Attached files
Exhibit 10.5
SUBSCRIPTION
AGREEMENT
This
Subscription Agreement (this “Agreement”) is being
delivered to the purchaser identified on the signature page to this Agreement
(the “Subscriber”) in
connection with its investment in PR Complete Holdings, Inc., a
Nevada corporation (the “Company”). The
Company is conducting a private placement (the “Offering”) of units
(“Units”) at a
purchase price of $1,000.00 per Unit, with each Unit consisting of (i) 10,000
shares of common stock, par value $0.0001 per share (the “Shares”) and (ii) a
five (5) year warrant to purchase 10,000 shares of common stock (the “Warrant Shares”) at a
per share exercise price of $0.10 (the “Exercise Price”),
substantially in the form attached hereto as Exhibit A (the “Warrants”). For
purposes of this Agreement, the term “Securities” shall
refer to the Units, the Shares, the Warrants, and the Warrant
Shares.
1. SUBSCRIPTION AND PURCHASE
PRICE
(a) Subscription. Subject
to the conditions set forth in Section 2 hereof, the Subscriber hereby
subscribes for and agrees to purchase the number of Units indicated on page 10
hereof on the terms and conditions described herein.
(b) Purchase of
Units. The Subscriber understands and acknowledges that the
purchase price to be remitted to the Company in exchange for the Units shall be
set at $1,000.00 per Unit, for an aggregate purchase price as set forth on page
10 hereof (the “Aggregate Purchase
Price”). The Subscriber’s delivery of this Agreement to the Company shall
be accompanied by payment for the Units subscribed for hereunder, payable in
United States Dollars, by wire transfer of immediately available funds delivered
contemporaneously with the Subscriber’s delivery of this Agreement to the
Company in accordance with the wire instructions provided on Exhibit B. The
Subscriber understands and agrees that, subject to Section 2 and applicable
laws, by executing this Agreement, it is entering into a binding
agreement.
2. ACCEPTANCE,
OFFERING TERM AND CLOSING PROCEDURES
(a) Acceptance or
Rejection. The obligation of the Subscriber to purchase the Units shall
be irrevocable, and the Subscriber shall be legally bound to purchase the Units
subject to the terms set forth in this Agreement. The Subscriber understands and
agrees that the Company reserves the right to reject this subscription for Units
in whole or part in any order at any time prior to the Closing for any reason,
notwithstanding the Subscriber’s prior receipt of notice of acceptance of the
Subscriber’s subscription. In the event of rejection of this subscription by the
Company in accordance with this Section 2, or if the sale of the Units is not
consummated by the Company for any reason or no reason, this Agreement and any
other agreement entered into between the Subscriber and the Company relating to
this subscription shall thereafter have no force or effect, and the Company
shall promptly return or cause to be returned to the Subscriber the purchase
price remitted to the Company, without interest thereon or deduction
therefrom.
(b) Closing. The
closing of the purchase and sale of the Units hereunder (the “Closing”) shall take
place at the offices of Anslow & Jaclin, LLP, 195 Route 9, South, Suite 204,
Manalapan, NJ 07726 or such other place as determined by the
Company. The Closing shall take place on a Business Day promptly
following the satisfaction of the conditions set forth in Section 8 below, as
determined by the Company (the “Closing Date”).
“Business Day”
shall mean from the hours of 9:00 a.m. (Eastern Time) through 5:00 p.m. (Eastern
Time) of a day other than a Saturday, Sunday or other day on which commercial
banks in New York, New York are authorized or required to be closed. The Shares
and Warrants purchased by the Subscriber will be delivered by the Company
promptly following the Closing.
(c) Following Acceptance or
Rejection. The Subscriber acknowledges and agrees that this
Agreement and any other documents delivered in connection herewith will be held
by the Company. In the event that this Agreement is not accepted by the Company
for whatever reason, which the Company expressly reserves the right to do, this
Agreement, the Aggregate Purchase Price received (without interest thereon) and
any other documents delivered in connection herewith will be returned to the
Subscriber at the address of the Subscriber as set forth in this Agreement. If
this Agreement is accepted by the Company, the Company is entitled to treat the
Aggregate Purchase Price received as an interest free loan to the Company until
such time as the Subscription is accepted.
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(d) Favored Nations
Provision. Other than in connection with (i) full or partial
consideration in connection with a strategic merger, acquisition, consolidation
or purchase of substantially all of the securities or assets of a corporation or
other entity which holders of such securities or debt are not at any time
granted registration rights equal to or greater than those granted to the
Subscribers, (ii) the Company’s issuance of securities in connection with
strategic license agreements and other partnering arrangements so long as such
issuances are not for the purpose of raising capital and which holders of such
securities or debt are not at any time granted registration rights equal to or
greater than those granted to the Subscribers, (iii) the Company’s issuance of
Common Stock or the issuances or grants of options to purchase Common Stock to
employees, directors, and consultants, pursuant to plans that have been approved
by a majority of the board of directors or in existence as such plans are
constituted on the date of this Agreement, (iv) securities upon the exercise or
exchange of or conversion of any securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of
this Agreement on the terms in effect on the Closing Date including the
permissible amendment thereof after the closing date, (v) as a result
of the exercise of Warrants or conversion of notes which are granted or issued
pursuant to this Agreement, (vi) the Company’s issuance of Common Stock or the
issuances or grants of options to purchase Common Stock to consultants and
service providers, and (v) any and all securities required to be assumed by the
Company by the terms thereof as a result of any of the foregoing even if issued
by a predecessor acquired in connection with a business combination, merger or
share exchange (collectively, the foregoing (i) through (v) are “Excepted Issuances”), if at
any time prior to the five (5) year anniversary of the date of this Agreement
(the “Expiration Date”),
the Company shall agree to or issue (the “Lower Price Issuance”) any
Common Stock or securities convertible into or exercisable for shares of Common
Stock (or modify any of the foregoing which may be outstanding) to any person or
entity at a price per share or conversion or exercise price per share which
shall be less than the Unit price per share of Common Stock hereunder
(disregarding any value attributable to the Warrants) in effect at such time, or
if less than the Warrant exercise price in effect at such time, without the
consent of the Subscribers, then the Company shall issue such additional number
of shares and the Warrant exercise price shall automatically be reduced to such
other lower price. The average Purchase Price of the Shares of Common
Stock and average exercise price in relation to the Warrant Shares shall be
calculated separately for the Shares and Warrant Shares. Common Stock
issued or issuable by the Company for no consideration or for consideration that
cannot be determined at the time of issue will be deemed issuable or to have
been issued for $0.0001 per share of Common Stock. The rights of
Subscribers set forth in this Section 2 are in addition to any other rights the
Subscribers have pursuant to this Agreement, the Notes, or the Warrants, and any
other agreement referred to or entered into in connection herewith or to which
Subscribers and Company are parties. Notwithstanding anything herein
or in any other agreement to the contrary, the Company shall only be required to
make a single adjustment with respect to any Lower Price Issuance, regardless of
the existence of multiple basis therefore.
(e) Maximum Exercise of
Rights. In the event the exercise of the rights
described in Section 2 would or could result in the issuance of an
amount of Common Stock of the Company that would exceed the maximum amount that
may be issued to Subscribers calculated in the manner as described in Section
2(f) of this Agreement, then the issuance of such additional shares of Common
Stock of the Company to Subscribers will be deferred in whole or in part until
such time as Subscribers are able to beneficially own such Common Stock without
exceeding the applicable maximum amount set forth calculated in the manner
described in Section 2(f) of this Agreement and notifies the Company
accordingly.
(f) Maximum
Conversion. A Subscriber shall not be entitled to convert
Warrants nor may the Company make any payment for a Lower Priced Issuance, or
otherwise, by delivery of shares of Common Stock which would be in excess of the
sum of (i) the number of shares of Common Stock beneficially owned by such
Subscriber and its Affiliates on a payment date, and (ii) the number of Warrant
Shares issuable upon the conversion of the Warrant with respect to which the
determination of this provision is being made on a calculation date, which would
result in beneficial ownership by Subscriber and its Affiliates of more than
4.99% of the outstanding shares of Common Stock of the Company on such
date. For the purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Rule 13d-3
thereunder. Subject to the foregoing, the Subscriber shall not be
limited to aggregate beneficial ownership of only 4.99% and aggregate beneficial
ownership by the Subscriber may exceed 4.99%. The Subscriber may
increase the permitted beneficial ownership amount up to 9.99% upon and
effective after 61 days prior written notice to the
Company. Subscriber may allocate which of the equity of the Company
deemed beneficially owned by Subscriber shall be included in the 4.99% amount
described above and which shall be allocated to the excess above
4.99%.
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(g) Share
Issuance. Until the Expiration Date, if the Company shall
issue any Common Stock except for the Excepted Issuances, prior to the complete
exercise of this Warrant for a consideration less than the Purchase Price that
would be in effect at the time of such issuance, then, and thereafter
successively upon each such issuance, the Purchase Price shall be reduced to
such other lower price for then outstanding Warrants. For purposes of
this adjustment, the issuance of any security or debt instrument of the Company
carrying the right to convert such security or debt instrument into Common Stock
or of any warrant, right or option to purchase Common Stock shall result in an
adjustment to the Purchase Price upon the issuance of the above-described
security, debt instrument, warrant, right, or option if such issuance is at a
price lower than the Purchase Price in effect upon such issuance and again at
any time upon any actual, permitted, optional, or allowed issuances of shares of
Common Stock upon any actual, permitted, optional, or allowed exercise of such
conversion or purchase rights if such issuance is at a price lower than the
Purchase Price in effect upon any actual, permitted, optional, or allowed such
issuance. Common Stock issued or issuable by the Company for no
consideration will be deemed issuable or to have been issued for $0.0001 per
share of Common Stock.
(h) Extraordinary Events
Regarding Common Stock. In the event that the Company shall
(a) issue additional shares of Common Stock as a dividend or other
distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of Common Stock, then, in each such event,
the Unit Purchase Price shall, simultaneously with the happening of such event,
be adjusted by multiplying the then Purchase Price by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein. The number of shares of
Common Stock and Warrants that the Subscriber shall thereafter, be issued and
obtain on the exercise hereof, be entitled to receive shall be adjusted to a
number determined by multiplying the number of shares of Common Stock that would
otherwise (but for the provisions of this Section) be issuable on such exercise
by a fraction of which (a) the numerator is the Purchase Price that would
otherwise (but for the provisions of this Section) be in effect, and (b) the
denominator is the Purchase Price in effect on the date of such
exercise.
(i) Certificate as to
Adjustments. In each case of any adjustment or readjustment in
the shares of Common Stock issuable hereunder or on the exercise of the
Warrants, the Company at its expense will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or readjustment
in accordance with the terms hereof and of the Warrant and prepare a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based, including a statement of
(a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or
Other Securities) outstanding or deemed to be outstanding, and (c) the
Purchase Price and the number of shares of Common Stock to be received and to be
received upon exercise of the Warrant, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as provided herein. The
Company will forthwith mail a copy of each such certificate to the Subscriber
and of the Warrant and any Warrant Agent of the Company.
3. THE
SUBSCRIBER’S REPRESENTATIONS, WARRANTIES AND COVENANTS
The
Subscriber hereby acknowledges, agrees with and represents, warrants and
covenants to the Company, as follows:
(a) The
Subscriber 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
Subscriber.
(b) The
Subscriber acknowledges its understanding that the Offering and sale of the
Securities is intended to be exempt from registration under the Securities Act
of 1933, as amended (the “Securities Act”), by
virtue of Section 4(2) of the Securities Act and the provisions of Regulation D
promulgated thereunder (“Regulation
D”). In furtherance thereof, the Subscriber represents and
warrants to the Company and its affiliates as follows:
(i) The
Subscriber realizes that the basis for the exemption from registration may not
be available if, notwithstanding the Subscriber’s representations contained
herein, the Subscriber 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 Subscriber does not have any such
intention.
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(ii) The
Subscriber realizes that the basis for exemption would not be available if the
Offering is part of a plan or scheme to evade registration provisions of the
Securities Act or any applicable state or federal securities laws.
(iii) The
Subscriber is acquiring the Securities solely for the Subscriber’s own
beneficial account, for investment purposes, and not with a view towards, or
resale in connection with, any distribution of the Securities.
(iv) The
Subscriber has the financial ability to bear the economic risk of the
Subscriber’s investment, has adequate means for providing for its current needs
and contingencies, and has no need for liquidity with respect to an investment
in the Company.
(v) The
Subscriber and the Subscriber’s attorney, accountant, purchaser representative
and/or tax advisor, if any (collectively, the “Advisors”) has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of a prospective investment in the Securities.
If other than an individual, the Subscriber also represents it has not been
organized solely for the purpose of acquiring the Securities.
(vi) The
Subscriber (together with its Advisors, if any) has received all documents
requested by the Subscriber, if any, has carefully reviewed them and understands
the information contained therein, prior to the execution of this
Agreement.
(c) The
Subscriber is not relying on the Company or any of its employees, agents,
sub-agents or advisors with respect to the legal, tax, economic and related
considerations involved in this investment. The Subscriber has relied on the
advice of, or has consulted with, only its Advisors. Each Advisor, if any, has
disclosed to the Subscriber 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 Company or
any affiliate or sub-agent thereof.
(d) The
Subscriber has carefully considered the potential risks relating to the Company
and a purchase of the Securities, and fully understands that the Securities are
a speculative investment that involves a high degree of risk of loss of the
Subscriber’s entire investment. Among other things, the Subscriber has carefully
considered each of the risks described under the heading “Risk Factors” in the
Company’s SEC Filings (as defined in Section 4(d) below), which risk factors are
incorporated herein by reference.
(e) The
Subscriber will not sell or otherwise transfer any Securities without
registration under the Securities Act or an exemption therefrom, and fully
understands and agrees that the Subscriber must bear the economic risk of 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 Subscriber 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 Subscriber also understands that, except as otherwise provided in
Section 5 hereof, the Company is under no obligation to register the Securities
on behalf of the Subscriber or to assist the Subscriber in complying with any
exemption from registration under the Securities Act or applicable state
securities laws. The Subscriber understands that any sales or transfers of the
Securities are further restricted by state securities laws and the provisions of
this Agreement.
(f) No
oral or written representations or warranties have been made, or information
furnished, to the Subscriber or its Advisors, if any, by the Company or any of
its officers, employees, agents, sub-agents, affiliates, advisors or
subsidiaries in connection with the Offering, other than any representations of
the Company contained herein, and in subscribing for the Units, the Subscriber
is not relying upon any representations other than those contained
herein.
(g) The
Subscriber’s overall commitment to investments that are not readily marketable
is not disproportionate to the Subscriber’s net worth, and an investment in the
Securities will not cause such overall commitment to become
excessive.
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(h) The
Subscriber 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.
(i) Neither
the 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. There is no government or other insurance covering any
of the Securities.
(j) The
Subscriber and 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 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 Subscriber and its Advisors, if
any.
(k) The
Subscriber is unaware of, is in no way relying on, and did not become aware of,
the Offering 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 is not subscribing for Units and
did not become aware of the Offering through or as a result of any seminar or
meeting to which the Subscriber was invited by, or any solicitation of a
subscription by, a person not previously known to the Subscriber in connection
with investments in securities generally.
(l) The
Subscriber has taken no action that 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.
(m) The
Subscriber is not relying on the Company or any of its employees, agents, or
advisors with respect to the legal, tax, economic and related considerations of
an investment in the Shares, and the Subscriber has relied on the advice of, or
has consulted with, only its own Advisors.
(n) The
Subscriber acknowledges that any estimates or forward-looking statements or
projections furnished by the Company to the Subscriber 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.
(o) No
oral or written representations have been made, or oral or written information
furnished, to the Subscriber or its Advisors, if any, in connection with the
Offering that are in any way inconsistent with the information contained
herein.
(p) (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 (i) is
responsible for the decision to invest in the Company; (ii) is independent of
the Company and any of its affiliates; (iii) is qualified to make such
investment decision; and (iv) 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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(q) This
Agreement is not enforceable by the Subscriber unless it has been accepted by
the Company, and the Subscriber acknowledges and agrees that the Company
reserves the right to reject any subscription for any reason.
(r) The
Subscriber will indemnify and hold harmless the Company and, where applicable,
its directors, officers, employees, agents, advisors, affiliates and
shareholders, and each other person, if any, who controls any of the foregoing
from and against any and all loss, liability, claim, damage and expense
whatsoever (including, but not limited to, any and all fees, costs and expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any claim, lawsuit, administrative proceeding or investigation whether commenced
or threatened) (a “Loss”) arising out of
or based upon any representation or warranty of the Subscriber contained herein
or in any document furnished by the Subscriber to the Company in connection
herewith being untrue in any material respect or any breach or failure by the
Subscriber to comply with any covenant or agreement made by the Subscriber
herein or therein; provided, however, that the
Subscriber shall not be liable for any Loss that in the aggregate
exceeds the Subscriber’s Aggregate Purchase Price tendered
hereunder.
(s) The
Subscriber is, and on each date on which the Subscriber continues to own
restricted securities from the Offering will be, an “Accredited Investor” as
defined in Rule 501(a) under the Securities Act. In general, an “Accredited
Investor” is deemed to be an institution with assets in excess of $5,000,000 or
individuals with a net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with his or her spouse.
(t) The
Subscriber, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the Offering, and has so
evaluated the merits and risks of such investment. The Subscriber has not
authorized any person or entity to act as its Purchaser Representative (as that
term is defined in Regulation D of the General Rules and Regulations under the
Securities Act) in connection with the Offering. The Subscriber is able to bear
the economic risk of an investment in the Securities and, at the present time,
is able to afford a complete loss of such investment.
(u) The
Subscriber has reviewed, or had an opportunity to review, all of the SEC
Filings.
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4. THE
COMPANY’S REPRESENTATIONS, WARRANTIES AND COVENANTS
The
Company hereby acknowledges, agrees with and represents, warrants and covenants
to the Subscriber, 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 Subscriber 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 organizational materials, 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) The
Company is subject to, and in full compliance with, the reporting requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”). The Company has made available to each Subscriber through the
EDGAR system true and complete copies of each of the Company’s Quarterly Reports
on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K, in
each case filed since September 12, 2008 (collectively, the “SEC Filings”), and
all such SEC Filings are incorporated herein by reference. The SEC
Filings, when they were filed with the SEC (or, if any amendment with respect to
any such document was filed, when such amendment was filed), complied in all
material respects with the applicable requirements of the Exchange Act and the
rules and regulations thereunder and did not, as of such date, contain an 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 the
light of the circumstances under which they were made, not misleading. All
reports and statements required to be filed by the Company under the Securities
Act and the Exchange Act have been filed, together with all exhibits required to
be filed therewith. The Company and each of its direct and indirect
subsidiaries, if any (collectively, the “Subsidiaries”), are
engaged in all material respects only in the business described in the SEC
Filings, and the SEC Filings contain a complete and accurate description in all
material respects of the business of the Company and the
Subsidiaries.
(e) The
Company acknowledges and agrees that the Subscriber is acting solely in the
capacity of an arm’s length purchaser with respect to the Securities and the
transactions contemplated hereby. The Company further acknowledges that the
Subscriber is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Subscriber or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Subscriber’s purchase of the
Units. The Company further represents to the Subscriber that the Company’s
decision to enter into this Agreement has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company and its
representatives.
(f) The
Company will indemnify and hold harmless the Subscriber and, where applicable,
its directors, officers, employees, agents, advisors and shareholders, from and
against any and all Loss arising out of or based upon any representation or
warranty of the Company contained herein or in any document furnished by the
Company to the Subscriber in connection herewith being untrue in any material
respect or any breach or failure by the Company to comply with any covenant or
agreement made by the Company to the Subscriber in connection therewith; provided, however, that the
Company’s liability shall not exceed the Subscriber’s Aggregate Purchase Price
tendered hereunder.
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5. PIGGY-BACK
REGISTRATION RIGHTS
(a) For a period of twelve (12) months
following the Closing Date, the Company shall notify the Subscriber in writing
at least twenty (20) days prior the filing of any registration statement under
Securities Act, in connection with a public offering of shares of the Company’s
common stock (including, but not limited to, registration statements relating to
secondary offerings of securities of the Company but excluding any registration
statements (i) on Form S-4 or S-8 (or any successor or substantially similar
form), or of any employee stock option, stock purchase or compensation plan or
of securities issued or issuable pursuant to any such plan, or a dividend
reinvestment plan, (ii) otherwise relating to any employee, benefit plan or
corporate reorganization or other transactions covered by Rule 145 promulgated
under the Securities Act, or (iii) on any registration form that does not permit
secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the resale of
the Shares and the Warrant Shares) and will afford the Subscriber an opportunity
to include in such registration statement all or part of the Shares and Warrant
Shares held by the Subscriber. In the event the Subscriber desires to include in
any such registration statement all or any part of the Shares and the Warrant
Shares held by the Subscriber, the Subscriber shall within ten (10) days after
the above-described notice from the Company, so notify the Company in writing,
including the number of such Shares and Warrant Shares that the Subscriber
wishes to include in such registration statement. If the Subscriber decides not
to include all of its Shares and Warrant Shares in any registration statement
thereafter filed by the Company, the Subscriber shall nevertheless continue to
have the right to include any Shares and Warrant Shares in any subsequent
registration statement or registration statements as may be filed by the Company
with respect to the offering of the securities, all upon the terms and
conditions set forth herein.
(b) Notwithstanding the foregoing, if the
managing underwriter or underwriters of any such proposed public offering advise
the Company that the total amount or kind of securities that the Subscriber, the
Company and any other persons intended to be included in such proposed public
offering is sufficiently large to adversely affect the success of such proposed
public offering, then the amount or kind of securities to be offered for the
various parties wishing to have shares of the Company’s common stock registered
shall be included in the following order:
(i) if
the Company proposes to register treasury shares or authorized but unissued
shares of its common stock (collectively, “Primary
Securities”):
(A) first, the Primary
Securities;
(B) second, the Shares and Warrant Shares
requested to be included in such registration statement, together with shares of
its common stock that do not constitute Shares, Warrant Shares or Primary
Securities (“Other
Securities”) held by
parties exercising similar piggy-back registration rights (or if necessary, such
Shares, Warrant Shares and Other Securities pro rata among the holders thereof
based upon the number of such Shares, Warrant Shares and Other Securities
requested to be registered by each such holder).
(ii) if the Company proposes to register
Other Securities:
(A) first, the Other Securities requested
to be included in such registration by holders exercising demand registration
rights;
(B) second, the Shares and Warrant Shares
requested to be included in such registration, together with Other Securities
held by parties exercising similar piggy-back registration rights (or if
necessary, such Shares, Warrant Shares and Other Securities pro rata among the
holders thereof based upon the number of such Shares, Warrant Shares and Other
Securities requested to be registered by each such holder).
Anything to the contrary in this
Agreement notwithstanding, the Company may withdraw or postpone a registration
statement referred to herein (a “Registration
Statement”) at any time before it becomes effective or withdraw, postpone
or terminate the offering after it becomes effective without obligation to the
Subscriber.
(c) In connection with its obligation under
this Section 5, the Company will (i) furnish to the Subscriber without charge,
at least one copy of any effective registration statement and any post-effective
amendments thereto, including financial statements and schedules, and, if the
Subscriber so requests in writing, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference) in the
form filed with the SEC; and (ii) deliver to the Subscriber and the
underwriters, if any, without charge, as many copies of the then effective
prospectus included in the registration statement, as the same may be amended or
supplemented (including such prospectus subject to completion) (the
“Prospectus”), and any amendments or supplements
thereto as such persons may reasonably request.
8
(d) As a condition to the inclusion of its
Shares and Warrant Shares, the Subscriber shall furnish to the Company such
information regarding the Subscriber and the distribution proposed by the
Subscriber as the Company may request in writing or as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.
(e) The Subscriber agrees by acquisition of
the Shares and Warrant Shares that, upon receipt of any notice from the Company
of the happening of any event that, in the good faith judgment of the Company’s
Board of Directors, requires the suspension of the Subscriber’s rights under
this Section 5, the Subscriber will forthwith discontinue disposition of the
Shares and Warrant Shares pursuant to the then current Prospectus until the
Subscriber is advised in writing by the Company that the use of the Prospectus
may be resumed. If so directed by the Company, on the happening of such event,
the Subscriber will deliver to the Company (at the Company’s expense) all
copies, other than permanent file copies then in the Subscriber’s possession, of
the Prospectus covering the Shares and Warrant Shares at the time of receipt of
such notice.
(f) The Subscriber hereby covenants with
the Company (i) not to make any sale of Shares and Warrant Shares without
effectively causing the prospectus delivery requirements under the Securities
Act to be satisfied, and (ii) if such Shares and Warrant Shares are to be sold
by any method or in any transaction other than on a national securities
exchange, the Nasdaq Global Select Market, the Nasdaq Global Market, Nasdaq
Capital Market or in the over-the-counter market, in privately negotiated
transactions, or in a combination of such methods, to notify the Company at
least 5 business days prior to the date on which the Subscriber first offers to
sell any such Shares or Warrant Shares.
(g) The Subscriber acknowledges and agrees
that the Shares and Warrant Shares sold pursuant to a registration statement
described in this Section 5 are not transferable on the books of the Company
unless the stock certificate submitted to the transfer agent evidencing the
Shares or Warrant Shares is accompanied by a certificate reasonably satisfactory
to the Company to the effect that (x) the Shares and Warrant Shares have been
sold in accordance with such registration statement and (y) the requirement of
delivering a current Prospectus has been satisfied.
(h) The Subscriber shall not take any
action with respect to any distribution deemed to be made pursuant to such
registration statement that would constitute a violation of Regulation M under
the Exchange Act, or any other applicable rule, regulation or
law.
(i) Upon the expiration of the
effectiveness of any registration statement described in this Section 5, the
Subscriber shall discontinue sales of the Shares and Warrant Shares pursuant to
such registration statement upon receipt of notice from the Company of the
Company’s intention to remove from registration the Shares and Warrant Shares
covered by such registration statement that remain unsold, and the Subscriber
shall notify the Company of the number of registered Shares and Warrant Shares
that remain unsold immediately upon receipt of such notice from the
Company.
(j) In the case of the registration of any
underwritten primary offering initiated by the Company (other than any
registration by the Company on Form S-4 or Form S-8 (or any successor or
substantially similar form), or of (i) an employee stock option, stock purchase
or compensation plan or of securities issued or issuable pursuant to any such
plan, or (ii) a dividend reinvestment plan) or any underwritten secondary
offering initiated at the request of a holder of securities of the Company
pursuant to registration rights granted by the Company, the Subscriber agrees
not to effect any public sale or distribution of securities of the Company,
except as part of such underwritten registration, during the period beginning
fifteen (15) days prior to the closing date of such underwritten offering and
during the period ending ninety (90) days after such closing date (or such
longer period as may be reasonably requested by the Company or by the managing
underwriter or underwriters).
(k) Anything to the contrary contained in
this Agreement notwithstanding, when, in the opinion of counsel for the Company,
registration of the Shares and Warrant Shares is not required by the Securities
Act, in connection with a proposed sale of such Shares and Warrant Shares, the
Subscriber shall have no rights pursuant to this Section 5. In furtherance and
not in limitation of the foregoing, the Subscriber shall have no rights pursuant
to this Section 5 at such time as all of the Subscriber’s Shares and Warrant
Shares may be sold without limitation pursuant to Rule 144.
9
6. USE
OF PROCEEDS
The Company anticipates using the gross
proceeds from the Offering for general corporate purposes including growth
initiatives and capital expenditures.
7. CONDITIONS
TO ACCEPTANCE OF SUBSCRIPTION
The
Company’s right to accept the subscription of the Subscriber is conditioned upon
satisfaction of the following conditions precedent on or before the date the
Company accepts such subscription:
(a) As
of the Closing, no legal action, suit or proceeding shall be pending that 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 in all material respects on the date of this
Agreement and shall be true and correct as of the Closing as if made on the
Closing Date.
|
8.
|
MISCELLANEOUS
PROVISIONS
|
(a) All
parties hereto have been represented by counsel, and no inference shall be drawn
in favor of or against any party by virtue of the fact that such party’s counsel
was or was not the principal draftsman of this Agreement.
(b) Each
of the parties hereto shall be responsible to pay the costs and expenses of its
own legal counsel in connection with the preparation and review of this
Agreement and related documentation.
(c) 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.
(d) The
representations, warranties and agreement of the Subscriber and the Company made
in this Agreement shall survive the execution and delivery of this Agreement and
the delivery of the Securities.
(e) Any
party may send any notice, request, demand, claim or other communication
hereunder to the Subscriber at the address set forth on the signature page of
this Agreement or to the Company at its primary office (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.
(f) 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
Subscriber is more than one person or entity, the obligation of the Subscriber
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 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
hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
(g) This
Agreement is not transferable or assignable by the Subscriber.
(h) This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without giving effect to conflicts of law
principles.
10
(i) The
Company and the Subscriber hereby agree that any dispute that may arise between
them arising out of or in connection with this Agreement shall be adjudicated
before a court located in the City of New York, Borough of Manhattan, and they
hereby submit to the exclusive jurisdiction of the federal and state courts of
the State of New York located in the City of New York, Borough of Manhattan with
respect to any action or legal proceeding commenced by any party, and
irrevocably waive any objection they now or hereafter may have respecting the
venue of any such action or proceeding brought in such a court or respecting the
fact that such court is an inconvenient forum, relating to or arising out of
this Agreement or any acts or omissions relating to the sale of the securities
hereunder, and consent to the service of process in any such action or legal
proceeding by means of registered or certified mail, return receipt requested,
postage prepaid, in care of the address set forth herein or such other address
as either party shall furnish in writing to the other.
(j) 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.
[Signature
Pages Follow]
11
ALL SUBSCRIBERS MUST
COMPLETE THIS PAGE
IN
WITNESS WHEREOF, the Subscriber has executed this Agreement on the ____ day of
December 2009.
|
|
x $1,000.00
for each
Unit =
|
|
|
Units
subscribed for
|
Aggregate
Purchase Price
|
Manner in
which Title is to be held (Please Check One):
|
1.
|
___
|
Individual
|
7.
|
___
|
Trust/Estate/Pension
or Profit sharing Plan
Date
Opened:______________
|
|
2.
|
___
|
Joint
Tenants with Right of Survivorship
|
8.
|
___
|
As
a Custodian for
________________________________
Under
the Uniform Gift to Minors Act of the State of
________________________________
|
|
3.
|
___
|
Community
Property
|
9.
|
___
|
Married
with Separate Property
|
|
4.
|
___
|
Tenants
in Common
|
10.
|
___
|
Keogh
|
|
5.
|
___
|
Corporation/Partnership/
Limited Liability Company
|
11.
|
___
|
Tenants
by the Entirety
|
|
6.
|
___
|
IRA
|
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 IRA
INVESTMENT.
Name of
Firm (Bank, Brokerage, Custodian):
Account
Name:
Account
Number:
Representative
Name:
Representative
Phone Number:
Address:
City,
State, Zip:
12
IF MORE
THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN.
INDIVIDUAL
SUBSCRIBERS MUST COMPLETE THIS PAGE 11.
SUBSCRIBERS
WHICH ARE ENTITIES MUST COMPLETE PAGE 12.
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 _________ 2009, on behalf of the
Company.
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||
|
By:_________________________________
Name:
Title:
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||
13
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 __________ 2009, on behalf of the
Company.
|
|
|
By:
_________________________________
Name:
Title: President and Chief Executive
Officer
|
|
14
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 shares of common
stock and warrants to purchase common stock (the “Units”), is
made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is
either a bank, savings and loan association, insurance company, or
registered investment adviser, or (2) you have total assets in excess of
$5,000,000 and the decision that you shall subscribe for and purchase the
Shares is made solely by persons or entities that are accredited
investors, as defined in Rule 501 of Regulation D promulgated under the
Securities Act (“Regulation D”)
or (3) you are a self-directed plan and the decision that you shall
subscribe for and purchase the Units is made solely by persons or entities
that are accredited investors.
|
|
o
|
You
are a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940, as
amended.
|
|
o
|
You
are an organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended (the “Code”), a
corporation, Massachusetts or similar business trust or a partnership, in
each case not formed for the specific purpose of making an investment in
the Units and its underlying securities in excess of
$5,000,000.
|
|
o
|
You
are a director or executive officer of the
Company.
|
|
o
|
You
are a natural person whose individual net worth, or joint net worth with
your spouse, exceeds $1,000,000 at the time of your subscription for and
purchase of the Units.
|
|
o
|
You
are a natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with your spouse in
excess of $300,000 in each of the two most recent years, and who has a
reasonable expectation of reaching the same income level in the current
year.
|
|
o
|
You
are a trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Units and whose subscription for and
purchase of the Units is directed by a sophisticated person as described
in Rule 506(b)(2)(ii) of Regulation
D.
|
|
o
|
You
are an entity in which all of the equity owners are persons or entities
described in one of the preceding
paragraphs.
|
15
Check
all boxes below which correctly describe you.
With
respect to this investment in the Units, your:
Investment
Objectives:
p Aggressive
Growth
p Speculation
Risk
Tolerance: o Low
Risk o Moderate
Risk p High Risk
Are you
associated with a FINRA Member Firm? o Yes o No
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|
Your
initials (purchaser and co-purchaser, if applicable) are required for each
item below:
|
|
____
____
|
I/We
understand that this investment is not
guaranteed.
|
|
____
____
|
I/We
are aware that this investment is not
liquid.
|
|
____
____
|
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
Subscriber 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 the Units.
|
___________________________________
Name
of Purchaser [please print]
___________________________________
Signature
of Purchaser (Entities please
provide
signature of Purchaser’s duly
authorized
signatory.)
___________________________________
Name
of Signatory (Entities only)
___________________________________
Title
of Signatory (Entities only)
|
___________________________________
Name
of Co-Purchaser [please print]
___________________________________
Signature
of Co-Purchaser
|
16
VERIFICATION
OF INVESTMENT ADVISOR/BROKER
I state
that I am familiar with the financial affairs and investment objectives of the
investor named above and reasonably believe that a purchase of the securities is
a suitable investment for this investor and that the investor, either
individually or together with his or her purchaser representative, understands
the terms of and is able to evaluate the merits of this offering. I
acknowledge:
|
|
(a)
|
that
I have reviewed the Subscription Agreement and forms of securities
presented to me, and attachments (if any)
thereto;
|
|
|
(b)
|
that
the Subscription Agreement and attachments thereto have been fully
completed and executed by the appropriate party;
and
|
|
|
(c)
|
that
the subscription will be deemed received by the Company upon acceptance of
the Subscription Agreement.
|
|
Deposit
securities from this offering directly to purchaser’s
account?
|
o Yes
|
o No
|
|
|
If
“Yes,” please indicate the account number:
_____________________________________
|
_____________________________________ ____________________________________
Broker/Dealer
Account Executive
_____________________________________ ____________________________________
(Name of
Broker/Dealer)
(Signature)
_____________________________________ ____________________________________
(Street
Address of Broker/Dealer
Office)
(Print Name)
_____________________________________ ____________________________________
(City of
Broker/Dealer
Office) (State) (Zip) (Representative
I.D. Number)
_____________________________________ ____________________________________
(Telephone
Number of Broker/Dealer
Office)
(Date)
_____________________________________ ____________________________________
(Fax
Number of Broker/Dealer
Office)
(E-mail Address of Account
Executive)
17