XG SCIENCES, INC. SUBSCRIPTION AGREEMENT FOR ACCREDITED INVESTORS UNDER REGULATIOND
Exhibit 10.36
XG SCIENCES, INC.
SUBSCRIPTION AGREEMENT
FOR ACCREDITED INVESTORS UNDER REGULATION D
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY U.S. STATE OR ANY OTHER JURISDICTION. THERE ARE FURTHER RESTRICTIONS ON THE TRANSFERABILITY OF THE SECURITIES DESCRIBED HEREIN.
THE PURCHASE OF THE SECURITIES INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY ACCREDITED INVESTORS WHO CAN BEAR THE RISK OF THE LOSS OF THEIR ENTIRE INVESTMENT.
Ladies/Gentlemen:
XG Sciences, Inc., a Michigan corporation (the "Company") is selling in this offering (this “Offering”) (i) promissory notes (each a “Note”), in the form attached hereto as Exhibit A, and (ii) warrants to purchase shares of the common stock of the Company, no par value per share (“Common Stock”) in the form attached hereto as Exhibit B (“Warrants” and together with the Notes and any shares of Common Stock issuable upon exercise of the Warrants, the “Securities”) to persons who are “accredited investors” as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The Company reserves the right to increase or decrease the amount of the Offering at its sole discretion. The Company may conduct multiple closings of this Offering upon its acceptance of subscriptions from investors (each, a “Closing”).
| 1. | Subscription. |
1.1 The undersigned hereby subscribes for the number of Securities set forth on the signature page below at the purchase price set forth therein. The undersigned acknowledges and agrees that the Company will only issue Warrants to purchase Common Stock at a strike price of $8 per share (with a 30% warrant coverage for investors who in invest in the Offering prior to December 31, 2015, and a 20% warrant coverage for investors who invest thereafter), to those investors who meet the criteria below.
Such Warrants will have a five (5) year term and will contain a provision that allows for a net exercise of the Warrants by the holder and that to the extent any of such warrants are “in the money” at expiration, the Company will automatically effect a “net exercise” of such Warrants on behalf of the holder. The Company reserves the right to alter this Warrant coverage at any time in its discretion prior to execution of this Agreement by the undersigned.
1.2 If the undersigned is paying with a check or money order, enclosed is a check or money order payable to the order of XG Sciences, Inc., in the amount set forth on the signature page below as payment in full of the total purchase price of the Securities subscribed for.
1.3 If the undersigned in paying by wire transfer, the understand shall effect a wire transfer in the amount set forth on the signature page below as payment in full of the total purchase price of the Securities subscribed for to the bank account set forth in and in accordance with the wire instructions detailed in Exhibit C.
1.4 The subscription amount tendered by the undersigned will be deposited by the Company into a non-interest bearing account when received.
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1.5 The Company expects to utilize the subscription funds received from this Offering to expand capacity and invest in capital equipment. The remaining funds will be used to fund general Company operations and may be spent for salaries and wages, sales and marketing, research and development, or general corporate purposes as determined by management.
| 2. | Representations and Warranties of the Company. |
The Company hereby represents and warrants as follows:
2.1 The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted.
2.2 The Company has full power and authority and, has taken all requisite action on the part of the Company, its officers, directors and stockholders necessary for (i) the authorization, execution and delivery of the this Subscription Agreement, the Note and Warrant (collectively, the “Transaction Documents”), (ii) the authorization of the performance of all obligations of the Company hereunder or thereunder, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Securities. The Transaction Documents constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.
2.3 The issuance of the Securities has been duly and validly authorized and, when issued and paid for pursuant to this Subscription Agreement, shall be free and clear of all encumbrances and restrictions (other than those created by the undersigned investor (the “Investor”)), except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws. Upon the due exercise of the Warrants, the Common Stock issuable will be validly issued, fully paid and non-assessable free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and except for those created by the Investor. The Company has reserved a sufficient number of shares of Common Stock for issuance upon exercise of the Warrants.
2.4 The execution, delivery and performance by the Company of the Transaction Documents, and the offer, issuance and sale of the Securities require no consent of, action by or in respect of, or filing with, any governmental body, agency, or official other than filings that have been made pursuant to applicable state securities laws, and post-sale filings pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods. Subject to the accuracy of the representations and warranties of the Investor set forth in Section 5 hereof, the Company has taken all action necessary to exempt (i) the issuance and sale of the Securities, (ii) the issuance of the Common Stock upon exercise of the Warrants, and (iii) the other transactions contemplated by the Transaction Documents from the provisions of any shareholder rights plan or other “poison pill” arrangement, any anti-takeover, business combination or control share law or statute binding on the Company or to which the Company or any of its assets and properties may be subject and any provision of the Company Organizational Documents (as defined in Section 4.6) that is or could reasonably be expected to become applicable to the Investor as a result of the transactions contemplated hereby, including without limitation, the issuance of the Securities and the ownership, disposition or voting of the Securities by the Investor or the exercise of any right granted to the Investor pursuant to this Subscription Agreement or the other Transaction Documents.
2.5 The net proceeds of the Offering hereunder shall be used by the Company for working capital and general corporate purposes.
2.6 The execution, delivery and performance of the Transaction Documents by the Company and the issuance and sale of the Securities will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) the Company Organizational Documents (as defined in Section 4.6) in effect on the date hereof, or (ii)(a) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company, or (b) any agreement or instrument to which the Company is a party or by which the Company is bound or to which any of their respective assets or properties is subject.
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2.7 No person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company.
2.8 Neither the Company nor any person acting on its behalf has conducted any general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offer or sale of any of the Securities.
2.9 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 Company security or solicited any offers to buy any security, under circumstances that would adversely affect reliance by the Company on Section 4(a)(2) for the exemption from registration for the transactions contemplated hereby or would require registration of the Securities under the Securities Act .
2.10 There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of the Company’s officers or directors in their capacities as such, which could reasonably be expected to have a material adverse effect.
2.11 The Company has made or filed all federal and state income and all other material tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.
2.12 The Company shall 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 in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.
2.13 The Company is not in default under any material agreement or instrument, and to the knowledge of the Company, no such default by the Company is imminent.
2.14 Michael Knox has withdrawn his Default and Foreclosure Notice sent to the Company on December 7, 2015 and no other officer, director, or investor in the Company has provided the Company any notice of default under any material agreement or instrument.
3. Defaults. To the actual knowledge of the Company, all of the representations of the Company herein are true at the time of executing this Subscription Agreement. If any of the representations of the Company made herein are false, it shall be an Event of Default (as defined in the Note) under the Note and subject to the remedies described therein.
4. Subscriber’s Acknowledgments and Agreements.
The undersigned understands, acknowledges and agrees that:
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4.1 This subscription may be accepted or rejected in whole or in part by the Company, in its sole discretion. The Company may also terminate the Offering at any time, and may increase or decrease the size of the Offering at its sole discretion.
4.2 Except as provided under applicable securities laws, this subscription is and shall be irrevocable except that (a) the undersigned’s execution and delivery of this Subscription Agreement will not constitute an agreement between the Company and the undersigned until this Subscription Agreement is accepted on behalf of the Company and, if not so accepted, the undersigned’s subscription and obligations hereunder will terminate and (b) the undersigned can, at any time prior to acceptance of this Subscription Agreement, request in writing that the undersigned be released from the obligations hereunder (and the Company may, but need not, in its discretion, elect to release the undersigned from the subscription and from such obligations).
4.3 No U.S. federal or state agency has made any finding or determination as to the fairness of the terms of this Offering. These Securities have not been recommended or endorsed by any U.S. federal or state securities commission or regulatory agency.
4.4 (a) The Securities have not been registered under the Securities Act, or applicable U.S. state securities laws, (b) the Securities are deemed to be “restricted securities” under the Securities Act and applicable U.S. state securities laws, and (c) the purchase of the Securities is taking place in a transaction not involving a public offering or persons that are not accredited investors. Furthermore, the undersigned is aware that any resale inconsistent with the Securities Act may create liability on the undersigned’s part and/or the part of the Company, and agrees not to assign, sell, pledge, transfer or otherwise dispose of or transfer any such Securities unless registered under the Securities Act and applicable U.S. state securities laws, or an opinion is given by counsel satisfactory to the Company that such registration is not required.
4.5 The undersigned acknowledges and agrees that there can be no assurance that there will be any market for the Securities in the foreseeable future, and that, as a result, the undersigned must be prepared to bear the economic risk of his investment for an indefinite period of time.
4.6 The Company has made available to the undersigned (a) the Company’s Articles of Incorporation and Bylaws, each as amended to date (collectively, the “Company Organizational Documents”), (b) the Shareholder Agreement dated March 18, 2013 (the “Shareholder Agreement”), (c) the Voting Agreement dated January 15, 2014 (the “Voting Agreement”), (d) the Certificate of Designations, (e) the Warrant and (f) the Note. The undersigned also acknowledges that the undersigned has had a reasonable opportunity to examine the Company Organizational Documents, the Shareholder Agreement, the Voting Agreement, the Certificate of Designations, the Warrant and the Note. The undersigned further acknowledges and agrees that the undersigned will continue to be bound by the Company Organizational Documents, the Shareholder Agreement, the Voting Agreement, the Certificate of Designations, the terms of the Warrant (if one is issued) and the Note.
| 5. | Subscriber’s Representations and Warranties. |
The undersigned hereby represents and warrants as follows:
5.1 The undersigned is acquiring the Securities for the undersigned’s own account for investment, not for the interest of any other person, not for resale to any other person and not with a view to or in connection with a sale or distribution.
5.2 All information furnished in the Investor Questionnaire, in the form of Exhibit D attached hereto, completed by the undersigned is true and correct in all respects.
5.3 The undersigned’s overall commitment to investments that are not readily marketable is not disproportionate to the undersigned’s net worth and the undersigned’s investment in the Company will not cause such overall commitment to become excessive. The undersigned has adequate net worth and means of providing for current needs and personal contingencies to sustain a complete loss of the undersigned’s investment in the Company, and the undersigned has no need for liquidity in this investment.
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5.4 The undersigned has sufficient knowledge and experience in financial and business matters so that he/she is capable of evaluating the merits and risks of an investment in the Securities and of protecting his or her interests in connection with such investment, or he/she has obtained the advice of an attorney, a certified public accountant, or an investment advisor registered under the Investment Advisors Act of 1940 or under the Michigan Uniform Securities Act of 2002, with respect to the merits and risks of an investment in the Securities and the protection of his interests.
5.5 The undersigned has had an opportunity to ask questions of and receive answers from representatives of the Company with respect to this Offering. The Company has provided the undersigned with all documents requested and has provided answers to all of the undersigned’s questions relating to an investment in the Company. In addition, the undersigned has had an opportunity to discuss this investment with representatives of the Company and to ask questions of them.
5.6 The undersigned is acquiring the Securities and has been furnished with the Company Organizational Documents (as amended to date), the Shareholder Agreement, the Voting Agreement, the Certificate of Designations, the Warrant and the Note. The undersigned has not been furnished with any prospectus or other offering literature.
5.7 The undersigned understands that an investment in the Company is speculative and involves a high degree of risk, and the undersigned has carefully reviewed and is aware of all of the risk factors related to the purchase of the Securities.
5.8 The undersigned understands that there is no market for the Securities, and it is not anticipated that such a market will develop.
5.9 If this Subscription Agreement is executed and delivered on behalf of a partnership, trust, corporation or other entity: the undersigned has been duly authorized to execute and deliver this Subscription Agreement, the Investor Questionnaire, and all other documents and instruments (if any) executed and delivered on behalf of such entity in connection with its purchase of Securities subscribed for.
5.10 The Company and the other purchasers are relying on the truth and accuracy of the declarations, representations and warranties herein made by the undersigned. Accordingly, the foregoing representations and warranties and undertakings are made by the undersigned with the intent that they may be relied upon in determining his/her suitability as a purchaser. The undersigned agrees that such representations and warranties shall survive the acceptance of the undersigned as a purchaser, and the undersigned indemnifies and agrees to hold harmless, the Company and each other purchaser from and against all damages, claims, expenses, losses or actions resulting from the untruth of any of the warranties and representations contained in this Subscription Agreement.
5.11 The foregoing representations and warranties are true as of the date of this Subscription Agreement and shall be true as of the date the Company issues and sells Securities to the undersigned. If such representations and warranties shall not be true in any respect prior to such date, the undersigned will give prompt written notice of such fact to the Company.
6 Certificates. The undersigned agrees that each certificate representing the Securities shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required by applicable state securities or "blue sky" laws):
“THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.”
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| 7 | Registration Rights; Exchange Right. |
7.1 The Company will use its best efforts to (a) publicly file a registration statement on Form S-1 with the Securities and Exchange Commission (“SEC”) to register shares of its Common Stock (a “Registration Statement”) by January 31, 2016 (the “Registration Timeframe”), provided, however, such Registration Timeframe may be extended as the Company determines in its sole discretion.
7.2 Commencing six (6) months following the listing of the Common Stock on a Qualified National Exchange, the Company shall be obligated to notify the holder of Registrable Securities (as defined below) in writing at least ten (10) days prior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding any registration statement relating to any employee benefit plan or with respect to any corporate reorganization or other transaction under Rule 145 of the Securities Act) and will afford each such holder an opportunity to include in such registration statement all or part of such Registrable Securities held by such holder. Each holder of Registrable Securities desiring to include in any such registration statement, all of part of the Registrable Securities held by it shall, within ten (10) days after the above-described notice from the Company, so notify the Company in writing. Such notice shall state the intended method of disposition of the Registrable Securities held by such holder. If a holder decides not to include all of its Registrable Securities in the registration statement thereafter filed by the Company, such holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein. “Registrable Securities” means the shares of Common Stock issuable upon the exercise of the Warrants sold pursuant to this Offering.
7.3 For the period of time commencing on the Closing of the Offering (hereinafter, the “Commencement Date”) and ending on the earlier to occur of (i) December 31, 2017, and (ii) the date the Company consummates a sale of New Securities (as defined below) that results in gross proceeds to the Company of at least $18,000,000 (the “Exchange Right Period”), in the event that the Company consummates any financing transaction with any third-party consisting of any new designation of debt, equity or equity-linked securities of the Company, such designation of securities having never been issued prior to the Commencement Date (any such security or securities used in such new financing are hereinafter collectively referred to as a “New Security”), then the Investor shall have the right (the “Exchange Right”), in his, her or its sole discretion, to exchange all or any portion of the Common Stock issuable to such Investor in connection herewith, in his, her or its possession on a price per share basis into such New Security on the relative price per share terms as such New Security was sold to the third-parties (an “Exchange”). Upon an Exchange, the Company shall take all necessary action to ensure that the Investor is assigned all rights and assumes all obligations set forth in the definitive agreements pursuant to which the New Security was sold. For so long as any amounts remain outstanding under the Notes during the Exchange Right Period, the Company shall notify each holder of such outstanding Notes in writing within ten (10) business days of the issuance of any New Security (the “New Security Closing Date”) and such written notice shall contain: (a) the names and contact information for the investors in the New Security, (b) the aggregate dollar amount or principal amount of such New Securities being issued to each new investor of such securities, and (c) a copy of the definitive transaction documents affecting the issuance of the New Security (“Notice”). Notwithstanding the foregoing, the Exchange Right attached to any particular New Security shall terminate at 5:00 PM, ET on the later of the 30th day following (a) the Notice date, or (b) the New Security Closing Date. The holder shall make each election under this Section 7 by delivering written notice of such election to the Company.
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| 8 | Governing Law; Arbitration; Venue. |
8.1 This Subscription Agreement and all rights and obligations hereunder shall be deemed to be made under and governed by the laws of the State of Michigan applicable to agreements made and to be performed entirely within such State, without reference to such State's laws regarding the conflict of laws.
8.2 Any dispute or difference with respect to any matter arising out of or in connection with this Subscription Agreement and the Offering shall first be submitted for arbitration to the American Arbitration Association.
8.3 Any litigation arising hereunder shall be instituted only in Ingham County or the state courts of the State of Michigan sitting in Ingham County. All parties agree that venue shall be proper in Ingham County for all such legal or equitable proceedings.
8.4 Failure of any party to exercise any right or remedy under this Subscription Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.
8.5 All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.
8.6 The headings of this Subscription Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Subscription Agreement.
8.7 If any provision of this herein shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Subscription Agreement or the validity or enforceability of this Subscription Agreement in any other jurisdiction.
[Remainder of page intentionally left blank. Signatures to follow]
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IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Subscription Agreement as of the Date Accepted below.
| The Company: | ||
| XG SCIENCES, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| The Investor: | ||
| By: | ||
| Name: | ||
| Title: | ||
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| Date: |
| Name of Subscriber: |
Type of Subscriber (check one): Individual _____ Tenants in Common _____ Existing Partnership _____ Joint Tenants _____ Corporation _____ Trust _____ Minor with Adult Custodian under UGMA _____
| Principal Amount of Note Subscribed For: |
| Number of Warrants issuable (with a strike price of $8/share): |
| By: | |||
| Signature of Subscriber | Taxpayer I.D. Number of Subscriber | ||
| Name: | |||
| Title: | |||
| Subscriber’s business address, including email, and | Subscriber’s mailing address | ||
| telephone number (please type or print) | (if different than business address) | ||
| Email: | |||
| Phone: | |||
| By: | |||
| Signature of Co-Subscriber | Taxpayer I.D. Number of Co-Subscriber | ||
| Name: | |||
| Co-Subscriber’s business address including email and | Co-Subscriber’s mailing address | ||
| telephone number (please type or print) | (if different than business address) | ||
| Email: | |||
| Phone: | |||
Accepted:
XG SCIENCES, INC.
| By: | Date Accepted: | |||
| Name: | ||||
| Title: | ||||
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EXHIBIT A
FORM OF NOTE
EXHIBIT B
FORM OF WARRANT
EXHIBIT C
WIRE INFORMATION
EXHIBIT D
CONFIDENTIAL ACCREDITED INVESTOR QUESTIONNAIRE
XG SCIENCES, INC.
| To: | XG Sciences, Inc. |
XG Sciences, Inc., a Michigan corporation (the “Company”), is offering, pursuant to an accompanying Subscription Agreement (the “Subscription Agreement”), promissory notes (“Notes”) and warrants (“Warrants”) to purchase common stock, no par value per share (“Common Stock”). The Warrant and the Notes are referred to herein as the “Securities”.
I. The undersigned subscriber (the “Subscriber”) represents and warrants that he, she or it comes within one category marked below, and that for any category marked, he, she or it has truthfully set forth, where applicable, the factual basis or reason the Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL EXCEPT AS NECESSARY FOR THE COMPANY TO COMPLY WITH LAW AND/OR ANY RULES PROMULGATED BY ANY REGULATORY AGENCY. The undersigned shall furnish any additional information which the Company deems necessary in order to verify the answers set forth below.
| Category A_____ | The undersigned is an individual (not a partnership, corporation, etc.) whose individual net worth, or joint net worth with his or her spouse, presently exceeds $1,000,000. |
| Explanation. In calculating net worth you may include equity in personal property and real estate (other than the value, after deducting mortgage obligations, of Subscriber’s principal residence which may not be included in such net worth calculation), cash, short-term investments, stock and securities. Equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property. | |
| Category B_____ | The undersigned is an individual (not a partnership, corporation, etc.) who had an individual income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years (in each case including foreign income, tax exempt income and full amount of capital gains and losses but excluding any income of other family members and any unrealized capital appreciation) and has a reasonable expectation of reaching the same income level in the current year. |
| Category C_____ | The undersigned is a director or executive officer of the Company, which is issuing and selling the Securities. |
| Category D_____ | The undersigned is a bank; a savings and loan association; insurance company; registered investment company; registered business development company; licensed small business investment company (“SBIC”); or employee benefit plan within the meaning of Title 1 of ERISA and (a) the investment decision is made by a plan fiduciary which is either a bank, savings and loan association, insurance company or registered investment advisor, or (b) the plan has total assets in excess of $5,000,000 or is a self directed plan with investment decisions made solely by persons that are accredited investors. |
| 1 |
| (describe entity) |
| Category E_____ | The undersigned is a private business development company as defined in section 202(a)(22) of the Investment Advisors Act of 1940. |
| (describe entity) |
| Category F_____ | The undersigned is either a corporation, partnership, Massachusetts business trust, or non-profit organization within the meaning of Section 501(c)(3) of the Internal Revenue Code, in each case not formed for the specific purpose of acquiring the Securities and with total assets in excess of $5,000,000. |
| (describe entity) |
| Category G | The undersigned is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, where the purchase is directed by a “sophisticated person” as defined in Regulation 506(b)(2)(ii) under the Securities Act of 1933. |
| (describe entity) |
| Category H_____ | The undersigned is an entity (other than a trust) all the equity owners of which are “accredited investors” within one or more of the above categories. If relying upon this Category alone, each equity owner must complete a separate copy of this Questionnaire. |
| (describe entity) |
| Category I_____ | The undersigned is not within any of the categories above and is therefore not an accredited investor. |
| 2 |
For purposes hereof, “individual income” means adjusted gross income less any income attributable to a spouse or to property owned by a spouse, increased by the following amounts (but not including any amounts attributable to a spouse or to property owned by a spouse): (i) the amount of any interest income received which is tax-exempt under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), (ii) the amount of losses claimed as a limited partner in a limited partnership (as reported on Schedule E of Form 1040), (iii) any deduction claimed for depletion under Section 611 et seq. of the Code, and (iv) any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income pursuant to the provisions of Section 12.02 of the Code.
The undersigned agrees that the undersigned will notify the Company at any time on or prior to the execution of the Subscription Agreement or this Questionnaire in the event that the representations and warranties in the Subscription Agreement or in this Questionnaire shall cease to be true, accurate and complete.
II. SUITABILITY (please answer each question)
(a) For an individual Subscriber, please describe your current employment, including the company by which you are employed and its principal business:
(b) For an individual Subscriber, please describe any college or graduate degrees held by you:
(c) For all Subscribers, please list types of prior investments:
(d) For all Subscribers, please state whether you have you participated in other private placements before:
YES________ NO________
(e) If your answer to question (d) above was “YES”, please indicate frequency of such prior participation in private placements of:
| Public | Private | |||
| Companies | Companies | |||
| Frequently | ||||
| Occasionally | ||||
| Never |
| 3 |
(f) For individual Subscribers, do you expect your current level of income to significantly decrease in the foreseeable future:
YES________ NO________
(g) For trust, corporate, partnership and other institutional Subscribers, do you expect your total assets to significantly decrease in the foreseeable future:
YES________ NO________
(h) For all Subscribers, do you have any other investments or contingent liabilities which you reasonably anticipate could cause you to need sudden cash requirements in excess of cash readily available to you:
YES________ NO________
(i) For all Subscribers, are you familiar with the risk aspects and the non-liquidity of investments such as the Securities for which you seek to subscribe?
YES________ NO________
(j) For all Subscribers, do you understand that there is no guarantee of financial return on this investment and that you run the risk of losing your entire investment?
YES________ NO________
III. MANNER IN WHICH TITLE IS TO BE HELD. (circle one)
| (a) | Individual Ownership |
| (b) | Community Property |
| (c) | Joint Tenant with Right of Survivorship (both parties must sign) |
| (d) | Partnership* |
| (e) | Tenants in Common |
| (f) | Corporation* |
| (g) | Trust* |
| (h) | Limited Liability Company* |
| (i) | Other |
*If Securities are being subscribed for by an entity, the attached Certificate of Signatory must also be completed.
IV. FINRA AFFILIATION.
Are you affiliated or associated with a FINRA member firm (please check one):
YES________ NO________
If Yes, please describe:
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*If Subscriber is a Registered Representative with an FINRA member firm, have the following acknowledgment signed by the appropriate party:
The undersigned FINRA member firm acknowledges receipt of the notice required by Rule 3050 of the NASD Conduct Rules.
| Name of FINRA Member Firm | ||
| By: | ||
| Authorized Officer | ||
| Date: | ||
| V. | Disqualification Events. |
| 1. | Certain Criminal Convictions. |
Have you been convicted, within the past ten (10) years (or five (5) years, in the case of the Company, its predecessors and affiliated issuers), of any felony or misdemeanor involving:
| · | in connection with the purchase or sale of any security; |
| · | involving the making of any false filing with the U.S. Securities and Exchange Commission (the “SEC”); or |
| · | arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment advisor or paid solicitor of purchasers of securities? |
¨ Yes. If yes, please explain: ____________________________________________________
¨ No.
| 2. | Certain Court Injunctions and Restraining Orders. |
Are you subject to any order, judgment or decree of any court of competent jurisdiction that was entered within the past five (5) years and currently restrains or enjoins you from engaging in any conduct or practice:
| · | in connection with the purchase or sale of any security; |
| · | involving the making of any false filing with the SEC; or |
| · | arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities? |
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¨ Yes. If yes, please explain: ____________________________________________________
¨ No.
| 3. | Final Orders of Certain State and Federal Regulators. |
Are you subject to a Final Order (as defined below) of state regulators of securities, insurance, banking, savings associations or credit unions; federal banking agencies; the Commodity Futures Trading Commission; or the National Credit Union Administration that:
| · | bars you from: |
| · | associating with an entity regulated by any of the aforementioned regulators; |
| · | engaging in the business of securities, insurance or banking; or |
| · | engaging in savings association or credit union activities; or |
| · | constitutes a Final Order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct entered within the past ten (10) years? |
¨ Yes. If yes, please explain: ____________________________________________________
¨ No.
The term “Final Order” means a written directive or declaratory statement issued by a federal or state agency described in Rule 506(d)(1)(iii) under the Securities Act of 1933 under applicable statutory authority that provides for notice and an opportunity for a hearing, which constitutes a final disposition or action by that federal or state agency.
| 4. | SEC Disciplinary Orders. |
Are you subject to any order of the SEC that currently:
| · | suspends or revokes your registration as a broker, dealer, municipal securities dealer or investment adviser; |
| · | places limitations on the activities, functions or operations of, or imposes civil money penalties on, such person; or |
| · | bars you from being associated with any entity or from participating in the offering of any penny stock?1 |
¨ Yes. If yes, please explain: ____________________________________________________
1 A disqualification based on a suspension or limitation of activities expires when the suspension or limitation expires.
¨ No.
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| 5. | SEC Cease-and-Desist Orders. |
Are you subject to any order of the SEC that was entered within the past five (5) years and currently orders you to cease and desist from committing or causing a future violation of:
| · | any scienter-based (intent-based) anti-fraud provision of the federal securities laws (including, for example, but not limited to): |
| · | Section 17(a)(1) of the Securities Act of 1933, |
| · | Section 10(b) of the Exchange Act and Rule 10b-5, and |
| · | Section 15 (c) (1) of the Securities Exchange Act); or |
| · | Section 5 of the Securities Act of 1933, which generally requires that securities be registered and prohibits the sale of unregistered securities. |
¨ Yes. If yes, please explain: ____________________________________________________
¨No.
| 6. | SRO Suspension/Expulsion. |
Have you been suspended or expelled from membership in, or suspended or barred from association with a member of, a securities self-regulatory organization (“SRO”, such as a registered national securities exchange or a registered national or affiliated securities association, including FINRA) for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade?
¨ Yes. If yes, please explain: ____________________________________________________
¨No.
| 7. | SEC Stop Orders. |
Have you filed (as a registrant or issuer), or were you named as an underwriter in any registration statement or Regulation A offering statement filed with the SEC that, within the past five (5) years, was the subject of a refusal order, stop order, or order suspending the Regulation A exemption, or is currently the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued?
¨ Yes. If yes, please explain: ____________________________________________________
¨ No.
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| 8. | USPS False Representations Order. |
Are you subject to a United States Postal Service (“USPS”) false representation order entered within the past five (5) years, or are you currently subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the USPS to constitute a scheme or device for obtaining money or property through the mail by means of false representations?
¨ Yes. If yes, please explain: ____________________________________________________
¨ No.
VI. The undersigned is informed of the significance to the Company of the foregoing representations and answers contained in this Questionnaire contained herein and such answers have been provided under the assumption that the Company will rely on them.
VII. In furnishing the above information, the undersigned acknowledges that the Company will be relying thereon in determining, among other things, whether there are reasonable grounds to believe that the undersigned qualifies as a Purchaser under Section 4(2) and/or Regulation D of the Securities Act of 1933 and applicable state securities laws for the purposes of the proposed investment.
VIII. The undersigned understands and agrees that the Company may request further information of the undersigned in verification or amplification of the undersigned’s knowledge of business affairs, the undersigned’s assets and the undersigned’s ability to bear the economic risk involved in an investment in the securities of the Company.
IX. The undersigned represents to you that (a) the information contained herein is complete and accurate on the date hereof and may be relied upon by you, (b) the undersigned will notify you immediately of any change in any such information occurring prior to the acceptance of the subscription and will promptly send you written confirmation of such change. The undersigned hereby certifies that he, she or it has read and understands the Subscription Agreement related hereto and (c) the undersigned acknowledges that you may be required to publicly disclose the information provided in this Questionnaire and that he, she or it consents to such public disclosure.
X. In order for the Company to comply with applicable anti-money laundering/U.S. Treasury Department Office of Foreign Assets Control (“OFAC”) rules and regulations, Subscriber is required to provide the following information:
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| 1. | Payment Information |
(a) Name and address (including country) of the bank from which Subscriber’s payment to the Company is being wired (the “Wiring Bank”):
(b) Subscriber’s wiring instructions at the Wiring Bank:
(c) Is the Wiring Bank located in the U.S. or another “FATF Country”*?
________ Yes ________ No
(d) Is Subscriber a customer of the Wiring Bank?
________ Yes ________ No
| 2. | Additional Information |
For Individual Subscribers:
_____ A government issued form of picture identification (e.g., passport or drivers license).
_____ Proof of the individual’s current address (e.g., current utility bill), if not included in the form of picture identification.
* As of the date hereof, countries that are members of the Financial Action Task Force on Money Laundering (“FATF Country”) are: Argentina, Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, Kingdom of the Netherlands, New Zealand, Norway, Portugal, Russian Federation, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, United Kingdom and the United States of America.
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For Funds of Funds or Entities that Invest on Behalf of Third Parties:
| _____ | A certificate of due formation and organization and continued authorization to conduct business in the jurisdiction of its organization (e.g., certificate of good standing). |
| _____ | An “incumbency certificate” attesting to the title of the individual executing these subscription materials on behalf of the prospective investor. |
| _____ | A completed copy of a certification that the entity has adequate anti-money laundering policies and procedures (“AML Policies and Procedures”) in place that are consistent with the USA PATRIOT Act, OFAC and other relevant federal, state or non-U.S. anti-money laundering laws and regulations (with a copy of the entity’s current AML Policies and Procedures to which such certification relates). |
| _____ | A letter of reference any entity not located in the U.S. or other FATF Country, from the entity’s local office of a reputable bank or brokerage firm that is incorporated, or has its principal place of business located, in the U.S. or other FATF Country certifying that the prospective investor maintains an account at such bank/brokerage firm for a length of time and containing a statement affirming the prospective investor’s integrity. |
For all other Entity Subscribers:
| _____ | A certificate of due formation and organization and continued authorization to conduct business in the jurisdiction of its organization (e.g., certificate of good standing). |
| _____ | An “incumbency certificate” attesting to the title of the individual executing these subscription materials on behalf of the prospective investor. |
| _____ | A letter of reference from the entity’s local office of a reputable bank or brokerage firm that is incorporated, or has its principal place of business located, in the U.S. or other FATF Country certifying that the prospective investor maintains an account at such bank/brokerage firm for a length of time and containing a statement affirming the prospective investor’s integrity. |
| _____ | If the prospective investor is a privately-held entity, a certified list of the names of every person or entity who is directly or indirectly the beneficial owner of 25% or more of any voting or non-voting class of equity interests of the Subscriber, including (i) country of citizenship (for individuals) or principal place of business (for entities) and, (ii) for individuals, such individual’s principal employer and position. |
| _____ | If the prospective investor is a trust, a certified list of (i) the names of the current beneficiaries of the trust that have, directly or indirectly, 25% or more of any interest in the trust, (ii) the name of the settlor of the trust, (iii) the name(s) of the trustee(s) of the trust, and (iv) the country of citizenship (for individuals) or principal place of business (for entities). |
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XI. ADDITIONAL INFORMATION.
A TRUST MUST ATTACH A COPY OF ITS DECLARATION OF TRUST OR OTHER GOVERNING INSTRUMENT, AS AMENDED, AS WELL AS ALL OTHER DOCUMENTS THAT AUTHORIZE THE TRUST TO INVEST IN THE SECURITIES. ALL RESOLUTIONS AND DOCUMENTATION MUST BE COMPLETE AND CORRECT AS OF THE DATE HEREOF.
XII. INFORMATION VERIFICATION CONSENT.
BY SIGNING THIS QUESTIONNAIRE, SUBSCRIBER HEREBY GRANTS THE COMPANY PERMISSION TO REVIEW ALL PUBLICLY AVAILABLE INFORMATION REGARDING SUBSCRIBER, INCLUDING, BUT NOT LIMITED TO INFORMATION PROVIDED BY OFAC FOR THE PURPOSE OF VERIFYING INFORMATION PROVIDED BY SUBSCRIBER HEREIN.
[SIGNATURE PAGE FOLLOWS]
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INVESTOR QUESTIONNAIRE EXECUTION PAGE
| Subscriber’s Name | Co-Subscriber’s Name | |
| Signature | Signature (if purchasing jointly) | |
| Name Typed or Printed | Name Typed or Printed | |
| Title | Title | |
| Address | Address | |
| City, State and Zip Code | City, State and Zip Code | |
| Telephone Number | Telephone Number | |
| Email Address | Email Address |
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