GVI SECURITY SOLUTIONS, INC. SUBSCRIPTION AGREEMENT
GVI
SECURITY SOLUTIONS, INC.
SUBSCRIPTION
AGREEMENT made
as
of this __ day of December, 2006 between GVI Security Solutions, Inc., a
Delaware corporation (the “Company”), and ___________________ (the
“Subscriber”).
WHEREAS,
the Company desires to issue up to 4,167,000 shares of the Company’s common
stock, par value $.001 per share (“Common Stock”), in a private placement (this
“Offering”), at a price of $0.60 per share and on the terms and conditions
hereinafter set forth, and the Subscriber desires to acquire the number of
shares of Common Stock set forth on the signature page hereof.
NOW,
THEREFORE, for and in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto do hereby agree as
follows:
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I.
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SUBSCRIPTION
FOR UNITS AND REPRESENTATIONS BY AND COVENANTS OF
SUBSCRIBER
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1.1 Subject
to the terms and conditions hereinafter set forth, the Subscriber hereby
subscribes for and agrees to purchase from the Company such number of shares
(the “Shares”) of Common Stock as is set forth upon the signature page hereof at
a price equal to $0.60 per share, and the Company agrees to sell such Shares
to
the Subscriber for said purchase price. Subscriber shall pay the purchase price
by delivery of a certified or bank check payable to the Company (or by wire
transfer of such amount to an account designated by the Company),
contemporaneously with the execution and delivery of this Subscription
Agreement.
1.2 The
Subscriber recognizes that the purchase of Common Stock involves a high degree
of risk in that (i) an investment in the Company is highly speculative and
only
investors who can afford the loss of their entire investment should consider
investing in the Company and the Common Stock; (ii) he may not be able to
liquidate his investment; and (iii) transferability of the Common Stock is
extremely limited.
1.3
The
Subscriber represents and warrants that it is an “accredited investor” as such
term in defined in Rule 501 of Regulation D promulgated under the Securities
Act
of 1933, as amended (the “Act”), and that it is able to bear the economic risk
of an investment in the Common Stock. Specifically,
Subscriber is (check appropriate items(s)):
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(i)
a bank as defined in Section 3(a)(2) of the Act, or a savings and
loan
association or other institution as defined in Section 3(a)(5)(A)
of the
Act whether acting in its individual or fiduciary capacity; a broker
or
dealer registered pursuant to Section 15 of the Securities Exchange
Act of
1934; an insurance company as defined in Section 2(13) of the Act;
an
investment company registered under the Investment Company Act
of 1940 or
a business development company as defined in Section 2(a)(48) of
that Act;
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; 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 $5,000,000; an employee benefit plan
within the
meaning of the 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 $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons
that
are accredited investors;
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(ii)
a private business development company as defined in Section 202(a)(22)
of
the Investment Advisers Act of
1940;
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(iii)
an organization described in Section 501(c)(3) of the Internal
Revenue
Code of 1986, as amended, corporation, Massachusetts or similar
business
trust, or partnership, not formed for the specific purpose of acquiring
the Shares, with total assets in excess of
$5,000,000;
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(iv)
a director or executive officer of the
Company;
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(v)
a natural person whose individual net worth, or joint net worth
with that
person’s spouse, at the time of his or her purchase exceeds
$1,000,000;
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(vi)
a natural person who had an individual income (not including his
or her
spouse’s income) in excess of $200,000 in 2004 and 2005 or joint income
with his or her spouse in excess of $300,000 in each of those years
and
has a reasonable expectation of reaching such income level in
2006;
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(vii)
a trust, with total assets in excess of $5,000,000, not formed
for the
specific purpose of acquiring the Shares,
whose purchase is directed by a person having such knowledge and
experience in financial and business matters that he or she is
capable of
evaluating the merits and risks entailed in the purchase of the
Shares;
or
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(viii)
an entity in which all of the equity owners are Accredited Investors
(if
this alternative is checked, Subscriber
must
identify each equity owner and provide statements signed by each
demonstrating how each is qualified as an accredited
investor).
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1.4 The
Subscriber acknowledges that it has prior investment experience, and that
Subscriber recognizes the highly speculative nature of this
investment.
1.5 The
Subscriber acknowledges that it has been furnished by the Company during the
course of this transaction with all information regarding the Company that
it
has requested and; that it has been afforded the opportunity to meet with,
ask
questions of and receive answers from duly authorized officers or other
representatives of the Company concerning the terms and conditions of this
Offering.
1.6 The
Subscriber acknowledges that this Offering may involve tax consequences, and
that the Company has not provided tax advice or information to the Subscriber.
The Subscriber acknowledges that it must retain his own professional advisors
to
evaluate the tax and other consequences of an investment in the Common Stock.
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1.7 The
Subscriber acknowledges that this Offering has not been reviewed by the United
States Securities and Exchange Commission (“SEC”) because of the Company’s
representations that this is intended to be a nonpublic offering pursuant to
Sections 4(2) and/or 3(b) of the Act. The Subscriber represents that the Shares
are being purchased for its own account, for investment and not for distribution
or resale to others. The Subscriber agrees that it will not sell or otherwise
transfer the Shares unless they are registered under the Act or unless an
exemption from such registration is available.
1.8 The
Subscriber understands that the Shares have not been registered under the Act.
The Subscriber understands that Rule 144 (the “Rule”) promulgated under the
Act requires, among other conditions, a one year holding period prior to the
resale (in limited amounts) of securities acquired in a non-public offering
without having to satisfy the registration requirements under the Act. The
Subscriber understands that the Company is currently a reporting company but
makes no representation or warranty regarding its fulfillment in the future
of
any reporting requirements under the Securities Exchange Act of 1934, as
amended, or its dissemination to the public of any current financial or other
information concerning the Company, as is required by the Rule as one of the
conditions of its availability. The Subscriber agrees that the Company may,
if
it desires, permit the transfer of the Shares out of Subscriber’s name only when
Subscriber’s request for transfer is accompanied by an opinion of counsel
reasonably satisfactory to the Company that neither the sale nor the proposed
transfer results in a violation of the Act or any applicable state “blue sky”
laws.
1.9 The
Subscriber consents to the placement of a legend on any certificate or other
document evidencing the Shares stating that they have not been registered under
the Act and setting forth or referring to the restrictions on transferability
and sale thereof.
1.10 The
Subscriber acknowledges that if he is a Registered Representative of an NASD
member firm, he must give such firm the notice required by the NASD’s Rules of
Fair Practice, receipt of which must be acknowledged by such firm on the
signature page hereof.
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II.
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REPRESENTATIONS
BY THE COMPANY
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2.1 The
Company represents and warrants to the Subscriber that prior to the consummation
of this Offering and on the date of the Closing:
(a) The
Company is a corporation duly organized, existing and in good standing under
the
laws of the State of Delaware and has the corporate power to conduct the
business which it conducts and proposes to conduct.
(b) The
execution, delivery and performance of this Subscription Agreement by the
Company will have been duly approved by the Board of Directors of the Company
and all other actions required to authorize and effect the offer and sale of
the
Shares will have been duly taken and approved.
(c) The
Shares have been duly and validly authorized.
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III. BACK
REGISTRATION RIGHTS
3.1 “Piggyback”
Registration Rights.
If, at
any time before December 31, 2008, the Company shall determine to proceed with
the actual preparation and filing of a registration statement under the Act
in
connection with a proposed offer and sale of any of its equity securities by
it
or any of its security holders (other than a registration statement on Form
S 4,
S 8 or other limited purpose form), the Company will give written notice of
its
determination to all record holders of the Common Stock sold in the Offering.
Upon the written request of any holder of the Shares or a transferee of such
holder (the “Holder” or, collectively, the “Holders”), within 15 days after
receipt of any such notice from the Company, the Company will cause all of
the
Shares with respect to which a request for inclusion has been received to be
included in such registration statement, all to the extent required to permit
the sale or other disposition by the prospective seller or sellers of the Shares
to be so registered; provided,
however,
that
the Company’s obligations under this Section 3.1 are subject to the contractual
rights of any other security holder whose agreement with the Company prior
to
the date hereof might limit such inclusion; and, provided further
that
nothing herein shall prevent the Company from abandoning or delaying any
registration at any time, or reducing the number of Shares to be included in
such registration statement (on a pro rata basis) if the Company, in its sole
discretion, determines that such reduction is advisable due to the provisions
of
Rule 415 under the Act or for any other purpose. If any registration pursuant
to
this Section 3.1 shall be underwritten in whole or in part, the Company may
require that the Shares requested for inclusion pursuant to this Section 3.1
be
included in the underwriting on the same terms and conditions as the securities
otherwise being sold through the underwriters. In such event, the Holders
requesting inclusion in the registration statement shall, if requested by the
underwriters, execute an underwriting agreement containing customary
representations and warranties by selling stockholders and a lock-up on shares
not being sold. If in the good faith judgment of the managing underwriter of
such public offering the inclusion of all of the Shares originally covered
by a
request for registration (the “Requested Stock”) would reduce the number of
shares which could be sold by the Company or interfere with the successful
marketing of the shares of stock offered by the Company, the number of shares
of
Requested Stock otherwise to be included in the underwritten public offering
may
be reduced pro rata (by number of shares) among the holders thereof requesting
such registration or excluded in their entirety if so required by the
underwriter. To the extent only a portion of the Requested Stock is included
in
the underwritten public offering, those shares of Requested Stock which are
thus
excluded from the underwritten public offering shall be withheld from the market
by the holders thereof for a period, not to exceed 90 days, which the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering.
The
obligation of the Company under this Section 3.1 shall not apply to Shares
that
at such time are eligible for immediate resale pursuant to Rule 144(k) under
the
Act.
3.2 Registration
Procedures.
In
connection with any registration statement filed pursuant to Section 3.1, the
Company shall:
(a) furnish
to the Holders participating in such registration such reasonable number of
copies of the prospectus as may be necessary in order to facilitate the public
offering of such securities;
(b) use
its
best efforts to register or qualify the securities covered by such registration
statement under the state securities or blue sky laws of such jurisdictions
as
the Holders may reasonably request in writing within 20 days following the
original filing of such registration statement, except that the Company shall
not for any purpose be required to execute a general consent to service of
process or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or subject itself to taxation in
any
such jurisdiction;
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(c) notify
the Holders, promptly after it shall receive notice thereof, of the time when
such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been
filed;
(d) notify
the Holders promptly of any request by the SEC for the amending or supplementing
of such registration statement or prospectus or for additional information;
and
(e) advise
the Holders, promptly after it shall receive notice or obtain knowledge thereof,
of the issuance of any stop order by the SEC suspending the effectiveness of
such registration statement or the initiation or threatening of any proceeding
for that purpose and promptly use its best efforts to prevent the issuance
of
any stop order or to obtain its withdrawal if such stop order should be
issued.
The
Company may require each Holder of Shares as to which any registration is being
effected to furnish to the Company such information regarding the distribution
of such Shares as the Company may from time to time reasonably request in
writing.
3.3 Expenses.
(a) With
respect to the registration required pursuant to Section 3.1 hereof, all fees,
costs and expenses of and incidental to such registration, inclusion and public
offering (as specified in paragraph (b) below) shall be borne by the Company,
provided, however, that the Holders shall bear their pro rata share of the
underwriting discount and commissions and transfer taxes and the cost of their
own counsel.
(b) The
fees,
costs and expenses of registration to be borne by the Company as provided in
paragraph (a) above shall include, without limitation, all registration, filing,
and NASD fees, printing expenses, fees and disbursements of counsel and
accountants for the Company, and all legal fees and disbursements and other
expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered and
qualified (except as provided in 3.3(a) above). Fees and disbursements of
counsel and accountants for the Holders and any other expenses incurred by
the
Holders not expressly included above shall be borne by the Holders.
3.4 Indemnification.
(a) The
Company will indemnify and hold harmless each Holder of Shares which are
included in a registration statement pursuant to the provisions of Section
3.1
hereof, its directors and officers, and any underwriter (as defined in the
Act)
for such Holder and each person, if any, who controls such Holder or such
underwriter within the meaning of the Act (collectively the “Indemnified
Holders”), from and against, and will reimburse such Indemnified Holder with
respect to, any and all loss, damage, liability, cost and expense to which
such
Indemnified Holder may become subject under the Act or otherwise, insofar as
such losses, damages, liabilities, costs or expenses are caused by, arise out
of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or the omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading; provided, however, that the Company will not be liable in any
such case to the extent that any such loss, damage, liability, cost or expenses
is caused by, arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished by or on behalf of such Indemnified Holder in writing
specifically for use in the preparation thereof.
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(b) Each
Holder of Shares included in a registration pursuant to the provisions of
Section 3.1 hereof will indemnify and hold harmless the Company, its directors
and officers, any controlling person and any underwriter from and against,
and
will reimburse the Company, its directors and officers, any controlling person
and any underwriter with respect to, any and all loss, damage, liability, cost
or expense to which the Company or any controlling person and/or any underwriter
may become subject under the Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by, arise out of or are based upon
any
untrue statement or alleged untrue statement of any material fact contained
in
such registration statement, any prospectus contained therein or any amendment
or supplement thereto, or the omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein,
in
light of the circumstances in which they were made, not misleading, in each
case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in reliance upon
and in strict conformity with written information furnished by or on behalf
of
such Holder specifically for use in the preparation thereof.
(c) Promptly
after receipt by an indemnified party pursuant to the provisions of paragraph
(a) or (b) of this Section 3.4 of notice of the commencement of any action
involving the subject matter of the foregoing indemnity provisions such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said paragraph (a) or (b),
promptly notify the indemnifying party of the commencement thereof; but the
omission to so notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than hereunder
and will not relieve it from any liability hereunder except to the extent that
such failure results in the forfeiture by the indemnifying party of substantial
rights or defenses. In case such action is brought against any indemnified
party
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified
party, provided, however, if counsel for the indemnifying party concludes that
a
single counsel cannot under applicable legal and ethical considerations,
represent both the indemnifying party and the indemnified party, the indemnified
party or parties have the right to select separate counsel to participate in
the
defense of such action on behalf of such indemnified party or parties. After
notice from the indemnifying party to such indemnified party of its election
so
to assume the defense thereof, the indemnifying party will not be liable to
such
indemnified party pursuant to the provisions of said paragraph (a) or (b) for
any legal or other expense subsequently incurred by such indemnified party
in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed counsel
in
accordance with the provisions of the preceding sentence, (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after the
notice of the commencement of the action or (iii) the indemnifying party has,
in
its sole discretion, authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party.
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3.5 Suspension.
The
Company may suspend the effectiveness of the registration statement, or, without
suspending such effectiveness, instruct the Subscriber that no sales of Shares
included in the registration statement may be made if, in the Company’s
reasonable judgment, an event or circumstance occurs and is continuing as a
result of which such registration statement, any related prospectus or any
document incorporated therein by reference as then amended or supplemented
would, in the good faith judgment of the Board of Directors of the Company,
contain an untrue statement of a material fact or omit to state a material
fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (a “Suspension Period”)
by providing the Subscriber with written notice of such Suspension Period and
the reasons therefor. The Company shall use its reasonable efforts to provide
such notice a reasonable number of days prior to the commencement of a
Suspension Period, provided that in any event the Company shall provide such
notice no later than the commencement of such Suspension Period. In addition,
the Company shall not be required to keep the registration statement effective,
or may without suspending such effectiveness instruct the holders of Shares
included in the registration statement not to sell such Shares, during any
period during which the Company is instructed, directed, ordered or otherwise
requested by any governmental agency or self-regulatory organization to stop
or
suspend such trading or sales (“Supplemental Suspension Period”). The Company
shall give prompt written notice to Subscriber of the termination of any
Suspension Period or Supplemental Suspension Period.
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MISCELLANEOUS
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4.1 Any
notice or other communication given hereunder shall be deemed sufficient if
in
writing and sent by registered or certified mail, return receipt requested,
addressed to the Company, at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and to Subscriber at his address indicated
on
the signature page of this Subscription Agreement. Notices shall be deemed
to
have been given on the date of mailing, except notices of change of address,
which shall be deemed to have been given when received.
4.2 This
Subscription Agreement shall not be changed, modified or amended except by
a
writing signed by the parties to be charged, and this Subscription Agreement
may
not be discharged except by performance in accordance with its terms or by
a
writing signed by the party to be charged.
4.3 This
Subscription Agreement shall be binding upon and inure to the benefit of the
parties hereto and to their respective heirs, legal representatives, successors
and assigns. This Subscription Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and merges
and supersedes all prior discussions, agreements and understandings of any
and
every nature among them.
4.4 Notwithstanding
the place where this Subscription Agreement may be executed by any of the
parties hereto, the parties expressly agree that all the terms and provisions
hereof shall be construed in accordance with and governed by the laws of the
State of New York. The parties hereby agree that any dispute which may arise
between them arising out of or in connection with this Subscription Agreement
shall be adjudicated before a court located in New York City and they hereby
submit to the exclusive jurisdiction of the courts of the State of New York
located in New York, New York and of the federal courts in the Southern District
of New York with respect to any action or legal proceeding commenced by any
party, and irrevocably waive any objection they now or hereafter may have
respecting the venue of any such action or proceeding brought in such a court
or
respecting the fact that such court is an inconvenient forum, relating to or
arising out of this Subscription Agreement or any acts or omissions relating
to
the sale of the securities hereunder, and consent to the service of process
in
any such action or legal proceeding by means of registered or certified mail,
return receipt requested, in care of the address set forth below or such other
address as the undersigned shall furnish in writing to the other.
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4.5 This
Subscription Agreement may be executed in counterparts. Upon the execution
and
delivery of this Subscription Agreement by each Subscriber, this Subscription
Agreement shall become a binding obligation of each Subscriber with respect
to
the purchase of the Shares as herein provided; subject, however, to the right
hereby reserved to the Company to enter into the same agreements with other
subscribers and to add and/or to delete other persons as
subscribers.
4.6 The
holding of any provision of this Subscription Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Subscription Agreement, which shall remain in full force
and
effect.
4.7 The
parties agree to execute and deliver all such further documents, agreements
and
instruments and take such other and further action as may be necessary or
appropriate to carry out the purposes and intent of this Subscription
Agreement.
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IN
WITNESS WHEREOF, the parties have executed this Subscription Agreement as of
the
day and year first written above.
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Signature
of Subscriber
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Signature
of Co-Subscriber
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Name
of Subscriber
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Name
of Co-Subscriber
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[please
print]
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[please
print]
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Address
of Subscriber
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Address
of Co-Subscriber
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Social
Security or Taxpayer
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Social
Security or Taxpayer Identification
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Identification
Number of Subscriber
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Number
of Co-Subscriber
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Purchase
Price of Shares Subscribed For
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*If
Subscriber is a Registered Representative
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with
an NASD member firm, have the following
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acknowledgment
signed by the appropriate party:
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The
undersigned NASD member firm
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acknowledges
receipt of the notice
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required
by Rule 3050 of the NASD
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Subscription
Accepted:
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Conduct
Rules.
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GVI
SECURITY SOLUTIONS, INC.
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Name
of NASD Member Firm
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By:
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇
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Title: Chief Executive Officer
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By
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Authorized
Officer
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