SECURITIES PURCHASE AGREEMENT NANOSENSORS, INC. Up to $1,500,000 of Units Each Unit consisting of one share of Common Stock and one Common Stock Purchase Warrant, each entitling the holder to purchase one share of Common Stock.
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____________________
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____________________
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Name
of Purchaser
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Agreement
No.
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NANOSENSORS,
INC.
Up
to $1,500,000 of Units
Each
Unit consisting of one share of Common Stock and one Common Stock
Purchase
Warrant, each entitling the holder to purchase one share of Common
Stock.
Maximum
of 150,000,000 shares of Common Stock and 150,000,000 Warrants
Offering
Price - $0.01 per Unit, Minimum Investment $50,000
(Common
Stock, Par Value $.001 per share)
In
the event you decide not to participate in this offering please return this
Securities Purchase Agreement to the principal office of the Company as set
forth below.
NANOSENSORS,
INC.
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ #▇
▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Dated:
May 11, 2006
CONFIDENTIAL
SECURITIES PURCHASE AGREEMENT
INSTRUCTIONS:
Items
to
be delivered by all Purchasers:
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a.
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One
(1) completed and executed Securities Purchase Agreement, including
the
Investor Questionnaire.
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b.
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One
(1) completed and executed Registration Rights Agreement, including
the
Selling Security Holder Questionnaire annexed
thereto.
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c.
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Payment
in the amount of subscription, by wire transfer of funds or check.
All
checks should be made payable to “Signature Bank as Escrow Agent For
NanoSensors, Inc.” in the total amount of the Units subscribed
for.
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d.
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Wired
funds should be made according to directions from the Company or
the
Selling Agents.
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THE
PURCHASER IS RESPONSIBLE FOR ALL WIRE TRANSFER FEES IMPOSED BY THE
PURCHASER’S BANK.
The
following exhibits constitute a part of this Agreement:
EXHIBIT
A: INVESTOR
QUESTIONNAIRE
EXHIBIT
B: FORM
OF WARRANT
EXHIBIT
C: REGISTRATION
RIGHTS AGREEMENT
EXHIBIT
D: ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED NOVEMBER 30,
2005
EXHIBIT
E: QUARTERLY
REPORT ON FORM 10-QSB FOR THE FISCAL QUARTER ENDED FEBRUARY 28,
2006
EXHIBIT
F: CURRENT
REPORT ON FORM 8-K DATED MAY 8, 2006
ALL
DOCUMENTS SHOULD BE RETURNED TO THE SELLING AGENT FROM WHOM THE PURCHASER
INITIALLY RECEIVED SUCH DOCUMENTS
ii
THIS
SECURITIES PURCHASE AGREEMENT
(the
“Agreement”), is made by and among those purchasers indicated on the signature
page to this Agreement (referred to collectively as the “Purchasers”), and
NANOSENSORS,
INC., a
Nevada
corporation (the “Company”). For each Purchaser, this Agreement shall be deemed
made as of the later of the date that it is executed by such Purchaser and
the
Company.
Article
I
SALE
OF UNITS
1.1
Sale
of Units.
The
Company has authorized the sale of the up to an aggregate of $1,000,000 of
Units
of the Company’s securities and an additional $500,000 of Units as an
oversubscription amount for a per Unit purchase price of $50,000 (the “Purchase
Price”). Each $50,000 Unit consists of 5,000,000 shares of the Company’s Common
Stock (the “Shares”) and warrants to purchase an additional 5,000,000 shares of
the Company’s Common Stock (the “Warrants” and the shares of Common Stock
issuable upon exercise of the Warrants are the “Warrant Shares”).
1.2
Purchase
Price.
Subject
to the terms and conditions hereof and on the basis of the representations
and
warranties hereinafter set forth, the Company hereby agrees to issue and sell
to
each Purchaser, and each Purchaser agrees to purchase from the Company, upon
the
Closing (as defined in Section 1.4 hereof), the number of Units as described
herein for the applicable Purchase Price as set forth on the signature page
of
this Agreement executed by such Purchaser. The number of Units purchased
hereunder by a Purchaser (and the corresponding Purchase Price payable by such
Purchaser for the Units being purchased by it) shall be as specified on the
signature page of this Agreement executed by such Purchaser. The Company may
reject any subscription in whole or in part and the Company may agree to issue
fractional Units hereunder. This offer is only being made to “accredited
investors” (as defined in Rule 501 under the Securities Act of 1933, as amended
(the “Securities Act”)) in reliance upon an exemption from registration under
Section 4(2) of the Securities Act and/or Regulation D promulgated thereunder,
and on similar exemptions under applicable state laws. The Company and Selling
Agents (defined below) may accept subscriptions for less than a whole Unit
in
their sole discretion.
1.3
Offering
Period. The
Units
are being offering (the “Offering”) during the offering period commencing on May
11, 2006 and terminating on the earlier of (a) June 11, 2006 or (b) the date
on
which all Units authorized for sale (including the oversubscription amount)
have
been sold, unless extended by the Company and the selling agents for up to
an
additional 30 days (the “Offering Period”).
1.4 No
Minimum; Multiple Closings.
The
Purchaser acknowledges and agrees that all subscription amounts will be
deposited in an escrow account maintained by the Company and that there is
no
minimum Offering amount necessary for the funds to be released to the Company.
Subject to the escrow conditions discussed below, funds may be released to
the
Company and closings held, from time to time, as determined by the Company
at
any time during the Offering Period. The final Closing shall be either the
date
of which this Offering is fully subscribed or the last date during the Offering
Period on which the Company accepts a subscription, whichever is latest. Each
closing of the transactions contemplated hereunder (the “Closing”) shall be
deemed to occur at the offices of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, ▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇
▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as shall be mutually agreeable
to the parties, at 11:00 a.m., New York Time, on such other date as be mutually
agreeable to the parties.
1.5
Closing
Matters.
At each
Closing the following actions shall be taken:
(a)
Each
Purchaser shall deliver its Purchase Price in immediately available United
States funds to the escrow account established for the Offering; and
(b)
Subject
to the provisions of Section 1.7 hereof, the Company shall deliver certificates
representing the Shares and Warrants comprising the amount of Units subscribed
for to each Purchaser.
(c) The
Company intends to use the proceeds derived from this sale to satisfy its
working capital requirements, however an amount of up to $90,000 may be used
for
payments of accrued compensation. Management reserves the right to utilize
the
net proceeds of the sale in a manner in the best interests of the Company.
The
amount of the net proceeds that will be invested in particular areas of the
Company’s business will depend upon future economic conditions and business
opportunities. To the extent that the Company continues to incur losses from
operations, such losses will be funded from its general funds, including the
net
proceeds of this sale.
1.6 Description
of Warrants. The
following discussion is subject to the terms and conditions of the Warrants,
a
copy of which is annexed hereto as Exhibit
B,
and
Purchasers are referred to the form of the Warrant for more detailed
information.
(a) Each
Warrant will entitle the holder to purchase one share of Common Stock (“Warrant
Shares”) at an initial exercise price of $0.04 per share, subject to adjustments
in the event we (A) declare a dividend or make a distribution on our common
stock in shares of our common stock, (B) subdivide or reclassify the outstanding
shares of common stock into a greater number of shares, (C) combine or
reclassify the outstanding common stock into a smaller number of shares or
(D)
issue shares of Common Stock or other securities at a price below the per share
Purchase Price. The Warrants may be exercised in whole or in part at any time
during the five year period commencing on the date of issuance. The Warrants
may
be exercised on a cashless basis in the event the registration statement
contemplated by the Registration Rights Agreement (defined below) is not
declared effective within six months of the final Closing, or such registration
statement is not maintained effective for the period specified in the
Registration Rights Agreement.
(b) Commencing
twelve months after the effective date of the registration statement
contemplated by the Registration Rights Agreement (attached hereto as
Exhibit
C
and
referred to herein as the “Registration Rights Agreement”), the Company, at its
option, may redeem some or all of the Warrants upon not less than thirty (30)
days nor more than sixty (60) days prior written notice to the Warrant Holder
at
a redemption price of $0.01 per Warrant only in the event that the closing
bid
price of our Common Stock is at least 300% of the exercise price for twenty
(20)
consecutive trading days prior to the date of the notice of redemption and
the
Warrant Shares are covered by a registration statement declared effective by
the
Securities and Exchange Commission. A Warrant holder may exercise the Warrants
during the period from the date of notice of redemption until 5:00 Eastern
Time
on the business day immediately preceding the redemption date.
1.7 Escrow
of Funds; Holdback; Appointment. (a)
All
proceeds received by from Purchasers as consideration for the purchase of the
Units will be deposited in an escrow account. Closings will be held from time
to
time as agreed upon by the Company and the Selling Agents. An amount equal
to
60% of the aggregate Purchase Price paid shall be retained in the escrow account
(the “Escrowed Funds”) until the occurrence of (i) the registration statement
contemplated by the Registration Rights Agreement entered into among the Company
and the Purchasers is declared effective by the U.S. Securities and Exchange
Commission and (ii) the Company has (A) obtained the approval of the requisite
number of its stockholders necessary to amend its Certificate of Incorporation
to increase the number of authorized shares of Common Stock to 950,000,000
shares of Common Stock, (B) complied with its obligations under the rules and
regulations established by the U.S. Securities and Exchange Commission for
obtaining such shareholder approval; and (C) filed an Amendment to its
Certificate of Incorporation and such certificate shall have been accepted
for
filing by the Secretary of State for the State of Nevada.
2
(b)
Until
such time as the Company has satisfied its obligations as described in Section
1.7(a), the Company shall not be required to issue certificates representing
the
number of Shares and Warrants allocable to the Escrowed Funds until such time
as
the funds are released to the Company from escrow. The Shares and Warrants
representing the Escrowed Funds may be referred to as the “Holdback
Securities”.
(c) Upon
the
Company’s satisfaction of these conditions, the Company shall be authorized to
execute and deliver instructions to the escrow agent for the release to the
Company of such Escrowed Funds; provided, however, that ▇▇▇▇▇▇ Associates,
L.P.,
as the agent for the Purchasers, countersigns such instructions. Each Purchaser
hereby designates ▇▇▇▇▇▇ Associates, L.P., a Selling Agent, as its
representative and agent for the purpose of verifying the Company’s compliance
with its obligations under this Section 1.7 and countersigning such escrow
release instructions. Immediately following the Company’s delivery of
countersigned escrow release instructions to the escrow agent pursuant to this
Section 1.7(c), the Company shall cause the Holdback Securities to be delivered
to the Purchasers.
(d) In
the
event the Company is unable to (i) have the U.S. Securities and Exchange
Commission declare the registration statement contemplated by the Registration
Rights Agreement effective within six months of the final Closing Date, or
(ii)
rightfully cause its Certificate of Incorporation to be amended to increase
the
number of shares of authorized Common Stock to 950,000,000 shares, then each
Purchaser shall have the right to demand the Company to instruct the escrow
agent to return the Escrowed Funds to each Purchaser. In the event a Purchaser
delivers such a demand to the Company, the Company shall promptly instruct
the
escrow agent to release and return the Escrowed Funds allocable to such
Purchaser. Upon the return of such Purchaser’s Escrowed Funds, such Purchaser’s
subscription for Units shall be deemed modified in order to cancel its
subscription for the amount of Escrowed Funds returned. Upon the Company’s
authorization to the escrow agent to return such Escrowed Funds, the Company
shall have no further liability to issue and deliver the Holdback Securities,
which securities shall be deemed cancelled.
(e)
Notwithstanding
the foregoing, a particular Purchaser may consent to the release of some or
all
of its Purchase Price that has been designated as Escrowed Funds to the Company
regardless of the Company’s satisfaction of its obligations as described in this
Section 1.7 by furnishing the Company and ▇▇▇▇▇▇ Associates with written notice
of such election. Upon its receipt of such an election, the Company shall be
entitled to submit a release instruction to the escrow agent for such Escrowed
Funds, which such instruction must be countersigned by ▇▇▇▇▇▇ Associates, and
upon its delivery to the escrow agent of such a duly executed instruction
letter, the Company shall cause the certificates representing the Holdback
Securities to be delivered to such Purchaser.
1.8 Certain
Reports Filed Under the Securities Exchange Act of 1934. Annexed
to this Agreement are the Company’s (i) Annual Report on Form 10-KSB for the
fiscal year ended November 30, 2005 (the “Annual Report”), (ii) Quarterly Report
on Form 10-QSB for the fiscal quarter ended February 28, 2006 (the “Quarterly
Report”) and (iii) Current Report on Form 8-K dated May 8, 2006 concerning the
Company’s intention to undertake this Offering (the “Current Report”). The
foregoing reports comprise an integral part of this Agreement and each Purchaser
is urged to read each such report in its entirety. The Annual Report, Quarterly
Report and Current Report may be collectively referred to herein as the “SEC
Reports”.
3
Article
II
REPRESENTATIONS
AND WARRANTIES OF COMPANY
The
Company hereby represents and warrants to the Purchasers as of the date of
this
Agreement as follows:
(A) The
Company is duly organized, validly existing and in good standing under the
laws
of its state of incorporation, with all requisite power and authority to own,
lease, license, and use its properties and assets and to carry out the business
in which it is engaged, except where the failure to have or be any of the
foregoing may not be expected to have a material adverse effect on the Company’s
presently conducted businesses. The Company is not in violation of any of the
provisions of its certificate of incorporation, bylaws or other organizational
or charter documents. The Company is duly qualified to transact the business
in
which it is engaged and is in good standing as a foreign corporation in every
jurisdiction in which its ownership, leasing, licensing or use of property
or
assets or the conduct of its business make such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not, individually or in the aggregate, have or reasonably be expected
to
result in (i) a material and adverse effect on the legality, validity or
enforceability of this Agreement, (ii) a material and adverse effect on the
results of operations, assets, prospects, business or condition (financial
or
otherwise) of the Company, taken as a whole, or (iii) an adverse impairment
to
the Company’s ability to perform on a timely basis its obligations hereunder
(any of (i), (ii) or (iii), a “Material Adverse Effect”).
(B) The
Company is authorized to issue 500,000,000 shares of Common Stock, $.001 par
value per share and 20,000,000 shares of Preferred Stock, $.001 par value per
share. No securities of the Company are entitled to preemptive or similar
rights, and no entity or person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement unless any such rights have been
waived. Except as (i) a result of the purchase and sale of the Units, (ii)
as
disclosed in the Company’s SEC Reports and (iii) as described in Section II(J)
below, 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 exchangeable for, or giving any entity
or person any right to subscribe for or acquire, any shares of Common Stock,
or
contracts, commitments, understandings or arrangements by which the Company
is
or may become bound to issue additional shares of Common Stock, or securities
or
rights convertible or exchangeable into shares of Common Stock. The issue and
sale of the Units will not (except pursuant to their terms thereunder),
immediately or with the passage of time, obligate the Company to issue shares
of
Common Stock or other securities to any entity or person and will not result
in
a right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities.
(C) The
Company has the requisite corporate power and authority to enter into, deliver
and consummate the transactions contemplated by this Agreement, to issue and
sell the Units and deliver the Shares and Warrants, and otherwise to carry
out
its obligations hereunder. The execution and delivery of this Agreement and
the
consummation by it of the transactions contemplated thereby have been duly
authorized by the Company and no further action is required by the Company
in
connection therewith, other than the Company’s obligations in connection with
increasing its authorized capital stock, as described in Section 5.6(d) below.
When executed and delivered by the Company, this Agreement will constitute
the
legal, valid and binding obligation of the Company, enforceable as to the
Company in accordance with its terms, except as enforcement may be limited
by
bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance
or
transfer, moratorium or other laws or court decisions, now or hereinafter in
effect, relating to or affecting the rights of creditors generally and as may
be
limited by general principles of equity and the discretion of the court having
jurisdiction in an enforcement action (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
4
(D) Other
than the Company’s obligations in connection with increasing its authorized
capital stock, as described in Section 5.6(d) below, no consent, authorization,
approval, order, license, certificate or permit of or from, or declaration
or
filing with, any federal, state, local or other governmental authority or any
court or any other tribunal is required by the Company for the execution,
delivery or performance by the Company of this Agreement or the execution,
issuance, sale or delivery of the Units.
(E) 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
or
entity in connection with the execution, delivery and performance by the Company
of this Agreement or the issuance, sale or delivery of the Units other than
(i)
any filings required by state securities laws, (ii) the filing of a Notice
of a
Sale of Securities on Form D with the Commission under Regulation D of the
Securities Act, (iii) those that have been made or obtained prior to or
contemporaneously with the date of this Agreement and (iv) the approval of
the
Company’s stockholders for the Company to amend its Certificate of Incorporation
in order to increase its authorized capital stock.
(F) Other
than the Company’s obligations in connection with increasing its authorized
capital stock, as described in Section 5.6(d) below, the execution, delivery
and
performance of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby do not and will not: (i) conflict with
or violate any provision of the Company’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
violate, conflict with, or constitute a default or breach (or an event that
with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility,
debt
or other instrument (evidencing a Company debt or otherwise) or other
understanding to which the Company is a party or by which any property or asset
of the Company is bound or affected, or (iii) result in a violation of any
law,
rule, regulation, order, judgment, injunction, decree or other restriction
of
any court or governmental authority to which the Company is subject (including
federal and state securities laws and regulations), or by which any property
or
asset of the Company is bound or affected; except in the case of each of clauses
(ii) and (iii), such as could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect.
(G) The
Shares and Warrants comprising the Units have been duly authorized and, when
issued and paid for in accordance with this Agreement, will be duly and validly
issued, fully paid and nonassessable, will not be issued in violation of any
preemptive or other rights of stockholders, and will be issued free and clear
of
all liens and encumbrances, other than restrictions on transfer under applicable
securities laws. Effective upon the Company’s amendment of its Certificate of
Incorporation to increase the amount of its authorized capital stock, the
Company will reserve all of the Shares and Warrant Shares from its duly
authorized capital stock.
(H) Since
December 30, 2005, the Company has filed all reports required to be filed by
it
under the Securities Act of 1933, as amended (the “Securities Act”), and the
Exchange Act of 1934, as amended (the “Exchange Act”), including pursuant to
Section 13(a) or 15(d) thereof, for the period from December 30, 2005 and ending
as of the date hereof (or such shorter period as the Company was required by
law
to file such reports) on a timely basis or has timely filed 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 and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein or necessary in order to make the statements therein, in light
of
the circumstances under which they were made, not misleading. The financial
statements of the Company 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.
Such
financial statements have been prepared in accordance with generally accepted
accounting principles in the United States applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated Subsidiaries
as of and for the dates thereof and the results of operations and cash flows
for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
5
(I) Litigation.
Except as disclosed in the SEC Reports, there is no pending or, to the best
knowledge of the Company, threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having jurisdiction
over the Company, or any of its affiliates that would affect the execution
by
the Company or the performance by the Company of its obligations under this
Agreement, and all other agreements entered into by the Company relating
hereto. Except as disclosed in the SEC Reports, there is no pending or, to
the best knowledge of the Company, threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its affiliates which litigation
if adversely determined could have a material adverse effect on the
Company.
(J) No
Undisclosed Liabilities.
Except for the Company’s obligation to issue warrants to an investor arising out
of the Company’s failure to file a registration statement pursuant to a certain
Subscription Agreement entered into as of November 10, 2005, the Company has
no
liabilities or obligations which are material, individually or in the aggregate,
which are not disclosed in the SEC Reports, other than those incurred in the
ordinary course of the Company’s businesses since April 19, 2006 and which,
individually or in the aggregate, would not reasonably be expected to have
a
material adverse effect on the Company’s financial condition.
(K) No
Undisclosed Events or Circumstances.
Since April 19, 2006, no event or circumstance has occurred or exists with
respect to the Company or its businesses, properties, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which
has
not been so publicly announced or disclosed in the SEC Reports.
(L) Dilution.
The Company’s executive officers and directors have studied and fully understand
the nature of the Units being sold hereby and recognize that they have a
potential dilutive effect on the interests of other holders of the Company’s
securities. The board of directors of the Company has concluded, in its
good faith business judgment, that such issuance is in the best interests of
the
Company.
Article
III
REPRESENTATIONS
AND WARRANTIES OF PURCHASERS
By
signing this Agreement, each undersigned Purchaser hereby represents and
warrants to the Company as follows as an inducement to the Company to accept
the
subscription of the Purchaser:
(A) The
Purchaser acknowledges and agrees that (i) the offering and sale of the Units
are intended to be exempt from registration under the Securities Act by virtue
of Section 4(2) of the Securities Act and/or Regulation D promulgated
thereunder, (ii) the Units have not been registered under the Securities Act
and
(iii) that the Company has represented to the Purchaser (assuming the veracity
of the representations of the Purchaser made herein and in the Questionnaire
annexed hereto at Exhibit
A)
that
the Units, Shares, Warrants and Warrant Shares (collectively, the “Securities”)
have been offered and sold by the Company in reliance upon an exemption from
registration provided in Section 4(2) of the Securities Act and Regulation
D
thereunder. In accordance therewith and in furtherance thereof, the Purchaser
represents and warrants to and agrees with the Company that it is an accredited
investor (as defined in Rule 501 promulgated under the Securities Act) because
the purchaser is [Please
check statements applicable to the Purchaser]:
6
| o | a bank as defined in Section 3(a)(2) of the Securities Act; |
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o
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a
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Act;
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o
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a
broker or dealer registered pursuant to Section 15 of the Exchange
Act;
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| o | an insurance company as defined in Section 2(13) of the Securities Act; |
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o
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an
investment company registered under the Investment Company Act of
1940, as
amended or a business development company as defined in Section 2(a)(48)
of such act;
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o
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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;
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o
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an
employee benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, as amended, if the investment
decision is made by a plan fiduciary, as defined in Section 3(21)
of such
Act, which is either a bank, savings and loan association, insurance
company, or registered investment adviser, or if the employee benefit
plan
has total assets in excess of $5,000,000 or, if a self-directed plan,
with
investment decisions made solely by persons that are accredited
investors;
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o
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a
private business development company as defined in Section 202(a)(22)
of
the Investment Advisers Act of 1940, as
amended;
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o
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an
organization described in Section 501(c)(3) of the Internal Revenue
Code,
a corporation, Massachusetts or similar business trust, or partnership,
not formed for the specific purpose of acquiring the securities offered,
with total assets in excess of
$5,000,000;
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o
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a
natural person whose individual net worth or joint net worth with
that
person's spouse, at the time of his purchase exceeds
$l,000,000;
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o
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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 that person's spouse
in
excess of $300,000 in each of those years and has a reasonable expectation
of reaching the same income level in the current
year;
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o
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a
trust, with total assets in excess of $5,000,000, not formed for
the
specific purpose of acquiring the securities offered, whose purchase
is
directed by a sophisticated person as described in Rule 506(b)(2)(ii)
of
the Exchange Act; or
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o
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an
entity in which all of the equity owners are accredited investors.
(If
this alternative is checked, the Purchaser must identify each equity
owner
and provide statements signed by each demonstrating how each qualifies
as
an accredited investor.)
|
|
o
|
a
plan established and maintained by a state, its political subdivisions,
or
any agency or instrumentality thereof, for the benefit of its employees,
if such plan has total assets in excess of
$5,000,000
|
| o | a director or officer of the Company. |
7
(B) The
Purchaser hereby represents and warrants that the Purchaser is acquiring the
Units hereunder for its own account for investment and not with a view to
distribution, and with no present intention of distributing the Units or selling
the Units for distribution. The Purchaser understands that the Units are being
sold to the Purchaser in a transaction which is exempt from the registration
requirements of the Securities Act. Accordingly, the Purchaser acknowledges
that
it has been advised that the Units have not been registered under the Securities
Act and are being sold by the Company in reliance upon the veracity of the
Purchaser’s representations contained herein and upon the exemption from the
registration requirements provided by the Securities Act and the securities
laws
of all applicable states. The Purchaser's acquisition of the Units shall
constitute a confirmation of the foregoing representation and warranty and
understanding thereof.
(C) The
Purchaser (or its “Purchaser Representative” if any) has such knowledge and
experience in financial and business matters as is required for evaluating
the
merits and risks of making this investment, and the Purchaser or its Purchaser
Representative(s) has received such information requested by the Purchaser
concerning the business, management and financial affairs of the Company in
order to evaluate the merits and risks of making this investment. Further,
the
Purchaser acknowledges that the Purchaser has had the opportunity to ask
questions of, and receive answers from, the officers of the Company concerning
the terms and conditions of this investment and to obtain information relating
to the organization, operation and business of the Company and of the Company's
contracts, agreements and obligations or needed to verify the accuracy of any
information contained herein or any other information about the Company. Except
as set forth in this Agreement, no representation or warranty is made by the
Company to induce the Purchaser to make this investment, and any representation
or warranty not made herein or therein is specifically disclaimed and no
information furnished to the Purchaser or the Purchaser's advisor(s) in
connection with the sale were in any way inconsistent with the information
stated herein. The Purchaser further understands and acknowledges that no person
has been authorized by the Company to make any representations or warranties
concerning the Company, including as to the accuracy or completeness of the
information contained in this Agreement.
(D) The
Purchaser is making the foregoing representations and warranties with the intent
that they may be relied upon by the Company in determining the suitability
of
the sale of the Units to the Purchaser for purposes of federal and state
securities laws. Accordingly, each Purchaser represents and warrants that the
information stated herein is true, accurate and complete, and agrees to notify
and supply corrective information promptly to the Company as provided above
if
any of such information becomes inaccurate or incomplete. The Purchaser has
completed this Agreement and Questionnaire, has delivered it herewith and
represents and warrants that it is accurate and true in all respects and that
it
accurately and completely sets forth the financial condition of the Purchaser
on
the date hereof. The Purchaser has no reason to expect there will be any
material adverse change in its financial condition and will advise the Company
of any such changes occurring prior to the closing or termination of the
Offering.
(E) The
Purchaser is not subscribing for any of the Units as a result of or subsequent
to any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio,
any
seminar or meeting, or any solicitation of a subscription by a person not
previously known to the Purchaser in connection with investments in Units
generally.
(F) The
Purchaser has received certain information regarding the Company, including
this
Agreement, and other accompanying documents of the Company receipt of which
is
hereby acknowledged. The Purchaser has carefully reviewed all information
provided to it and has carefully evaluated and understands the risks described
therein related to the Company and an investment in the Company, and understands
and has relied only on the information provided to it in writing by the Company
relating to this investment. No agent prepared any of the information to be
delivered to prospective investors in connection with this transaction.
Prospective investors are advised to conduct their own review of the business,
properties and affairs of the Company before subscribing to purchase the
Units.
8
(G) The
Purchaser also understands and agrees that, although the Company will use its
best efforts to keep the information provided in this Agreement strictly
confidential, the Company or its counsel may present this Agreement and the
information provided in answer to it to such parties as they may deem advisable
if called upon to establish the availability under any federal or state
securities laws of an exemption from registration of the private placement
or if
the contents thereof are relevant to any issue in any action, suit or proceeding
to which the Company or its affiliates is a party, or by which they are or
may
be bound or as otherwise required by law or regulatory authority.
(H) The
individual signing below on behalf of any entity hereby warrants and represents
that he/she is authorized to execute this Agreement on behalf of such entity.
If
an individual, the Purchaser has reached the age of majority in the state in
which the Purchaser resides. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all requisite action, if any, in respect thereof on the part
of
Purchasers and no other proceedings on the part of Purchasers are necessary
to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchasers and constitutes a valid and
binding obligation of Purchasers, enforceable against Purchasers in accordance
with its terms (subject to applicable bankruptcy, insolvency and similar laws
affecting creditors’ rights generally and subject, as to enforceability, to
general principles of equity (whether applied in a proceeding in equity or
at
law)).
(I) The
Purchaser is aware that the offering of the Units involves securities for which
only a limited trading market exists, thereby requiring any investment to be
maintained for an indefinite period of time. The purchase of the Units involves
risks which the Purchaser has evaluated, and the Purchaser is able to bear
the
economic risk of the purchase of such Units and the loss of its entire
investment. The undersigned is able to bear the substantial economic risk of
the
investment for an indefinite period of time, has no need for liquidity in such
investment and can afford a complete loss of such investment. The Purchaser's
overall commitment to investments that are not readily marketable is not, and
his acquisition of the Units will not cause such overall commitment to become,
disproportionate to his net worth and the Purchaser has adequate means of
providing for its current needs and contingencies.
(J) The
Purchaser acknowledges and agrees that there is no “minimum” offering amount for
the Units and that subject to the terms of the escrow arrangement discussed
above, funds may be immediately released to the Company.
(K) In
entering into this Agreement and in purchasing the Units, the Purchaser further
acknowledges that:
(i)
The
Company has informed the Purchaser that the Units have not been offered for
sale
by means of general advertising or solicitation and the Purchaser acknowledges
that it has either a pre-existing personal or business relationship with either
the Company or any of its officers, directors or controlling person, of a nature
and duration such as would enable a reasonable prudent investor to be aware
of
the character, business acumen, and general business and financial circumstances
of the Company and an investment in the Units.
(ii)
Neither the Units nor any interest therein may be resold by the Purchaser in
the
absence of a registration under the Securities Act or an exemption from
registration. In particular, the Purchaser is aware that all of the foregoing
described Units will be “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 the conditions thereof are met. Other than set
forth in this Agreement, the Company has no obligation to register any
securities purchased or issuable hereunder.
(iii)
The
following legends (or similar language) shall be placed on the certificate(s)
or
other instruments evidencing the Shares, Warrants and Warrant
Shares:
9
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE “ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER
SUCH NOTES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED
OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO
IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2)
THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH NOTES, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH NOTES
MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS.
(iv)
The
Company may at any time place a stop transfer order on its transfer books
against the Units. Such stop order will be removed, and further transfer of
the
Units will be permitted, upon an effective registration of the respective Units,
or the receipt by the Company of an opinion of counsel satisfactory to the
Company that such further transfer may be effected pursuant to an applicable
exemption from registration.
(L) The
Company has employed its own legal counsel in connection with the Offering.
The
Purchasers have not been represented by independent counsel in connection with
the preparation of this Agreement or the terms of this Offering and no
investigation of the merits or fairness of the Offering has been conducted
on
behalf of the Purchasers. Prospective Purchasers should consult with their
own
legal, tax and financial advisors with respect to the Offering made pursuant
to
this Agreement.
(M) ______________
(insert
name of Purchaser Representative: if
none leave blank)
has
acted
as the Purchaser’s Purchaser Representative for purposes of the private
placement exemption under the Act. If the Purchaser has appointed a Purchaser
Representative (which term is used herein with the same meaning as given in
Rule
501(h) of Regulation D), the Purchaser has been advised by his Purchaser
Representative as to the merits and risks of an investment in the Company in
general and the suitability of an investment in the Units for the Purchaser
in
particular.
(N) The
undersigned hereby acknowledges that officers, affiliates, employees and
directors of the Company and/or the Selling Agents may purchase Units in the
Offering.
(O) It
never
has been represented, guaranteed or warranted by any Selling Agent, the Company,
any of the officers, directors, stockholders, partners, employees or agents
of
the Company, or any other persons, whether expressly or by implication, that:
(i) the Company or the Purchasers will realize any given percentage of profits
and/or amount or type of consideration, profit or loss as a result of the
Company’s activities or the Purchaser’s investment in the Company; or (ii) the
past performance or experience of the management of the Company, or of any
other
person, will in any way indicate the predictable results of the ownership of
the
Units or of the Company's activities.
(P) The
Purchaser acknowledges that any delivery to it of this Agreement relating to
the
Units prior to the determination by the Company of its suitability as a
Purchaser shall not constitute an offer of the Units until such determination
of
suitability shall be made, and the Purchaser hereby agrees that it shall
promptly return this Agreement and the other Offering documents to the Company
upon request. The Purchaser understands that the Company shall have the right
to
accept or reject this subscription in whole or in part. Unless this subscription
is accepted in whole or in part by the Company, this subscription shall be
deemed rejected in whole.
10
Article
IV
INDEMNIFICATION
4.1 Indemnification
by the Company.
The
Company agrees to defend, indemnify and hold harmless the Purchasers and shall
reimburse Purchasers for, from and against each claim, loss, liability, cost
and
expense (including without limitation, interest, penalties, costs of preparation
and investigation, and the reasonable fees, disbursements and expenses of
attorneys, accountants and other professional advisors) (collectively, “Losses”)
directly or indirectly relating to, resulting from or arising out of any untrue
representation, misrepresentation, breach of warranty or non-fulfillment of
any
covenant, agreement or other obligation by or of the Company contained herein
or
in any certificate, document, or instrument delivered to Purchasers pursuant
hereto.
4.2
Indemnification
by Purchasers.
Purchasers agrees to defend, indemnify and hold harmless the Company and shall
reimburse The Company for, from and against all Losses directly or indirectly
relating to, resulting from or arising out of any untrue representation,
misrepresentation, breach of warranty or non-fulfillment of any covenant,
agreement or other obligation of the Purchasers contained herein or in any
certificate, document or instrument delivered to the Company pursuant
hereto.
4.3
Procedure.
The
indemnified party shall promptly notify the indemnifying party of any claim,
demand, action or proceeding for which indemnification will be sought under
Sections 4.1 or 4.2 of this Agreement, and, if such claim, demand, action or
proceeding is a third party claim, demand, action or proceeding, the
indemnifying party will have the right at its expense to assume the defense
thereof using counsel reasonably acceptable to the indemnified party. The
indemnified party shall have the right to participate, at its own expense,
with
respect to any such third party claim, demand, action or proceeding. In
connection with any such third party claim, demand, action or proceeding,
Purchasers and the Company shall cooperate with each other and provide each
other with access to relevant books and records in their possession. No such
third party claim, demand, action or proceeding shall be settled without the
prior written consent of the indemnified party, which shall not be unreasonably
withheld. If a firm written offer is made to settle any such third party claim,
demand, action or proceeding and the indemnifying party proposes to accept
such
settlement and the indemnified party refuses to consent to such settlement,
then: (i) the indemnifying party shall be excused from, and the indemnified
party shall be solely responsible for, all further defense of such third party
claim, demand, action or proceeding; and (ii) the maximum liability of the
indemnifying party relating to such third party claim, demand, action or
proceeding shall be the amount of the proposed settlement if the amount
thereafter recovered from the indemnified party on such third party claim,
demand, action or proceeding is greater than the amount of the proposed
settlement.
ARTICLE
V
OTHER
AGREEMENTS
5.1 Selling
Agent Compensation.
The
Company intends to engage registered broker-dealers to serve as selling agents
(the “Selling Agents”), for the sale of the Units and pay commissions and other
compensation to the Selling Agents who procure purchasers of the Units. We
will
pay and issue to each Selling Agent (i) a fee of 10% of the gross proceeds
of
the sale of the Units to Purchasers procured by such Selling Agent; (ii) a
non-accountable expense allowance equal to 3% of the gross proceeds of the
sale
of Units to such Purchasers; and (iii) a warrant (the “Agent Warrants”) to
purchase such number of Shares and Warrants as equals 20% of the total number
of
Units sold in the Offering to Purchasers procured by each Selling Agent. Each
Selling Agent shall also receive a warrant solicitation fee of 10% of the cash
proceeds from the exercise of the Warrants by those purchasers procured by
such
Selling Agent in this Offering that exercised such Warrants and for whom such
Selling Agent was properly designated as the soliciting broker. Agent Warrants
shall be exercisable at the per share Purchase Price for a period of five years
from the date of issuance. Each Selling Agent has also been granted the right,
on a pro-rata
basis,
of first refusal for a period of 24 months from the final Closing Date to serve
as the Company’s agent on any subsequent financing transaction, including public
or private offerings of equity or debt securities, excluding commercial bank
financing arrangements and grants from federal, state or local government
entities.
11
5.2 Anti-Dilution
Protection. (a)
If
during
the
period commencing on the final Closing and ending upon the date which is 180
days from the effective date of the registration statement required to be filed
by the Company pursuant to the Registration Rights Agreement, the Company sells
additional shares of Common Stock in a capital raising transaction, or
securities convertible into or exercisable for shares of common stock (or agrees
to modify any such securities which are outstanding prior to Closing)
(collectively, the “New Shares”) for a purchase price or conversion or exercise
price that is less than the Purchase Price without the consent of the
Purchasers, then the Company shall issue, for each such occasion, subject to
the
exceptions set forth below, such number of additional shares of Common Stock
so
that per share Purchase Price of the Shares issued hereunder to a Purchaser
(of
only the Shares, Warrants or Warrant Shares still owned by the Purchaser) is
equal to such other lower price per share. In addition, in such an event, the
terms of the Warrants shall be similarly adjusted in accordance with the terms
and conditions thereof. The
number of additional Shares issued to each Purchaser pursuant to this
anti-dilution protection will be rounded down to the nearest whole share and
no
fractional shares will be issued.
(b)
Notwithstanding
the foregoing, the following issuances and transactions by the Company shall
not
result in any issuance of additional shares of Common Stock (or in any
adjustment to the Warrants) to Purchasers
in the
Offering: (i) upon the exercise or conversion of any warrants, options or
convertible securities issued and outstanding as of the date hereof or issued
hereafter under the Company’s Employee Stock Option Plan (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like, and net of any repurchases of such Units or cancellations or
exemptions of such options, warrants or other rights); (ii) shares of Common
Stock issued hereunder or issuable upon exercise of warrants issued in
connection with the Offering to either a Purchaser or to Selling Agents; (iii)
shares of Common Stock (or securities convertible into or exercisable for shares
of Common Stock) which may be issued to consultants, vendors, or distributors
to
the Company as consideration for services provided to the Company or to third
parties in connection with a joint venture, strategic alliance or other
commercial relationship with such third party relating to the operation of
the
Company’s business, the primary purpose of which is not to raise equity capital;
(iv) the reduction in the exercise price of the common stock purchase warrants
issued and outstanding prior to the commencement of the Offering as contemplated
in Section 5.7 of this Agreement; and (v) shares of Common Stock or other
securities issued in connection with any stock split, stock dividend or
recapitalization of the Company.
(c)
Within
15
days following any transaction by the Company which would result in the
Purchasers
in the
Offering being entitled to additional shares of Common Stock hereunder, the
Company shall provide written notice of such transaction to each Purchaser
of the
terms of such transaction and shall, within 30 days of consummation of such
transaction, deliver share certificates to the Purchasers representing any
additional Shares. Any
such
additional Shares shall be included in the term “Registrable Securities” as
defined in the Registration Rights Agreement between the Company and the
Purchaser.
5.3 Conditions
Precedent to the Obligations of the Purchasers to Purchase
Units.
The
obligation of each Purchaser to acquire Units at the Closing is subject to
the
satisfaction or waiver by such Purchaser, at or before the Closing, of each
of
the following conditions:
(a) the
representations and warranties of the Company contained herein shall be true
and
correct in all material respects as of the date when made and as of the Closing
Date as though made on and as of such date;
(b) the
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement, the
Registration Rights Agreement and any other agreement or instrument executed
in
connection with the Offering (collectively, the “Transaction Documents”) to be
performed, satisfied or complied with by it at or prior to the Closing;
(c) no
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any
of
the transactions contemplated by any Transaction Document;
12
(d)
since
the
date of execution of this Agreement, no event or series of events shall have
occurred that reasonably would be expected to have or result in a (i) an adverse
effect on the legality, validity or enforceability of any Transaction Document,
or (ii) a material and adverse effect on the results of operations, assets,
business or condition (financial or otherwise) of the Company;
(e) the
Company and the Purchasers shall execute and deliver a Registration Rights
Agreement substantially in the form of
Exhibit C;
and
(f)
the
Company shall have obtained such agreements and documents as are reasonably
required to lock-up the Shares and Warrants issued to those Purchasers that
were
referred to a Selling Agent by the Company’s management for a period of time
commencing on the Closing Date and until six months from the date that such
Shares or Warrant Shares may be sold publicly pursuant to the registration
statement contemplated by the Registration Rights Agreement or under Rule 144,
promulgated by the Securities and Exchange Commission.
5.4 Conditions
Precedent to the Obligations of the Company to sell Units.
The
obligation of the Company to sell Units at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of each of
the
following conditions:
(a) the
representations and warranties of each Purchaser contained herein shall be
true
and correct in all material respects as of the date when made and as of the
Closing Date as though made on and as of such date;
(b) each
Purchaser shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor at or
prior to the Closing;
(c) No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any
of
the transactions contemplated by the Transaction Documents;
(d) the
Company and the Purchasers shall execute and deliver a Registration Rights
Agreement substantially in the form of Exhibit
C;
and
(e) the
Company shall have obtained such agreements and documents as are reasonably
required to lock-up the Shares and Warrants issued to those Purchasers that
were
referred to a Selling Agent by the Company’s management for a period of time
commencing on the Closing Date and until six months from the date that such
Shares or Warrant Shares may be sold publicly pursuant to the registration
statement contemplated by the Registration Rights Agreement or under Rule 144,
promulgated by the Securities and Exchange Commission.
5.5 Right
of Participation.
(a) Offered
Securities.
For a
period of twelve (12) months from the Effective Date of the Registration
Statement, the Company will not, directly or indirectly, effect a subsequent
financing of its securities (whether structured as debt or equity), unless
in
each such case the Company shall have first offered to sell to the Purchasers
in
this Offering an amount of the securities offered in such subsequent financing
equal to either (a) 100% of the securities offered in such subsequent financing
if the subsequent financing is for an amount no greater than the total amount
of
Units sold in this Offering or (b) 50% of the securities offered in such
subsequent financing if the subsequent financing is for an amount in excess
of
the total amount of Units sold in this Offering (the securities to be offered
to
Purchasers pursuant to this Section being referred to herein in the
“Offered
Securities”).
The
Company shall offer to sell to each Purchaser (A) such Purchaser’s pro
rata
share of
the Offered Securities (the “Basic
Amount”),
and
(B) such additional portion of the Offered Securities as such Purchaser shall
indicate it will purchase should the other Purchasers subscribe for less than
their Basic Amounts (the “Undersubscription
Amount”),
at a
price and on such other terms as shall have been specified by the Company in
writing delivered to such Purchaser (the “Offer”),
which
Offer by its terms shall remain open and irrevocable for a period of not less
than five (5) business days from such Purchaser’s receipt of the terms of the
Offer in writing (the “Offer
Period”).
13
(b) Notice
of Acceptance.
Each
Purchaser that wishes to accept the Offer shall deliver written notice thereof
(a “Notice
of Acceptance”)
to the
Company prior to the expiration of the Offer Period, specifying the amount
of
such Purchaser’s Basic Amount that the Purchaser elects to purchase and, if such
Purchaser elects to purchase all of its Basic Amount, the Undersubscription
Amount that Purchaser elects to purchase. If the aggregate of the Basic Amounts
subscribed for by all Purchasers is less than the total Offered Securities,
each
Purchaser who has indicated in its Notice of Acceptance that it wishes to
purchase Undersubscription Amounts shall be entitled to purchase all
Undersubscription Amounts it has subscribed for; provided,
however,
that if
the aggregate of the Undersubscription Amounts subscribed for exceed the
difference between the Offered Securities and the Basic Amounts subscribed
for
(the “Available
Undersubscription Amount”),
each
Purchaser who has subscribed for any Undersubscription Amount shall be entitled
to purchase only that portion of the Available Undersubscription Amount as
the
Undersubscription Amount subscribed for by such Purchaser bears to the total
Undersubscription Amounts subscribed for by all Purchasers, subject to rounding
by the Board of Directors to the extent it deems reasonably
necessary.
(c) Permitted
Sales of Refused Securities.
In the
event that Notices of Acceptance are not timely delivered by the Purchasers
in
respect of some or all of the Offered Securities, the Company shall have sixty
(60) days from the expiration of the Offer Period to close the sale of all
or
any part of such Offered Securities as to which a Notice of Acceptance has
not
been given by an Purchaser (the “Refused
Securities”)
to the
persons or entities specified in the Offer, but only upon terms and conditions,
including, without limitation, unit price and interest rates (if applicable),
which are, in the aggregate, no more favorable to such other persons or entities
or less favorable to the Company than those set forth in the Offer.
(d) Reduction
in Amount of Offered Securities.
In the
event that the Company proposes to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in paragraph
(c)
above), then each Purchaser may, at its option and in its sole and absolute
discretion, reduce the number or other units of the Offered Securities specified
in its Notice of Acceptance to an amount which shall be not less than the amount
of the Offered Securities which such Purchaser elected to purchase pursuant
to
paragraph (b) above multiplied by a fraction, (A) the numerator of which shall
be the amount of Offered Securities which the Company actually proposes to
sell,
and (B) the denominator of which shall be the amount of all Offered Securities.
In the event that any Purchaser so elects to reduce the number or amount of
Offered Securities specified in its Notice of Acceptance, the Company may not
sell or otherwise dispose of more than the reduced amount of the Offered
Securities until such securities have been offered to the Purchasers in
accordance herewith.
(e) Closing.
Upon
each closing of the purchase and sale of Offered Securities, the Purchaser
shall
purchase from the Company, and the Company shall sell to the Purchaser the
number of Offered Securities specified in the Notices of Acceptance, as reduced
pursuant to paragraph (d) above if the Purchasers have so elected, upon the
terms and conditions specified in the Offer. The purchase by the Purchasers
of
any Offered Securities is subject in all cases to the preparation, execution
and
delivery by the Company and the Purchasers of a purchase agreement relating
to
such Offered Securities on the same terms and conditions applicable to other
persons or entities purchasing the Offered Securities.
(f) Further
Sale.
In each
case, any Offered Securities not purchased by the Purchasers or other persons
or
entities in accordance herewith may not be sold or otherwise disposed of by
the
Company until they are again offered to the Purchasers under the procedures
specified herein.
14
5.6 Post-Closing
Covenants.
(a) Board
of Directors.
The
Company shall agree to take all necessary action to increase the number of
individuals serving on its board of directors such that the Company’s board of
directors shall be comprised of a majority of independent directors, as the
term
“independence” is defined in the Marketplace Rules of the Nasdaq Stock Market.
As soon as possible after the final Closing, the Company shall appoint to its
board of directors at least one independent director nominated for election
by
the Purchasers of a majority of Units subscribed for. After such initial
appointment, the Company shall seek to nominate such individual for reelection
to the board for at least two subsequent years.
(b) Securities
Laws Disclosure.
By 4:30
p.m. (New York City time) on the trading day immediately following each Closing,
the Company will issue a press release or Current Report on Form 8-K disclosing
the execution of this Agreement, the material terms of the transactions
contemplated hereby and the closing of the transactions contemplated hereby.
In
addition, the Company will make such other filings and notices in the manner
and
time required by the Commission.
(c)
Reporting
Requirements.
The
Company agrees that it will, during the period beginning on the initial Closing
date and ending on the date on which the Shares and Warrant Shares may be
publicly sold without limitation pursuant to Rule 144(k) of the Securities
Act
(i) cause its Common Stock to continue to be registered under Section 12(b)
or
12(g) of the Exchange Act, (ii) comply in all respects with its reporting and
filing obligations under the Exchange Act, and (iii) use commercially reasonable
efforts to cause its quarterly reports to be filed under the Exchange Act
without the need of filing a notice of extension for such filing.
(d)
Increase
of Authorized Capital.
The
Company shall, as soon as possible after Closing, but in any event prior to
the
effective date of the Registration Statement contemplated by the Registration
Rights Agreement, (A) obtain the approval of the requisite number of its
stockholders necessary to amend its Certificate of Incorporation to increase
the
number of authorized shares of Common Stock to 950,000,000 shares of Common
Stock, (B) comply with its obligations under the rules and regulations
established by the U.S. Securities and Exchange Commission for obtaining such
shareholder approval; and (C) file an Amendment to its Certificate of
Incorporation and have such certificate accepted for filing by the Secretary
of
State for the State of Nevada.
5.7 Other
Transactions. The
Company intends to offer to the holders of all of the Company’s currently
outstanding Class A Common Stock Purchase Warrants, an opportunity to exercise
such warrants at a reduced exercise price equal to $.01 per share, provided
such
warrant holders determine to exercise such warrants with the thirty-day period
immediately following the Company’s making of such offer. At the conclusion of
such thirty-day period, the exercise price of all unexercised Class A Warrants
will be reset to its current price of $.03 per share and will continue to be
exercisable in accordance with its terms for its stated duration.
ARTICLE
VI
MISCELLANEOUS
6.1 Survival.
The
representations and warranties set forth in Articles II and III hereof shall
survive the Closing. No investigation made by or on behalf of either party
shall
affect the representations and warranties made pursuant to this Agreement.
No
party makes any additional or implied representations other than those set
forth
herein.
6.2 Expenses.
Each
party hereto shall bear and pay all costs and expenses incurred by it in
connection with the transactions contemplated hereby, including fees and
expenses of its own brokers, finders, financial consultants, accountants and
counsel.
6.3
Entire
Agreement.
This
Agreement, including the Exhibits, contains the entire agreement and
understanding of the parties with respect to its subject matter. This Agreement
supersedes all prior arrangements and understandings between the parties, either
written or oral, with respect to its subject matter.
15
6.4 Binding
Effect of Subscription.
The
Purchaser hereby acknowledges and agrees, subject to any applicable state
securities laws that the subscription and application hereunder are irrevocable,
that the Purchaser is not entitled to cancel, terminate or revoke this Agreement
and that this Agreement shall survive the death or disability of the Purchaser
and shall be binding upon and inure to the benefit of the Purchaser and his
heirs, executors, administrators, successors, legal representatives, and
assigns. If the Purchaser is more than one person, the obligations of the
Purchaser hereunder shall be joint and several, and the agreements,
representations, warranties, and acknowledgments herein contained shall be
deemed to be made by and be binding upon each such person and his heirs,
executors, administrators, successors, legal representatives, and
assigns.
6.5 Captions.
The
table of contents and captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
6.6 Amendments;
Waivers.
No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and the
Purchasers holding a majority of the Units subscribed for in the Offering or,
in
the case of a waiver, by the party against whom enforcement of any such waiver
is sought
(in the
case of the Purchasers, such waiver shall be in writing and approved by a
majority of the Purchasers).
No
waiver of any default with respect to any provision, condition or requirement
of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right.
6.7 Notices.
Any
notice, demand or other communication which any party hereto may be required,
or
may elect, to give to anyone interested hereunder shall be sufficiently given
if
(a) deposited, postage prepaid, in a United States mail box, stamped, registered
or certified mail, return receipt requested, addressed to such address as may
be
listed on the books of the Company, or, if to the Company, the Company’s
executive office, or (b) delivered personally at such address.
6.8 Execution.
This
Agreement may be executed through the use of separate signature pages or in
any
number of counterparts, and each of such counterparts shall, or all purposes,
constitute one agreement binding on all parties, notwithstanding that all
parties are not signatories to the same counterpart.
6.9 Severability.
Each
provision of this Agreement is intended to be severable from every other
provisions, and the invalidity or illegality of any portion hereof, shall not
affect the validity or legality of the remainder hereof.
6.10 Non-Assignment.
This
Agreement is not transferable or assignable by the Purchaser except as may
be
provided herein.
6.11 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement (whether brought against a party hereto or its
respective Affiliates, employees or agents) shall be commenced exclusively
in
the state and federal courts sitting in the City of New York, Borough of
Manhattan (the “New
York Courts”).
Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of the
New
York Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any proceeding, any
claim
that it is not personally subject to the jurisdiction of any New York Court,
or
that such proceeding has been commenced in an improper or inconvenient forum.
Each party hereto hereby irrevocably waives personal
16
service
of process and consents to process being served in any such proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If either party shall commence a proceeding to enforce
any
provisions of this Agreement, then the prevailing party in such proceeding
shall
be reimbursed by the other party for its reasonable attorney’s fees and other
reasonable costs and expenses incurred with the investigation, preparation
and
prosecution of such Proceeding.
6.12 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the Company, the
Purchasers and their respective successors and permitted assigns.
Signature
page to Securities Purchase Agreement Follows
17
SIGNATURE
PAGE TO SECURITIES PURCHASE AGREEMENT
IN
WITNESS WHEREOF, the parties hereto have executed or caused this Agreement
to be
executed by their signature as natural persons or by individuals by their duly
authorized officers as of the __ day of _______, 2006.
THE
COMPANY:
NANOSENSORS,
INC.:
_______________________
By:
▇▇▇
▇▇▇▇
Chief
Executive Officer
18
EXECUTION
BY AN INDIVIDUAL
(Not
applicable to entities)
IF
YOU
ARE PURCHASING SECURITIES WITH YOUR SPOUSE, YOU MUST BOTH SIGN THIS SIGNATURE
PAGE.
PLEASE
INDICATE DESIRED TYPE OF OWNERSHIP OF SECURITIES:
[ ]
Individual
[ ]
Joint
Tenants (rights of survivorship)
[ ]
Tenants
in Common (no rights of survivorship)
I
represent that the foregoing information is true and correct.
IN
WITNESS WHEREOF, the undersigned has duly executed this Securities Purchase
Agreement and agrees to the terms hereof.
Dated:
__________________ _____2006
Subscription
Amount: $_____________
Number
of
Shares of Common Stock to be purchased: _______________
Number
of
Warrants to be purchased: ___________
_____________________________________________
(Name
of
Investor - Please Print)
_____________________________________________
(Signature)
_____________________________________________
(Name
of
co-Investor - Please Print)
_____________________________________________
(Signature
of Co-Investor)
19
PARTNERSHIP
SIGNATURE PAGE
The
undersigned PARTNERSHIP hereby represents and warrants that the person signing
this Securities
Purchase
Agreement on behalf of the PARTNERSHIP is a general partner of the PARTNERSHIP,
has been duly authorized by the PARTNERSHIP to acquire the Units and sign this
Securities
Purchase
Agreement on behalf of the PARTNERSHIP and, further, that the undersigned
PARTNERSHIP has all requisite authority to purchase such Units and enter into
the Securities
Purchase
Agreement.
IN
WITNESS WHEREOF, the undersigned has duly executed this Securities Purchase
Agreement and agrees to the terms hereof.
Dated:
__________________ _____2006
Subscription
Amount: $_____________
Number
of
Shares of Common Stock to be purchased: _______________
Number
of
Warrants to be purchased: ___________
|
_____________________________________________
|
|
|
Name
of Partnership
|
|
|
(Please
Type or Print)
|
|
|
By:
________________________________________________
|
|
|
(Signature)
|
|
|
Name:
______________________________________________
|
|
|
(Please
Type or Print)
|
|
|
Title:
______________________________________________
|
|
|
(Please
Type or Print)
|
20
CORPORATION/LIMITED
LIABILITY COMPANY SIGNATURE PAGE
The
undersigned CORPORATION or LIMITED LIABILITY COMPANY hereby represents and
warrants that the person signing this Securities
Purchase
Agreement on behalf of the CORPORATION or LIMITED LIABILITY COMPANY has been
duly authorized by all requisite action on the part of the CORPORATION or
LIMITED LIABILITY COMPANY to acquire the Units and sign this Securities
Purchase
Agreement on behalf of the CORPORATION or LIMITED LIABILITY COMPANY and,
further, that the undersigned CORPORATION or LIMITED LIABILITY COMPANY has
all
requisite authority to purchase the Units and enter into this Securities
Purchase
Agreement.
IN
WITNESS WHEREOF, the undersigned has duly executed this Securities Purchase
Agreement and agrees to the terms hereof.
Dated:
__________________ _____2006
Subscription
Amount: $_____________
Number
of
Shares of Common Stock to be purchased: _______________
Number
of
Warrants to be purchased: ___________
| _____________________________________________ | |
|
Name
of Corporation
|
|
|
Or
Limited Liability Company
|
|
|
(Please
Type or Print)
|
|
|
By:
________________________________________________
|
|
|
Signature
|
|
|
Name:
______________________________________________
|
|
|
(Please
Type or Print)
|
|
|
Title:
_______________________________________________
|
|
|
(Please
Type or Print)
|
21
TRUST/RETIREMENT
PLAN SIGNATURE PAGE
The
undersigned TRUST or RETIREMENT PLAN hereby represents and warrants that the
persons signing this Securities
Purchase
Agreement on behalf of the TRUST or RETIREMENT PLAN are duly authorized to
acquire the Units and sign this Securities
Purchase
Agreement on behalf of the TRUST or RETIREMENT PLAN and, further, that the
undersigned TRUST or RETIREMENT PLAN has all requisite authority to purchase
such Units and enter into the Securities
Purchase
Agreement.
IN
WITNESS WHEREOF, the undersigned has duly executed this Securities Purchase
Agreement and agrees to the terms hereof.
Dated:
__________________ _____2006
Subscription
Amount: $_____________
Number
of
Shares of Common Stock to be purchased: _______________
Number
of
Warrants to be purchased: ___________
| _____________________________________________ | |
|
Title
of Trust or Retirement Plan
|
|
|
(Please
Type or Print)
|
|
|
By:
________________________________________________
|
|
|
Signature
of Trustee or
|
|
|
Authorized
Signatory
|
|
|
Name
of Trustee:
______________________________________
|
|
|
(Please
Type or Print)
|
|
|
By:
________________________________________________
|
|
|
Signature
of Co-Trustee if applicable
|
|
|
Name
of Co-Trustee:
___________________________________
|
|
|
(Please
Type or Print)
|
22