AVITAR, INC.
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SUBSCRIPTION AGREEMENT
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INSTRUCTIONS
IMPORTANT: PLEASE READ CAREFULLY BEFORE SIGNING.
SIGNIFICANT REPRESENTATIONS ARE CONTAINED IN THIS DOCUMENT.
THERE ARE TWO AGREEMENTS ATTACHED. BOTH AGREEMENTS
NEED TO BE COMPLETED AND EXECUTED AS FOLLOWS:
1. Fill in the missing information on the page immediately following this
page.
2. Individual Investors must complete and sign Question 7.8 and sign the
Individual Investor signature page.
3. Entity Investors must complete Question 7.9 (certain persons affiliated
with the Entity Investor may be required to complete and sign Question
7.8) and sign the Entity Investor signature page.
DELIVER THE EXECUTED AGREEMENTS TO:
HCFP/▇▇▇▇▇▇▇ Securities, LLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Finance Department
TOGETHER WITH PAYMENT FOR THE PROMISSORY NOTES
AND COMMON STOCK SUBSCRIBED FOR.
February 6, 2003
Print Name of Subscriber ___________
SUBSCRIPTION AGREEMENT
IMPORTANT: Please refer to Schedule 1 attached hereto when reviewing this
document. Schedule 1 is incorporated herein and made a part hereof. Capitalized
terms used herein may be defined in Schedule 1.
Avitar, Inc. ("Company") and the Investor hereby agree as follows:
1.Subscription for Securities. I (sometimes referred to herein as the
"Investor") hereby subscribe for and agree to purchase $__________ of Units,
each whole Unit consisting of a $50,000 original principal amount Senior
Subordinated Promissory Note ("Note") and 300,000 shares of common stock, $.01
par value ("Common Stock"), upon the terms and conditions of the offering
("Offering") described in this Agreement and Schedule 1 hereto. HCFP/▇▇▇▇▇▇▇
Securities, LLC ("Placement Agent") is acting as the exclusive placement agent
for the Offering.
2.Offering Period. The Notes and Common Stock comprising the Units are
currently being offered by the Company through the date set forth on Schedule 1
("Offering Termination Date").
3. Investor Delivery of Documents and Payment. I hereby (i) tender to the
Placement Agent the full purchase price by wire or check in accordance with the
instructions set forth on Schedule 1, in full payment of the purchase price of
the Units for which I am subscribing pursuant to this Subscription Agreement,
and (ii) hereby tender two manually executed copies of this Subscription
Agreement. Prior to the earlier of a Closing (as defined in Section 5 hereof) on
my subscription or the Offering Termination Date, my subscription amount will be
held in a non-interest bearing escrow account in accordance with Schedule 1. If
the Company does not have a Closing on my subscription as set forth on Schedule
1 by the Offering Termination Date, my payment will be returned to me without
interest or deduction.
4. Acceptance or Rejection of Subscription. The Company and the Placement
Agent each has the right to reject this subscription for Units, in whole or in
part for any reason and at any time prior to the Closing, notwithstanding prior
receipt by me of notice of acceptance of my subscription. In the event of the
rejection of this subscription, my payment will be returned promptly to me
without interest or deduction, and this Subscription Agreement will have no
force or effect. The Notes and Common Stock comprising the Units subscribed for
herein will not be deemed issued to or owned by me until two copies of this
Subscription Agreement have been executed by me and countersigned by the Company
and the Closing with respect to my subscription has occurred.
5. Closing and Delivery of Securities. The initial closing of the Offering
("Initial Closing") may occur at any time, at the mutual discretion of the
Company and the Placement Agent, on or prior to the Offering Termination Date
and after satisfaction (or waiver) of the closing conditions and the sale of the
minimum amount of Units being offered. If more than one closing is anticipated,
the closing and subsequent closings with respect to the sale of additional Units
may take place at any time on or prior to the Offering Termination Date (each
such closing, together with the Initial Closing, being referred to as a
"Closing") In the event my subscription is accepted and the Closing occurs, my
payment will be released to the Company and the documentation and certificates
representing the Notes and Common Stock comprising the Units will be delivered
promptly to me, along with a fully executed version of this Subscription
Agreement.
6. Offering to Accredited Investors. This Offering is limited to accredited
investors as defined in Section 2(15) of the Securities Act of 1933, as amended
("Securities Act"), and Rule 501 promulgated thereunder, and is being made
without registration under the Securities Act in reliance upon the exemptions
contained in Sections 3(b), 4(2) and/or 4(6) of the Securities Act and
applicable state securities laws. As indicated by my responses herein, the
Investor is an "accredited investor" within the meaning of Section 2(15) of the
Securities Act and Rule 501 promulgated thereunder.
7.Investor Representations and Warranties. I acknowledge, represent and
warrant to the Company and the Placement Agent as follows:
7.1. Representations and Obligations of the Investor.
(a) I am aware that, except for any rescission rights that may be
provided under applicable laws, I am not entitled to cancel, terminate or
revoke this subscription, and any agreements made in connection herewith
will survive my death or disability. In order to induce the Company to
issue and sell the Notes and Common Stock comprising the Units to me, I
represent and warrant that the information relating to me stated herein is
true and complete as of the date hereof and will be true and complete as of
the date on which my purchase of Notes and Common Stock becomes effective.
If, prior to the final consummation of the offer and sale of the Notes and
Common Stock, there should be any change in such information or any of such
information becomes incorrect or incomplete, I agree to notify the Company
and supply the Company promptly with corrective information. I represent
that I have not and covenant that I will not sell short the Company's
securities from the date of the Disclosure Package (as hereinafter defined)
through the date of the closing of my investment in the Company.
(b) I am purchasing the Notes and Common Stock for my own account, for
investment, and not with a view to the distribution of the Notes and Common
Stock, nor with any present intention of selling or otherwise disposing of
all or any part of the Notes and Common Stock. I agree that I must bear the
economic risk of my investment for an indefinite period of time because,
among other reasons, the Notes and Common Stock currently have not been
registered under the Securities Act or under the securities laws of any
state and, therefore, cannot be resold, pledged, assigned or otherwise
disposed of unless they are subsequently registered under the Securities
Act and under applicable state securities laws (as provided herein) or an
exemption from such registration is available.
(c) I am an accredited investor within the meaning of Section 2(15) of
the Securities Act and Rule 501 promulgated thereunder.
7.2. Information About the Company.
(a) The Notes and Common Stock are being offered directly by the
Company through the placement agent, HCFP/▇▇▇▇▇▇▇ Securities, LLC. The
Company is offering the securities in reliance upon exemptions contained in
the Securities Act and applicable state securities laws.
(b) I have either met with or been given reasonable opportunity to
meet with officers of the Company for the purpose of asking reasonable
questions of such officers concerning the terms and conditions of the
Offering and of the Notes and Common Stock and the business and operations
of the Company and all such questions have been answered to my full
satisfaction. I have also been given an opportunity to obtain any
additional relevant information to the extent reasonably available to the
Company. I have been given access to full and complete information
regarding the Company and have utilized such access to my satisfaction for
the purpose of verifying information which I have obtained regarding the
Company. I have received all information and materials regarding the
Company that I have reasonably requested.
(c) I have received no representation or warranty from the Company or
the Placement Agent or any of their respective officers, directors,
employees or agents in respect of my investment in the Company. I am not
participating in the offer as a result of or subsequent to: (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television, radio or
the Internet or (ii) any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising. In making my
investment decision, I have relied solely on the information contained in
the Disclosure Package referred to below.
(d) I have read the Disclosure Package prepared by the Company, dated
February 6, 2003 and all exhibits listed therein, and I fully understand
the Disclosure Package, including the Section entitled "Risk Factors." I
understand that when the Company files any reports with the Securities and
Exchange Commission after the date of the Disclosure Package and prior to
the termination of the Offering, until my subscription is accepted, it will
provide me with copies thereof which will be deemed part of the Disclosure
Package. I am aware that my investment in the Company involves a high
degree of risk. I acknowledge the risk that the Company is operating with a
negative working capital, that its assets are pledged to prior lenders, and
that it is dependent upon this Offering to survive. I acknowledge the risk
that even with the gross maximum proceeds from the Offering, it is likely
the Company will need additional financing. I acknowledge that there is no
assurance that any additional financing will be available in the time frame
required by the Company, on terms satisfactory to the Company or at all. I
also acknowledge that the Company and Placement Agent may schedule and hold
a Closing for this Offering at any time once the minimum offering amount is
received, and the Company is not providing me with any assurance that the
maximum amount of gross proceeds in this Offering will be received.
7.3. Speculative Investment. I am aware that the Notes and Common
Stock comprising the Units are a speculative investment that involves a
high degree of risk. I acknowledge that I could lose my total investment in
the Company. I have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an
investment in the Notes and Common Stock and have obtained, in my judgment,
sufficient information from the Company to evaluate the merits and risks of
an investment in the Company. I have not utilized any person as my
purchaser representative (as defined in Regulation D of the Securities Act)
in connection with evaluating such merits and risks and have relied solely
upon my own investigation in making a decision to invest in the Company. I
have been urged to seek independent advice from my professional advisors
relating to the suitability of an investment in the Company in view of my
overall financial needs and with respect to the legal and tax implications
of such investment. I believe that the investment in the Notes and Common
Stock is suitable for me based upon my investment objectives and financial
needs, and I have adequate means for providing for my current financial
needs and contingencies and have no need for liquidity with respect to my
investment in the Company. The investment in the Company does not
constitute all or substantially all of my investment portfolio.
7.4. Restrictions on Transfer. I understand that (i) neither the Notes
or Common Stock nor the shares of common stock issuable upon conversion of
the Notes (if any), have been registered under the Securities Act or the
securities laws of certain states in reliance on specific exemptions from
registration, (ii) no securities administrator of any state or the federal
government has recommended or endorsed this Offering or made any finding or
determination relating to the fairness of an investment in the Company, and
(iii) the Company is relying on my representations and agreements for the
purpose of determining whether this transaction meets the requirements of
the exemptions afforded by the Securities Act and certain state securities
laws. I acknowledge that the Notes, Common Stock and the shares of common
stock underlying the Notes are subject to restrictions on transferability
and may not be resold, assigned or otherwise disposed of unless they are
subsequently registered under the Securities Act and under applicable
securities laws of certain states or an exemption from such registration is
available. I further acknowledge that, although the Company has agreed to
file a Registration Statement covering the resale by me of the Common Stock
and of the shares underlying the Note, (i) there is no assurance that the
Company will do so, (ii) the registration rights granted to me pursuant to
Section 7 of Schedule 1 are substantially limited, (iii) such Registration
Statement, if filed, may not be declared effective or, (iv) if declared
effective, the Company may not be able to keep it effective until I effect
the resale of securities registered thereby. I understand that the
certificates evidencing the Notes, Common Stock and the shares of common
stock issuable upon conversion of the Notes will bear the legends set forth
below:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT") OR
APPLICABLE STATE LAW. THE SECURITIES MAY NOT BE PLEDGED, SOLD,
ASSIGNED OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT THERETO UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAW, OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED."
7.5. No Market for Notes. I understand that there is no market for the
Notes, and that there is a limited market at present (and there may not be
any market in the future) for the shares of the common stock of the
Company. I agree that (i) the purchase of the Notes and Common Stock is a
long-term investment and (ii) I may have to bear the economic risk of
investment for an indefinite period of time because the Notes and Common
Stock have not been registered under the Securities Act and neither the
Notes or Common Stock nor the shares of Common Stock that may be issued on
conversion of the Notes may be resold, pledged, assigned, or otherwise
disposed of unless they are subsequently registered under the Securities
Act and under applicable securities laws of certain states or an exemption
from such registration is available. I understand that the Company is under
no obligation to register the Notes or Common Stock or the shares of common
stock that may be issued on conversion of the Note, except as set forth in
Section 7 of Schedule 1, or to assist me in complying with any exemption
from such registration under the Securities Act or any state securities
laws.
7.6. Stockholder Approval. I understand that, pursuant to the rules
and regulations of the American Stock Exchange to which the Company is
subject, the shares of common stock which may be issued on conversion of
the Notes and certain other shares of common stock being issued or issuable
in connection with the Offering may not be issued until the Company has
obtained stockholder approval. I also understand that the Company needs to
increase the number of shares of common stock authorized to be issued under
its certificate of incorporation. Although the Company has committed to me
and the Placement Agent to use its best efforts to obtain the stockholder
approval before the fifth month after the Initial Closing to comply with
the rules and regulations of the American Stock Exchange and to increase
the authorized common stock capital of the Company, I understand that it
may not be able to obtain that approval, in which case the Notes may become
due (although the Company may not have the money to pay them) at the
holders option upon notice given during the period stated in the Note and
certain of the shares to which I may be entitled as a penalty for the
Company not filing and having declared effective the registration statement
which forms a part of my registration rights may not be issuable to me.
7.7. Entity Authority/Investor Residency.
(a) If the Investor is a corporation, partnership, company, trust,
employee benefit plan, individual retirement account, ▇▇▇▇▇ Plan, or other
tax-exempt entity, it is authorized and qualified to become an investor in
the Company and the person signing this Subscription Agreement on behalf of
such entity has been duly authorized by such entity to do so.
(b) The undersigned represents and warrants to the Company that (i) if
an entity, its principal place of business and executive offices are
located in the State set forth on the Entity Investor signature page hereof
and (ii) if an individual, his or her state of residency is the State set
forth on the Individual Investor signature page hereof.
7.8. Accredited Investor Status For Individuals. (INVESTORS THAT ARE
CORPORATIONS, LIMITED LIABILITY COMPANIES, PARTNERSHIPS, REVOCABLE TRUSTS,
IRREVOCABLE TRUSTS, EMPLOYEE BENEFIT PLAN TRUSTS AND INDIVIDUAL RETIREMENT
ACCOUNTS SHOULD IGNORE THE FOLLOWING QUESTIONS AND PROCEED TO SECTION 7.9).
(a) I am an accredited investor within the meaning of Section 2(15) of
the Securities Act and Rule 501 promulgated thereunder because (check any
boxes that apply):
|_| My individual annual income during each of the two most recent years
exceeded $200,000 and I expect my annual income during the current
year will exceed $200,000.
|_| If I am married, my joint annual income with my spouse during each of
the two most recent years exceeded $300,000 and I expect my joint
annual income with my spouse during the current year will exceed
$300,000.
|_| My individual or joint (together with my spouse) net worth (including
my home, home furnishings and automobiles) exceeds $1,000,000.
(b) The aggregate value of my assets is approximately $___________.
(c) My aggregate liabilities are approximately $___________. (d) My current
and expected income is:
YEAR INCOME
2003 (estimated) $
2002 (Actual) $
2001 (Actual) $
Individual Investors must sign below and then should skip to Section 8.
Each person associated with an Entity Investor who is required under Section 7.9
to separately complete the questions in this Section 7.8 must sign the
confirmation below:
I hereby confirm the answers to Section 7.8 are true and correct in
all respects as of the date hereof and will be on the date of the
purchase of Notes and Warrants.
Executed this ____ day of ________, 2003.
Signature:__________________________________________
Print Name:_________________________________________
7.9. Accredited Investor Status for Entities. (INVESTORS WHO ARE
INDIVIDUALS SHOULD IGNORE THESE QUESTIONS.)
(a) The entity is a (check applicable box):
|_| Corporation
|_| Limited Liability Company
|_| Partnership
|_| Revocable Trust
|_| Irrevocable Trust
(If the Investor is an Irrevocable Trust, a supplemental
questionnaire, which is contained on the page following the Entity
Investor signature page of this Subscription Agreement, must be
completed by the person directing the investment decision for the
trust.)
|_| Employee Benefit Plan Trust
|_| Individual Retirement Account (If you are an ▇▇▇, skip (b)) (b) Check all
boxes which apply: |_| The Entity was not formed for the specific purpose of
investing in the Company |_| The Entity has total assets in excess of $5 million
dollars
|_|
For Employee Benefit Plan Trusts Only: The decision to invest in the
Company was made by a plan fiduciary, as defined in Section 3(21) of
ERISA, who is either a bank, insurance company or registered
investment advisor.
(c) If you did not check the first two of the three boxes in Question
(b) or if the Entity is an Individual Retirement Account or a Self-directed
Employee Benefit Plan Trust, list the name of each person who:
(i) owns an equity interest in the Entity (i.e., each stockholder if
the Entity is a corporation, each member if the Entity is a limited
liability company and each partner if the Entity is a partnership); or
(ii) is a grantor for the revocable trust or Individual Retirement
Account; or
(iii) is the person making the investment decision for a self-directed
Employee Benefit Plan Trust.
EACH PERSON LISTED ABOVE MUST SEPARATELY COMPLETE AND SUBMIT TO THE COMPANY THE
ANSWERS TO QUESTION 7.8 AND SIGN THE WRITTEN CONFIRMATION AT THE END OF SECTION
7.8.
7.10.____No Offer Until Determination of Suitability. I acknowledge
that any delivery to me of the documents relating to the Offering of the
Notes and Common Stock prior to the determination by the Company of my
suitability will not constitute an offer of the Notes and Common Stock
until such determination of suitability is made.
7.11.____For Florida Residents. The Notes and Common Stock have not
been registered under the Securities Act or the Florida Securities Act, by
reason of specific exemptions thereunder relating to the limited
availability of the Offering. The Notes and Common Stock cannot be sold,
transferred, or otherwise disposed of to any person or entity unless
subsequently registered under the Securities Act or the Securities Act of
Florida, if such registration is required. Pursuant to Section 517.061(11)
of the Florida Securities Act, when sales are made to five (5) or more
persons in Florida, any sale made pursuant to Subsection 517.061(11) of the
Florida Securities Act will be voidable by such Florida purchaser either
within three days after the first tender of consideration is made by the
purchaser to the issuer, an agent of the issuer, or an escrow agent, or
within three days after the availability of the privilege is communicated
to such purchaser, whichever occurs later. In addition, as required by
Section 517.061(11)(a)(3), Florida Statues and by Rule 3-500.05(a)
thereunder, if I am a Florida resident I may have, at the offices of the
Company, at any reasonable hour, after reasonable notice, access to the
materials set forth in the Rule that the Company can obtain without
unreasonable effort or expense.
8._______Indemnification. I hereby agree to indemnify and hold harmless the
Company and HCFP/▇▇▇▇▇▇▇ Securities, LLC, as Placement Agent, their respective
officers, directors, stockholders, employees, agents, and attorneys against any
and all losses, claims, demands, liabilities, and expenses (including reasonable
legal or other expenses incurred by each such person in connection with
defending or investigating any such claims or liabilities, whether or not
resulting in any liability to such person or whether incurred by the indemnified
party in any action or proceeding between the indemnitor and indemnified party
or between the indemnified party and any third party) to which any such
indemnified party may become subject, insofar as such losses, claims, demands,
liabilities and expenses (a) arise out of or are based upon any untrue statement
or alleged untrue statement or a material fact made by me and contained herein,
or (b) arise out of or are based upon any breach by me of any representation,
warranty, or agreement made by me contained herein. The Placement Agent is a
third-party beneficiary of this Section, and this Section may not be modified or
amended without the prior written agreement of the Placement Agent.
9._______Severability; Remedies. In the event any parts of this
Subscription Agreement are found to be void, the remaining provisions of this
Subscription Agreement are nevertheless binding with the same effect as though
the void parts were deleted.
10.______Governing Law and Jurisdiction. This Subscription Agreement will
be deemed to have been made and delivered in New York City and will be governed
as to validity, interpretation, construction, effect and in all other respects
by the internal laws of the State of New York. Each of the Company and the
Investor hereby (i) agrees that any legal suit, action or proceeding arising out
of or relating to this Subscription Agreement will be instituted exclusively in
New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York, (ii) waives any objection
to the venue of any such suit, action or proceeding and the right to assert that
such forum is not a convenient forum for such suit, action or proceeding, (iii)
irrevocably consents to the jurisdiction of the New York State Supreme Court,
County of New York, and the United States District Court for the Southern
District of New York in any such suit, action or proceeding, (iv) agrees to
accept and acknowledge service of any and all process that may be served in any
such suit, action or proceeding in New York State Supreme Court, County of New
York or in the United States District Court for the Southern District of New
York and (v) agrees that service of process upon it mailed by certified mail to
its address set forth on my signature page will be deemed in every respect
effective service of process upon it in any suit, action or proceeding.
11.______Counterparts. This Subscription Agreement may be executed in one
or more counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument. The execution of this
Subscription Agreement may be by actual or facsimile signature.
12.______Benefit. This Subscription Agreement is binding upon and inures to
the benefit of the parties hereto (and HCFP/▇▇▇▇▇▇▇ Securities, LLC to the
extent it is a third-party beneficiary hereof) and their respective heirs,
executors, personal representatives, successors and assigns. The Placement Agent
is a third-party beneficiary with respect to any sections hereof that so state
or that otherwise indicate that the Placement Agent would be entitled to rely on
the representations, warranties or covenants made by me therein.
13.______Notices. All notices, offers, acceptances and any other acts under
this Subscription Agreement (except payment) must be in writing, and are
sufficiently given if delivered to the addressees in person, by overnight
courier service, or, if mailed, postage prepaid, by certified mail (return
receipt requested), and will be effective three days after being placed in the
mail if mailed, or upon receipt or refusal of receipt, if delivered personally
or by courier or confirmed telecopy, in each case addressed to a party. All
communications to me should be sent to my preferred address on the signature
page hereto. All communications to the Company should be sent to the addresses
set forth on Schedule 1. Each party may designate another address by notice to
the other parties.
14.______Oral Evidence. This Subscription Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior oral and written agreements between the parties hereto with
respect to the subject matter hereof. This Subscription Agreement may not be
changed, waived, discharged, or terminated orally, but rather, only by a
statement in writing signed by the party or parties against which enforcement or
the change, waiver, discharge or termination is sought.
15.______Section Headings. Section headings herein have been inserted for
reference only and will not be deemed to limit or otherwise affect, in any
matter, or be deemed to interpret in whole or in part, any of the terms or
provisions of this Subscription Agreement.
16.______Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements contained herein will survive the
delivery of, and the payment for, the Securities.
17.______Acceptance of Subscription. The Company in its discretion may
accept this Subscription Agreement at any time for all or any portion of the
Securities subscribed for by executing a copy hereof as provided and notifying
me within a reasonable time thereafter.
SIGNATURE PAGE FOR INDIVIDUAL INVESTORS - COMPLETE ALL INFORMATION
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Name: ___________________ Name of Joint Investor (if any):__________________
Residence Address:
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Telephone: (H) ____________(W) ________________ Fax ____________________________
Occupation:______________________Employer: ____________________________________
Business Address:
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Send communications to:
|_| Home |_| Office |_| E-Mail:
E-mail address:
Age: ______________________________________
Social Security Number:
Check manner in which Notes and Warrants are to be held:
|_|______Individual |_| Tenants in |_| Joint Tenants with Right
Ownership Common of Survivorship (both
parties must sign)
|_| Community Property |_| Other (please indicate)
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INVESTOR MUST SIGN AND PRINT NAME BELOW: The foregoing subscription is
accepted and the Company
hereby agrees to be bound by its
terms.
Signature:___________________________ AVITAR, INC
Print Name:___________________________
Signature:___________________________ By:_______________________________
Print Name:___________________________ Name:________________________
Date: _____________________________ Title:_______________________
Date:________________________
SIGNATURE PAGE FOR ENTITY INVESTORS - COMPLETE ALL INFORMATION
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Name of Entity:
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Address of Principal Office:
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Telephone: _______________________________ Fax _______________________
Taxpayer Identification Number:_________________________________________
Check type of Entity:
|_| Employee Benefit |_| Limited |_| General Partnership
Plan Trust Partnership
|_| Limited Liability |_| Corporation |_| Other (please indicate)
Company Trust
|_| Individual Retirement
Account
Date of Formation or incorporation:______ State of Formation or incorporation:
Describe the business of the Entity:
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List the names and positions of the executive officers, managing members,
partners or trustees authorized to act with respect to investments by the Entity
generally and specify who has the authority to act with respect to this
investment.
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Name: Position Authority for this investment (yes or no)
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INVESTOR MUST SIGN AND PRINT NAME BELOW: The foregoing subscription is
accepted and the Company
hereby agrees to be bound by its
terms.
__________________________________________ AVITAR, INC.
Signature of Authorized Signatory
Name:_____________________________________
Title:____________________________________ By:_______________________________
Date: ______________________________ Name:_______________________
Title:______________________
Date:_______________________
SUPPLEMENTAL QUESTIONNAIRE
This Supplemental Questionnaire must be completed by the person directing the
investment decision for an irrevocable trust. No other person needs to complete
this Supplemental Questionnaire.
Please respond to the following questions, supplying as much detail as possible
in order to make your answers complete: 1. Name of Trustee ("Trustee") who is
directing the decision for the Trust to invest in the Company
________________________. The remaining questions should be answered by the
Trustee. 2. Does the Trustee have sufficient knowledge and experience in
financial and business matters to enable it
to evaluate the merits and risks of an investment in the Company?
Yes________ No ______
3. During the last three years, the Trustee has made the following investments:
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Year Nature of Investment Amount
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18. Please list all the educational institutions the Trustee has attended
(including high schools, colleges, and specialized training schools), and
indicate the dates attended and the degree(s) (if any) obtained from each.
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From To Institution Degree
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19. Please list any professional licenses the Trustee has.
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20. Indicate the Trustee's principal business experience or occupation during
the last three years. (Please list present, or most recent, position first and
the others in reverse chronological order).
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From To Name of Employer Position
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21. Indicate by check ▇▇▇▇ which of the following categories best describes the
extent of the Trustee's prior experience in the areas of investment listed
below:
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Substantial
Experience
or Knowledge No Experience
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Marketable securities
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Government securities
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Municipal (tax-exempt) securities
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Commodities
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Options (stock or commodities)
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Securities for which no market exists
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Limited partnerships
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Real estate or oil and gas programs
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Tax deferred investment generally
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22. Does the Trustee make his own investment decisions with respect to
investments?
_________ Always _________ Frequently
_________ Usually _________ Rarely
23. What is the Trustee's principal sources of investment knowledge or advice?
(The Trustee may check more than one).
_________ First hand experience with industry
_________ Financial publication(s)
_________ Trade or industry publication(s)
_________ Banker(s)
_________ Broker(s)
_________ Investment Advisor(s)
_________ Attorney(s)
_________ Accountant(s)
24. Please provide in the space below any additional information which would
indicate that the Trustee has sufficient knowledge and experience in financial
and business matters so that the Trustee are capable of evaluating the merits
and risks of investing in restricted securities for which no market exists, such
as those being offered by the Company.
SCHEDULE 1
1._______Subscription. The Company is offering through HCFP/▇▇▇▇▇▇▇ Securities,
LLC, as Placement Agent, on a "best efforts $850,000 minimum, $1,850,000
maximum" basis, 15% senior subordinated promissory notes ("Notes") and shares of
common stock, $.01 par value ("Common Stock"). The Notes and Common Stock are
being offered in Units consisting of (i) a $50,000 Note and 300,000 shares of
Common Stock. The Notes will have the following terms (as described in more
detail in the forms attached to the Disclosure Package):
The Notes will be senior unsecured indebtedness of the Company, but
they will be subordinate to the senior indebtedness outstanding on the
date of the Initial Closing in the approximate amount of $1,500,000
owed by the Company to Global Capital Advisors, Ltd. and LINC, LLC
("Senior Debt"). The Notes will bear interest at a rate of fifteen
(15%) percent per annum from the date of their issuance through the
date they become due and payable, and if the Notes are not paid when
due, at the default rate of twenty (20%) percent per annum thereafter.
Interest will be paid in cash, with 10% per annum being paid in
quarterly installments each year commencing on the third monthly
anniversary of the Initial Closing and 5% per annum being accrued and
becoming due and payable at maturity of the Note, but the Company may
prepay all or a portion of this accrued interest at any time without
notice. Principal and all accrued interest are payable on the fifth
anniversary of the Initial Closing of the Offering.
The Notes will be prepaid at the option of the holder upon (i) any
debt or equity financing (or financings) consummated by the Company
after the Offering in which the Company raises gross proceeds in
excess of $3.5 million, (ii) the sale by the Company of all or
substantially all of its assets, or at the consummation of any mergers
or consolidations involving the Company in which the Company is not
the surviving entity, or the Company is the survivor but the owners of
voting stock before the transaction own less than 50% of the voting
stock after the transaction, (iii) the sale or exchange of all or
substantially all of the outstanding shares of the Company's common
stock (including by way of merger, consolidation, etc.), or (iv) the
failure by the Company to obtain Stockholder Approval (as defined
below) within five months of the Initial Closing. The Company may, at
its option, prepay the Notes in whole, but not in part, prior to
maturity, provided that (i) prepayment may not be made prior to 18
months after the final Closing of the offering, (ii) Stockholder
Approval has been obtained, (iii) the Company has given not less than
20 business days advance written notice to the note holders of its
intent to prepay the Notes, and (iv) the last sale price of the Common
Stock for the 20 consecutive trading days prior to such notice has
been equal to or greater than 300% of the Conversion Price (as
hereinafter defined and subject to adjustment as provided in the
Note). At the time of any prepayment of the Notes, the Company will
pay all accrued interest due thereon.
The Notes will contain customary affirmative and negative covenants
(including covenants restricting the Company from incurring additional
indebtedness and from using the proceeds of the offering to repay
certain outstanding debt and amounts to officers, directors and
significant stockholders other than compensation and reimbursement
expenses in the ordinary course, in each case without "Majority
Consent" (as defined below)) and typical default provisions, any of
which may be waived by Majority Consent. "Majority Consent" is the
written consent of holders of at least 50.1% of the principal amount
of Notes outstanding.
The Notes and any accrued and unpaid interest due thereon, will be
convertible, at any time after receipt of the Stockholder Approval and
before repayment, at the option of the holder, into Common Stock of
the Company ("Note Shares"), at a conversion price equal to the
average last sale price of the common stock for the ten trading days
ending two business days prior to the Initial Closing. There will be
full adjustment to the conversion price for stock splits, stock
dividends, combinations, recapitalizations and reclassifications.
Additionally, if shares (or derivative securities) are issued at a
price (or with exercise or conversion prices) less than the conversion
price, the conversion price will be automatically lowered to that
price. Such conversion price, as adjusted, shall be referred to herein
as the "Conversion Price."
Within five months of the Initial Closing, the Company will convene
either an annual meeting or a special meeting of stockholders at which
it will seek the approval of its stockholders for (i) the issuance and
reservation of all shares of Common Stock issued or issuable in
connection with, or as a result of, the Offering and (ii) an amendment
to the certificate of incorporation to increase the authorized shares
of common stock to not less than 125,000,000 shares ("Stockholder
Approval").
The Company has granted to the holders of the Notes a right of first
refusal to purchase any portion or all of any securities offered by
the Company to any person for capital raising purposes for which it
has not engaged an investment banker, during the period commencing the
date of the Initial Closing and terminating on the two-year
anniversary of the Initial Closing. If the holder of a Note does not
accept in writing any such offer within 10 business days after receipt
of the written notice from the Company, then the Company may proceed
with the proposed financing and the holder of the Note will not have
any claim or right with respect to such sale of securities. If,
thereafter, such proposed financing is modified in any material
respect, the Company shall adopt the same procedure as with respect to
the original proposed offering of securities by the Company. This
grant by the Company shall not be effective unless the Offering
results in gross proceeds of $1,500,000 or more.
2. Board Designee. If the gross proceeds to the Company from the Offering equal
or exceed $1,500,000, the noteholders will have the right to have a designee
(reasonably acceptable to the Company) appointed to the board of directors of
the Company for a period of five years or so long as the Notes are outstanding,
whichever is shorter.
3. Offering Period; Minimum Subscription Amount. The Company will sell Notes and
Common Stock only to accredited investors during the period beginning on the
date of the Disclosure Package and ending on March 15, 2003 unless such ending
date is extended without notice to the investor, by the Company to a date not
later than April 15, 2003 ("Offering Termination Date"). The minimum
subscription amount is $50,000, but the Placement Agent has reserved the right
to accept subscriptions for lesser amounts in their discretion.
4. Payment. Please instruct your bank to wire funds for securities purchased to:
"CST&T AAF - Avitar Special Account"
JPMorganChase Bank
ABA #▇▇▇-▇▇▇▇-▇▇
A/C#530-396793
All wires must stipulate the name of the subscriber.
If you are paying by check, please mail your check for the securities
purchased payable to "CST&T AAF - Avitar Special Account" to:
HCFP/▇▇▇▇▇▇▇ Securities, LLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Corporate Financing Department
All subscription amounts will be held in a non-interest bearing escrow
account maintained by Continental Stock Transfer & Trust Company, ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, until a Closing and release to the Company. The
fees and expenses of the escrow agent will be paid by the Company.
5. Fees and Expenses. The Company has agreed to pay the Placement Agent a cash
commission of 7% and a non-accountable expense allowance of 2% of the gross
proceeds raised in the Offering and issue to the Placement Agent that number of
shares of common stock equal to 10% of all the Shares and a warrant to purchase
that number of shares of common stock equal to 10% of all the common stock
issuable upon conversion of the Notes. In addition, the Placement Agent will be
reimbursed certain expenses, including the reasonable fees and expenses of its
counsel. All such fees and expenses shall be deducted from the proceeds of this
Offering, and paid by the Company to the appropriate persons at the Closing. The
Company is also obligated to pay a finder's fee to a third party in connection
with the is Offering equal to 1% of the gross proceeds of the Offering.
6. Closing. If, at any time during the Offering Period, subscriptions for at
least $850,000 of Units have been received and accepted by the Company (and
funds in payment therefore have cleared ) and certain other conditions of the
offering have been satisfied (or waived) as described in the Disclosure Package,
then, upon the mutual consent of the Company and the Placement Agent, an Initial
Closing ("Closing") shall take palace with respect to such accepted
subscriptions. If the conditions precedent to the Closing as described in the
Disclosure Package are not satisfied (or waived) or subscriptions for at least
$850,000 are not received and accepted (and funds in payment therefore cleared)
by the Offering Termination Date, then the Offering will be terminated and all
funds received from subscribers will be returned, without interest and without
any deduction.
7. Registration Rights.
(a) Registration; Extra Shares. The Company shall file a Registration
Statement ("Registration Statement") under the Securities Act of 1933, as
amended ("Securities Act") with the Securities and Exchange Commission,
registering for resale the Common Stock sold as part of the Units and the Common
Stock which may be issued upon conversion of the Notes. The Company agrees to
file the Registration Statement as soon as practicable, but not later than 45
days after the final Closing of the Offering. The Company agrees to use its best
efforts to have the Registration Statement declared effective as soon as
practicable, but in no event later than the 90th day after the final Closing of
the Offering("Target Date") If the Company shall either fail to file the
Registration Statement by the 45th day after the final Closing or to have the
Registration Statement declared effective by the Target Date, then on the Target
Date and on each monthly anniversary of the Target Date thereafter until the
earlier of the effective date of the Registration Statement ("Effective Date")
or the 19th monthly anniversary of the Target Date, the Company shall issue to
the holder of the Note, as liquidated damages, the number of shares of Common
Stock equal to (a) 1% of the then outstanding principal amount of the holder's
Note, divided by (b) the average of the last sales price of the common stock of
the Company for the ten trading days ending on each monthly anniversary date of
the Target Date while the Registration Statement is not declared effective
("Penalty Shares"). The Company agrees that it shall include the Penalty Shares,
if any, in the Registration Statement. The Company shall keep the Registration
Statement effective and current until all the securities thereunder are sold or
until all the securities may be sold by the holders thereof under Rule 144(k) or
otherwise without any restriction. The Company will pay all fees and expenses
incurred by the Company in connection with the preparation and filing of the
Registration Statement with the SEC.
(b) Amended Prospectus. The Company will notify each holder of the Notes as
expeditiously as possible following the effectiveness of any Registration
Statement filed pursuant to this Section 7, and/or of any request by the
Commission for the amending or supplementing of such Registration Statement or
Prospectus. If the Prospectus is amended to comply with the requirements of the
Securities Act, the holders, if requested by the Company, will immediately cease
making offers of the Common Stock and return all Prospectuses to the Company and
the Company will promptly provide the holders with revised Prospectuses to
enable the holders to resume making offers of the Common Stock. The Company will
promptly notify the holders, if after delivery of a Prospectus to the holders,
that, in the judgment of the Company, it is advisable to suspend use of the
Prospectus delivered to the holders due to pending material developments or
other events that have not yet been publicly disclosed and as to which the
Company believes public disclosure would be detrimental to the Company. Upon
receipt of such notice, each such holder will immediately discontinue any sales
of Common Stock pursuant to such Registration Statement until such holder has
received copies of a supplemented or amended Prospectus or until such holder is
advised in writing by the Company that the then current Prospectus may be used
and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such Prospectus.
Notwithstanding anything to the contrary herein, the Company will not exercise
its rights under this subsection to suspend sales of Common Stock for a period
in excess of 60 days in any 365-day period.
(c) Indemnification by Company.
(i) The Company shall indemnify the holder of the Common Stock
registered on the Registration Statement to be sold or resold pursuant to
any registration statement hereunder and any underwriter or person deemed
to be an underwriter under the Securities Act and each person, if any, who
controls such holder or underwriters or persons deemed to be underwriters
within the meaning of Section 15 of the Securities Act or Section 20(a) of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), against
all loss, claim, damage, expense or liability (including all reasonable
attorneys' fees and other expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which the holder
may become subject under the Securities Act, the Exchange Act or otherwise,
arising from such registration statement, except for any loss, claim,
damage, expense or liability (including all reasonable attorneys' fees and
other expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) arising from information furnished to the
Company by or on behalf of the holder, in writing, for specific inclusion
in such registration statement. The holder of the Common Stock to be sold
or resold pursuant to such registration statement, and their successors and
assigns, shall indemnify the Company, against all loss, claim, damage,
expense or liability (including all reasonable attorneys' fees and other
expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which the Company may become subject under
the Securities Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of the holder, in writing, for specific inclusion
in such registration statement.
(ii) If any action is brought against a party hereto ("Indemnified
Party") in respect of which indemnity may be sought against the other party
("Indemnifying Party"), such Indemnified Party shall promptly notify
Indemnifying Party in writing of the institution of such action and
Indemnifying Party shall assume the defense of such action, including the
employment and fees of counsel reasonably satisfactory to the Indemnified
Party. Such Indemnified Party shall have the right to employ its or their
own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (i) the employment
of such counsel shall have been authorized in writing by Indemnifying Party
in connection with the defense of such action, or (ii) Indemnifying Party
shall not have employed counsel to defend such action, or (iii) such
Indemnified Party shall have been advised by counsel that there may be one
or more legal defenses available to it which may result in a conflict
between the Indemnified Party and Indemnifying Party (in which case
Indemnifying Party shall not have the right to direct the defense of such
action on behalf of the Indemnified Party), in any of which events, the
reasonable fees and expenses of not more than one additional firm of
attorneys designated in writing by the Indemnified Party shall be borne by
Indemnifying Party. Notwithstanding anything to the contrary contained
herein, if Indemnified Party shall assume the defense of such action as
provided above, Indemnifying Party shall not be liable for any settlement
of any such action effected without its written consent.
(iii) If the indemnification or reimbursement provided for hereunder
is finally judicially determined by a court of competent jurisdiction to be
unavailable to an Indemnified Party (other than as a consequence of a final
judicial determination of willful misconduct, bad faith or gross negligence
of such Indemnified Party), then the Indemnifying Party agrees, in lieu of
indemnifying such Indemnified Party, to contribute to the amount paid or
payable by such Indemnified Party (i) in such proportion as is appropriate
to reflect the relative benefits received, or sought to be received, by the
Indemnifying Party on the one hand and by such Indemnified Party on the
other, or (ii) if (but only if) the allocation provided in clause (i) of
this sentence is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in such
clause (i) but also the relative fault of the Indemnifying Party and of
such Indemnified Party; provided, however, that in no event shall the
aggregate amount contributed by the Indemnifying Party exceed the profit,
if any, earned by the Indemnifying Party as a result of the conversion by
him of the Notes and the sale or resale by him of the Common Stock included
in the Units and issued on conversion of the Notes.
(iv) The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at common law,
by separate agreement or otherwise.
(d) Successors and Assigns. The registration rights granted to the
Investors in this Section shall inure to the benefit of the Investors'
successors, heirs, pledgees, assignees, transferees and purchasers of the Notes,
the Common Stocks or the Common Stock issuable on conversion of the Notes, as
the case may be. 8. Notices. All communications to us should be sent to:
Avitar, Inc.
▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
_________Dolgenos ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
_________96 Spring Street
_________New ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
_________Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
_________Tel: (▇▇▇) ▇▇▇-▇▇▇▇
_________Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
_________HCFP/▇▇▇▇▇▇▇ Securities, LLP
_________888 Seventh Avenue
_________17th Floor
_________New ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
_________Attention: ▇▇▇ ▇▇▇▇▇▇▇▇▇
_________Tel: (▇▇▇) ▇▇▇-▇▇▇▇
_________Fax: (▇▇▇) ▇▇▇-▇▇▇▇