701
North
Post Oak Road, Suite 600
The
undersigned (the “Investor”) is writing to advise you of the following terms and
conditions under which the Investor hereby offers to subscribe (the “Offer”) for
the securities of this offering which are offered by Bluegate Corporation,
a
Nevada corporation (the “Company”). There is no placement agent for the offering
as it is being offered directly by management. The Company is issuing
securities
consisting of its Series C Convertible Non-Redeemable Preferred Stock,
par value
$.001 (“Series C Preferred Stock”) with warrants to acquire shares of the
Company's Common Stock, par value $.001(“Warrants”) (collectively, the
“Securities”) at $12,500 per Security. Each Security contains one (1) share of
Series C Preferred Stock and a warrant to purchase 125,000 shares of
Common
Stock at $0.17 per share. The undersigned understands that the Securities
are
being issued pursuant to the exemption from registration requirements
of the
Securities Act of 1933, as amended (the “Act”), provided by Section 4(2) of the
Act. As such, the Series C Preferred, Stock, the Warrants, and the underlying
shares of Common Stock into which the Series C Preferred Stock and Warrants
may
be converted (the “Underlying Shares”) are “restricted
securities.”
All
proceeds received from subscribers for the Securities in the offering
will be
paid directly to the Company against delivery by the Company of certificates
representing the Series C Preferred Stock and Warrants.
Subject
to the terms and conditions hereinafter set forth in this Subscription
Agreement, the undersigned hereby offers to purchase the Securities as
set forth
in the Investor Signature Page attached hereto.
If
the
Offer is accepted by the Company, the Securities shall be paid for by
the
delivery of such amount by wire transfer, check, or money order payable
to the
order of Bluegate Corporation Series C Preferred Stock Purchase, which
is being
delivered contemporaneously herewith.
Certificates
of Series C Preferred Stock and Warrants will be delivered as directed
by the
undersigned.
The
undersigned acknowledges that the Company may accept or reject the Offer,
in
whole or in part, for any reason whatsoever. Acceptance of this Offer
shall be
deemed given by the countersigning of this Subscription Agreement on
behalf of
the Company.
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4.
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Representations
and Warranties of the
Investor.
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The
undersigned, in order to induce the Company to accept this Offer, hereby
warrants and represents as follows:
(A) The
undersigned has sufficient liquid assets to sustain a loss of the undersigned's
entire investment.
(B) The
undersigned represents that he (she or it) is an Accredited Investor
as that
term is defined in Regulation D promulgated under the Securities Act of
1933, as amended (the “Act”). In general, an “Accredited Investor” is
deemed to be an institution with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000 or annual income
exceeding $200,000 or $300,000 jointly with
their spouse.
(C) The
Company has not made any other representations or warranties to the Investor
with respect to the Company except as contained herein. The Company has not
rendered any investment advice to the Investor with respect to the
Company.
(D) The
undersigned has not authorized any person or institution to act as his
Purchaser Representative (as that term is defined in Regulation D of the
General Rules and Regulations under the Act) in connection with this
transaction. The undersigned has such knowledge and experience in
financial, investment and business matters that he is capable of evaluating
the merits and risks of the prospective investment in the Securities. The
undersigned has consulted with such independent legal counsel or
other advisers as he has deemed appropriate to assist the undersigned in
evaluating his proposed investment in the Securities.
(E) The
undersigned understands that the Securities involve a high degree of
risk
and represents that he (i) has adequate means of providing for his current
financial needs and possible personal contingencies, and has no need for
liquidity of investment in the Securities; (ii) can afford (a) to
hold unregistered securities for an indefinite period of time as required
and (b) sustain a complete loss of the entire amount of the subscription;
and (iii) has not made an overall commitment to investments which are not
readily marketable which is disproportionate so as to cause such overall
commitment to become excessive.
(F) The
undersigned has also been afforded the opportunity to ask questions of,
and
receive answers from, the officers and/or directors of the Company
concerning the terms and conditions of the offering and to obtain any
additional information, to the extent that the Company possesses
such information or can acquire it without unreasonable effort or expense,
necessary to verily the accuracy of the information furnished; and has
availed
himself of such opportunity to the extent he considers appropriate in order
to permit him to evaluate the merits and risks of an investment in the
Securities. It is understood that all documents, records and books
pertaining to this investment have been made available for inspection, and
that the books and records of the Company will be available upon reasonable
notice for inspection by investors during reasonable business hours at its
principal place of business.
(G) The
undersigned acknowledges that the Securities including Underlying Shares
have
not been registered under the Act in reliance on an exemption for
transactions by an issuer not involving a public offering, and further
understands that the Investor is purchasing the Securities without
being furnished any prospectus setting forth all of the information that
would be required to be furnished under the Act.
(H) The
undersigned further acknowledges that this offering has not been passed
upon or
the merits thereof endorsed or approved by any state or federal
authorities.
(I) The
Securities being subscribed for are being acquired solely for the account
of the
undersigned and not with a view to, or for resale in connection with,
any
distribution in any jurisdiction where such sale or distribution would
be
precluded. By such representation, the Investor means that no other person
has a
beneficial interest in the Securities (or Underlying Shares) subscribed
for
hereunder, and that no other person has furnished or will furnish directly
or
indirectly, any part of or guarantee the payment of any part of the
consideration to be paid to the Company in connection therewith. The
undersigned
does not intend to dispose of all or any part of the Securities (or Warrant
or
Common Stock issuable upon any exercise of the Warrant) except in compliance
with the provisions of the Act and applicable state securities laws and
understands that the Securities are being offered pursuant to a specific
exemption under the provisions of the Act, which exemption(s) depends,
among
other things, upon compliance with the provisions of the Act.
(J) The
undersigned further represents and agrees that the undersigned will not
sell,
transfer, pledge or otherwise dispose of or encumber the Securities (including
the Underlying Shares) prior to registration, or the undersigned will,
if
requested, furnish the Company and its transfer agent with an opinion
of counsel
satisfactory to the Company in form and substance that registration under
the
Act or applicable state securities laws is not required.
(K) The
undersigned hereby agrees that the Company may insert the following or
similar
legend on the face of the certificates evidencing the Securities and
the
Underlying Shares, if required in compliance with federal and state securities
laws:
“These
securities have not been registered under Act or under the securities
laws of
any state. They may not be sold, offered for sale, pledged, or hypothecated
in
the absence of a registration statement in effect with respect to the
securities
under such act or an opinion of counsel reasonably satisfactory to the
company
that such registration is not required pursuant to a valid exemption
under the
Act.”
(L) Neither
the Company nor any person acting on its behalf has offered or sold the
undersigned the Securities by means of any form of general solicitation
or
general advertising and the Securities were not offered or sold to the
Investor
by means of publicly disseminated advertisements or sales
literature.
(M) The
undersigned represents that during the 30 days prior to the date hereof,
the
undersigned has not, directly or indirectly, made any short sales of,
or granted
any option for the purchase of or entered into any hedging or similar
transaction with the same economic effect as a net short sale, in the
Common
Stock.
The
undersigned certifies that each of the foregoing representations and
warranties
set forth in subsection (A) through (M) inclusive of this Section 4 are
true as
of the date hereof and shall survive such date.
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5.
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Representations
and Warranties of the
Company.
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The
Company hereby makes the following representations and warranties to
the
Investor:
(A)
Subsidiaries.
The
Company has no direct or indirect subsidiaries (each a “Subsidiary,” and
collectively, “Subsidiaries”) except as described in SEC Reports. All the issued
and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable, and free of preemptive and
similar rights, and the Company owns all of the issued and outstanding
shares of
capital stock of each Subsidiary, except as described in such the SEC
Reports.
(B)
Organization
and Qualification.
Each of the Company and the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and authority
to own
and use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents.
(C)
Authorization;
Enforcement.
The Company has the requisite corporate power
and authority to enter into and to consummate the offering. The execution
and delivery of this Subscription Agreement by the Company and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Company and no
further
consent or action is required by the Company, other than the Required
Approvals (as defined below). This Subscription Agreement,
when executed and delivered in accordance with the terms hereof, will
constitute
the valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar
laws
affecting creditors' rights and remedies generally and general principles
of
equity.
(D)
No
Conflicts.
The execution, delivery and performance of this Subscription
Agreement by the Company and the consummation by the Company of the
offering do not and will not: (i) conflict with or violate any provision of
the Company's or any Subsidiary's certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
subject to obtaining the Required Approvals, conflict with, or constitute a
default (or an event that 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 (with or without notice, lapse of time or
both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by
which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental
authority as currently in effect to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations),
or by
which any property or asset of the Company or a Subsidiary is bound or
affected; except in the case of each of clauses (ii) and (iii), such as
could not, individually or in the aggregate (a) adversely affect the
legality,
validity or enforceability of the offering, (b) have or result in or be
reasonably likely to have or result in a material adverse effect on the
results of operations, assets, prospects, business or condition (financial
or
otherwise) of the Company and the Subsidiaries, taken as a whole, or
(c)
adversely impair the Company's ability to perform fully on a timely basis
its
obligations under this Subscription Agreement (any of (a), (b) or (c),
a
“Material Adverse Effect”).
(E)
Filings,
Consents and Approvals.
Neither the Company nor any Subsidiary is required
to obtain any consent, waiver, authorization or order of, give any notice
to, or
make any filing or registration with, any court or other federal, state,
local or other governmental authority or other Person in connection with
the
execution, delivery and performance by the Company of this Subscription
Agreement, other than (i) the filing with the SEC of a Form D pursuant
to SEC
Regulation D and (ii) applicable Blue Sky filings (collectively, the
“Required
Approvals”). Such “Person” means an individual or corporation,
partnership, trust, incorporated or unincorporated association, joint
venture, limited liability company, joint stock company, government (or
agency or subdivision thereof) or other entity of any kind.
(F)
Issuance
of the Securities.
The Securities are duly authorized and, when issued and
paid for in accordance with this Subscription Agreement, will be duly and
validly issued, fully paid and nonassessable, free and clear of all
liens. The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance upon conversion
of the
Series C Preferred Stock and for the issuance of the shares of Common
Stock upon
exercise of the Warrants. The issuance and sale of the Securities hereunder
does not contravene the SEC rules and regulations.
(G)
Capitalization.
The number of shares and type of all authorized, issued, and
outstanding capital stock of the Company is as set forth in the SEC
Reports. No Person has any right of first refusal, preemptive right, right
of participation, or any similar right to participate in the offering.
Except as
a result of the purchase and sale of the Securities which may be issued in
connection with this offering and except for (1) options for capital stock
issued or issuable under the Company's option plans set forth in the
SEC Reports and (2) warrants issued by the Company as set forth in the SEC
Reports, there are no outstanding options, warrants, script rights to
subscribe
to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for,
or
giving any Person any right to subscribe for or acquire, any shares of
Common Stock, or contracts, commitments, understandings or arrangements
by which
the Company or any Subsidiary is or may become bound to issue additional
shares
of Common Stock, or securities or rights convertible or exchangeable
into shares
of Common Stock
(H)
SEC
Reports; Financial Statements.
The Company has filed all reports required to
be filed by it under the Act and the Securities Exchange Act of 1934
(the
“Exchange Act”), including pursuant to Section 13(a) of 15(d) thereof, for the
two years preceding the date hereof (or such shorter period as the Company
was
required by law to file such material) (the foregoing materials being
collectively referred to herein as the “SEC Reports”). The SEC Reports, when
filed, complied in all material respects with the requirements of the
Act and
the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted 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. The financial
statements of the Company that have been included in the SEC Reports
comply in
all material respects with applicable accounting requirements and the
rules and
regulations of the SEC with respect thereto as in effect at the time
of filing.
Such financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
periods
involved (“GAAP”), except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects
the
financial position of the Company and its consolidated subsidiaries as
of and
for 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,
immaterial, year-end audit adjustments.
(I)
Material
Changes.
Since the date of the latest audited financial statement
dated December 31, 2006 and subsequent quarterly 10Q filings included
within the SEC Reports: (i) there has been no event, occurrence or development
that has had a Material Adverse Effect, (ii) the Company has not incurred
any
liabilities (contingent or otherwise) other than (A) trade payables and
accrued
expenses incurred in the ordinary course of business consistent with
past
practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in
filings
made with the SEC, (iii) the Company has not altered its method of accounting
or
the identity of its auditors, (iv) the Company has not declared or made
any
dividend or distribution of cash or other property to its stockholders
except in
the ordinary course of business consistent with prior practice, or purchased,
redeemed or made any agreements to purchase or redeem any shares of its
capital
stock except consistent with prior practice or pursuant to existing Company
stock option or similar plans.
(J)
Litigation.
As set forth in the SEC Reports and Company financial statements for
March 31,
2007, there is no action, suit, inquiry, notice of violation, proceeding
or
investigation pending or, to the knowledge of the Company, threatened
against or
affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency
or
regulatory authority (federal, state, county, local or foreign) (collectively,
an “Action”) which: (i) adversely affects or challenges the legality, validity
or enforceability of this Subscription Agreement or the Securities or
(ii)
would, if there were an unfavorable decision, individually or in the
aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
Neither
the Company nor any Subsidiary is or has been the subject of any Action
involving a claim of violation of or liability under federal or state
securities
laws. The Company does not have pending before the SEC any request for
confidential treatment of information. There has not been, and to the
knowledge
of the Company, there is not pending or contemplated, any investigation
by the
SEC involving the Company. The SEC has not issued any stop order or other
order
suspending the effectiveness of any registration statement filed by the
Company
or any Subsidiary under the Exchange Act or the Securities
Act.
(K)
Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or in
violation
of (and no event has occurred that has not been waived that, with notice
or
lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice
of a
claim that it is in default under or that it is in violation of, any
material
indenture, loan or credit agreement or any other material agreement or
instrument to which it is a party or by which it or any of its properties
is
bound (whether or not such default or violation has been waived), which
default
or violation would have or result in a Material Adverse Effect, (ii)
is in
violation of any order of any court, arbitrator or governmental body,
or (iii)
is in violation of any statute, rule or regulation of any governmental
authority, except in each case as would not, individually or in the aggregate,
have or result in a Material Adverse Effect.
(L)
Regulatory
Permits.
The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state,
local or
foreign regulatory authorities necessary to conduct their respective
businesses
as described in the SEC Reports, except where the failure to possess
such
permits would not, individually or in the aggregate, have or reasonably
be
expected to result in a Material Adverse Effect (“Material Permits”), and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material
Permit.
(M)
Listing
and Maintenance Requirements.
The Company is currently quoted on the OTC
Bulletin Board under the symbol “BGAT”. The Company is, and has no reason to
believe that it will not in the foreseeable future to be in compliance
with all
requirements to be quoted on the OTC Bulletin Board.
(N)
Internal
Accounting Controls.
The Company and the Subsidiaries maintain a system of
internal accounting controls sufficient 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 in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access
to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared
with
the existing assets at reasonable intervals and appropriate action is
taken with
respect to any differences. The Company has established disclosure controls
and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
Company
and designed such disclosures controls and procedures to ensure that
material
information relating to the Company, including its Subsidiaries, is made
known
to the certifying officers by others within those entities. The Company's
certifying officers have evaluated the effectiveness of the Company's
disclosure
controls and procedures as of the date immediately prior to the filing
of the
Company's most recent periodic report under the Exchange Act (such date,
the
“Evaluation Date
”). The Company presented in such report the conclusions
of the certifying officers about the effectiveness of the disclosure
controls
and procedures based on their evaluations as of the Evaluation Date.
Since the
Evaluation Date, there have been no significant changes in the Company's
internal controls (as such term is defined in Item 307(b) of Regulation
S-K
under the Exchange Act).
(O) Disclosure.
The disclosure provided to the Investor regarding the Company, its business
and
the transactions contemplated hereby, furnished by or on behalf of the
Company,
including all of the SEC Reports, does not contain any untrue statement
of a
material fact or omit to state any material fact necessary in order to
make the
statements made therein, in light of the circumstances under which they
were
made, not misleading. The Company acknowledges and agrees that the Investor
makes or has made no representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth
in this
Subscription Agreement.
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6.
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Covenants
of the Company.
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(A)
Registration
Rights.
The Company grants to the Investor registration rights relating
to the Underlying Shares under the following terms and
conditions:
(1) The
Company will prepare and file, at its own expense, within 90 days from
its Final Closing a registration statement under the Act (the “Registration
Statement”) with the SEC sufficient to permit the non-underwritten public
offering and resale of the Underlying Shares (the “Registrable Securities”)
through the facilities of all appropriate securities exchanges, if any,
on which the Common Stock is being sold or on the over-the-counter market
if the Common Stock is traded thereon.
(2) The
Company will use its reasonable best efforts to cause such
Registration Statement to become effective within one hundred and fifty
(150) days from its filing or, if earlier, within twenty (20) business
days of Commission clearance to request acceleration
of effectiveness. The number of shares designated in the Registration
Statement to be registered shall include all of the Registrable Securities
and
shall include appropriate language regarding reliance upon Rule 416 to the
extent permitted by the SEC. The Company will notify the Investors of the
effectiveness of the Registration Statement within five (5) business
days of
such event.
(3) Except
as otherwise provided in Section 6(C) below, the Company will use
its reasonable best efforts to maintain effectiveness under the Act of the
Registration Statement or any post-effective amendment thereto filed under
the terms of this Agreement until the earlier of (i) the date that none
of the
Registrable Securities covered by such Registration Statement are or
may become
issued and outstanding, (ii) the date that all of the Registrable Securities
have been sold pursuant to such Registration Statement, (iii) the date that
all Registrable Securities have been otherwise transferred to persons who
may trade such shares without restriction under the Securities Act, and the
Company has delivered a new certificate or other evidence of ownership
for such
securities not bearing a restrictive legend, or (iv) the date that all
Registrable Securities may be sold at any time, without volume or manner of
sale limitations, pursuant to Rule 144(k) or any similar provision then in
effect under the Securities Act in the opinion of counsel to the Company,
which counsel shall be reasonably acceptable to the Investor.
(4) If,
at any time during which the Registration Statement required by Section
6(A)(1)
and 6(A)(2) above is not effective, the Company shall determine to proceed
with
the preparation and filing of a separate registration statement pursuant
to the
Act in connection with the proposed offer and sale of any securities
by it or
any of its securities holders (other than a registration statement on
Form S-4,
S-8, or other limited purpose Form), the Company will give written notice
of its
determination to do so to the Investor. Upon receipt of a written request
from
Investor, within twenty (20) days after receipt of any such notice from
the
Company, the Company will cause all such Registrable Securities requested
by the
Investor to be included in such registration statement, all to the extent
required to permit the sale or other disposition by the Investor of such
shares.
The obligation of the Company under this Section 6(A) (4) shall be unlimited
as
to the number of registration statements to which it applies, unless
the
Effectiveness Period has ended. Notwithstanding the foregoing, the Company
shall
have the right to postpone or withdraw any registration effect pursuant
to this
Section 6(A) (4) without obligation to the Investor. In addition, if
any
registration effected pursuant to this Section 6(A)(4) is a registered
public
offering involving an underwriting, the Company shall so advise the Investor
as
a part of the written notice given pursuant to this Section 6(A)(4).
In such
event, the right of the Investor to include Registrable Securities in
such
registration pursuant to this Section 6(A)(4) shall be conditioned upon
Investor's execution of an underwriting agreement upon customary terms
with the
underwriter or underwriters selected for the underwriting by the Company.
If the
managing underwriter advises the Company in writing that marketing factors
require a limitation in the number of shares held by selling stockholders
to be
underwritten, the number of Registrable Securities that may be included
in such
Registration Statement and underwriting shall be allocated among all
investors,
including the Investor, requesting registration in proportion, as nearly
as
practicable, to the respective number of shares of Registrable Securities
held
by them on the date the Company gives the notice specified in this Section
6(A)(4).
(5) All
fees, disbursements and out-of-pocket expenses and costs incurred by
the Company in connection with the preparation and filing of the
Registration Statement and in complying with applicable federal securities
and Blue Sky laws (including, without limitation, all attorneys' fees of
the Company) shall be borne by the Company. The Investor and
the other investors in the offering shall bear the cost of underwriting
and/or brokerage discounts, fees and commissions, if any, applicable to the
Registrable Securities being registered and the fees and expenses of their
counsel. The Company shall use its reasonable best efforts to qualify
any of
the Securities for sale in such states as any Investor reasonably
designates. However, the Company shall not be required to qualify in any
state which will require an escrow or other restriction relating to the
Company and/or the sellers, or which will require the Company to qualify
to
do business in such state or require the Company to file therein any
general consent to service of process. If NASDR Rule 2710 requires any
broker-dealer to make a filing prior to executing a sale by a Purchaser of
the Securities, make an issuer filing with the NASDR, Inc.
Corporate Financing Department pursuant to NASDR Rule 2710(b) (10) (A) (i)
and respond within five (5) Trading Days to any comments received from
NASDR in connection therewith, and pay the filing fee required in
connection therewith. The Company, at its expense, will supply the Investor
with copies of the applicable Registration Statement and any prospectus
included therein, and other related documents in such quantities as may be
reasonably requested by the Investor.
(6) In
the event that (i) the Registration Statement to be filed by the
Company pursuant to Section 6(A)(2) is not declared effective by the SEC
within the earlier of one hundred and fifty (150) days from its filing or
twenty (20) days of clearance by the SEC to request effectiveness, (ii)
such Registration Statement is not maintained as effective by the Company
for the period set forth in Section 6(A)(2) above (each a “Registration
Default”) then the Company will pay Investor (pro rated on a daily basis),
as partial compensation for such failure and not as a penalty, in the form
of Common Stock, one and one-half percent (1.5%) of the purchase price
of the
Registrable Securities purchased from the Company and held by the Investor
for
each month (or portion thereof) until such Registration Statement has been
filed or declared effective or lapsed effectiveness (in the case of clause
(ii) above), one and one-half percent (1.5%) of the purchase price of the
Registrable Securities purchased from the Company and held by the Investor
each month (or portion thereof) (regardless of whether one or more such
Registration Defaults are then in existence, but without
duplication of such partial compensatory payments) until such Registration
Statement has been declared effective. Such compensatory payments shall
be made
to the Investor in cash, within thirty (30) calendar days of demand,
provided, however, that the payment of such amounts shall not relieve the
Company from its obligations to register the Securities pursuant to this
Section. For purposes of this calculation, the value of the common stock
will be computed using the average of the closing price for the five
preceding
trading days.
If
the
Company does not remit the payment to the Investor as set forth above,
the
Company will pay the Investor reasonable costs of collection, including
attorneys' fees, in addition to the liquidated damages. The registration
of the
Securities pursuant to this provision or payment of such compensatory
amounts
shall not affect or limit the Investor's other rights or remedies as
set forth
in this Agreement or at law.
(B) The
Company shall be entitled to suspend the availability of any Registration
Statement, by providing notice thereof to the Investors, without incurring
or
accruing any obligation to pay liquidated damages pursuant to Section
6(A)(4),
no more than one (1) time in any three month period or three (3) times
in any
twelve month period, and any such period during which the availability
of the
Registration Statement is suspended (the “Deferral Period”) shall, without
incurring any obligation to pay liquidated damages pursuant to Section
6(A)(4),
not exceed 30 days;
provided
that the aggregate duration of any
Deferral Periods shall not exceed 15 days in any three month period or
40 days
in any twelve (12) month period;
provided
that in the case of a
Material Event relating to an acquisition or a probable acquisition or
financing, recapitalization, business combination or other similar transaction,
the Company may, without incurring any obligation to pay liquidated damages
pursuant to Section 6(A)(4), deliver to the Holders a second notice to
the
effect set forth above, which shall have the effect of extending the
Deferral
Period by up to an additional 30 days, or such shorter period of time
as is
specified in such second notice. As used herein, “Material Event” shall mean the
occurrence of any event or the existence of any fact as a result of which
any
Registration Statement shall contain any untrue statement of a material
fact or
omit to state any material fact required to be stated therein or necessary
to
make the statements therein not misleading.
(C) In
the case of each registration affected by the Company pursuant to any
section
herein, the Company will keep each shareholder advised in writing as to the
initiation of each registration and as to the completion thereof. At its
expense, the Company will:
(1) Keep
such registration effective at least until such time as the Underlying
Shares are eligible to have the restrictive legend removed pursuant to SEC
Rule 144(k);
(2) Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration
statement
as may be necessary to comply with the provisions of the Securities Act
with respect to a disposition of all securities covered by such registration
statement;
(3) Notify
the shareholders at any time when a prospectus relating thereto is required
to be delivered under the Act, of the happening of any event as a result
of
which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements
therein not misleading or incomplete in light of the circumstances then
existing, and at the request of the shareholders, prepare and furnish to
them a reasonable number of copies of a supplement to or an amendment
of such
prospectus as may be necessary so that, as thereafter delivered to the
shareholders, such prospectus shall not include an untrue statement of
a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or
incomplete in light of the circumstances then existing;
(4) Use
its commercially reasonable best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a registration
statement, and, if such an order is issued, to obtain the withdrawal of
such order at the earliest possible moment and to notify Investor (and, in
the event of an underwritten offering, the managing underwriter) of the
issuance
of such order and the resolution thereof;
(5) Cause
all shares which are registered in accordance with the provisions
herein, to be listed or included for quotation on each exchange on which
the shares of Common Stock are then listed or included for
quotation;
(6) Provide
a transfer agent and registrar for all such shares and CUSIP number for
all such
shares of Common Stock in each case not later than the effective date
of such
registration statement; and
(7) Otherwise
use its commercially reasonable best efforts to comply with all applicable
rules and regulations of the SEC.
(D) To
the extent Investor includes any Underlying Shares in a Registration
Statement pursuant to the terms hereof, Investor will indemnify and hold
harmless the Company, its directors and officers and any controlling person
from and against, and will reimburse the Company, its directors and officers
and
any controlling person with respect to, any and all loss, damage, liability,
cost or expense to which the Company, its directors and officers or such
controlling person may become subject under the Act or otherwise, insofar
as such losses, damages, liabilities, costs or expenses are caused by
any
untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading, in each case
to the extent, but only to the extent, that such untrue statement or
alleged
untrue statement or omission or alleged omission was so made in reliance
upon
and in conformity with written information furnished by or on behalf of the
Investor specifically for use in the preparation thereof and provided
further,
that the maximum amount that may be recovered from Investor shall be
limited to the amount of proceeds received by Investor from the sale
of such
shares of Common Stock.
(E) To
the extent any indemnification by an indemnifying party is prohibited
or limited
by law, the indemnifying party agrees to make the maximum contribution with
respect to any amounts for which it would otherwise be liable hereunder to
the extent permitted by law, provided that (i) no contribution shall be
made under circumstances where the indemnifying party would not have
been
liable for indemnification pursuant to the provisions hereof, (ii) no
seller of securities guilty of fraudulent misrepresentation (within the
meaning of Section ll(f) of the Act) shall be entitled to contribution
from any
seller of securities who was not guilty of such fraudulent misrepresentation,
and (iii) the amount of the contribution together with any other payments
made
in respect of such loss, damage, liability or expense, by any seller
of
securities shall be limited to the net amount of proceeds received by
such
seller from the sale of such securities.
(F) The
Investor will cooperate with the Company in connection with this
Subscription Agreement, including timely supplying all information
reasonably requested by the Company (which shall include all information
regarding the Investor and proposed manner of sale of securities required
to
be disclosed in any registration statement filed in accordance with this
Section 6 and executing and returning all documents reasonably requested in
connection with the registration and sale of any securities
being registered hereunder and entering into and performing their
obligations under any underwriting agreement, if the offering is an underwritten
offering, in usual and customary form, with the managing underwriter
or
underwriters of such underwritten offering.
(G)
Transfer
Restrictions.
(1) The
Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or
Rule 144, to the Company or to an affiliate of an Investor or in connection
with a pledge as contemplated in Section 6(H)(2), the Company may require
the transferor thereof to provide to the Company an opinion of counsel
selected by the transferor and reasonably acceptable to the Company, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of
such transferred Securities under the Act. As a condition of
transfer, any such transferee shall agree in writing to be bound by the
terms of this Subscription Agreement and shall have the rights of an
Investor under this Subscription Agreement.
(2) The
Investors agree to the imprinting, so long as is required by this Section
6(H)
(2) of a legend on any of the Securities in the following
form:
THIS
[PREFERRED STOCK] [WARRANT] AND THE SHARES ISSUABLE UPON [CONVERSION
OF THE
[PREFERRED STOCK] [EXERCISE OF THE [WARRANT] HAVE NOT BEEN REGISTERED
UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR UNDER ANY STATE SECURITIES
LAW AND MAY NOT BE SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED
UNTIL
(1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER
THE ACT AND
ANY APPLICABLE STATE SECURITIES LAW OR (2) THE COMPANY RECEIVES AN OPINION
OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH PREFERRED STOCK
MAY BE
SOLD, ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
(3) Certificates
evidencing the Underlying Shares shall not contain any legend (including
the legend set forth in Section 6(H)(2) hereof): (i) while a registration
statement (including the Registration Statement) covering the resale of
such security is effective under the Act, or (ii) following any sale of
such Underlying Shares pursuant to Rule 144, or (iii) if such Underlying
Shares are eligible for sale under Rule 144(k), or (iv) if such legend
is not
required under applicable requirements of the Act (including judicial
interpretations and pronouncements issued by the staff of the SEC);
provided, however,
in connection with the issuance of the Underlying
Shares, each Investor, severally and not jointly with the other Investors,
hereby agrees to adhere to and abide by all prospectus delivery
requirements under the Act and rules and regulations of the SEC. The
Company shall cause its counsel to issue a legal opinion to the Company's
transfer agent promptly after the Effective Date if required by the Company's
transfer agent to effect the removal of the legend hereunder. If all or any
portion of Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Underlying Shares, or if
such Underlying Shares may be sold under Rule 144(k) or if such legend
is
not otherwise required under applicable requirements of the Act (including
judicial interpretations thereof) then such Underlying Shares shall be
issued free of all legends. The Company agrees that following the Effective
Date or at such time as such legend is no longer required under
this Section 6(H)(3), it will, no later than ten (10) days following the
delivery by an Investor to the Company or the Company's transfer agent of a
certificate representing Underlying Shares, as applicable, issued with a
restrictive legend (such third (3
rd
)
day, the “Legend
Removal Date”), deliver or cause to be delivered to such Investor a
certificate representing such shares that is freefrom all restrictive
and other
legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.
(4) Each
Investor, severally and not jointly with the other Investors, agrees
that the
removal of the restrictive legend from certificates representing Securities
as
set forth in this Section 6(H) is predicated upon the Company's reliance
that
the Investor will sell any Securities pursuant to either the registration
requirements of the Act, including any applicable prospectus delivery
requirements, or an exemption there from.
(I)
Material
Non-Public Information.
The Company covenants and agrees that neither it nor
any other person or entity acting on its behalf will provide the Investor
or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Investor shall
have
executed a written agreement regarding confidentiality and use of such
information. The Company understands and confirms that the investor shall
be
relying on the foregoing representations in effecting transactions in
securities
of the Company.
Notwithstanding
any of the representations, warranties, acknowledgments, or agreements
made
herein by the Investor, the Investor does not thereby, or in any manner,
waive
any rights granted to the Investor under federal or state securities
laws.
The
Investor agrees that he shall not cancel, terminate, or revoke this Subscription
Agreement or any agreement of the Investor made hereunder other than
as set
forth herein, and that this Subscription Agreement shall survive the
death or
disability of the Investor.
|
|
9.
|
Termination
of Subscription
Agreement.
|
If
prior
to the Company's issuance of the Securities, the Company elects to cancel
this
Subscription Agreement, provided that it returns to the Investor, without
interest and without deduction, all sums paid by the Investor, this Offer
shall
be null and void and of no further force and effect, and no party shall
have any
rights against any other party hereunder.
(A) All
notices or other communications given or made hereunder shall be in writing
and shall be mailed by registered or certified mail, return receipt
requested, postage prepaid, or by overnight courier service to the Investor
at his address set forth below and to the Company at the addresses set
forth
herein.
(B) This
Subscription Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and may be amended only by
a writing executed by all parties.
(C) The
provisions of this Subscription Agreement shall survive the execution
thereof.
(D) The
Subscription Agreement shall be governed by the laws of the State of
Texas and
the Investor consents to the exclusive jurisdiction of, and venue in, the
state courts in Harris County in the State of Texas (or in the
event of exclusive federal jurisdiction, the courts of the Southern District
of
Texas).
The
Investor certifies that he has read this entire Subscription Agreement
and that
every statement on the part of the Investor made and set forth herein
is true
and complete.
INVESTOR
SIGNATURE PAGE FOR BLUEGATE CORPORATION SUBSCRIPTION
AGREEMENT
Please
print or type, Use ink only. (All Parties Must Sign)
The
undersigned investor hereby certifies that he: (i) agrees to all the
terms and
conditions of this Subscription Agreement, (ii) meets the suitability
standards
set forth herein and (iii) is a resident of the state or foreign jurisdiction
indicated below.
Dollar
Amount of Securities Subscribed for:
$100,000
|
SAI
Corporation
|
|
If
other than individual check one and
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|
Name
of Investor (Print)
|
|
indicate
capacity of signatory under the signature:
|
|
|
|
£
|
Trust
|
|
|
|
£
|
Estate
|
|
Name
of Joint Investor (if any) (Print)
|
|
£
|
Uniform
Gifts to Minors Act, State of
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|
|
|
|
£
|
Attorney-in-fact
|
|
/s/
Stephen J. Sperco
|
|
S
|
Corporation
|
|
Signature
of Investor
|
|
£
|
Other
|
|
|
|
|
|
|
|
|
|
If
Joint Ownership, Check one:
|
|
|
|
£
|
Joint
Tenants with Right of Survivorship
|
|
|
|
£
|
Tenants
in Common
|
|
Signature
of Joint Investor (if any)
|
|
£
|
Tenants
by the Entirety
|
|
|
|
£
|
Community
by Property
|
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President
|
|
|
|
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|
Capacity
of Signatory (if applicable)
|
|
Backup
Withholding Statement:
|
|
|
|
£
|
Please
check this box only if the investor is subject to backup
withholding
|
|
|
|
|
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|
Social
Security or Taxpayer Identification Number
|
|
|
|
|
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Foreign
Person:
|
|
Investor
Mail Address:
|
|
£
|
Please
check this box only if the investor is a
|
|
SAI
Corporation
|
|
|
nonresident
alien, foreign corporation, foreign
|
|
180
North Stetson Avenue. Suite 700
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|
|
partnership,
foreign trust or foreign estate
|
|
Street
Address
|
|
|
|
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Chicago,
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IL
|
60601
|
|
Share
and Warrant Registration Name(s) and Amounts:
|
|
|
State
|
Zip
Code
|
|
|
|
Telephone:
(312) 602-7000
|
Fax:
( )
|
|
Name
|
Amount
|
Address
for Delivery of Shares (if different from above):
|
£
NASD Firm Reg. Rep.
|
|
|
No.
|
|
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£
Other
Investor Representative
|
|
The
investor agrees to the terms of this Agreement and, as required by the
Regulations pursuant to the Internal Revenue Code, certifies under penalty
of
perjury that (1) the Social Security Number or Taxpayer Identification
Number
and address provided above is correct, (2) the investor is not subject
to backup
withholding (unless the Backup Withholding Statement box is checked)
either
because he has not been notified that he is subject to backup withholding
as a
result of a failure to report all interest or dividends or because the
Internal
Revenue Service has notified him that he is no longer subject to backup
withholding and (3) the investor (unless, the Foreign Person box above
is
checked) is not a nonresident alien, foreign partnership, foreign trust
or
foreign estate.
THE
SUBSCRIPTION FOR SECURITIES OF BLUEGATE CORPORATION. BY THE ABOVE NAMED
INVESTOR(S) IS ACCEPTED THIS 28
th
DAY
OF JUNE
2007.
|
By:
|
/s/
Charles E. Leibold
|
|
|
Name:
|
CHARLES
E. LEIBOLD
|
|
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Title:
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CFO
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12
