantor or indemnitor of any liability of any other
Person.
For
purposes of this Section 6.9, June 30, 2016 is referred to as the
“Balance Sheet Date”.
6.10
Changes. Except disclosed in
the SEC Reports, or where the occurrence of any of the following
events would not have a Material Adverse Effect, since June 30,
2016 there has not been:
6.10.1.
any effect, event,
condition or circumstance (including, without limitation, the
initiation of any litigation or other legal, regulatory or
investigative proceeding) against the Company that individually or
in the aggregate, with or without the passage of time, the giving
of notice, or both, has had or could reasonably be expected to have
a Material Adverse Effect;
6.10.2.
any resignation or
termination of any director, officer or key employee of the Company
or any Subsidiary, and neither the Company nor any Subsidiary has
received notification of any impending resignation from any such
Person;
6.10.3.
any material change
in the contingent obligations of the Company or any Subsidiary by
way of guaranty, endorsement, indemnity, warranty or
otherwise;
6.10.4.
any material
damage, destruction or loss adversely affecting the assets,
properties, business, financial condition or prospects of the
Company and its Subsidiaries taken as a whole, whether or not
covered by insurance;
6.10.5.
any waiver by the
Company or any Subsidiary of a valuable right or of any
debt;
6.10.6.
any development,
event, change, condition or circumstance that constitutes, whether
with or without the passage of time or the giving of notice or
both, a default under any outstanding debt obligation of the
Company or any Subsidiary;
6.10.7.
any change in any
compensation arrangement or agreement with any employee,
consultant, officer, director or stockholder of the Company or any
Subsidiary that would increase the cost of any such agreement or
arrangement to the Company or any Subsidiary by more than $10,000
in each instance, except as set forth in Schedule 6.7 hereto
;
6.10.8.
any labor
organization activity of the employees of the Company or any
Subsidiary;
6.10.9.
any declaration or
payment of any dividend or other distribution of the assets of the
Company or any Subsidiary;
6.10.10.
any change in the
accounting methods or practices followed by the Company or any
Subsidiary; or
6.10.11.
any Contract or
commitment made by the Company or any Subsidiary to do any of the
foregoing.
6.11
Title to Properties and Assets; Liens,
etc. Except where a violation of this Section 6.11 could not
reasonably be expected to have a Material Adverse Effect, the
Company and each Subsidiary has good and marketable title to the
properties and assets it owns, and the Company and each Subsidiary
has a valid license in all properties and assets licensed by it,
including the properties and assets reflected as owned in the most
recent balance sheet included in the Financial Statements, and has
a valid leasehold interest in its leasehold estates, in each case
subject to no encumbrance, other than those resulting from taxes
which have not yet become delinquent or those of the lessors of
leased property or assets. All facilities, machinery, equipment,
fixtures, vehicles and other properties owned, leased or used by
the Company or any Subsidiary are in good operating condition and
repair, ordinary wear and tear excepted and are fit and usable for
the purposes for which they are being used. Each of the Company and
its Subsidiaries is in compliance with all terms of each lease to
which it is a party or is otherwise bound.
6.12
Intellectual
Property.
6.12.1.
The Company or the
applicable Subsidiary is the owner or licensee of all intellectual
property and all Licensed Intellectual Property as described in the
SEC Documents (collectively, the “Intellectual
Property”). Neither the Company nor any Subsidiary has
licensed any Intellectual Property to any Person. All of the
registrations and applications for registration of the Intellectual
Property are valid, subsisting and in full force and effect, and
all actions and payments necessary for the maintenance and
continuation of such Intellectual Property have been taken or paid
on a timely basis. The Company and its Subsidiaries owns or
possesses sufficient legal rights to use all of the Intellectual
Property and the exclusive right to use all Owned Intellectual
Property and all Licensed Intellectual Property as being licensed
to the Company and its Subsidiaries.
-7-
6.13
Compliance with Other
Instruments. Except as set forth in the SEC Reports, 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 indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is
in violation of any judgment, decree or order of any court,
arbitrator or other governmental authority or (iii) is or has been
in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material
Adverse Effect.
6.14
Litigation. Except as set forth
in the SEC Reports, there is no legal proceeding pending or, to the
knowledge of the Company, threatened against the Company or any
Subsidiary or any investigation of the Company or any Subsidiary,
nor is the Company aware of any fact that would make any of the
foregoing reasonably likely to arise. Neither the Company nor any
Subsidiary is a party or subject to the provisions of any Order.
Except as set forth in the SEC Reports, there is no Legal
Proceeding by the Company or any Subsidiary currently pending or
that the Company or any Subsidiary intends to initiate. Neither the
Company nor any Subsidiary, nor any director or officer thereof, is
or has been the subject of any Order involving a claim of violation
of or liability under federal or state securities laws or a claim
of breach of fiduciary duty. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any
current or former director or officer of the Company.
6.15
Tax Returns and
Payments.
6.15.1.
Except as set forth
in the SEC Reports and as set forth in Schedule 6.15 hereto, the
Company and each Subsidiary has filed all Tax Returns required to
be filed by it, and each such entity has timely paid all Taxes owed
(whether or not shown on any Tax Return). All such Tax Returns were
complete and correct, and such Tax Returns correctly reflected the
facts regarding the income, business, assets, operations,
activities, status and other matters of such entity and any other
information required to be shown thereon. The Company and each
Subsidiary has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
Employee, creditor, independent contractor, shareholder, member or
other third party. The Company and each Subsidiary has established
adequate reserves for all Taxes accrued but not yet payable. No
deficiency assessment with respect to or proposed adjustment of the
Company and/or any Subsidiaries Taxes is pending or, to the
knowledge of the Company, threatened. There is no tax lien (other
than for current Taxes not yet due and payable), imposed by any
taxing authority, outstanding against the assets, properties or the
business of the Company or any Subsidiary.
6.15.2.
Neither the Company
nor any Subsidiary has agreed to make any adjustment under Section
481(a) of the Internal Revenue Code of 1986, as amended (the
“Code”) (or any corresponding provision of state, local
or foreign tax law) by reason of a change in accounting method or
otherwise, and neither the Company nor any Subsidiary will be
required to make any such adjustment as a result of the
transactions contemplated by this Agreement. Neither the Company
nor any Subsidiary has been or is a party to any tax sharing or
similar agreement. Neither the Company nor any Subsidiary is or has
ever been a party to any joint venture, partnership, limited
liability company, or other arrangement or Contract which could be
treated as a partnership for federal income tax purposes. Neither
the Company nor any Subsidiary is or has ever been a “United
States real property holding corporation” as that term is
defined in Section 897 of the Code.
6.16
Employees.
6.16.1.
(a) Neither the
Company nor any Subsidiary has, or has ever had any, collective
bargaining agreements with any of its employees; (b) there is no
labor union organizing activity pending or, to the knowledge of the
Company, threatened with respect to the Company or any Subsidiary;
(c) no employee has or is subject to any agreement or Contract to
which the Company or any Subsidiary is a party (including, without
limitation, licenses, covenants or commitments of any nature)
regarding his or her employment or engagement; (d) to the best of
the Company’s knowledge, no employee is subject to any Order
that would interfere with his or her duties to the Company or any
Subsidiary or that would conflict with the businesses the Company
or any Subsidiary as currently conducted and as proposed to be
conducted; (e) no employee is in violation of any term of any
employment contract, proprietary information agreement or any other
agreement relating to the right of any such Person to be employed
by, or to contract with, the Company or any Subsidiary; (f) to the
best of the Company’s knowledge, the continued employment by
the Company or any Subsidiary of its present employees, and the
performance of their respective duties to such entity, will not
result in any violation of any term of any employment contract,
proprietary information agreement or any other agreement relating
to the right of any such individual to be employed by, or to
contract with, the Company or any Subsidiary, and neither the
Company nor any Subsidiary has received any written notice alleging
that such violation has occurred; (g) no Employee or consultant has
been granted the right to continued employment by or service to the
Company or any Subsidiary or to any compensation following
termination of employment with or service to the Company or any
Subsidiary; and (h) neither the Company nor any Subsidiary has any
present intention to terminate the employment or engagement or
service of any officer or any significant employee or
consultant
6.16.2.
Except as set forth
in the SEC Reports, there are no outstanding or, to the knowledge
of the Company, threatened claims against the Company or any
Subsidiary or any Affiliate (whether under federal or state law,
under any employment agreement, or otherwise) asserted by any
present or former employee or consultant of the Company or any
Subsidiary. Neither the Company nor any Subsidiary is in violation
of any law or Requirement of Law concerning immigration or the
employment of persons other than U.S. citizens.
-8-
6.17
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, except where the failure to possess such permits could
not 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
6.18
Offering Valid. Assuming the
accuracy of the representations and warranties of the Purchasers
contained in the subscription agreements entered into by each
Purchaser in connection with this Agreement, the offer, sale and
issuance of the Securities will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the
“Securities Act”), and will be exempt from registration
and qualification under applicable state securities
laws.
6.19
Disclosure. Except with respect
to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms
that neither it nor any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any
information that it believes constitutes or might constitute
material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the
Company. All of the disclosure furnished by or on behalf of the
Company to the Purchasers regarding the Company and its
Subsidiaries, their respective businesses and the transactions
contemplated hereby, is, as of each Closing Date, true and correct
and 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 press releases disseminated by
the Company during the twelve months preceding the date of this
Agreement taken as a whole do not contain any untrue statement of a
material fact or omit 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
and when made, not misleading. The Company acknowledges and agrees
that no Purchaser makes or has made any representations or
warranties with respect to the transactions contemplated hereby
other than those specifically set forth in Section 7
hereof.
6.20
Investment Company Act. Neither
the Company nor any Subsidiary is an “investment
company”, or a company “controlled” by an
“investment company”, within the meaning of the
Investment Company Act of 1940, as amended.
6.21
Foreign Payments;
Undisclosed Contract Terms
6.21.1.
To the knowledge of
the Company, neither the Company nor any Subsidiary has made any
offer, payment, promise to pay or authorization for the payment of
money or an offer, gift, promise to give, or authorization for the
giving of anything of value to any Person in violation of the
Foreign Corrupt Practices Act of 1977, as amended and the rules and
regulations promulgated thereunder.
6.21.2.
To the knowledge of
the Company, there are no understandings, arrangements, agreements,
provisions, conditions or terms relating to, and there have been no
payments made to any Person in connection with any agreement,
Contract, commitment, lease or other contractual undertaking of the
Company or any Subsidiary which are not expressly set forth in such
contractual undertaking.
6.22
No Broker. Neither the Company
nor any Subsidiary has employed any broker or finder, or incurred
any liability for any brokerage or finder’s fees in
connection with the sale of the Securities.
6.23
Compliance with Laws. Neither
the Company nor any Subsidiary is in violation of, or in default
under, any Requirement of Law applicable to such Subsidiary, or any
Order issued or pending against such Subsidiary or by which the
Company’s or such Subsidiary’s properties are bound,
except for such violations or defaults that have not had, and could
not reasonably be expected to have, a Material Adverse
Effect.
6.24
No Integrated Offering.
Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 5, neither the Company, nor any of
its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would cause this offering of any of the shares of Preferred Stock,
Conversion Shares (collectively, the “Securities”) to
be integrated with prior offerings by the Company for purposes of
(i) the Securities Act which would require the registration of any
such securities under the Securities Act, or (ii) any applicable
shareholder approval provisions of any Trading Market on which any
of the securities of the Company are listed or
designated.
6.25
Application of Takeover
Protections. The Company and the Board of Directors have
taken all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become
applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation as a
result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.
6.26
No General Solicitation.
Neither the Company nor any person acting on behalf of the Company
has offered or sold any of the Securities by any form of general
solicitation or general advertising. The Company has offered the
Securities for sale only to the Purchasers and certain other
“accredited investors” within the meaning of Rule 501
under the Securities Act.
-9-
6.27
Foreign Corrupt Practices.
Neither the Company nor any Subsidiary, nor to the knowledge of the
Company or any Subsidiary, any agent or other person acting on
behalf of the Company or any Subsidiary, has: (i) directly or
indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or
domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate
funds, (iii) failed to disclose fully any contribution made by the
Company or any Subsidiary (or made by any person acting on its
behalf of which the Company is aware) which is in violation of law
or (iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended.
6.28
[Intentionally Deleted]
6.29
Office of Foreign Assets
Control. Neither the Company nor any Subsidiary nor, to the
Company's knowledge, any director, officer, agent, employee or
affiliate of the Company or any Subsidiary is currently subject to
any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department
(“OFAC”).
6.30
U.S. Real Property Holding
Corporation. The Company is not and has never been a U.S.
real property holding corporation within the meaning of Section 897
of the Internal Revenue Code of 1986, as amended, and the Company
shall so certify upon Purchaser’s request.
6.31
Money Laundering. The
operations of the Company and its Subsidiaries are and have been
conducted at all times in compliance with applicable financial
record-keeping and reporting requirements of the Currency and
Foreign Transactions Reporting Act of 1970, as amended, applicable
money laundering statutes and applicable rules and regulations
thereunder (collectively, the “Money Laundering Laws”),
and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving
the Company or any Subsidiary with respect to the Money Laundering
Laws is pending or, to the knowledge of the Company or any
Subsidiary, threatened.
6.32
Bad Actor Disqualification
(a)
No Disqualification
Events. With respect to Securities to be offered and sold hereunder
in reliance on Rule 506 under the Securities Act ("Regulation D
Securities"), none of the Company, any of its predecessors, any
affiliated issuer, any director, executive officer, other officer
of the Company participating in the offering, any beneficial owner
of 20% or more of the Company's outstanding voting equity
securities, calculated on the basis of voting power, nor any
promoter (as that term is defined in Rule 405 under the Securities
Act) connected with the Company in any capacity at the time of sale
(each, an "Issuer Covered Person" and, together, "Issuer Covered
Persons") is subject to any of the "Bad Actor" disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act
(a "Disqualification Event"), except for a Disqualification Event
covered by Rule 506(d)(2) or (d)(3). The Company has exercised
reasonable care to determine whether any Issuer Covered Person is
subject to a Disqualification Event. The Company has complied, to
the extent applicable, with its disclosure obligations under Rule
506(e), and has furnished to the Purchasers a copy of any
disclosures provided thereunder.
(b)
Other Covered
Persons. The Company is not aware of any person that (i) has been
or will be paid (directly or indirectly) remuneration for
solicitation of purchasers in connection with the sale of the
Securities and (ii) who is subject to a Disqualification
Event.
6.33
Notice of Disqualification
Events. The Company will notify the Purchaser in writing of
(i) any Disqualification Event relating to any Issuer Covered
Person and (ii) any event that would, with the passage of time,
become a Disqualification Event relating to any Issuer Covered
Person, prior to any Closing of this Offering.
6.34
Transactions with Affiliates and
Employees. Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of
the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of
the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director,
trustee or partner, in each case in excess of $120,000 other than
for: (i) payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) other employee benefits, including stock option
agreements under any stock option plan of the Company.
-10-
6.35
Xxxxxxxx-Xxxxx; Internal Accounting
Controls. The Company is in material compliance with all
provisions of the Xxxxxxxx-Xxxxx Act of 2002 which are applicable
to it as of the Closing Date. Except as disclosed in the SEC
Reports, 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 GAAP 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. Except
as disclosed in the SEC Reports, the Company has established
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the
Commission’s rules and forms. The Company’s certifying
officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period
covered by the Company’s most recently filed periodic report
under the Exchange Act (such date, the “Evaluation
Date”). The Company presented in its most recently filed
periodic report under the Exchange Act 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
changes in the Company’s internal control over financial
reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial
reporting.
6.36
Listing and Maintenance
Requirements. The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any
notification that the SEC is contemplating terminating such
registration. The Company has not, in the 12 months preceding the
date hereof, received notice from any OTC Market on which the
Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no
reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements.
6.37
OFAC. Neither the Company nor
any Subsidiary or, to the Company’s knowledge, any director,
officer, agent, employee, Affiliate or person acting on behalf of
any Subsidiary, is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”); and the Company will not
directly or indirectly use the proceeds of the sale of the
Securities, or lend, contribute or otherwise make available such
proceeds to any joint venture partner or other person or entity,
towards any sales or operations in Cuba, Iran, Syria, Sudan,
Myanmar or any other country sanctioned by OFAC or for the purpose
of financing the activities of any person currently subject to any
U.S. sanctions.
6.38
Registration Rights. Except as
set forth in SEC Reports, neither the Company nor any Subsidiary is
under any obligation, or has granted any rights that have not been
terminated, to register any of such Subsidiary’s currently
outstanding securities or any of its securities that may hereafter
be issued.
6.39
Material Non-Public
Information. Except with respect to the transactions
contemplated hereby that will be publicly disclosed, neither the
Company nor any Subsidiary has provided any Purchaser with any
information that such Subsidiary believes constitutes material
non-public information.
6.40
Right to Receive Additional
Shares. Except as set forth in the SEC Reports, shares to be
issued to previous shareholders as set forth in Schedule 6.7
hereto, or in connection with the Shares issued in this Offering,
no existing shareholder of the Company has any right to cause the
Company to issue additional shares of Common Stock or other
securities to such shareholder.
6.41
Post Offering Covenants.
For a period of one
(1) year from the date hereof (i) the Company shall not issue any
or become subject to any indebtedness greater than $250,000, except
for ordinary trade payables without the written consent of
Purchasers then holding more than 50% of the Shares (the
“Required Majority”) and (ii) the Company shall not
issue any equity securities of the Company without the consent of
the Required Majority, which consent shall not be unreasonably
withheld, except for shares issued upon the conversion of currently
existing securities or shares issued pursuant to the
Company’s duly adopted equity incentive plan and as disclosed
herewith in Schedule 6.7.
7.
Indemnification. The Purchaser agrees to
indemnify and hold harmless the Company, and each of its officers,
directors, managers, employees, agents, attorneys, control persons
and affiliates from and against all losses, liabilities, claims,
damages, costs, fees and expenses whatsoever (including, but not
limited to, any and all expenses incurred in investigating,
preparing or defending against any litigation commenced or
threatened) based upon or arising out of any actual or alleged
false acknowledgment, representation or warranty, or
misrepresentation or omission to state a material fact, or breach
by the Purchaser of any covenant or agreement made by the Purchaser
herein or in any other document delivered in connection with this
Subscription Agreement.
8.
Binding Effect. This Subscription
Agreement will survive the death or disability of the Purchaser and
will be binding upon and inure to the benefit of the parties and
their heirs, executors, administrators, successors, legal
representatives, and permitted assigns. If the Purchaser is more
than one person, the obligations of the Purchaser hereunder will be
joint and several and the agreements, representations, warranties
and acknowledgments herein will be deemed to be made by and be
binding upon each such person and such person’s heirs,
executors, administrators, successors, legal representatives and
permitted assigns.
9.
Modification. This Subscription
Agreement will not be modified or waived except by an instrument in
writing signed by the party against whom any such modification or
waiver is sought.
-11-
10.
Notices. Any notice or other
communication required or permitted to be given hereunder will be
in writing and will be mailed by certified mail, return receipt
requested, or delivered by reputable overnight courier such as
FedEx against receipt to the party to whom it is to be given (a) if
to the Company, at the address set forth in the Unit Purchase
Agreement or (b) if to the Purchaser, at the address set forth on
the signature page hereof (or, in either case, to such other
address as the party will have furnished in writing in accordance
with the provisions of this Section 10). Any notice or other
communication given by certified mail will be deemed given at the
time of certification thereof, except for a notice changing a
party’s address which will be deemed given at the time of
receipt thereof. Any notice or other communication given by
overnight courier will be deemed given at the time of
delivery.
11.
Assignability. This Subscription
Agreement and the rights, interests and obligations hereunder are
not transferable or assignable by the Purchaser and the transfer or
assignment of any of the Securities will be made only in accordance
with all applicable laws.
12.
Applicable Law. This Subscription
Agreement will be governed by and construed under the laws of the
State of New York as applied to agreements among New York residents
entered into and to be performed entirely within New York. The
parties hereto (1) agree that any legal suit, action or proceeding
arising out of or relating to this Subscription Agreement will be
instituted exclusively in New York State Supreme Court, County of
New York, or in the United States District Court for the Southern
District of New York, (2) waive any objection which the parties may
have now or hereafter to the venue of any such suit, action or
proceeding, and (3) irrevocably consent to the jurisdiction of the
New York State Supreme Court, County of New York, and the United
States District Court for the Southern District of New York in any
such suit, action or proceeding. Each of the parties hereto further
agrees to accept and acknowledge service of any and all process
which may be served in any such suit, action or proceeding in the
New York State Supreme Court, County of New York, or in the United
States District Court for the Southern District of New York and
agrees that service of process upon it mailed by certified mail to
its address will be deemed in every respect effective service of
process upon it, in any such suit, action or proceeding. THE
PARTIES HERETO AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS SUBSCRIPTION AGREEMENT OR ANY DOCUMENT OR AGREEMENT
CONTEMPLATED HEREBY.
13.
Blue Sky Qualification. The purchase of
Securities pursuant to this Subscription Agreement is expressly
conditioned upon the exemption from qualification of the offer and
sale of the Securities from applicable federal and state securities
laws.
14.
Use of Pronouns. All pronouns and any
variations thereof used herein will be deemed to refer to the
masculine, feminine, neuter, singular or plural as the identity of
the person or persons referred to may require.
15.
Confidentiality. The Purchaser
acknowledges and agrees that any information or data the Purchaser
has acquired from or about the Company not otherwise properly in
the public domain, was received in confidence. The Purchaser agrees
not to divulge, communicate or disclose, except as may be required
by law or for the performance of this Subscription Agreement, or
use to the detriment of the Company or for the benefit of any other
person or persons, or misuse in any way, any confidential
information of the Company, including any trade or business secrets
of the Company and any business materials that are treated by the
Company as confidential or proprietary, including, without
limitation, confidential information obtained by or given to the
Company about or belonging to third parties.
16.
Miscellaneous.
(a)
This Subscription
Agreement, together with the other Transaction Documents,
constitute the entire agreement between the Purchaser and the
Company with respect to the subject matter hereof and supersede all
prior oral or written agreements and understandings, if any,
relating to the subject matter hereof. The terms and provisions of
this Subscription Agreement may be waived, or consent for the
departure therefrom granted, only by a written document executed by
the party entitled to the benefits of such terms or
provisions.
(b)
Each of the
Purchaser’s and the Company’s representations and
warranties made in this Subscription Agreement will survive the
execution and delivery hereof and delivery of the
Securities.
(c)
Each of the parties
hereto will pay its own fees and expenses (including the fees of
any attorneys, accountants, appraisers or others engaged by such
party) in connection with this Subscription Agreement and the
transactions contemplated hereby whether or not the transactions
contemplated hereby are consummated.
(d)
This Subscription
Agreement may be executed in one or more counterparts each of which
will be deemed an original, but all of which will together
constitute one and the same instrument.
(e)
Each provision of
this Subscription Agreement will be considered separable and, if
for any reason any provision or provisions hereof are determined to
be invalid or contrary to applicable law, such invalidity or
illegality will not impair the operation of or affect the remaining
portions of this Subscription Agreement.
(f)
Paragraph titles
are for descriptive purposes only and will not control or alter the
meaning of this Subscription Agreement as set forth in the
text.
-12-
17. Signature
Page. It is hereby agreed by
the parties hereto that the execution by the Purchaser of this
Subscription Agreement, in the place set forth hereinbelow, will be
deemed and constitute the agreement by the Purchaser to be bound by
all of the terms and conditions hereof as well as each of the other
Transaction Documents, and will be deemed and constitute the
execution by the Purchaser of all such Transaction Documents
without requiring the Purchaser’s separate signature on any
of such Transaction Documents.
[Remainder
of page intentionally left blank.]
-13-
ANTI-MONEY LAUNDERING REQUIREMENTS
|
The USA PATRIOT Act
|
|
What is money laundering?
|
|
How big is the problem and why is it important?
|
|
The USA
PATRIOT Act is designed to detect, deter, and punish terrorists in
the United States and abroad. The Act imposes new anti-money
laundering requirements on brokerage firms and financial
institutions. Since April 24, 2002 all brokerage firms have been
required to have new, comprehensive anti-money laundering programs.
To help you understand these efforts, we want to provide you with
some information about money laundering and our steps to implement
the USA PATRIOT Act.
|
|
Money
laundering is the process of disguising illegally obtained money so
that the funds appear to come from legitimate sources or
activities. Money laundering occurs in connection with a wide
variety of crimes, including illegal arms sales, drug trafficking,
robbery, fraud, racketeering, and terrorism.
|
|
The use
of the U.S. financial system by criminals to facilitate terrorism
or other crimes could well taint our financial markets. According
to the U.S. State Department, one recent estimate puts the amount
of worldwide money laundering activity at $1 trillion a
year.
|
|
What are we required to do to eliminate money laundering?
|
||
|
Under
new rules required by the USA PATRIOT Act, our anti-money
laundering program must designate a special compliance officer, set
up employee training, conduct independent audits, and establish
policies and procedures to detect and report suspicious transaction
and ensure compliance with the new laws.
|
|
As part
of our required program, we may ask you to provide various
identification documents or other information. Until you provide
the information or documents we need, we may not be able to affect
any transactions for you.
|
-14-
SIGNATURE PAGE TO
SUBSCRIPTION AGREEMENT
Purchaser
hereby elects to purchase a total of $_________________,
representing ________Shares of Preferred Stock, at a purchase price
of $4.00 per Share.
Date
(NOTE: To be completed by the Purchaser): __________________,
2016
If
the Purchaser is an INDIVIDUAL, and if purchased as JOINT TENANTS,
as TENANTS IN COMMON, or as COMMUNITY PROPERTY:
|
____________________________
Print Name(s)
|
____________________________
Social Security
Number(s)
|
|
____________________________
Print Name(s)
|
____________________________
Social Security
Number(s)
|
|
____________________________
Signature(s) of Purchaser(s)
|
____________________________
Signature
|
|
|
|
|
Address:
|
|
|
____________________________
|
____________________________
|
|
____________________________
|
Date
|
|
____________________________
|
|
If the Purchaser is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY
COMPANY or TRUST:
|
Name of Entity
____________________________
____________________________
Name of
Partnership,
Corporation,
Limited
Liability Company
or Trust
|
__________________________
Federal TaxpayerIdentification Number
|
|
By: _______________________
Name:
Title:
|
__________________________
State of Organization
|
|
|
|
|
Address:
|
|
|
____________________________
|
___________________________
|
|
____________________________
|
Date
|
|
____________________________
|
|
AGREED
AND ACCEPTED:
|
By: /s/ Xxxxx
Xxxxxx
|
Date: October 13, 2016
|
|
Name: Xxxxx
Xxxxxx
|
|
|
Title: Chief Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
-15-
Schedules
Schedule
6.15
The Company has not
filed its federal and state tax returns for the 2015 year. The
Company had a net loss during such year and believes that no taxes
are due for 2015.
The Company has
been informed by the Internal Revenue Service that it has neglected
to file a Form W-3 Transmittal with accompanying Employee Form
W-2’s for tax year 2009. Failure to file the aforesaid forms
will result in an estimated penalty of $6,600. The Company has
reached out to its former officers to retrieve the forms, but has
been unsuccessful. The Company is in the process of requesting a
waiver for this penalty.
Schedule
6.7
Capitalization
Preferred Stock – 50,000,000
shares authorized; $0.0001 par value
Series A –
20,000 authorized and -0- outstanding
Series B –
30,000 authorized and 6,666 outstanding
Series C –
4,000,000 authorized and 3,090,365 outstanding
Series D –
5,000,000 authorized and 3,613,984 outstanding
Series E –
8,746,000 authorized and 8,357,826 outstanding
Series F –
1,100,000 authorized and 1,099,998 outstanding
Series G –
10,090,000 authorized and 10,083,351 outstanding
Common Stock – 750,000,000
authorized; $0.0001 par value, 46,123,701 issued and outstanding.
Reg S Common stock; 3,913 authorized, issued and
outstanding.
Options – 2,850,000 fully vested
options to purchase common stock, at an exercise price of $0.05.
The Company intends to grant to its Chief Executive Officer, Xxxxx
Xxxxxx, 10,000,000 fully vested options at an exercise price of
$0.01.
Warrants – 5,000 warrants to
purchase common stock at an exercise price of $4.50.
Upon the completion
of this Offering, the Company will be required to issue to
subscribers who participated in the Company’s private
offerings prior to February 15, 2015, pursuant to certain
anti-dilution protection, additional shares of Series C Preferred
Stock, Series F Preferred Stock and Series G Preferred Stock. The
Company will issue an aggregate of 550,000 shares of Series C
Preferred Stock. However, in lieu of issuing such additional shares
of Series F Preferred Stock and Series G Preferred Stock, the
Company will create a new series of preferred stock, to be
designated as “Series I Preferred Stock” and to issue
to such shareholder an aggregate of 114,944 shares of such Series I
Preferred Stock, each of which shall be convertible into one
hundred (100) shares of the Company’s common
stock.
-16-
Schedule A
FORM
OF INVESTOR QUESTIONNAIRE
For
Individual Investors Only
(All
individual investors must INITIAL where appropriate. Where there
are joint investors both parties must INITIAL):
Initial _______
I certify
that I have a
“net worth” of at least $1 million either individually
or through aggregating my individual holdings and those in which I
have a joint, community property or other similar shared ownership
interest with my spouse. For purposes of calculating net worth
under this paragraph, (i) the primary residence shall not be
included as an asset, (ii) to the extent that the indebtedness that
is secured by the primary residence is in excess of the fair market
value of the primary residence, the excess amount shall be included
as a liability, and (iii) if the amount of outstanding indebtedness
that is secured by the primary residence exceeds the amount
outstanding 60 days prior to the execution of this Subscription
Agreement, other than as a result of the acquisition of the primary
residence, the amount of such excess shall be included as a
liability.
Initial _______
I certify
that I have had an
annual gross income for the past two years of at least $200,000 (or
$300,000 jointly with my spouse) and expect my income (or joint
income, as appropriate) to reach the same level in the current
year.
For Non-Individual Investors (all Non-Individual Investors must INITIAL where appropriate):
Initial _______
The undersigned
certifies that it is a partnership, corporation, limited liability
company or business trust that is 100% owned by persons who meet
either of the criteria for Individual Investors,
above.
Initial _______
The undersigned
certifies that it is a partnership, corporation, limited liability
company or business trust that has total assets of at least $5
million and was not formed for the purpose of investing in
Company.
Initial _______
The undersigned
certifies that it is an employee benefit plan whose investment
decision is made by a plan fiduciary (as defined in ERISA
§3(21)) that is a bank, savings and loan association,
insurance company or registered investment adviser.
Initial _______
The undersigned
certifies that it is an employee benefit plan whose total assets
exceed $5,000,000 as of the date of the Subscription
Agreement.
Initial _______
The undersigned
certifies that it is a self-directed employee benefit plan whose
investment decisions are made solely by persons who meet either of
the criteria for Individual Investors, above.
Initial _______
The undersigned
certifies that it is a U.S. bank, U.S. savings and loan association
or other similar U.S. institution acting in its individual or
fiduciary capacity.
Initial _______
The undersigned
certifies that it is a broker-dealer registered pursuant to
§15 of the Securities Exchange Act of 1934.
Initial _______
The undersigned
certifies that it is an organization described in §501(c)(3)
of the Internal Revenue Code with total assets exceeding $5,000,000
and not formed for the specific purpose of investing in
Company.
Initial _______
The undersigned
certifies that it is a trust with total assets of at least
$5,000,000, not formed for the specific purpose of investing in
Company, and whose purchase is directed by a person with such
knowledge and experience in financial and business matters that he
is capable of evaluating the merits and risks of the prospective
investment.
Initial _______
The undersigned
certifies that it is a plan established and maintained by a state
or its political subdivisions, or any agency or instrumentality
thereof, for the benefit of its employees, and which has total
assets in excess of $5,000,000.
Initial _______
The undersigned
certifies that it is an insurance company as defined in
§2(a)(13) of the Securities Act of 1933, as amended, or a
registered investment company.
-17-
Investor
Questionnaire
(Must
be completed by Purchaser)
Section
A - Individual Purchaser Information
Purchaser Name(s):
________________________________________________________________________
Individual
executing Profile or Trustee:
_______________________________________________________________________
Social Security
Numbers / Federal I.D. Number:
________________________________________________________________________
Date of Birth:
_________________ Marital Status: _________________
Joint Party Date of
Birth:________________
Investment
Experience (Years): ___________
Annual Income:
_________________
Net Worth:
________________
Home Street
Address:
________________________________________________________________________
Home City, State
& Zip Code:
________________________________________________________________________
Home Phone:
________________________ Home Fax:
_____________________
Home Email:
_______________________________
Employer:
________________________________________________________________________
Employer Street
Address:
________________________________________________________________________
Employer City,
State & Zip Code:
________________________________________________________________________
Bus. Phone:
__________________________ Bus. Fax:
_______________________
Bus. Email:
________________________________
Type of Business:
________________________________________________________________________
Please check if you
are a FINRA member or affiliate of a FINRA member firm:
_______
-18-
Section
B – Entity Purchaser Information
Purchaser Name(s):
________________________________________________________________________
Authorized
Individual executing Profile or Trustee:
_____________________________________________________________________
Social Security
Numbers / Federal I.D. Number:
_______________________________________________________________________
Investment
Experience (Years): ___________
Annual Income:
_______________
Net Worth:
________________
Was the Trust
formed for the specific purpose of purchasing the
Securities?
[ ] Yes [ ]
No
Principal Purpose
(Trust)_____________________________________
Type of Business:
________________________________________________________
Street Address:
________________________________________________________________________
City, State &
Zip Code:
________________________________________________________________________
Phone:
________________________ Fax: ________________________
Email:
__________________________
-19-
Section C – Form of Payment – Check or Wire
Transfer
____ Check payable
to “ORBITAL TRACKING
CORP”
____ Wire funds
from my outside account according to the “To subscribe for
Shares of Preferred Stock in the private offering of ORBITAL
TRACKING CORP.”
Section E – Securities Delivery Instructions (check
one)
____ Please deliver
my securities to the address listed in the above Investor
Questionnaire.
____ Please deliver
my securities to the below address:
______________________________________
______________________________________
______________________________________
______________________________________
Purchaser
Signature(s)
_______________________________________Date_______________
Purchaser
Signature(s)
_______________________________________Date_______________
-20-
