PRIORITY SOFTWARE, INC.
Exhibit
10.5
PRIORITY
SOFTWARE, INC.
INVESTORSUBSCRIPTION
AGREEMENT (the "Subscription Agreement") dated November __, 2006,
between PRORITY SOFTWARE, INC., a Nevada corporation (the
"Company") and the person or persons executing this Agreement on the last page
(the "Subscriber"). All documents mentioned herein are incorporated
by reference.
1.
Description of the Offering. This Subscription
Agreement is for units (the “Units”) comprised of a 10% Convertible Debenture
(the “Debenture”) and warrants (the “Warrants”) to purchase shares of the
Company’s common stock, par value $.001 per share (the “Common
Stock”). This Offering (the “Offering”) is made only to accredited
investors who qualify as accredited investors pursuant to the suitability
standards for investors described under Regulation D of the Securities Act
of
1933, as amended (the “Securities Act”) and who have no need for liquidity in
their investments. The Offering is for an investment of $100,000.00.
However, the Company reserves the right, in its sole discretion, to accept
fractional subscriptions. Prior to this Offering there was no public
market for the Debenture, the Warrants or the Common Stock, and no assurance
can
be given that a market will develop for the Debentures, or the, the Warrants
or
Common Stock, if developed, that it will be maintained so that any subscribers
in this Offering may avail any benefit from the same.
THE
SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND
SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF ANY STATE, OR OTHER
JURISDICTION AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE SECURITIES
MAY NOT BE TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR ASSIGNED EXCEPT AS
PERMITTED UNDER SUCH ACT OR SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.
2. Terms
of the Subscription. This Offering is made in
connection with a Confidential Offering Memorandum (the “Memorandum”) which is
incorporated by reference and made a part of this Subscription
Agreement. The subscription is for units (the “Units”)
comprised of a 10% Convertible Debenture and Warrants to purchase shares of
the
Company's Common Stock. The Debenture (the form of which is attached
to the Memorandum as Exhibit “A”) shall be repaid five (5) years after the date
of issuance (the “Maturity Date”). The “Debenture shall bear interest
at the rate of ten percent (10%) per annum and shall be repaid quarterly,
commencing with the quarter ending March 30, 2007, in amount of shares of Common
Stock equal to the amount of interest owed to the Holder, divided by the
Conversion Price of $1.00, subject to adjustment. The Warrants (a
form of which is attached to the Memorandum as Exhibit "B") may be exercised
immediately upon issuance to purchase shares of the Company’s Common Stock as
follows: 20,000 shares at a price of $2.00 per share; 20,000 shares
of a price of $3.00 per share; and 20,000 shares at a price of $4.00 per share,
subject to adjustment.
3.
Other Terms of the Offering. The execution
of this
Subscription Agreement shall constitute an offer by the Subscriber to subscribe
for the Debenture and the Warrants in the amount and on the terms specified
herein. The Subscriber must also complete and execute the Subscriber
Questionnaire attached hereto. The Company reserves the right, in its
sole discretion, to reject in whole or in part, any subscription
offer. If the Subscriber's offer is accepted, the Company will
execute a copy of this Subscription Agreement and return it to
Subscriber. The Company may, at its sole discretion, accept
fractional subscriptions.
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4. Subscription
Payment. Subscription for the Unit requires a total cash
investment of $100,000.00. The subscription price will be payable in
full upon acceptance of the subscription. The Company reserves the
right to accept fractional subscriptions.
5. The
Company's
Representations and Warranties. The Company hereby represents and
warrants as follows:
(a) The
Company is a corporation duly formed and in good standing under the laws of
the
State of Nevada with full power and authority to conduct its business as
presently contemplated;
(b) The
Company warrants and covenants that there are no material misstatements or
omissions in this Subscription Agreement or any information provided of the
Offering documents herein; and
(c) The
Company has the power to execute, deliver and perform this Subscription
Agreement and any other agreement contemplated herein;
6. Subscriber's
Representations, Warranties and Covenants. The undersigned
understands and acknowledges that the Debenture, the Warrants and the Common
Stock underlying same subscribed for herein (the “Securities”) are being offered
and sold under one or more of the exemptions from registration provided for
in
Section 3(b), 4(2) and 4(6) of the Securities Act including, Regulation D
promulgated thereunder, that the undersigned acknowledges that the Securities
are being purchased without the undersigned being offered or furnished any
offering literature, prospectus or other material, financial or otherwise,
and
that this action has not been scrutinized by the United States Securities and
Exchange Commission or by any regulatory authority charged with the
administration of the securities laws of any state. The undersigned
hereby further represents and warrants as follows:
(a) The
undersigned confirms that he understands and has fully considered, for purposes
of this investment, the risks of an investment in the Securities and understands
that: (i) this investment is suitable only for an investor who is
able to bear the economic consequences or losing his entire investment, (ii)
the
purchase of the Securities is a speculative investment which involves a high
degree of risk of loss by the undersigned of his entire investment, and (iii)
that there will be no public market for the Securities and the Common Stock
thereunder and accordingly, it may not be possible for the undersigned to
liquidate an investment in the Securities in case of an emergency.
(b) The
Subscriber is an
"Accredited Investor" as defined in Rule 501(a) of Regulation D under the
Securities Act. This representation is based on the fact that the
Subscriber, inter alia, is an accredited individual who, together with the
Subscriber’s spouse, have a net worth of at least $1,000,000 or the Subscriber,
individually, has had net income of not less than $200,000 during the last
two
years, and reasonably anticipates that the Subscriber will have an income of
at
least $200,000 during the present year and the next year;
(c) If
the Subscriber is a
corporation, partnership, trust or any unincorporated association: (i) the
person executing this Subscription Agreement does so with full right, power
and
authority to make this investment; (ii) that such entity was not formed for
the
specific purpose of making an investment in the Company; and (iii) that all
further representations and warranties made herein are true and correct with
respect to such corporation, partnership, trust and unincorporated
association;
(d) The
address set forth below
is the Subscriber's true and correct residence or place of business, and the
Subscriber has no present intention of becoming a resident of any other state
or
jurisdiction;
2
(e) The
Subscriber
understands and agrees that the Company prohibits the investment of funds by
any
persons or entities that are acting, directly or indirectly, (i) in
contravention of any U.S. or international laws and regulations, including
anti-money laundering regulations or conventions, (ii) on behalf of terrorists
or terrorist organizations, including those persons or entities that are
included on the List of Specially Designated Nationals and Blocked Persons
maintained by the U.S. Treasury Department's Office of Foreign Assets
Control1 ("OFAC"), as such list may be amended from time to time,
(iii) for a senior foreign political figure, any member of a senior foreign
political figure’s immediate family or any close associate of a senior foreign
political figure2, unless the Company, after being specifically
notified by the Subscriber in writing that it is such a person, conducts further
due diligence, and determines that such investment shall be permitted, or (iv)
for a foreign shell bank3 (such persons or entities in (i) – (iv) are
collectively referred to as "Prohibited Persons").
(f) The
Subscriber represents, warrants and covenants that: (i) it is not, nor is any
person or entity controlling, controlled by or under common control with the
Subscriber, a Prohibited Person, and (ii) to the extent the Subscriber has
any
beneficial owners4, (a) it has carried out thorough due diligence to
establish the identities of such beneficial owners, (b) based on such due
diligence, the Subscriber reasonably believes that no such beneficial owners
are
Prohibited Persons, (c) it holds the evidence of such identities and status
and
will maintain all such evidence for at least five years from the date of the
Subscriber's complete withdrawal from the Company, and (d) it will make
available such information and any additional information requested by the
Company that is required under applicable regulations.
(g) If
any of the foregoing representations, warranties or covenants cease to be true
or if the Company no longer reasonably believes that it has satisfactory
evidence as to their truth, notwithstanding any other agreement to the contrary,
the Company may, in accordance with applicable regulations, freeze the
Subscriber's investment, either by prohibiting additional investments, declining
or suspending any withdrawal requests and/or segregating the assets constituting
the investment, or the Subscriber's investment may immediately be involuntarily
withdrawn by the Company, and the Company may also be required to report such
action and to disclose the Subscriber's identity to OFAC or other
authority. In the event that the Company is required to take any of
the foregoing actions, the Subscriber understands and agrees that it shall
have
no claim against the Company, and its respective affiliates, directors, members,
partners, shareholders, officers, employees and agents for any form of damages
as a result of any of the aforementioned actions.
1 The
OFAC list may be accessed on the web at ▇▇▇▇://▇▇▇.▇▇▇▇▇.▇▇▇/▇▇▇▇.
2 Senior
foreign political figure means a senior official in the executive, legislative,
administrative, military or judicial branches of a foreign government (whether
elected or not), a senior official of a major foreign political party, or a
senior executive of a foreign government-owned corporation. In
addition, a senior foreign political figure includes any corporation, business
or other entity that has been formed by, or for the benefit of, a senior foreign
political figure. The immediate family of a senior foreign political
figure typically includes the political figure’s parents, siblings, spouse,
children and in-laws. A close associate of a senior foreign political
figure is a person who is widely and publicly known internationally to maintain
an unusually close relationship with the senior foreign political figure, and
includes a person who is in a position to conduct substantial domestic and
international financial transactions on behalf of the senior foreign political
figure.
3 Foreign
shell bank means a foreign bank without a physical presence in any country,
but
does not include a regulated affiliate. A post office box or
electronic address would not be considered a physical presence. A
regulated affiliate means a foreign shell bank that: (1) is an affiliate of
a
depository institution, credit union, or foreign bank that maintains a physical
presence in the United States or a foreign country, as applicable; and (2)
is
subject to supervision by a banking authority in the country regulating such
affiliated depository institution, credit union, or foreign bank.
4 Beneficial
owners will include, but not be limited to: (i) shareholders of a corporation;
(ii) partners of a partnership; (iii) members of a limited liability company;
(iv) investors in a fund-of-funds; (v) the grantor of a revocable or grantor
trust; (vi) the beneficiaries of an irrevocable trust; (vii) the individual
who
established an ▇▇▇; (viii) the participant in a self-directed pension plan;
(ix)
the sponsor of any other pension plan; and (x) any person being represented
by
the Subscriber in an agent, representative, intermediary, nominee or similar
capacity. If the beneficial owner is itself an entity, the
information and representations set forth herein must also be given with respect
to its individual beneficial owners. If the Subscriber is a
publicly-traded company, it need not conduct due diligence as to its beneficial
owners.
3
(h) The
Subscriber agrees to indemnify and hold harmless the Company, its respective
affiliates, directors, members, partners, shareholders, officers, employees
and
agents from and against any and all losses, liabilities, damages, penalties,
costs, fees and expenses (including legal fees and disbursements) which may
result, directly or indirectly, from any inaccuracy in or breach of any
representation, warranty, covenant or agreement set forth in this
Agreement.
(i) The
Subscriber has received
and read or reviewed, is familiar with and fully understands the documents
furnished by the Company. The Subscriber also fully understands this
Subscription Agreement and the risks associated with this interest and confirms
that all documents, records and books pertaining to the Subscriber’s investment
in the Securities and requested by the Subscriber have been made available
or
delivered to the Subscriber by the Company;
(j) The
Subscriber has had an
opportunity to ask questions of and receive answers from, the Company or a
person or persons acting on its behalf, concerning the terms and conditions
of
this investment and confirms that all documents, records and books pertaining
to
the investment in the Securities and requested by the Subscriber has been made
available or delivered to the Subscriber;
(k) The
Subscriber will be
acquiring the Securities, and the shares of Common Stock underlying the
Securities, solely for the Subscriber's own account, for investment and not
with
a view toward the resale, distribution, subdivision or fractionalization
thereof; and the Subscriber has no present plans to enter into any such
contract, undertaking, agreement or arrangement;
(l) The
Subscriber acknowledges
and understands that prior to this Offering there was no public market for
the
Securities and no assurance can be given that a public market will develop
for
the Securities offered hereby, or if developed, that it will be maintained
so
that any subscribers in this Offering may avail any benefit from the
same;
(m) The
Subscriber's compliance
with the terms and conditions of this Subscription Agreement will not conflict
with any instrument or agreement pertaining to the Securities or the
transactions contemplated herein; and will not conflict in, result in a breach
of, or constitute a default under any instrument to which the Subscriber is
a
party;
(n) The
Subscriber will seek
its own legal, tax and investment advice concerning tax implications attendant
upon the purchase of the Securities and understands and accepts that the Company
is relying upon this representation insofar as disclosure of tax matters is
concerned;
(o) The
Subscriber hereby
acknowledges and represents that the Subscriber is aware of the information
set
forth in this document and in any exhibits attached hereto; and
(p) The
foregoing
representations and warranties are true and accurate as of the date hereof
and
shall be true and accurate as of the date of delivery of the subscription to
the
Company and shall survive such delivery. If, in any respect, such
representations and warranties shall not be true and accurate, the Subscriber
shall give written notice of such fact to the Company, specifying which
representations and warranties are not true and accurate and the reasons
therefor.
7. Risk
Factors. THE SUBSCRIBER ACKNOWLEDGES THAT THERE ARE SIGNIFICANT RISKS
ASSOCIATED WITH THE PURCHASE OF THE UNITS AND THAT SUCH SECURITIES ARE HIGHLY
SPECULATIVE AND SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT AFFORD A TOTAL
LOSS
OF HIS OR HER ENTIRE INVESTMENT. The Subscriber represents and warrants
that he or she has carefully considered and reviewed the risk factors set forth
in the Memorandum which are hereby incorporated by reference in reaching a
determination to purchase the Securities:
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8. Responsibility. The
Company or its officers and directors shall not be liable, responsible or
accountable for damages or otherwise to any Subscriber for any act or omission
performed or omitted by them in good faith and in a manner reasonably believed
by them to be within the scope of the authority granted to them by this
Subscription Agreement and in the best interests of the Company, provided they
were not guilty of gross negligence, willful or wanton misconduct, fraud, bad
faith or any other breach of fiduciary duty with respect to such acts or
omissions.
9. Miscellaneous.
(a) The
Company and the
Subscriber hereby covenant that this Subscription Agreement is intended to
and
does contain and embody herein all of the understandings and agreements, both
written or oral, of the Company and the Subscriber with respect to the subject
matter of this Subscription Agreement, and that there exists no oral agreement
or understanding, express or implied liability, whereby the absolute, final
and
unconditional character and nature of this Subscription Agreement shall be
in
any way invalidated, empowered or affected. There are no
representations, warranties or covenants other than those set forth
herein.
(b) The
headings of this
Subscription Agreement are for convenient reference only and they shall not
limit or otherwise affect the interpretation or effect of any terms or
provisions hereof.
(c) This
Subscription Agreement
shall not be changed or terminated except as set forth herein. All of
the terms and provisions of this Subscription Agreement shall be binding upon
and inure to the benefit of and be enforceable by and against the successors
and
assigns of the Company and the heirs, executors, administrators and assigns
of
the Subscriber.
(d) A
modification or waiver of
any of the provisions of this Subscription Agreement shall be effective only
if
made in writing and executed with the same formality as this Subscription
Agreement. The failure of either the Company or the Subscriber to
insist upon strict performance of any of the provisions of this Subscription
Agreement shall not be construed as a waiver of any subsequent default of the
same or similar nature, or of any other nature or kind.
(e) The
various provisions of
this Subscription Agreement are severable from each other and from the other
provisions of this Agreement, and in the event that any provision in this
Subscription Agreement shall be held invalid or unenforceable by a court of
competent jurisdiction, the remainder of this Subscription Agreement shall
be
fully effective, operative and enforceable.
(f) Pronouns
used herein are to
be interpreted as referring to both the masculine and feminine
gender.
(g) This
Subscription Agreement
shall be construed and interpreted in accordance with the laws of the State
of
Nevada without reference to conflict of laws principle. The parties
agree that in the event of a laws controversy arising out of the interpretation,
construction, performance or breach of this Subscription Agreement, any and
all
claims arising out of, or relating to, this Subscription Agreement shall be
submitted by arbitration according to the Commercial Arbitration Rules of the
American Arbitration Association located in New York City before a single
arbitrator. Notwithstanding the prior sentence, any other action
commenced by either party herein shall be venued in the appropriate court of
competent jurisdiction located in the county of New York, State of New
York.
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(h) This
Subscription Agreement
may be executed in one or more counterparts each of which shall be deemed an
original and all of which together shall be deemed to be one and the same
instrument.
THE
SUBSCRIBER ACKNOWLEDGES THAT,
EXCEPT AS SET FORTH IN THIS AGREEMENT, NO REPRESENTATIONS OR WARRANTIES HAVE
BEEN MADE TO IT, OR TO ITS ADVISORS, BY THE COMPANY, OR BY ANY PERSON ACTING
ON
BEHALF OF THE COMPANY, WITH RESPECT TO THE INTERESTS, THE PROPOSED BUSINESS
OF
THE COMPANY, THE DEDUCTIBILITY OF ANY ITEM FOR TAX PURPOSES, AND/OR THE
ECONOMIC, TAX, OR ANY OTHER ASPECTS OR CONSEQUENCES OF A PURCHASE OF AN INTEREST
AND/OR ANY INVESTMENT IN THE COMPANY, AND THAT IT HAS NOT RELIED UPON ANY
INFORMATION CONCERNING THE OFFERING, WRITTEN OR ORAL, OTHER THAN THAT CONTAINED
IN THIS AGREEMENT.
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SIGNATURE
PAGE
The
Subscriber hereby offers to purchase and subscribe to a Unit encloses payment
of
$100,000 for an aggregate investment of $100,000.
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Signature
of Subscriber
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Name
of Subscriber
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and
Title of Authorized Signatory
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(If
Applicable)
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(Print)
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(▇▇▇▇▇)
▇▇▇▇, ▇▇▇▇▇ and Zip Code
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Social
Security/Taxpayer I.D. Number:
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AGREED
TO AND ACCEPTED:
As
of
___________, 2006
PRIORITY
SOFTWARE, INC.
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By:
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▇▇▇
▇▇▇▇▇▇▇▇▇, Chief Executive Officer
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COMPLETE
“SUBSCRIBER QUESTIONNAIRE” BELOW;
PROVIDE
REQUISITE ADDITIONAL INFORMATION
SUBSCRIBER
QUESTIONNAIRE
PERSONAL
DATA.
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Full
Name
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Residence
Telephone (Area Code Number)
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Business
Telephone (Area Code Number)
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Residence
or Principal Address (Street/City/State/Zip Code)
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Birth
Date
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Mailing
Address (if other than residence)
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Citizenship
(U.S./Other)
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Marital
Status
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Social
Security/Taxpayer I.D. Number
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Spouse’s
Full Name
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E-mail
Address
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Spouse’s
Social Security Number
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Facsimile
Number (Area Code/Number)
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ACCREDITED
INVESTOR. If Subscriber (or the entity on behalf of which
Subscriber is acting) is an “accredited investor” as that term is defined in
Rule 501(a) of Regulation D promulgated under the Act, and, as such, falls
within at least one of the following categories, then please
INITIAL each applicable
category.
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______
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(a)
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A
bank or savings and loan association or other institution (acting
either
in an individual or fiduciary capacity), registered broker-dealer,
insurance company, registered investment company, or business development
company, or licensed “small business investment company,” or an employee
benefit plan which either is represented in a fiduciary capacity
by a
bank, savings and loan association, insurance company or registered
investment advisor, has total assets in excess of $5,000,000 or is
self-directed and the plan’s business investments are made solely by
accredited investors.
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____
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(b)
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A
trust (i) with total assets in excess of $5,000,000, (ii) which was
not
formed for the specific purpose of acquiring the subject securities,
and
(iii) whose purchase is directed by a person who has such knowledge
and
experience in financial and business matters as to be capable of
evaluating the merits and risks of the prospective
investment.
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_____
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(c)
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An
organization described in Section 501(c)(3) of the Internal Revenue
Code,
corporation or similar business trust, or partnership, not formed
for the
specific purpose of acquiring the subject securities, with total
assets in
excess of $5,000,000.
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______
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(d)
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An
entity in which all of the equity owners are “accredited
investors.”
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______
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(e)
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A
director or an executive officer of the
Company.
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______
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(f)
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A
natural person whose individual net worth, or joint net worth with
spouse
(if any), exceeds $1,000,000
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______
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(g)
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A
natural person whose income in each of the two most recent calendar
years
exceeded $200,000 individually, or $300,000 jointly with spouse (if
any),
and who reasonably expects to reach that income level in the current
year.
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