Subscription Agreement and Accredited Investor Questionnaire
and
Accredited
Investor Questionnaire
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE COMPANY SHALL HAVE RECEIVED AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION OF
SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED.
PRIVATE SHARE
ISSUE
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To:
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DAIS
ANALYTIC CORPORATION. (hereinafter referred to as the “Company”), with an
address for notice and delivery located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇.
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The Company is offering, on a private
placement basis, Equity (as defined in the secured convertible promissory note
by and between Company and subscriber dated _________, __, 200_ (“Convertible
Note”) of its own issue (each being a “Share”) to eligible investors
(each such an investor who subscribes to this issue by this document is
hereinafter referred to as the “Subscriber”), pursuant to the
terms and conditions of the Convertible Note. The Company offers, and the
Subscriber accepts, the Shares on the terms and conditions as set forth in this
subscription agreement (the “Agreement”).
Article
1
SUBSCRIPTION FOR
SHARES
1.1 Subscription
for Shares. Based upon the hereinafter terms,
conditions, representations, warranties and covenants given by each party to the
other and subject to the terms and conditions of the Convertible Note, the
Subscriber hereby irrevocably subscribes for and agrees to purchase the quantity
of Shares of the Company as determined in accordance with the terms and
conditions of the Convertible Note including but not limited to the subscription
price described therein, for aggregate consideration of _______________ (US
$___________) (the “Subscription
Price”).
1.2 Acceptance
of Subscription. Subject to the Subscriber fulfilling
its obligations under the Convertible Note and Company opting to convert said
note, the Company, upon acceptance by its Board of Directors (the “Board”) of all or part of
this subscription Agreement, agrees to issue the accepted number of Shares, as
fully paid and non-assessable, and as consideration for the Subscriber’s
subscription, and to refund any excess subscription monies of the Subscription
Price of any non-accepted portion of this subscription
Agreement by the Board.
1.3 Subscriber’s
eligibility for subscription. The Subscriber
acknowledges that the Subscriber is purchasing the Shares on a private basis and
is either:
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(a)
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an
eligible investor under the Subscriber’s domicile laws;
or
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(b)
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is
subscribing for a value in Shares constituting an exempt investment under
the laws of the Subscriber’s domicile;
or
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(c)
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is
subscribing pursuant to a qualifying offering memorandum and the terms
thereof; or
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(d)
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is
otherwise an eligible investor under the laws of the Subscriber’s domicile
by virtue of the Subscriber’s wealth, income and investment knowledge and
capacity.
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1.4 Risks of
subscription. The Subscriber acknowledges that no party
independent of the Company has made or will make any opinion or representations
on the merits or risks of an investment in any of the Shares unless sought out
by the Subscriber; which the Subscriber is encouraged to do.
Article
2
UNITED STATES ACCREDITED
INVESTOR DECLARATIONS
2.1 Subscriber’s
Declarations as an “Accredited Investor”. The
undersigned Subscriber warrants and certifies that the Subscriber is an
“Accredited Investor”, as that term is defined in Regulation D promulgated
under the United States Securities Act of 1933, as
amended (the “U.S.
Act”), by virtue of the Subscriber’s qualification under one or more of
the following categories {please check the appropriate box or boxes where
applicable}:
o The Subscriber is a
natural person whose individual net worth, or joint net worth with that person’s
spouse, exceeds U.S. $1,000,000.
o The Subscriber is a
natural person who had an individual income in excess of U.S. $200,000 in each
of the two most recent years or joint income with the Subscriber’s spouse in
excess of U.S. $300,000 in each of those years and has a reasonable expectation
of reaching the same income level in the current year.
o The Subscriber is a
corporation, organization described in section 501(c)(3) of the United States
Internal Revenue Code,
Massachusetts, or similar business trust or partnership, not formed for the
specific purpose of acquiring the Shares, with total assets in excess of U.S.
$5,000,000.
o The Subscriber
is a trust, with total assets in excess of U.S. $5,000,000, not formed for the
specific purpose of acquiring the Shares, whose purchase is directed by a
sophisticated person.
o The Subscriber
is a director or executive officer of the Company.
o The Subscriber
is a “private business development company” as that term is defined in section
202(a)(22) of the United States Investment Advisers Act of
1940.
o The Subscriber
is either: (a) a “bank” as defined in section 3(a)(2) of the U.S. Act, or a
“savings and loan association or other institution” as defined in section
3(a)(5)(A) of the U.S. Act, whether acting in its individual or fiduciary
capacity; or (b) a broker or dealer registered pursuant to section 15 of the
United States Securities
Exchange Act of 1934; or (c) an “insurance company” as defined in section
2(13) of the U.S. Act; or (d) an investment company registered under the United
States Investment Company Act
of 1940 or a “business development company” as defined in section
2(a)(48) of the United States Investment Company Act of
1940; or (e) a small business investment company licensed by the United
States “Small Business Administration” under either of subsections 301(c) or (d)
of the United States Small
Business Investment Act of 1958; or (f) a plan established and maintained
by a state, its political subdivisions, or any agency or instrumentality of a
state or its political subdivisions, for the benefit of its employees, if such
plan has total assets in excess of U.S. $5,000,000; or (g) an employee benefit
plan within the meaning of the United States Employee Retirement Income Security
Act of 1974, if the investment decision is made by a plan fiduciary as
defined in section 3(21) of the United States Employee Retirement Income Security
Act of 1974 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 U.S. $5,000,000 or, if a self-directed plan,
with investment decisions made solely by persons that are accredited
investors.
o The Subscriber is an
entity in which all of the equity owners are accredited investors under one or
more of the categories set forth hereinabove.
Article
3
RESTRICTED SECURITIES AND
DISPOSITION UNDER “RULE
144”
3.1 No
registration. The Subscriber acknowledges and
understands that neither the sale of the Shares which the Subscriber is
acquiring nor any of the Shares themselves have been registered under the U.S.
Act or any state securities laws, and, furthermore, that the Shares must be held
indefinitely unless subsequently registered under the U.S. Act or an exemption
from such registration is available.
3.2 Legending
of the Shares. The Subscriber also acknowledges and
understands that the certificates representing the Shares will be stamped with
the following legend (or substantially equivalent language) restricting transfer
in the following manner:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE COMPANY SHALL HAVE RECEIVED AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION OF
SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED.
The Subscriber hereby consents to the
Company making a notation on its records or giving instructions to any transfer
agent of the Shares in order to implement the restrictions on transfer set forth
and described hereinabove.
3.3 Disposition
under Rule 144. The Subscriber also acknowledges and
understands that:
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(a)
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the
Shares are restricted securities within the meaning of Rule 144
promulgated under the U.S. Act;
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(b)
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the
exemption from registration under Rule 144 will not be available in any
event for at least one year from the date of purchase and payment of the
Shares by the Subscriber, and even then will not be available unless (i) a
public trading market then exists for the Shares of the Company, (ii)
adequate information concerning the Company is then available to the
public and (iii) other terms and conditions of Rule 144 are complied with;
and
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(c)
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any
sale of the Shares may be made by the Subscriber only in limited amounts
in accordance with such terms and
conditions.
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3.4 Further
restrictions on disposition. The Company agrees to issue
or reissue certificates representing any of the securities, without the legend
set forth above if at such time, prior to making any transfer of any such
securities, such holder thereof shall give written notice to the Company
describing the manner and terms of such transfer and removal as the Company may
reasonably request. Such proposed transfer and removal will not be
effected until: (a) either (i) the Company has received an opinion of counsel
reasonably satisfactory to the Company, to the effect that the registration of
the securities under the Securities Act is not required in connection with such
proposed transfer, (ii) a registration statement under the Securities Act
covering such proposed disposition has been filed by the Company with the
Commission and has become effective under the Securities Act, (iii) the Company
has received other evidence reasonably satisfactory to the Company that such
registration and qualification under the
Securities Act
and state securities laws are not required (which may include an opinion of
counsel provided by the Company), or (iv) the holder provides the Company with
reasonable assurances that such security can be sold pursuant to Rule 144 under
the Securities Act (which may include an opinion of counsel provided by the
Company); and (b) either (i) the Company has received an opinion of counsel
reasonably satisfactory to the Company, to the effect that registration or
qualification under the securities or "blue sky" laws of any state is not
required in connection with such proposed disposition, (ii) compliance with
applicable state securities or "blue sky" laws has been effected, or (iii) the
holder provides the Company with reasonable assurances that a valid exemption
exists with respect thereto (which may include an opinion of counsel provided by
the Company). The Company will respond to any such notice from a
holder within five (5) business days. In the case of any proposed
transfer under this Section 3.4, the Company will use commercially reasonable
efforts to comply with any such applicable state securities or "blue sky" laws,
but shall in no event be required, (x) to qualify to do business in any state
where it is not then qualified, (y) to take any action that would subject it to
tax or to the general service of process in any state where it is not then
subject, or (z) to comply with state securities or “blue sky” laws of any state
for which registration by coordination is unavailable to the
Company. The restrictions on transfer contained in this Section 3.4
shall be in addition to, and not by way of limitation of, any other restrictions
on transfer contained in any other section of this
Agreement. Whenever a certificate representing the Conversion Shares
or Warrant Shares is required to be issued to a Purchaser without a legend, in
lieu of delivering physical certificates representing the Common Stock, provided
the Company's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer program, the Company shall use its
reasonable best efforts to cause its transfer agent to electronically transmit
the Common Stock to a Subscriber by crediting the account of such Subscriber's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC")
system (to the extent not inconsistent with any provisions of this
Agreement).
Article
4
METHOD OF
SUBSCRIPTION AND ACCEPTANCE BY THE COMPANY
4.1 Method of
subscription. It is hereby acknowledged and agreed by
the parties hereto that any subscription for Shares shall be made by the
Subscriber:
(a) by
faxing to the Placement Agent, Legend Merchant Group, (▇▇▇) ▇▇▇-▇▇▇▇ , a
completed copy of this Agreement together with an executed copy
of Registration Rights Agreement; and
(b) by
delivering to the Escrow Agent:
American
Stock Transfer & Trust Company
▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇
Phone:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
An
originally executed copy of this completed Agreement and the Registration Rights
Agreement together with payment for the exact Subscription Price for such Shares
in the following manner:
(i) by
delivery to the Escrow Agent’s above address of a bank draft or cashier’s check
for the exact Subscription Price for the Shares; or
(ii) by
wire transfer to the Escrow Agent of the exact Subscription Price for the Shares
to the following wiring instructions:
▇.▇.
▇▇▇▇▇▇ Chase
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇
A/C
# ▇▇▇-▇▇▇-▇▇▇
ABA
# 021 000 021
American
Stock Transfer & Trust Company
As
Escrow Agent for
DAIS
ANALYTIC CORPORATION
4.2 Acceptance
of subscription or return of Subscription Price by the
Company. The Subscriber acknowledges that the Company
will be accepting subscriptions for Shares on a first come, first serve, basis.
As a consequence the Company, upon acceptance by its Board of all or part of
this subscription Agreement (the “Acceptance”), hereby agrees
to issue the accepted number of Shares, as fully paid and non-assessable, and as
consideration for the Subscriber’s subscription, and to refund any excess
subscription monies of the Subscription Price of any non-accepted portion of
this subscription Agreement by the Board. In this regard the
Subscriber acknowledges that, although Shares may be issued to other purchasers
concurrently with the Company’s Acceptance of all or part of this subscription
Agreement, there may be other sales of Shares by the Company, some or all of
which may close before or after the Acceptance herein. The Subscriber
further acknowledges that there is a risk that insufficient funds may be raised
by the Company upon the Company’s Acceptance of all or part of this subscription
Agreement to fund the Company’s objectives and that further closings may not
take place after Acceptance herein.
4.3 Delivery
of Share certificate. The Company, subject to the terms
and conditions of the Convertible Note, agrees to deliver to the Subscriber a
certificate representing the accepted number of Shares purchased by the
Subscriber under this subscription Agreement and registered in the name of the
Subscriber.
Article
5
INVESTMENT
SUBSCRIPTION TERMS, CORPORATE DISCLOSURE AND
GENERAL
SUBSCRIBER ACKNOWLEDGEMENTS AND WARRANTIES
Subscription
Agreement and Accredited Investor Questionnaire - Page 6 of 30
5.1 Description
of the Shares. The Company is issuing Shares at a price
per Share as determined pursuant to the terms of the Convertible
Note. The Shares are a part of the authorized shares of the
Company. Copies of the corporate documents of the Company describing
the classes of shares authorized by Company and the rights of shareholders are
available upon request.
5.2 Use of
funds for the Shares. The Subscriber acknowledges and
agrees that the Subscription Price funds to be raised from the Shares are to be
employed for the business of the Company in accordance with management’s
discretion as to the best use of the same for the Company’s business
plans. The Company reserves the right at any time to alter its
business plans in accordance with management’s appreciation of the market for
the goods and services of the Company. The parties also
acknowledge that a portion of the initial proceeds received by the Company shall
be used to repay certain existing promissory notes of the Company.
5.3 The
Subscriber’s acknowledgments. The Subscriber acknowledges and
agrees that:
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(a)
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Further
financings: subject to the rights contained in the
Convertible Note and Warrants, including the price protection
provisions, the Company may issue further offers similar to the within
which may bear higher or lower prices (as determined by the Company in
accordance with its appreciation of market conditions). The
Company may, and will, acquire debt and/or equity financings in the future
required or advisable in the course of the Company’s business
development;
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(b)
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Withdrawal or
revocation: this Agreement is given for valuable
consideration and shall not be withdrawn or revoked by the Subscriber once
tendered to the Solicitors with the Subscription
Price;
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(c)
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Agreement to be
bound: the Subscriber hereby specifically agrees
to be bound by the terms of this Agreement as to all particulars hereof
and hereby reaffirms the acknowledgments, representations and powers as
set forth in this Agreement;
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(d)
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Reliance on
Subscriber’s representations: the Subscriber
understands that the Company will rely on the acknowledgments,
representations and covenants of the Subscriber contained herein in
determining whether a sale of the Shares to the Subscriber is in
compliance with applicable securities laws. The Subscriber
warrants that all acknowledgments, representations and covenants are true
and accurate; and
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5.4 The
Subscriber’s representations, warranties and
understandings. The Subscriber acknowledges, represents
and warrants to the Company and understands that:
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(a)
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Experience: the
Subscriber has the requisite knowledge and experience in financial and
business matters for properly evaluating the risks of an investment in the
Company;
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Subscription
Agreement and Accredited Investor Questionnaire - Page 7 of 30
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(b)
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Information: the
Subscriber has received all information regarding the Company reasonably
requested by the Subscriber;
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(c)
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Risk: the
Subscriber understands that an investment in the Company involves certain
risks of which the Subscriber has taken full cognizance, and which risks
the Subscriber fully understands;
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(d)
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Adequacy of
information: the Subscriber has been given the
opportunity to ask questions of, and to receive answers from, the Company
concerning the terms and conditions of the offering and to obtain
additional information necessary to verify the accuracy of the information
contained in the information described in paragraph “(b)” hereinabove, or
such other information as the Subscriber desired in order to evaluate an
investment in the Company;
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(e)
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Residency: the
residence of the Subscriber as set forth herein below is the true and
correct residence of the Subscriber and the Subscriber has no present
intention of becoming a resident or domiciliary of any other State or
jurisdiction;
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(f)
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Independent
investigation: in making a decision to invest in
the Company the Subscriber has relied solely upon independent
investigations made by the Subscriber, and the particular tax consequences
arising from an investment in the Company will depend upon the
Subscriber’s individual circumstances;
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(g)
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Principal: the
Subscriber is purchasing the Shares as principal for the Subscriber’s own
account and not for the benefit of any other person, except as otherwise
stated herein, and not with a view to the resale or distribution of all or
any of the Shares; provided, however, that
by making the representations herein, such Subscriber does not agree to
hold the Shares for any minimum or other specific term and reserves the
right to dispose of the Shares at any time in accordance with Federal and
state securities laws applicable to such
disposition;
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(h)
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Decision to
purchase: the decision of the Subscriber to enter
into this Agreement and to purchase Shares pursuant hereto has been based
only on the representations of this Agreement and any collateral business
plan or offering memorandum provided herewith or based upon the
Subscriber’s relationship with a director and/or senior officer of the
Company. It is not made on other information relating to the
Company and not upon any oral representation as to fact or otherwise made
by or on behalf of the Company or any other person. The
Subscriber agrees that the Company assumes no responsibility or liability
of any nature whatsoever for the accuracy, adequacy or completeness of any
business plan information which has been created based upon the Company’s
management experience. In particular, and without limiting the
generality of the foregoing, the decision to subscribe for Shares has not
been influenced by:
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(i)
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newspaper,
magazine or other media articles or reports related to the Company or its
business;
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(ii)
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promotional
literature or other materials used by the Company for sales
or marketing purposes; or
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Subscription
Agreement and Accredited Investor Questionnaire - Page 8 of 30
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(iii)
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any
representations, oral or otherwise, that the Company will become a listed
company, that any of the Shares will be repurchased or have any guaranteed
future realizable value or that there is any certainty as to the success
of the Company or the liquidity or value of any of the
Shares;
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(i)
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Advertisements: the
Subscriber acknowledges that the Subscriber has not purchased Shares as a
result of any general solicitation or general advertising, including
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar media or broadcast over radio or
television, or any seminar or meeting whose attendees have been invited by
general solicitation or general
advertising;
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(j)
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Information not
received: the Subscriber has received an Offering
Memorandum describing the business and affairs of the Company which has
been prepared for delivery to, and review by, prospective purchasers in
order to assist them in making an investment decision in respect of the
Shares, and the Subscriber has not become aware of any advertisement in
printed media of general and regular paid circulation, radio or television
with respect to the distribution of the
Shares;
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(k)
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Information
received: the Subscriber has received an Offering
Memorandum concerning the Company and has had access to additional
information as the Subscriber has considered necessary in connection with
the Subscriber’s investment decision to acquire the
Shares;
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(l)
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Satisfaction with
information received: the Subscriber acknowledges
that, to the Subscriber’s
satisfaction:
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(i)
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the
Subscriber has either had access to or has been furnished with sufficient
information regarding the Company and the terms of this investment
transaction to the Subscriber’s
satisfaction;
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(ii)
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the
Subscriber has been provided the opportunity to ask questions concerning
this investment transaction and the terms and conditions thereof and all
such questions have been answered to the Subscriber’s satisfaction;
and
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(iii)
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the
Subscriber has been given ready access to and an opportunity to review any
information, oral or written, that the Subscriber has requested, in
particular to any offering memorandum or business plan of the Company, if
available concurrent with or as a part of this
Agreement;
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(m)
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Reliance of
representative: the Subscriber, by reason of the
Subscriber’s knowledge and experience in financial and business matters,
is capable of evaluating the risks and merits of an investment in the
Shares or, if the Subscriber is relying upon the investment advice of a
representative who has advised the undersigned in connection with this
investment (the “Representative”), the
undersigned believes the Representative to be sophisticated and competent
in the area of investment advice and analysis and therefore capable of
evaluating the risks and merits of an investment in
the Shares;
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Subscription
Agreement and Accredited Investor Questionnaire - Page 9 of 30
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(n)
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Economic
risk: the Subscriber has such knowledge and
experience in financial and business affairs as to be capable of
evaluating the merits and risks of the Subscriber’s investment in and to
any of the Shares, and the Subscriber is able to bear the economic risk of
a total loss of the Subscriber’s investment in and to any of the
Shares;
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(o)
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Speculative
investment: the Subscriber understands that an
investment in any of the Shares is a speculative investment and that there
is no guarantee of success of the Company’s management’s
plans. Management’s plans are an effort to apply present
knowledge and experience to project a future course of action which is
hoped will result in financial success employing the Company’s assets and
with the present level of management’s skills and of those whom the
Company will need to attract (which cannot be
assured). Additionally, all plans are capable of being
frustrated by new or unrecognized or unappreciated present or future
circumstances which can typically not be accurately, or at all,
predicted;
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(p)
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Address: the
Subscriber is resident as set out on the last page of this Agreement as
the “Subscriber’s Address”, and the address as set forth on the last page
of this Agreement is the true and correct address of the
Subscriber;
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(q)
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Risk and resale
restriction: the Subscriber is aware of the risks
and other characteristics of the Shares and of the fact that the
Subscriber will not be able to resell the Shares except in accordance with
the applicable securities legislation and regulatory
policy;
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(r)
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Representations as to
resale: no person has made to the Subscriber any
written or oral representations:
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(i)
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that
any person will resell or repurchase any of the
Shares;
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(ii)
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that
any person will refund the purchase of any of the
Shares;
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(iii)
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as
to the future price or value of any of the Shares;
or
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(iv)
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that
any of the Shares will be listed and posted for trading on any stock
exchange, over-the-counter or bulletin board market, or that application
has been made to list and post any of the Shares for trading on any stock
exchange, over-the-counter or bulletin board market;
and
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the
Subscriber will not resell the Shares except in accordance with the
provisions of applicable securities legislation and stock exchange,
over-the-counter and/or bulletin board market
rules;
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(s)
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Reports and
undertakings: if required by applicable securities
legislation, policy or order or by any securities commission, stock
exchange or other regulatory authority, the Subscriber will execute and
otherwise assist the Company in filing such reports, undertakings and
other documents as may be reasonably required with respect to the issue of
the Shares;
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Subscription
Agreement and Accredited Investor Questionnaire - Page 10 of 30
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(t)
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Resale
restrictions: the Subscriber has been
independently advised as to the applicable hold period imposed in respect
of the Shares by securities legislation in the jurisdiction in which the
Subscriber’s resides and confirms that no representation has been made
respecting the applicable hold periods for the Shares and is aware of the
risks and other characteristics of the Shares and of the fact that the
Subscriber may not be able to resell the Shares except in accordance with
the applicable securities legislation and regulatory
policy.
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(u)
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Confidentiality: the
Subscriber understands that the Company’s business plan and this Agreement
are confidential. Furthermore, the Subscriber has not
distributed such, or divulged the contents thereof, to anyone other than
such legal or financial advisors as the Subscriber has deemed desirable
for purposes of evaluating an investment in the Shares, and the Subscriber
has not made any copies thereof except for the Subscriber’s own
records;
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(v)
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Age of
majority: the Subscriber, if an individual, has
attained the age of majority and is legally competent to execute this
Agreement and to take all actions required pursuant
hereto;
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(w)
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Authorization and
formation of Subscriber: the Subscriber, if a
corporation, partnership, trust or other form of business entity, is
authorized and otherwise duly qualified to purchase and hold the Shares,
and such entity has not been formed for the specific purpose of acquiring
Shares in this issue. In addition, the entering into of this
Agreement and the transactions contemplated hereby will not result in the
violation of any of the terms of and provisions of any law applicable to,
or the corporate documents, if a corporation, of, the Subscriber or of any
agreement, written or oral, to which the Subscriber may be a party or by
which the Subscriber may be bound;
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(x)
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Legal
obligation: this Agreement has been duly and
validly authorized, executed and delivered by and constitutes a legal,
valid, binding and enforceable obligation of the
Subscriber;
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(y)
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Legal and tax
consequences. the Subscriber acknowledges that an
investment in the securities of the Company may have tax consequences to
the Subscriber under applicable law, which the Subscriber is solely
responsible for determining, and the Subscriber also acknowledges and
agrees that the Subscriber is responsible for obtaining its own legal and
tax advice;
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(z)
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Compliance with
applicable laws: The Subscriber knows of no reason
(and is sufficiently knowledgeable to determine the same or has sought
legal advice) why the delivery of this Agreement, the acceptance of it by
the Company and the issuance of the Shares to the Subscriber will not
comply with all applicable laws of the Subscriber’s jurisdiction of
residence or domicile, and all other applicable laws, and the Subscriber
has no reason to believe that the Subscriber’s subscription hereby will
cause the Company to become subject to or required to comply with any
disclosure, prospectus or reporting requirements or to be subject to any
civil or regulatory review or proceeding. In addition, the
Subscriber will comply with all applicable securities laws and will assist
the Company in all
reasonable manner to comply with all applicable securities laws;
and
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Agreement and Accredited Investor Questionnaire - Page 11 of 30
5.5 Reliance
on Subscriber’s representations and warranties. The
Subscriber understands that the Company will rely on the representations and
warranties of the Subscriber herein in determining whether a sale of the Shares
to the Subscriber is in compliance with federal and applicable state and
provincial securities laws.
5.6 Change in
Subscriber’s representations and warranties. All of the
information set forth hereinabove with respect to the Subscriber and including,
without limitation, the acknowledgements, representations and warranties set
forth hereinabove, is correct and complete as of the date hereof.
Article
6
COMPANY
REPRESENTATIONS AND WARRANTIES
6.1 Representations
and warranties of the Company. The Company acknowledges,
represents and warrants to and with the Subscriber that:
(a) Standing. the
Company is a valid and subsisting corporation duly incorporated and in good
standing under the laws of the jurisdiction in which it is incorporated,
continued or amalgamated.
(b) Business. the
Company is duly registered and licensed to carry on business in the
jurisdictions in which it carries on business or owns property where so required
by the laws of that jurisdiction.
(c) Reservation of
Shares. the Company will reserve or set aside sufficient
shares in its treasury to issue to the Subscriber the Shares if the Company
accepts all or any part of the within subscription.
(d) Subscription
materials. this subscription Agreement and all other
written representations made by the Company to the Subscriber in connection with
the within subscription for Shares are and will be accurate in all material
respects and do not and will not omit any fact, the omission of which does or
will make such representations misleading or incorrect.
(e) Compliance with securities
legislation. the Company has complied and will comply
fully with the requirements of all applicable corporate and securities laws and
administrative policies and directions in relation to the issue and trading of
its securities and in all matters relating to the within
subscription.
(f) Compliance with corporate
materials. the issue and sale of the Shares by the
Company does not and will not conflict with, and does not and will not result in
a breach of, any of the terms of the Company’s incorporating documents or any
agreement or instrument to which the Company is a party.
(g) Corporate
authority. this Agreement has been or will be, when
accepted,
duly authorized by all necessary corporate action on the part of the Company,
and the Company has full corporate power and authority to undertake the within
subscription for Shares.
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Agreement and Accredited Investor Questionnaire - Page 12 of 30
(h) Restrictions on
Shares: no order ceasing, halting or suspending trading
in securities of the Company or prohibiting the sale of such securities has been
issued to and is outstanding against the Company or any of its directors,
officers or promoters or against any other companies that have common directors,
officers or promoters, and no investigations or proceedings for such purposes
are pending or threatened.
(i) Capitalization. The
authorized capital stock of the Company and the shares thereof currently issued
and outstanding as of the date hereof are set forth on Schedule 6.1(i)
hereto. All of the outstanding securities have been duly and validly
authorized. Except as set forth on Schedule 6.1(i) hereto, no shares
of Common Stock are entitled to preemptive rights or registration rights and
there are no outstanding options, warrants, scrip, rights to subscribe to, call
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Except as set
forth in Schedule 6.1 (i) there are no contracts, commitments, understandings,
or arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except as
set forth in schedule 6.1(i) the Company is not a party to any agreement
granting registration or anti-dilution rights to any person with respect to any
of its equity or debt securities. The Company is not a party to, and
it has no knowledge of, any agreement restricting the voting or transfer of any
shares of the capital stock of the Company.
(j) Issuance of
Securities. The securities to be issued at the closing have
been duly authorized by all necessary corporate action. When the
Conversion Shares and the Warrant Shares are issued in accordance with the terms
of the Notes and the Warrants, respectively, such shares will be duly authorized
by all necessary corporate action and validly issued and outstanding, fully paid
and nonassessable, and the holders shall be entitled to all rights accorded to a
holder of Common Stock.
(k) No
Conflicts. The execution, delivery and performance of the
transaction documents by the Company, the performance by the Company of its
obligations under this Agreement and the consummation by the Company of the
transactions contemplated herein and therein do not and will not (i) violate any
provision of the Company’s certificate of incorporation or bylaws, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party or by which it or its properties or assets are
bound, (iii) create or impose a lien, mortgage, security interest, charge or
encumbrance of any nature on any property of the Company under any agreement or
any commitment to which the Company is a party or by which the Company is bound
or by which any of its respective properties or assets are bound,
or
Subscription
Agreement and Accredited Investor Questionnaire - Page 13 of 30
(iv)
result in a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree (including Federal and state securities
laws and regulations) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries are bound
or affected, except, in all cases other than violations pursuant to clauses (i)
and (iv) above, for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. For the purposes of
this Agreement, “Material Adverse Effect” means any material adverse effect on
the business, operations, properties, prospects, or financial condition of the
Company and its subsidiaries and/or any condition, circumstance, or situation
that would prohibit or otherwise materially interfere with the ability of the
Company to perform any of its obligations under this Agreement in any material
respect.
(l) Financial
Statements. To the best of the Company’s knowledge, it has
delivered to the Subscribers true and complete copies of the Company’s audited
financial statements for the fiscal year ended December 31, 2006 (the “Audited
Financial Statements Date”) and unaudited financial statements for the fiscal
quarter ended June 30, 2007 (collectively, the “Financial
Statements”). To the best of the Company’s knowledge, except as
disclosed on Schedule 6.1(l) hereto, the Financial Statements complied in all
material respects with the requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations of the Securities
and Exchange Commission (the “Commission”) promulgated thereunder, and the
Financial Statements do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. To the best of the Company’s
knowledge, except as disclosed on Schedule 6.1(l) hereto, as of their respective
dates, the Financial Statements were complete and correct in all material
respects and complied with applicable accounting requirements and the published
rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. To the best of the Company’s
knowledge, such Financial Statements have been prepared in accordance with
accounting principles generally accepted in the United States ("GAAP") applied
on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the Notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial position of the Company and its subsidiaries as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(m) No Material Adverse
Change. Other than as disclosed in the Financial Statements,
resulting from existing debt reflected on such Financial Statements, or due to
debts incurred in the operation of the business, the Company has not experienced
or suffered any Material Adverse Effect.
(n) No Undisclosed
Liabilities. Since the Audited Financial Statements
Date, neither the Company nor any of its subsidiaries has incurred any
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) other than
those incurred in the ordinary course of the Company's or its subsidiaries
respective businesses or which, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect.
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Agreement and Accredited Investor Questionnaire - Page 14 of 30
(o) Indebtedness. The
Financial Statements and/or Schedule 6.1(o) hereto sets forth as of a recent
date all outstanding secured and unsecured Indebtedness of the Company or any
subsidiary, or for which the Company or any subsidiary has
commitments. For the purposes of this Agreement, “Indebtedness” shall
mean (a) any liabilities for borrowed money or amounts owed in excess of
$175,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $25,000 due under leases required to be
capitalized in accordance with GAAP. Except as set forth on Schedule
2.1(k), neither the Company nor any subsidiary is in default with respect to any
Indebtedness.
(p) Title to
Assets. Except as provided in Schedule 6.1(p) hereto, each of
the Company and the subsidiaries has good and marketable title to all of its
real and personal property, free and clear of any mortgages, pledges, charges,
liens, security interests or other encumbrances, except for those that,
individually or in the aggregate, do not cause a Material Adverse
Effect. Upon the receipt of proceeds from this offering, all leases
of the Company and each of its subsidiaries will be brought current and will be
valid and subsisting and in full force and effect.
(q) Actions
Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or any other proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any subsidiary which questions the validity of this Agreement or any of the
other transaction documents or the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except
as set forth in the Financial Statements or on Schedule 6.1(q) hereto, there is
no action, suit, claim, investigation, arbitration, alternate dispute resolution
proceeding or any other proceeding pending or, to the knowledge of the Company,
threatened, against or involving the Company, any subsidiary or any of their
respective properties or assets. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any subsidiary or any
officers or directors of the Company or subsidiary in their capacities as
such.
(r) Compliance with
Law. The business of the Company and the subsidiaries has been
and is presently being conducted in accordance with all applicable federal,
state and local governmental laws, rules, regulations and ordinances, except for
such
noncompliance that, individually or in the aggregate, would not cause a Material
Adverse Effect. The Company and each of its subsidiaries have all
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of its business as now
being conducted by it unless the failure to possess such franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
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Agreement and Accredited Investor Questionnaire - Page 15 of 30
(s) Taxes. The
Company and each of the subsidiaries has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected in
the financial statements of the Company and the subsidiaries for all current
taxes and other charges to which the Company or any subsidiary is subject and
which are not currently due and payable. None of the federal income
tax returns of the Company or any subsidiary have been audited by the Internal
Revenue Service. The Company has no knowledge of any additional
assessments, adjustments or contingent tax liability (whether federal or state)
of any nature whatsoever, whether pending or threatened against the Company or
any subsidiary for any period, nor of any basis for any such assessment,
adjustment or contingency.
(t) Intellectual
Property. The Company and each of the subsidiaries owns or
possesses all patents, trademarks, domain names (whether or not registered) and
any patentable improvements or copyrightable derivative works thereof, websites
and intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations, and all rights with respect to the
foregoing, which are necessary for the conduct of its business as now conducted
without any conflict with the rights of others.
(u) Environmental
Compliance. The Company and each of its subsidiaries have
obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under
any Environmental Laws. “Environmental Laws” shall mean
all applicable laws relating to the protection of the environment including,
without limitation, all requirements pertaining to reporting, licensing,
permitting, controlling, investigating or remediating emissions, discharges,
releases or threatened releases of hazardous substances, chemical substances,
pollutants, contaminants or toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature, into the air, surface water, groundwater or
land, or relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, material or wastes,
whether solid, liquid or gaseous in nature. The Company has all
necessary governmental approvals required under all Environmental Laws and used
in its business or in the business of any of its subsidiaries. The
Company and each of its subsidiaries are also in compliance with all other
limitations, restrictions, conditions, standards, requirements, schedules and
timetables required or imposed under all
Subscription
Agreement and Accredited Investor Questionnaire - Page 16 of 30
Environmental
Laws. Except for such instances as would not individually or in the
aggregate have a Material Adverse Effect, there are no past or present events,
conditions, circumstances, incidents, actions or omissions relating to or in any
way affecting the Company or its subsidiaries that violate or may violate any
Environmental Law after the Closing Date or that may give rise to any
environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
(v) Books and Record; Internal
Accounting Controls. The books and records of the Company and
its subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company or any
subsidiary. The Company maintains a manual system of internal
accounting controls to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements to maintain asset accountability, and (iii) access to assets is
permitted only in accordance with management’s general or specific
authorization.
(w) Material
Agreements. Except for the transaction documents (with respect
to clause (i) only) or as set forth in the Financial Statements or on Schedule
6.1(u) hereto, or as would not be reasonably likely to have a Material Adverse
Effect, (i) the Company and each of its subsidiaries have performed all
obligations required to be performed by them to date under any written or oral
contract, instrument, agreement, commitment, obligation, plan or arrangement,
filed or required to be filed with the Commission (the "Material Agreements"),
(ii) neither the Company nor any of its subsidiaries has received any notice of
default under any Material Agreement and, (iii) to the best of the Company's
knowledge, neither the Company nor any of its subsidiaries is in default under
any Material Agreement.
(x) Transactions with
Affiliates. Except as set forth in the Financial Statements or
on Schedule 6.1(x) hereto or in Section 6.1(aa) below, there are no loans,
leases, agreements, contracts, royalty agreements, management contracts or
arrangements or other continuing transactions between (a) the Company or any
subsidiary on the one hand, and (b) on the other hand, any officer, employee,
consultant or director of the Company, or any of its subsidiaries, or any person
owning any capital stock of the Company or any subsidiary or any member of the
immediate family of such officer, employee, consultant, director or stockholder
or any corporation or other entity controlled by such officer, employee,
consultant, director or stockholder, or a member of the immediate family of such
officer, employee, consultant, director or stockholder.
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Agreement and Accredited Investor Questionnaire - Page 17 of 30
(y) Securities
Act of 1933. Based in material part upon the representations
herein of the Subscribers, the Company has complied and will comply with
all applicable federal and state securities laws in connection with the offer,
issuance and sale of the Shares and the Warrants hereunder. Neither
the Company nor anyone acting on its behalf, directly or indirectly, has or will
sell, offer to sell or solicit offers to buy any of the Shares, the Warrants or
similar securities to, or solicit offers with respect thereto from, or enter
into any preliminary conversations or negotiations relating thereto with, any
person, or has taken or will take any action so as to bring the issuance and
sale of any of the Shares and the Warrants under the registration provisions of
the Securities Act and applicable state securities laws, and neither the Company
nor any of its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection with the offer
or sale of any of the Shares and the Warrants.
(z) Governmental
Approvals. Except for the filing of any notice prior or
subsequent to the Closing Date that may be required under applicable state
and/or Federal securities laws (which if required, shall be filed on a timely
basis), including the filing of a Form D and a registration statement or
statements pursuant to the Registration Rights Agreement, no authorization,
consent, approval, license, exemption of, filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution or delivery of the Shares and the Warrants, or
for the performance by the Company of its obligations under the transaction
documents.
(aa) Employees. Neither
the Company nor any subsidiary has any collective bargaining arrangements or
agreements covering any of its employees. The Company has employment
contracts with its CEO, its VP of Marketing and its general
counsel. Each employee has signed a written agreement regarding
proprietary information, non-competition agreement, non-solicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such subsidiary. No officer,
consultant or key employee of the Company or any subsidiary whose termination,
either individually or in the aggregate, could have a Material Adverse Effect,
has terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
subsidiary.
(bb) Dilutive
Effect. The Company understands and acknowledges that its
obligation to issue shares of Common Stock upon conversion of the Notes in
accordance with this Agreement and the Notes and its obligations to issue the
Warrant Shares upon the exercise of the Warrants in accordance with this
Agreement and the Warrants, is, in each case, absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interest of other stockholders of the Company.
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Agreement and Accredited Investor Questionnaire - Page 18 of 30
(cc) No
Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
securities pursuant to this Agreement to be integrated with prior
offerings by the Company for purposes of the Securities Act which would prevent
the Company from selling the securities pursuant to Rule 506 under the
Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or subsidiaries take
any action or steps that would cause the offering of the Shares to be integrated
with other offerings. The Company does not have any registration
statement pending before the Commission or currently under the Commission’s
review.
(dd) Independent Nature of
Subscribers. The Company acknowledges that the obligations of
each Subscriber under this Agreement and the other transaction documents are
several and not joint with the obligations of any other Subscriber, and no
Subscriber shall be responsible in any way for the performance of the
obligations of any other Subscriber under the transaction
documents. The Company acknowledges that the decision of each
Subscriber to purchase securities pursuant to this Agreement has been made by
such Subscriber independently of any other purchase and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or of its Subsidiaries
which may have made or given by any other Subscriber or by any agent or employee
of any other Subscriber, and no Subscriber or any of its agents or employees
shall have any liability to any Subscriber (or any other person) relating to or
arising from any such information, materials, statements or
opinions. The Company acknowledges that nothing contained herein and
no action taken by any Subscriber pursuant hereto or thereto, shall be deemed to
constitute the Subscribers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Subscribers are in
any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents.
(ee) Off-Balance Sheet
Arrangements. There is no transaction, arrangement, or other
relationship between the Company and an unconsolidated or other off balance
sheet entity that is not disclosed in its Financial Statements that should be
disclosed in accordance with GAAP and that would be reasonably likely to have a
Material Adverse Effect.
(ff) Foreign Corrupt
Practices. Neither the Company nor any Subsidiary, nor to the
knowledge of the Company, any agent or other person acting on behalf of the
Company or any Subsidiary, has (i) directly or indirectly, used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to
any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or made by
any person acting on its behalf of which the Company is aware) which
is in violation of law, or (iv) violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1977, as amended.
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Agreement and Accredited Investor Questionnaire - Page 19 of 30
6.2 Reliance
on Company’s representations and warranties. The
Subscriber acknowledges that no information or representation concerning
the Company has been provided to the Subscriber other than those contained in
this Agreement, and that the Subscriber is relying entirely upon this
Agreement. Any other information given or statement made is given or
made without liability or responsibility howsoever arising on the part of the
Company. No person acting as agent of the Company has any authority
to make or give any representation or warranty whatsoever in relation to the
Company or the Shares. Any such information given or statement made
is given or made without liability or responsibility howsoever arising on the
part of the Company, and the Subscriber hereby releases the Company from any
claims that may arise in respect thereof.
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Agreement and Accredited Investor Questionnaire - Page 20 of 30
Article
7
COMPANY
COVENANTS
7.1 Securities
Compliance. The Company shall notify the Commission in
accordance with their rules and regulations, of the transactions contemplated by
this Agreement, including filing a Form D with respect to the securities as
required under Regulation D and applicable “blue sky” laws, and shall take all
other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
securities to the Subscriber or subsequent holders.
7.2 Registration
and Listing. The Company shall use
its commercially reasonable efforts to cause its Common Stock to be registered
under the Exchange Act, to comply in all respects with its reporting and filing
obligations under the Exchange Act, to comply with all requirements related to
any registration statement filed pursuant to this Agreement, and to not take any
action or file any document (whether or not permitted by the Securities Act or
the rules promulgated thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under the Exchange
Act or Securities Act, except as permitted herein. The Company will
use its commercially reasonable efforts to trade its Common Stock on the OTC
Bulletin Board or other exchange or market on which the Common Stock may be
traded in the future. Subject to the terms of this Agreement, the
Company further covenants that it will use its commercially reasonable efforts
as the Subscribers may reasonably request, all to the extent required from time
to time to enable the Subscribers to sell the Shares without registration under
the Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act.
7.3 Compliance
with Laws. The
Company shall comply, and cause each subsidiary to comply, with all applicable
state and federal laws, rules, regulations and orders, noncompliance with which
could have a Material Adverse Effect.
7.4 Keeping
of Records and Books of Account. The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper and if applicable,
reasonable reserves for depreciation, depletion, obsolescence, amortization,
taxes, bad debts and other purposes in connection with its business shall be
made.
7.5 Use of
Proceeds. The net
proceeds from the sale of the Shares hereunder shall be used by the Company to
pay indebtedness and for working capital and general corporate purposes and not
to redeem any Common Stock or securities convertible, exercisable or
exchangeable into Common Stock or to settle any outstanding
litigation.
7.6 Reservation
of Shares. So long as any of
the Notes or Warrants remain outstanding, the Company shall use its commercially
reasonable efforts to at all times have authorized, and reserved for the purpose
of issuance, free of preemptive rights and other similar contractual rights of
stockholders, a number of shares of Common Stock equal to
one hundred percent (100%) of the number of shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all of the Notes and
exercise of the Warrants then outstanding.
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Agreement and Accredited Investor Questionnaire - Page 21 of 30
7.7 Reporting
Status. So long as a
Subscriber beneficially owns any of the Shares, once the Company becomes a
reporting company, the Company shall use its commercially reasonable efforts to
timely file all reports required to be filed with the Commission pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination.
7.8 Disclosure
of Material Information. The Company
covenants and agrees that neither it nor any other person acting on its behalf
has provided or will provide any Subscriber or its agents or counsel with any
information that the Company believes constitutes material non-public
information (other than with respect to the transactions contemplated by this
Agreement), unless prior thereto such Subscriber shall have executed a written
agreement regarding the confidentiality and use of such information. The
Company understands and confirms that each Subscriber shall be relying on the
foregoing representations in effecting transactions in securities of the
Company.
7.9 Pledge of
Securities. The
Company acknowledges and agrees that the Shares may be pledged by a Subscriber
in connection with a bona fide margin agreement or other loan or financing
arrangement that is secured by the Common Stock. The pledge of Common
Stock shall not be deemed to be a transfer, sale or assignment of the Common
Stock hereunder, and no Subscriber effecting a pledge of Common Stock shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document; provided that a Subscriber and its pledgee shall be required to comply
with the applicable provisions of this agreement in order to effect a sale,
transfer or assignment of Common Stock to such pledgee. At the Subscribers'
expense, the Company hereby agrees to execute and deliver such documentation as
a pledgee of the Common Stock may reasonably request in connection with a pledge
of the Common Stock to such pledgee by a Subscriber.
7.10 Company
Indemnity. The Company
agrees to indemnify and hold harmless the Subscribers (and their respective
directors, officers, affiliates, agents, successors and assigns) from and
against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorneys’ fees, charges and
disbursements) incurred by the Subscribers as a result of any inaccuracy in or
breach of the representations, warranties or covenants made by the Company
herein as such are incurred, except to the extent that such amounts result
solely from the Subscriber’ failure to perform any covenant or agreement
contained in this Agreement or the Subscriber’s illegal or willful misconduct,
gross negligence, misrepresentations, recklessness or bad faith (in each case,
as determined by a judgment to such effect) in performing its obligations under
this Agreement.
Subscription
Agreement and Accredited Investor Questionnaire - Page 22 of 30
Article
8
CLOSING
CONDITIONS
8.1 The
closing of the transactions contemplated by this Agreement is subject to the
satisfaction of each of the following conditions:
(a) The
Company shall have delivered to the Subscriber a secretary’s certificate, dated
as of the closing date, as to (i) the resolutions adopted by the Board of
Directors approving the transactions contemplated hereby, (ii) the incorporation
documents and bylaws of the Company, each as in effect at the closing, and (iii)
the authority and incumbency of the officers of the Company executing the
Transaction Documents and any other documents required to be executed or
delivered in connection therewith;
(b) The
Company shall have delivered to Subscribers a copy of the resolutions adapted by
its Board of Directors authorizing the offering, the issuance of the Notes and
Warrants;
(c) No
Material Adverse Effect (as hereinafter defined) shall have occurred since the
date this offer was accepted;
(d) All
of the representations and warranties of the Company and each Subscriber
hereunder shall be true and correct in all material respects as of the closing
date, except for representations and warranties that are expressly made as of a
particular date, which shall be true and correct as of such date.
(e) The
Company shall have delivered to the Subscriber an
officer’s certificate signed by an executive officer on behalf of the
Company, dated as of the closing date, confirming the accuracy of the Company’s
representations, warranties and covenants as of the closing date and confirming
the compliance by the Company with the conditions precedent set forth herein as
of the closing date; and
(f) The
Company shall have issued or authorized the issuance of the certificates
representing the Notes and the Warrants, to each Subscriber based upon their
respective purchase amounts hereunder, which Notes and Warrants shall be
delivered to the Subscribers within ten (10) business days of the closing
date.
Subscription
Agreement and Accredited Investor Questionnaire - Page 23 of 30
Article
9
GENERAL
PROVISIONS
9.1 Address
for delivery. Each notice, demand or other communication
required
or permitted to be given under this Agreement shall be in writing and shall be
sent by delivery (electronic with conformation or otherwise) or by prepaid
registered mail return receipt requested deposited in a post office
in United States addressed to the Subscriber or the Company at the
address specified in this Agreement. The date of receipt of such
notice, demand or other communication shall be the date of delivery thereof if
delivered, or, if given by registered mail as aforesaid, shall be deemed
conclusively to be the fifth day after the same shall have been so mailed,
except in the case of interruption of postal services for any reason whatsoever,
in which case the date of receipt shall be the date on which the notice, demand
or other communication is actually received by the addressee. Either
party may at any time and from time to time notify the other party in writing of
a change of address and the new address to which notice shall be given to it
thereafter until further change.
9.2 Severability
and construction. Each Article, section, sub-section,
paragraph, sub-paragraph, term and provision of this Agreement, and any portion
thereof, shall be considered severable, and if, for any reason, any portion of
this Agreement is determined to be invalid, contrary to or in conflict with any
applicable present or future law, rule or regulation, that ruling shall not
impair the operation of, or have any other effect upon, such other portions of
this Agreement as may remain otherwise intelligible (all of which shall remain
binding on the parties and continue to be given full force and agreement as of
the date upon which the ruling becomes final).
.
9.3 Governing
law; Jurisdiction. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of New York, without regard to principles of conflicts of
laws. Any legal action or proceeding with respect to this Agreement
shall be brought in the courts of the State of New York or of the United States
of America sitting in Manhattan, New York, and, by execution, delivery and
acceptance of this Agreement, both the Company and Subscriber hereby accept for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Company and Subscriber
hereby irrevocably waive, in connection with any such action or proceeding, any
objection, including, without limitation, any objection to the laying of venue
or based on the grounds of forum non conveniens, which they may now or hereafter
have to the bringing of any such action or proceeding in such respective
jurisdictions.
9.4 Survival
of representations and warranties. The covenants,
representations and warranties contained herein shall survive the closing of the
transactions contemplated hereby.
9.5 Counterparts. This
Agreement may be signed by the parties hereto in as many counterparts as may be
necessary, each of which so signed shall be deemed to be an original, and such
counterparts together shall constitute one and the same instrument and
notwithstanding the date of execution will be deemed to bear the execution date
as set forth in this Agreement. This Agreement may also be executed
and exchanged by facsimile and such facsimile copies shall be valid and
enforceable agreements.
9.6 Entire
Agreement and amendments. This Agreement constitutes the
only agreement between the parties with respect to the subject matter hereof and
shall supersede any and all prior negotiations and
understandings. There are no collateral agreements or understandings
hereto and this Agreement, and the documents contemplated
herein, constitutes the totality of the parties’ agreement. This
Agreement may be amended or modified in any respect by written instrument
only.
Subscription
Agreement and Accredited Investor Questionnaire - Page 24 of 30
9.7 Successors
and assigns. The terms and provisions of this Agreement
shall be binding upon and enure to the benefit of the Subscriber, the Company
and their respective successors and lawfully permitted assigns; provided that,
except as herein provided, this Agreement shall not be assignable by any party
without the written consent of the other. The benefit and obligations
of this Agreement, insofar as they extend to or affect the Subscriber, shall
pass with any assignment or transfer of any of the Shares in accordance with the
terms of this Agreement.
9.8 Effective
date. This Agreement shall take effect upon the date of
acceptance by the Company.
Subscription
Agreement and Accredited Investor Questionnaire - Page 25 of 30
IN
WITNESS WHEREOF the Parties hereto have hereunto set their respective
hands and seals in the presence of their duly authorized signatories effective
as at the date first above written.
Subscription
by Subscriber:
Dated
at __________, __________, on this _____ day of __________, 200_.
| Name of Subscriber - please print | ||
|
Subscriber’s
Address
|
||
| By: | ||
| Official Capacity or Title - please print | ||
| Authorized Signature | Telephone Number | |
|
Please
print name of individual whose
|
Facsimile Number | |
| signature appears above if different than | ||
|
the
name of the Subscriber printed above
|
Acceptance
by the Company:
DAIS
ANALYTIC CORPORATION. hereby accepts the above subscription by the
Subscriber on this _____ day of ___________, 2007.
| The CORPORATE SEAL of | ) | |
| DAIS ANALYTIC CORPORATION., | ) | |
| The Company herein, | ) | |
| was hereunto affixed in the presence of: | ) | (C/S) |
| ) | ||
| Authorized Signatory | ) |
Subscription
Agreement and Accredited Investor Questionnaire - Page 26 of 30
SCHEDULE
OF EXCEPTIONS PURSUANT TO ARTICLE 6
OF
SUBSCRIPTION
AGREEMENT AND ACCREDITED INVESTOR QUESTIONNAIRE
SCHEDULE
6.1 (i)
|
|
a.
|
Authorized
capital stock of Company and the shares thereof currently issued and
outstanding as of the date hereof:
|
| Authorized Shares: | ||||
| Preferred Shares | 10,000,000 | |||
| Common Shares | 50,000,000 | |||
| Issued and Outstanding Shares: | ||||
| Preferred (1) | - 0 - | |||
| Common | 8,427,579 | |||
| Options/Warrants Issued (2) | 6,844,181 | |||
| Shares issuable under Company’s 2000 Incentive Plan | 626,856 | |||
| Shares subject to issuance under Convertible note and Warrants Issuable (3) | 2,586,741 | |||
| Common Stock subject to Issue due to Bridge Financing: | ||||
| Share subject to issue pursuant to Bridge financing including warrant shares to Placement Agent assuming $3Million in Notes are issued | 31,500,000 | |||
| Share subject to issue pursuant to Bridge financing including warrant shares to Placement Agent assuming $3Million in Notes are issued | ||||
|
|
Footnotes:
|
|
|
(1)
In anticipation of this Offering the Company has an agreement with the
existing Preferred Shareholder finding all Series A Preferred Holdings,
Rights, etc. satisfied with the former Preferred Shareholder now being a
Common Shareholder. When the execution of this agreement is complete all
existing Preferred Shares and Warrants, and associated Preferred
Shareholder rights cease to
exist.
|
Subscription
Agreement and Accredited Investor Questionnaire - Page 27 of 30
|
(2)
|
An
existing option holder is has agreed to return 328,500 options to the
Company as of October 15, 2007.
|
|
(3)
|
This
sum is comprised of two items – the first is 248,687 warrants owed to
previous investors. The second is the Company entered into a six month
financial and strategic consulting agreement dated September 1, 2005 with
a financial consulting company. (“Consulting Company”) by which the
Consulting Company was to provide the Company with consulting services and
assist it in the procurement of equity and debt financing for business
expansion and development up to a maximum of $20,000,000. The
Consulting Company is not a license broker-dealer. In exchange for these
services, two of the shareholders of the Company assigned their
Convertible Notes Receivable, valued at $627,723, to the Consulting
Company. Per the terms of the Consulting Agreement and its
related documents, one half of the first note became vested in the
Consulting Company upon the execution of the Consulting Agreement which by
the terms of the Agreement resulted in $156,930 of said first note being
subject to conversion into the Company’s common stock at the rate of one
share per $.10 of note balance. In addition, the agreement
states that an additional $156,931 would be potentially eligible for
conversion upon the Company raising $1,000,000 in financing from any
source during the term of the Consulting Agreement. Conversion rights were
subject to pro rata vesting based on the funding secured. For
financial presentation purposes, the Company has accounted for this
transaction as a capital contribution by the stockholders of $627,723 for
the forgiveness of their notes and as consulting expense for equity given
to the Consulting Company. During the year ended December 31,
2005, the Company received funding of $599,972 in the form of bridge
loans. On December 23, 2005 the Company terminated the
Consulting Agreement subject to the provisions thereof. The
Company has no further obligations of any nature to the Consulting Company
for lack of performance by the Consulting Company. The shares to which
this note may be converted - 2,338,954 are included in the above table
even though the note balance has not been converted. In addition, the
shareholder of second note may contend, and has a possibility of being
successful, in having the amendment and assignment declared void requiring
his note be reinstated on the Company’s books. The shares
associated with this note are included in the Fully Diluted totals
presented above. The accounting entries made by the Company with regard to
the first note are not to be construed as a waiver of any rights the
Company may have in law or equity under the consulting agreement or any
agreements related thereto, nor as an admission, of an nature, by the
Company.
|
|
(4)
|
The
Company has entered into an agreement with Next Generation Investments,
LLC to modify the parties February 26, 2007 note indicating the
outstanding principal and interest of this note shall be made solely in
cash and not in the securities of the Company. Next Generation has
indicated a willingness to reinvest a portion of the initial investment in
this Offering.
|
|
(5)
|
Company
has an agreement with holders of 3,430,455 common shares whereby the
twelve parties have agreed to registration right agreement with the
Company if needed.
|
Subscription Agreement and Accredited Investor Questionnaire - Page 28 of
30
Schedule
6.1 (l)
None
Schedule
6.1 (o)
|
Secured
Debt:
|
|||
|
Holder
|
Amount
|
Description
|
|
|
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
|
80,050
|
Loan
|
|
|
Vision
Capital
|
83,683
|
Loan
|
|
|
Next
Generation
|
151,167
|
Loan
– reinvesting a portion
|
|
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
89,285
|
Loan
|
|
|
Unsecured
Debt:
|
|||
|
Holder
|
Amount
|
Description
|
|
|
▇▇▇▇
Family Trust
|
208,617
|
Loan
|
Schedule
6.1 (p)
Company’s
inventory, equipment, furnishings, receivables and trade fixtures together with
all of its right, title, and interest to any trademarks, trade names, contract
rights, and leasehold interests are pledge as security under the notes to
Sternlicht, Vision Capital, Next Generation (has stated willingness to reinvest
some portion or all into this Offering), and ▇▇▇▇▇▇▇▇ notes.
Schedule
6.1 (q)
Patent
interference relating to Company’s United States Patent number 6,413,298 was
filed with United States Patent Office in May of 2006.
Schedule
6.1 (u)
None
Subscription
Agreement and Accredited Investor Questionnaire - Page 29 of 30
Schedule 6.1(x)
|
|
·
|
Ethos
Business Ventures, LLC.
|
|
|
·
|
Aegis
Biosciences, LLC
|
|
|
·
|
▇▇▇▇
Family Charitable Trust
|
|
|
·
|
Legend
Merchant Group
|
|
|
·
|
Next
Generation Capital
|
|
|
·
|
▇▇▇▇▇
▇▇▇▇▇ - Individual
|
|
|
·
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
|
|
·
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
|
|
·
|
▇▇▇▇▇▇▇▇
Law Group
|
|
|
·
|
Spartan
Capital
|
|
|
·
|
Option/warrant
agreements
|
|
|
·
|
Agreement
to enter into Registration Rights Agreement with twelve (12) existing
shareholders as noted in Schedule
6.1(i)
|
Subscription Agreement and Accredited Investor Questionnaire - Page 30of 30