Exhibit No. 10.7 Blackhawk Capital Group BDC, Inc. Subscription Agreement and purchaser questionnaire
Exhibit
No. 10.7
Blackhawk
Capital Group BDC, Inc.
and purchaser
questionnaire
THIS
SUBSCRIPTION AGREEMENT, made as of this 12th day of
February 2009, by and between Blackhawk Capital Group BDC, Inc., a Delaware
corporation (the "Company"), with its address at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and EquitySmith, Inc., ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Purchaser").
NOW,
THEREFORE, in consideration of the mutual promises contained herein, and each
intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE
I – PURCHASE OF THE COMMON STOCK
Section
1.1 Purchase and Sale of
Common Stock. The Company agrees to issue, sell and deliver to
the Purchaser and the Purchaser agrees to purchase and accept from the Company,
One Million Six Hundred Thousand (1,600,000) shares of Common Stock, par value
$0.00001 per share, of the Company (the "Shares") at $5.00 per Share, for an
aggregate price of Eight Million Dollars ($8,000,000) (the "Purchase
Price").
ARTICLE
II – REPRESENTATIONS AND WARRANTIES; COVENANTS
Section
2.1 Company Representations and
Warranties. The Company represents and warrants to the
Purchaser as follows:
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(a)
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Incorporation. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of
Delaware.
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(b)
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Capitalization. The
authorized capital stock of the Company is 1,000,000,000 shares of Common
Stock ("Common Stock"), par value $0.00001 per Share. There are
no authorized or outstanding shares of preferred stock. As of
January 5, 2009, there are 32,467,484 shares of Common Stock issued and
outstanding.
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(c)
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Shares. The
Shares, when issued, sold, and delivered in accordance with the terms of
this Agreement, will be duly and validly issued, fully paid, and
nonassessable. All corporate action required to be taken by or
on behalf of the Company to authorize the Company to enter into and carry
out this Agreement, and for the authorization, issuance and delivery of
the Shares has been duly and properly
taken.
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(d)
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Private Placement
Memorandum. Except as set forth below and in the
Company's Confidential Private Placement Memorandum dated January 15, 2009
("Private Placement Memorandum"), neither the Company nor any of its
agents or representatives has made any agreements or taken any actions
which may cause anyone to be entitled to a commission or a finder's fee as
a result of the execution, delivery or performance of this Agreement or
consummation of the transactions contemplated
hereby.
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(e)
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Securities Act of
1933. Based in material part upon the representations
herein of the Purchaser, the Company has complied and will comply with all
applicable federal and state securities laws in connection with the offer,
issuance and sale of the Shares hereunder. Neither the Company
nor anyone acting on its behalf, directly or indirectly, has or will sell,
offer to sell or solicit offers to buy any of the Shares or similar
securities to, or solicit offers with respect thereto from, or enter into
any negotiations relating thereto with, any person, or has taken or will
take any action so as to bring the issuance and sale of any of the Shares
under the registration provisions of the Securities Act and applicable
state securities laws, and neither the Company nor any of its affiliates,
nor any person acting on its or their behalf, has engaged in an form of
general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or
sale of any of the Shares.
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(f)
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Proceeds. The
Company shall use the net proceeds of the Purchase Price to be received
from Purchaser as specified in "Use of Proceeds" in the Private Placement
Memorandum.
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(g)
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No
Litigation. To the knowledge of the Company, there is no
litigation or proceeding or investigation pending or threatened against
the Company in any federal, state or local court, or before any
administrative agency or arbitrator, or before any other tribunal duly
authorized to resolve disputes, which seeks to enjoin or prohibit, or
otherwise questions the validity of, the sale of Shares under this
Agreement. The Company completed a rescission offer with the
purchasers of its Common Stock in the Company's Regulation E offering
under the Securities Act that was conducted in 2004 and 2005 because
certain State filings were not made when that offering was
conducted. The rescission offer is described in the Private
Placement Memorandum.
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(h)
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Placement
Agents. Except for ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ Associates, Inc.
("JWL") and EquitySmith, Inc. ("ESI"), pursuant to the terms of a
placement agent agreement dated January 16, 2009 between the Company, JWL,
and ESI ("Placement Agent Agreement"), the Company has not employed any
broker or finder or incurred any liability for any brokerage, placement,
commissions, finders' fees, advisory fees or other similar fees in
connection with the sale of Shares.
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Section
2.2 Purchaser
Warranties. The Purchaser represents and warrants to the
Company as follows:
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(a)
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Organization and
Standing of the Purchaser. Purchaser is a corporation,
limited liability company or partnership duly incorporated or organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation or
organization.
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(b)
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Authorization and
Power. Purchaser has the requisite power and authority
to enter into and perform this Agreement and to purchase Shares being sold
to it hereunder. The execution, delivery and performance of
this Agreement by Purchaser and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate
or partnership action, and no further consent or authorization of
Purchaser or its Board of Directors, stockholders, or partners, as the
case may be, is required. When executed and delivered by the
Purchaser, this Agreement shall constitute the valid and binding
obligation of Purchaser enforceable against Purchaser in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general
application.
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(c)
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No
Conflict. The execution, delivery and performance of
this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated thereby and hereby do not and will not (i)
violate any provision of the Purchaser's charter or organization
documents, (ii) conflict with, or constitute a default (or an event which
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 of, any agreement, mortgage, deed of trust, indenture, note,
bond, license, lease agreement, instrument or obligation to which the
Purchaser is a party or by which the Purchaser's properties or assets are
bound, or (iii) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations) applicable to the
Purchaser or by which any property or asset of the Purchaser are bound or
affected, except, in all cases, other than violations pursuant to clauses
(i) or (iii) (with respect to federal and state securities laws) above,
except, for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or
in the aggregate, materially and adversely affect the Purchaser's ability
to perform its obligations under this
Agreement.
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(d)
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Acquisition for
Investment. Purchaser is purchasing the Shares solely
for its own account and not with a view to or for sale in connection with
distribution. Purchaser does not have a present intention to
sell any of the Shares, nor a present arrangement (whether or not legally
binding) or intention to effect any distribution of any of the Shares to
or through any person or entity; provided, however, that
by making the representations herein, Purchaser does not agree to hold the
Shares for any minimum or other specific term and reserves the right to
dispose of the Shares at any time in accordance with Federal and state
securities laws applicable to such disposition. Purchaser
acknowledges that it (i) has such knowledge and experience in financial
and business matters such that Purchaser is capable of evaluating the
merits and risks of Purchaser's investment in the Company, (ii) is able to
bear the financial risks associated with an investment in the Shares and
(iii) has been given full access to such records of the Company and the
Subsidiaries and to the officers of the Company and the Subsidiaries as it
has deemed necessary or appropriate to conduct its due diligence
investigation.
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(e)
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Rule 144A; Rule
144. Each Purchaser understands that the Shares must be
held indefinitely unless such Shares are registered under the Securities
Act or an exemption from registration is available. Purchaser
acknowledges that it is familiar with Rules 144A and 144 of the rules and
regulations of the Commission, as amended, promulgated pursuant to the
Securities Act ("Rules"), and that Purchaser has been advised that the
Rules permit resales only under certain
circumstances. Purchaser understands that to the extent that
Rule 144A or 144 is not available, Purchaser will be unable to sell any
Shares without either registration under the Securities Act or the
existence of another exemption from such registration
requirement.
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(f)
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General. Purchaser
understands that the Shares are being offered and sold in reliance on a
transactional exemption from the registration requirements of federal and
state securities laws and the Company is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgements
and understandings of Purchaser set forth herein in order to determine the
applicability of such exemptions and the suitability of Purchaser to
acquire the Shares. Purchaser understands that no United States
federal or state agency or any government or governmental agency has
passed upon or made any recommendation or endorsement of the
Shares.
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(g)
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No General
Solicitation. Purchaser acknowledges that the Shares
were not offered to Purchaser by means of any form of general or public
solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement,
article, notice or other communication published in any newspaper,
magazine, or similar media, or broadcast over television or radio, or (ii)
any seminar or meeting to which Purchaser was invited by any of the
foregoing means of communications. Purchaser, in making the
decision to purchase the Shares, has relied upon independent investigation
made by it and has not relied on any information or representations made
by third parties.
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(h)
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Accredited Investor;
Qualified Institutional Investor. Purchaser is an
"accredited investor" (as defined in Rule 501 of Regulation D), and a
"qualified institutional buyer" ("QIB") as defined under Rule 144A of the
Securities Act, and Purchaser has such experience in business and
financial matters that it is capable of evaluating the merits and risks of
an investment in the Shares. Purchaser acknowledges that an
investment in the Shares is speculative and involves a high degree of
risk.
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(i)
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Certain
Fees. Purchaser has not employed any broker or finder or
incurred any liability for any brokerage or investment banking fees,
placement, commissions, finders' structuring fees, financial advisory fees
or other similar fees in connection with this
Agreement.
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(j)
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No
Shorting. Purchaser has not engaged in any short sales
of any shares of Common Stock of the Company or instructed any third
parties to engage in any short sales of securities of the Company on its
behalf prior to the closing date. Purchaser covenants and
agrees that at closing it will not be in a net short position with respect
to the shares of Common Stock.
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(k)
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Information;
Risks. The Purchaser has
had an opportunity to discuss the Company’s business, management, and
financial affairs with management of the Company and has been supplied
with all documents, records, financial statements, books and other
information which the Purchaser has requested pertaining to the Company
and its activities and an investment in the Company, including but not
limited to the Private Placement Memorandum, a copy of which is attached
hereto as Exhibit
A and incorporated herein. The Purchaser has evaluated
and understands the risks of (including, but not limited to, the Risk
Factors described in the Private Placement Memorandum), and other
considerations relating to, a purchase of the Shares. The
Purchaser has been afforded the opportunity to obtain any additional
information necessary to verify the accuracy of any representations of the
Company made herein or information provided to the
Purchaser. The Purchaser confirms that, in making its, decision
to invest in the Shares, it has relied upon its own independent
investigation or that made by its agents, representatives and professional
advisors, and it and such agents, representatives and professional
advisors have been given the opportunity to ask questions of, and to
receive answers from, persons acting on behalf of the Company concerning
the Company and its activities and all other matters relating to the
operation of the Company and this investment. The Purchaser has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the investment represented
by the Shares, and it is able to bear the economic risk of such investment
including, without limitation, the risk that such investment might be held
indefinitely by it and the risk of complete loss of the
investment. The Purchaser has adequate net worth to sustain a
complete loss of its investment in the Company and has no need for
liquidity in its investment.
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(l)
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Qualified
Institutional Buyer ("QIB") Under Rule
144A.
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o The Purchaser is a
"qualified institutional buyer" ("QIB") under Rule 144A of the Securities Act
and owns and invests on a discretionary basis at least $100 million in
securities of issuers that are not affiliated with the Purchaser and Purchaser
is the following Rule 144A entity: ______________________________________ [fill
in Rule 144A entity type.]
o Purchaser shall deliver
to the Company a certification (signed by its chief financial officer or other
executive officer) specifying the amount of securities owned and invested no a
discretionary basis by Purchaser as of January ___, 2009.
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(m)
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Accredited
Investor. [Fill in if applicable.] The
Purchaser confirms that it is an Accredited Investor, as defined in Rule
501 of the Securities Act, by reason of meeting any one of the following
conditions (please initial each paragraph that is
applicable):
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(i)
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is
a natural person whose individual net worth, or joint net worth with his
or her spouse, as of the date of the purchase hereunder, exceeds
$1,000,000;
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______
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(ii)
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is
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 his or her spouse
in excess of $300,000 in each of the two most recent years and has a
reasonable expectation of reaching the same income level in the current
year;
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______
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(iii)
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is
(a) a bank, as defined in Section 3 (a)(2) of the Securities Act, or a
savings and loan association or other institution, as defined in Section 3
(a)(5)(A) of the Securities Act, whether acting in its individual or
fiduciary capacity; (b) a broker dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended; (c) an
insurance company as defined in Section 2 (a)(13) of the Securities
Act; (d) an investment company registered under the Investment Company Act
of 1940 or a business development company as defined in Section 2
(a)(48) of the Investment Company Act of 1940; (e) 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; (f) a plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has
total assets in excess of US $5,000,000; or (g) an employee benefit
plan within the meaning of Title I of the U.S. Employee
Retirement Income Security Act of 1974, 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 US $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited
investors;
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(iv)
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is
a private business development company as defined in Section 202
(a)(22) of the U.S. Investment Advisors Act of 1940, as
amended;
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(v)
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is
an organization described in Section 501 (c)(3) of the U.S. Internal
Revenue Code, or a corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the
Shares offered, with total assets of
US $5,000,000;
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(vi)
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is
a director or executive officer of the
Company;
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(vii)
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is
a trust with total assets in excess of US $5,000,000, not formed for
the specific purpose of acquiring the Shares offered, whose purchase is
directed by a person who, either alone or together with its, his or her
purchaser representative(s), has such knowledge and experience in
financial and business matters that such person is capable of evaluating
the merits and risks of the prospective
investment;
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(viii)
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is
an entity (i.e., partnership, corporation, unincorporated association or
trust) in which all of the equity owners qualify individually as
Accredited Investors under the paragraphs set forth above. An
entity can qualify under this paragraph even if newly formed for the
purpose of investing in the
Company.
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X
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(n)
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The
Purchaser understands that the Company is relying on the truth and
accuracy of the representations, covenants, and warranties herein made by
the Purchaser in offering the Shares to the Purchaser without having first
registered the Shares under the Securities Act or other applicable
securities laws.
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(o)
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Neither
the Purchaser nor any of its agents or representatives has made any
agreements or taken any actions, which may cause anyone to be entitled to
a commission or a finder's or broker’s fee as a result of the execution,
delivery or performance of this Agreement or consummation of the
transactions contemplated hereby.
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ARTICLE
III - CERTIFICATE LEGEND
Section
3.1 Legend. The
certificate representing the Shares shall be stamped or otherwise imprinted with
a legend substantially in the following form (in addition to any legend required
by applicable state securities or "blue sky" laws):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR BLACKHAWK SHALL HAVE RECEIVED AN OPINION OF COUNSEL
THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
ARTICLE
IV – CONDITIONS
Section
4.1 Conditions of
Company’s Obligations. The obligations of the Company
hereunder are subject to the receipt of the Purchase Price and the Purchaser’s
execution of this Subscription Agreement. The Company reserves the
right to reject any part or all of this subscription prior to its execution of
this Agreement.
ARTICLE
V – MISCELLANEOUS
Section
5.1 Fees and
Expenses. Each party shall bear and be solely responsible for
those costs and expenses incurred by such party in connection with the
transactions contemplated hereby, including such costs, fees, commissions and
expenses of accountants, attorneys, and others retained by such
party.
Section
5.2 Survival. The
representations and warranties of the parties contained herein shall survive the
execution and delivery of this Agreement and the issuance and sale of the Shares
hereunder.
Section
5.3 Indemnification. The
Purchaser hereby indemnifies and holds harmless the Company, its directors,
officers and representatives from and against any and all losses, liabilities,
claims, damages and expenses whatsoever (including, but not limited to, any and
all expenses whatsoever reasonably incurred) arising out of or based upon any
false representation or warranty or breach or failure by the Purchaser to comply
with any covenant or agreement made by the Purchaser.
Section
5.4 Notices. All
notices, requests, approvals, demands and other communications required or
permitted to be given in connection with this Agreement shall be in writing and
shall be deemed to have been duly given: upon receipt, if personally delivered
or sent by facsimile transmission; one (1) business day after sending, if
sent by overnight delivery service; or two (2) business days after mailing,
if mailed by certified mail with return receipt requested, postage prepaid; and
in each case to such party at the following address:
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(a)
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If
to the Company:
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▇▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
and Chief Executive Officer
Blackhawk
Capital Group BDC, Inc.
▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(▇▇▇)
▇▇▇-▇▇▇▇
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(b)
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If
to the Purchaser:
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▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇.
President
& Chief Executive Officer
EquitySmith,
Inc.
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇)
▇▇▇-▇▇▇▇
Section
5.5 Amendments. This
Agreement may not be amended except by a written agreement signed by both
parties hereto.
Section
5.6 Assignment; Binding
Effect. This Agreement may not be assigned by either party
without the prior written consent of the other party. The provisions
of this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
Section
5.7 Severability. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of the remaining provisions of this
Agreement.
Section
5.8 Entire
Agreement. This Agreement and the documents incorporated by
reference herein constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior and contemporaneous
agreements, discussions or negotiations, whether written or oral.
Section
5.9 Governing Law;
Forum. This Agreement shall be construed in accordance with
and governed by the laws of the State of New York without regard to principles
of conflicts of laws. The parties agree that any claim regarding the
sale of Shares and this Agreement shall be brought in a state or federal court
in the State of New York, County of New York, and each party consents to such
court having jurisdiction.
Section
5.10 No Third Party
Rights. This Agreement is not intended and shall not be
construed to create any rights in any persons or entities other than the Company
and the Purchaser and no person or entity shall assert or be entitled to assert
any rights as third party beneficiary hereunder.
Section
5.11 Counterparts. This
Agreement may be signed in any number of counterparts, each of which shall be an
original but all of which together shall constitute but one
agreement.
Section
5.12 Waiver. The failure
or delay on the part of either party to exercise any right, power, or privilege
herein, shall not constitute a waiver thereof. No waiver shall be
effective unless in writing.
Section
5.13 Headings. The
headings and captions in this Agreement are for convenience only and are not a
part of this Agreement.
Section
5.14 Interpretation. Neither
this Agreement nor any provision contained herein shall be interpreted for or
against either party solely because that party or that party’s legal
representative drafted the provision.
(THIS
PAGE INTENTIONALLY LEFT BLANK)
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
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BLACKHAWK
CAPITAL
GROUP
BDC, INC.
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By:
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/s/ ▇▇▇▇▇
▇. ▇▇▇▇▇▇
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▇▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
and Chief
Executive
Officer
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EquitySmith,
Inc.
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By:
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/s/ ▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇.
President
& Chief Executive Officer
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EXHIBIT
A
CONFIDENTIAL PRIVATE
PLACEMENT MEMORANDUM