XETHANOL CORPORATION
FORM OF SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT made as of this ____ day of _________
200__, between a publicly-traded company (the "Company"), which will acquire by
merger the business of Xethanol Corporation, and the undersigned subscriber (the
"Subscriber"). All terms not defined herein shall have the meaning ascribed to
them in the Company's Confidential Private Offering Memorandum dated November
2004, including any amendments or supplements thereto (the "Memorandum").
WHEREAS, the Company desires to secure equity financing by
issuing up to $12,000,000 in shares of Common Stock at a purchase price of $3.25
per share and has engaged National Securities Corporation and Neidiger, Tucker,
Bruner Inc. (the "Placement Agents") as its exclusive co-placement agents in
connection therewith; and
WHEREAS, the Subscriber desires to purchase the number of
shares of Common Stock set forth on the signature page hereof.
NOW, THEREFORE, in consideration of the promises and the
mutual covenants hereinafter set forth, the parties hereto do hereby agree as
follows:
I. SUBSCRIPTION FOR COMMON STOCK; REPRESENTATIONS AND WARRANTIES BY THE
SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase the number of shares of
Common Stock from the Company set forth on the signature page hereof, and the
Company agrees to issue such Common Stock to the Subscriber at a purchase price
equal to the product of (x) the number of shares of Common Stock subscribed for
and (y) $3.25 per share. The subscription price is payable by check made payable
to the order of "Signature Bank, as Escrow Agent for Xethanol Corporation" or by
wire transfer of immediately available funds delivered contemporaneously
herewith. The Common Stock purchased by the Subscriber will be delivered by the
Company promptly following the Termination Date (as hereinafter defined).
1.2 The Subscriber recognizes that the purchase of the shares of Common
Stock involves a high degree of risk and is suitable only for persons of
adequate financial means who have no need for liquidity in this investment in
that (i) he may not be able to liquidate his investment in the event of an
emergency; (ii) transferability is extremely limited; and (iii) in the event of
a disposition, he could sustain a complete loss of his entire investment.
1.3 The Subscriber acknowledges that he is (i) a qualified investor, as
described herein, to qualify for the purchase of the Common Stock; (ii)
competent to understand and does understand the nature of the investment; and
(iii) able to bear the economic risk of this investment.
1.4 The Subscriber represents that he is an "accredited investor," as such
term is defined in Rule 501 of Regulation D promulgated under the Securities Act
of 1933, as amended (the "Securities Act").
1.5 The Subscriber acknowledges that he has significant prior investment
experience, including investment in non-listed and non-registered securities.
The Subscriber has a sufficient net worth to sustain a loss of its entire
investment in the Company in the event such a loss should occur. The
Subscriber's overall commitment to investments which are not readily marketable
is not excessive in view of the Subscriber's net worth and financial
circumstances and the purchase of the Common Stock will not cause such
commitment to become excessive. The Subscriber recognizes the highly speculative
nature of this investment.
1.6 The Subscriber: (i) if a natural person, represents that the
Subscriber has reached the age of 21 and has full power and authority to execute
and deliver this Subscription Agreement and all other related agreements or
certificates and to carry out the provisions hereof and thereof; (ii) if a
corporation, partnership, or limited liability company or partnership, or
association, joint stock company, trust, unincorporated organization or other
entity, represents that such entity was not formed for the specific purpose of
acquiring the Common Stock, such entity is duly organized, validly existing and
in good standing under the laws of the state of its organization, the
consummation of the transactions contemplated hereby is authorized by, and will
not result in a violation of state law or its charter or other organizational
documents, such entity has full power and authority to execute and deliver this
Subscription Agreement and all other related agreements or certificates and to
carry out the provisions hereof and thereof and to purchase and hold the
securities constituting the Common Stock, the execution and delivery of this
Subscription Agreement has been duly authorized by all necessary action, this
Subscription Agreement has been duly executed and delivered on behalf of such
entity and is a legal, valid and binding obligation of such entity; or (iii) if
executing this Subscription Agreement in a representative or fiduciary capacity,
represents that it has full power and authority to execute and deliver this
Subscription Agreement in such capacity and on behalf of the subscribing
individual, ward, partnership, trust, estate, corporation, or limited liability
company or partnership, or other entity for whom the Subscriber is executing
this Subscription Agreement, and such individual, partnership, ward, trust,
estate, corporation, or limited liability company or partnership, or other
entity has full right and power to perform pursuant to this Subscription
Agreement and make an investment in the Company, and represents that this
Subscription Agreement constitutes a legal, valid and binding obligation of such
entity. The execution and delivery of this Subscription Agreement will not
violate or be in conflict with any order, judgment, injunction, agreement or
controlling document to which the Subscriber is a party or by which it is bound.
1.7 The Subscriber hereby represents that the Subscriber and the
Subscriber's attorney, accountant, purchaser representative and/or tax advisor,
if any (collectively, "Advisors") have been furnished by the Company or one of
the Placement Agents during the course of this transaction with the Memorandum
and with all information regarding the Company which the Subscriber and his
Advisors have requested or desired to know, subject in all cases to existing
confidentiality obligations and applicable law; and that the Subscriber and his
Advisors have been afforded the opportunity to ask questions of and receive
answers from duly authorized officers or other representatives of the Company
and the Placement Agents concerning the terms and conditions of the offering,
prior to the execution of this Subscription Agreement and all such questions
have been answered to the full satisfaction of the Subscriber and its Advisors,
if any.
1.8 The Subscriber hereby acknowledges that the offering of the shares
of Common Stock has not been filed with or reviewed by the Securities and
Exchange Commission (the "SEC") because of the Company's representations that
this is intended to be a nonpublic offering pursuant to Section 4(2) and Rule
506 of Regulation D promulgated under the Securities Act. The Subscriber
represents that the shares of Common Stock are being purchased for his own
account, for investment and not for distribution or resale to others. The
Subscriber agrees that he will not sell, transfer or otherwise dispose of any of
the shares of Common Stock unless they are registered under the Securities Act
or unless an exemption from such registration is available.
1.9 The Subscriber understands that the shares of Common Stock have not
been registered under the Securities Act by reason of a claimed exemption under
the provisions of the Securities Act which depends, in part, upon his investment
intention. In this connection, the Subscriber understands that it is the
position of the SEC that the statutory basis for such exemption would not be
present if his representation merely meant that his present intention was to
hold the shares of Common Stock for a short period, for a deferred sale, for a
market rise, assuming that a market develops and is maintained, or for any other
fixed period. The Subscriber realizes that, in the view of the SEC, a purchase
now with an intent to resell would represent a purchase with an intent
inconsistent with his representation to the Company, and the SEC might regard
such a sale, transfer or disposition as a deferred sale to which the exemption
is not available.
1.10 The Subscriber consents that the Company may, if it desires,
permit the transfer of the shares of Common Stock by the Subscriber out of his
name only when his request for transfer is accompanied by an opinion of counsel
reasonably satisfactory to the Company that the proposed sale,
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transfer or disposition does not result in a violation of the Securities Act or
any applicable state "blue sky" laws (collectively, "Securities Laws"). The
Subscriber agrees to hold the Company, the Placement Agents and any of their
respective directors, executive officers and controlling persons and their
respective heirs, representatives, successors and assigns harmless and to
indemnify them against all liabilities, costs and expenses incurred by them as a
result of any sale, transfer or disposition of the shares of Common Stock by the
undersigned Subscriber in violation of any Securities Laws or any
misrepresentation herein.
1.11 The Subscriber consents to the placement of a legend on the
certificates evidencing the shares of Common Stock stating that they have not
been registered under the Securities Act and setting forth or referring to the
restrictions on the sale, transfer or disposition thereof. The Subscriber is
aware that the Company will make a notation in its appropriate records with
respect to the restrictions on the sale, transfer or disposition of the shares
of Common Stock.
1.12 The Subscriber acknowledges and agrees that the Company is relying
on the Subscriber's representations contained in this Agreement and the related
subscription documents in determining whether to accept this subscription. The
Subscriber hereby gives the Company authority to call his bank or place of
employment or otherwise review the financial standing of the Subscriber and it
is further agreed that the Company reserves the unrestricted right to reject or
limit any subscription and to close the offer at any time.
1.13 The Subscriber represents and warrants that all representations
made by the Subscriber hereunder are true and correct in all material respects
as of the date of execution hereof, and the Subscriber covenants that until the
closing on the shares of Common Stock subscribed for he shall inform the Company
and the Placement Agents immediately of any changes in any of the
representations provided by the Subscriber hereunder.
1.14 The Subscriber is unaware of, is in no way relying on, and did not
become aware of the offering of the Common Stock through or as a result of, any
form of general solicitation or general advertising including, without
limitation, any article, notice, advertisement or other communication published
in any newspaper, magazine or similar media or broadcast over television, radio
or over the Internet, in connection with the offering and sale of the Common
Stock and is not subscribing for Common Stock and did not become aware of the
offering of the Common Stock through or as a result of any seminar or meeting to
which the Subscriber was invited by, or any solicitation of a subscription by, a
person not previously known to the Subscriber in connection with investments in
securities generally.
1.15 The Subscriber has taken no action which would give rise to any
claim by any person for brokerage commissions, finders' fees or the like
relating to this Subscription Agreement or the transactions contemplated hereby
(other than commissions to be paid by the Company to the Placement Agents or as
otherwise described in the Memorandum).
1.16 The Subscriber has adequate means of providing for such
Subscriber's current financial needs and foreseeable contingencies and has no
need for liquidity of the investment in the Common Stock for an indefinite
period of time.
1.17 The Subscriber is aware that an investment in the Common Stock
involves a number of very significant risks and has carefully read and
considered the matters set forth in the Memorandum and in particular the matters
under the caption "Risk Factors" therein.
1.18 The Subscriber acknowledges that any estimates or forward-looking
statements or projections included in the Memorandum were prepared by the
Company in good faith, but that the attainment of any such projections,
estimates or forward-looking statements cannot be guaranteed by the Company and
should not be relied upon.
1.19 No oral or written representations have been made, or oral or
written information furnished, to the Subscriber or its Advisors, if any, in
connection with the offering of the Common Stock which are in any way
inconsistent with the information contained in the Memorandum.
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1.20 Within five days after receipt of a request from the Company or
the Placement Agents, the Subscriber shall provide such information and deliver
such documents as may reasonably be necessary to comply with any and all laws
and ordinances to which the Company or the Placement Agents are subject.
1.21 The Subscriber's substantive relationship with either of the
Placement Agents or, subagents through which the Subscriber is subscribing for
Common Stock predates the Placement Agents' or such subagents' contact with the
Subscriber regarding an investment in the Common Stock.
1.22 (For ERISA plans only) The fiduciary of the ERISA plan (the
"Plan") represents that such fiduciary has been informed of and understands the
Company's investment objectives, policies and strategies, and that the decision
to invest "plan assets" (as such term is defined in ERISA) in the Company is
consistent with the provisions of ERISA that require diversification of plan
assets and impose other fiduciary responsibilities. The Subscriber or Plan
fiduciary (a) is responsible for the decision to invest in the Company; (b) is
independent of the Company and any of its affiliates; (c) is qualified to make
such investment decision; and (d) in making such decision, the Subscriber or
Plan fiduciary has not relied primarily on any advice or recommendation of the
Company or any of its affiliates.
II. REPRESENTATIONS AND WARRANTIES BY THE COMPANY
The Company represents and warrants to the Subscriber as follows:
2.1 The Company is a corporation duly organized, existing and in good
standing under the laws of the state of its incorporation and has the corporate
power to conduct its business.
2.2 The execution, delivery and performance of this Agreement by the
Company has been duly approved by the Board of Directors of the Company.
2.3 The shares of Common Stock have been duly and validly authorized
and, when issued in accordance with the terms hereof, will be duly and validly
issued, fully paid and non-assessable. To the extent Lead Investor Warrants are
issued in the Offering, the Company has duly and validly reserved, out of its
authorized and unissued Common Stock, for issuance upon exercise of Lead
Investor Warrants a number of shares sufficient for such purposes.
III. TERMS OF OFFERING
3.1 The subscription period will begin as of November 15, 2004 and will
terminate upon the occurrence of the earlier of (a) the 60th day thereafter,
unless extended by the Company and the Placement Agents for a period of up to an
additional 30 days, or (b) the Company's acceptance of subscriptions for
3,692,308 shares of Common Stock offered and the receipt of payment therefor
(the "Termination Date").
3.2 The Subscriber hereby agrees to purchase the number of shares of
Common Stock from the Company set forth upon the signature page hereof payable
to the escrow agent, Signature Bank, by check in the amount thereof made payable
to "Signature Bank, as Escrow Agent for Xethanol Corporation" or by wire
transfer of immediately available funds. If Subscriber's subscription is
rejected in whole, or the Offering is terminated or the Minimum Amount is not
subscribed for and accepted, all funds received from the Subscriber will be
returned without interest, penalty, expense or deduction, and this Subscription
Agreement shall thereafter be of no further force or effect. If Subscriber's
subscription is rejected in part, the funds for the rejected portion of such
subscription will be returned without interest, penalty, expense or deduction
and this Subscription Agreement will continue in full force and effect to the
extent such subscription was accepted.
3.3 The Company has retained the Placement Agents to coordinate the
offering as the Company's exclusive co-placement agents and financial advisors.
See the Memorandum for a description of the compensation payable to the
Placement Agents and other terms of the offering.
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IV. CERTAIN COVENANTS
4.1 (a) Subject to the other provisions of this Section IV, the Company
shall use its best efforts to file, within 90 days after the Termination Date, a
registration statement (the "Registration Statement") under the Securities Act
covering all of the shares of Common Stock subscribed by the Subscriber
hereunder and to the extent any Lead Investor Warrants are issued, the shares of
Common Stock issuable upon exercise of the Lead Investor Warrants (collectively,
the "Registrable Shares"). The Company shall use its best efforts to have the
Registration Statement declared effective by the SEC as soon as possible and, in
any event, within 180 days after the Termination Date.
(b) In the event the registration effected by the Company
pursuant to this Section 4.1 relates to an underwritten offering of securities,
the Subscriber's right to registration pursuant to this Section 4.1 shall be
conditioned upon its (i) participation in such underwriting, (ii) inclusion of
the Registrable Shares therein and (iii) execution of all customary underwriting
documents requested by the underwriter with respect thereto (the "Underwriter").
(c) All expenses (other than underwriting discounts and
commissions, brokerage fees and applicable transfer taxes) incurred in
connection with registrations, filings or qualifications pursuant to this
Section 4.1, including, without limitation, all registration, filing and
qualification fees, printers' and accounting fees and fees and disbursements of
counsel for the Company, shall be borne by the Company. In addition, the Company
shall pay the fees and expenses of one counsel for the selling shareholders in
an amount not to exceed $5,000; fees and expenses in excess of such amount shall
be borne by the selling shareholders. Further, the Company shall pay its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit or quarterly review, the expense of any liability insurance
obtained by the Company and the expenses and fees for listing or authorizing for
quotation the securities to be registered on each securities exchange, market or
automated quotation system on which any shares of Common Stock are then listed
or quoted.
(d) Each of the Company and the Subscriber shall indemnify the
other party hereto and their respective officers, directors, employees and
agents against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) by the indemnifying party of a material fact contained in any
prospectus or other document (including any related registration statement,
notification or the like) incident to any registration of the type described in
this Section 4.1, or any omission (or alleged omission) by the indemnifying
party to state in any such document a material fact required to be stated
therein or necessary to make the statements therein not misleading, and shall
reimburse such indemnified party for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action; provided that no party will be eligible for
indemnification hereunder to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished by such party for use in
connection with such registration.
(e) The Subscriber shall furnish to the Company or the
Underwriter, as applicable, such information regarding the Subscriber and the
distribution proposed by it as the Company may reasonably request in connection
with any registration or offering referred to in this Section 4.1. The
Subscriber shall cooperate as reasonably requested by the Company in connection
with the preparation of the registration statement with respect to such
registration, and for so long as the Company is obligated to file and keep
effective such registration statement, shall provide to the Company, in writing,
for use in the registration statement, all such information regarding the
Subscriber and its plan of distribution of the Registrable Shares included in
such registration as may be reasonably necessary to enable the Company to
prepare such registration statement, to maintain the currency and effectiveness
thereof and otherwise to comply with all applicable requirements of law in
connection therewith.
V. CONDITIONS TO ACCEPTANCE OF SUBSCRIPTION
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The Company's right to accept the subscription of the Subscriber is
conditioned upon satisfaction of the following conditions precedent on or before
the date the Company accepts such subscription (the "Closing Date") (any or all
of which may be waived by the Subscriber in his sole discretion):
5.1 On the Closing Date, no legal action, suit or proceeding shall be
pending which seeks to restrain or prohibit the transactions contemplated by
this Agreement.
5.2 The closing of the Reverse Merger (as defined in the Memorandum)
shall occur concurrently with the acceptance of this subscription.
5.3 The Board of Directors of the publicly-traded company which has
acquired by merger the business of Xethanol Corporation ("Xethanol") shall have
approved the issuance of the Common Stock pursuant to this Agreement in
accordance with the applicable laws of the jurisdiction of its incorporation and
expressly approved the assumption of this Agreement and a copy of such
resolutions shall have been made available to the Subscriber.
5.4 The publicly-traded company which has acquired by merger the
business of Xethanol shall have expressly assumed this Agreement and shall have
indicated such assumption by executing and delivering a counterpart of this
executed Agreement.
5.5 The representations and warranties of the Company contained in this
Agreement shall have been true and correct on the date of this Agreement and
shall be true and correct on the Closing Date as if made on the Closing Date.
VI. NOTICES TO SUBSCRIBERS
6.1 THE COMMON STOCK HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE
ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
LAWS. THE COMMON STOCK HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY
STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE
ACCURACY OR ADEQUACY OF THE MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
6.2 THE COMMON STOCK IS SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT, AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION
OR EXEMPTION THEREFROM. SUBSCRIBERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO
BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
VII. MISCELLANEOUS
7.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, addressed to the Company at Xethanol Corporation, 1185 Avenue
of the Americas, 20th Floor, New York, New York 10036, Attention: Mr.
Christopher d'Arnaud-Taylor, Chairman and Chief Executive Officer, and to the
Subscriber at his address indicated on the last page of this Agreement. Notices
shall be deemed to have been given on the date of mailing, except notices of
change of address, which shall be deemed to have been given when received.
7.2 This Agreement shall not be changed, modified, or amended except by
a writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
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7.3 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and to their respective heirs, legal representatives,
successors and assigns. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and merges
and supersedes all prior discussions, agreements and understandings of any and
every nature among them.
7.4 This Agreement and its validity, construction and performance shall
be governed in all respects by the laws of the State of New York, without
reference to its rules and principles governing conflicts of laws.
7.5 This Agreement may be executed in counterparts. Upon the execution
and delivery of this Agreement by the Subscriber, this Agreement shall become a
binding obligation of the Subscriber with respect to the purchase of the Common
Stock as herein provided.
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ANTI-MONEY LAUNDERING REQUIREMENTS
HOW BIG IS THE PROBLEM AND
THE USA PATRIOT ACT WHAT IS MONEY LAUNDERING? WHY IS IT IMPORTANT?
- ------------------------------------- -----------------------------------------------------------------------
The USA PATRIOT Act is designed to Money laundering is the process The use of the U.S. financial
detect, deter, and punish of disguising illegally obtained system by criminals to facilitate
terrorists in the United States and money so that the funds appear to terrorism or other crimes could
abroad. The Act imposes new come from legitimate sources or well taint our financial
anti-money laundering requirements activities. Money laundering markets. According to the U.S.
on brokerage firms and financial occurs in connection with a wide State Department, one recent
institutions. Since April 24, 2002 variety of crimes, including estimate puts the amount of
all brokerage firms have been illegal arms sales, drug worldwide money laundering
required to have new, comprehensive trafficking, robbery, fraud, activity at $1 trillion a year.
anti-money laundering programs. racketeering, and terrorism.
To help you understand theses
efforts, we want to provide you
with some information about money
laundering and our steps to
implement the USA PATRIOT Act.
WHAT ARE WE REQUIRED TO DO TO ELIMINATE MONEY LAUNDERING?
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Under new rules required by the USA PATRIOT Act, our As part of our required program, we may ask you to
anti-money laundering program must designate a provide various identification documents or other
special compliance officer, set up employee training information. Until you provide the information or
conduct independent audits, and establish policies documents we need, we may not be able to effect any
and procedures to detect and report suspicious transactions for you.
transaction and ensure compliance with the new laws.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
XETHANOL CORPORATION
(Operating initially as the publicly-traded
company)
By: /s/
-------------------------------------------
Name:
Title:
Date of Execution: _________________, 200__
TO BE COMPLETED BY INDIVIDUAL SUBSCRIBERS TO BE COMPLETED BY
CORPORATE, PARTNERSHIP, LLC OR
TRUST SUBSCRIBERS
____________________________________ ____________________________________
Name of Subscriber
[Please Print]
____________________________________
Name of Subscriber(s)
[Please Print]
____________________________________ By:__________________________________
Authorized Signatory
____________________________________ ____________________________________
Signature of Subscriber(s)
____________________________________ ____________________________________
Address of Subscriber Name and Title of Authorized Signatory
[Please Print]
____________________________________ ____________________________________
Social Security Number of Subscriber Taxpayer Identification Number of Subscriber
____________________________________ ____________________________________
Number of Shares Subscribed For Number of Shares Subscribed For
____________________________________ ____________________________________
Total Purchase Price Total Purchase Price
____________________________________ ____________________________________
Date of Execution Date of Execution
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