Document:

Unassociated Document

Exhibit 10.2

 

SUBSCRIPTION AGREEMENT

 

This SUBSCRIPTION AGREEMENT (this “Agreement”) is entered into this ___ day of____________, 2010 by and between INTEGRITY APPLICATIONS, INC., a Delaware corporation, (together with the Subsidiary (as defined below), the “Company”), and the undersigned (the “Purchaser”).

 

RECITALS:

 

WHEREAS, the Company desires to issue and sell to the Purchaser, and the Purchaser desires to purchase from the Company, shares (the “Purchased Shares”) of the Company’s common stock, par value $0.001 per share (“Common Stock”), as more fully described in the Offering Memorandum previously delivered to the Purchaser; and

 

WHEREAS, the Purchaser is agreeable to purchasing the Purchased Shares on the terms and subject to the conditions set forth therein and herein.

 

NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties and covenants herein contained, intending to be legally bound, the parties hereto hereby agree as follows:

 

	
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Definitions.  The following terms have the meanings indicated:

 

Accredited Investor Certification shall mean the Accredited Investor Certification in the form attached hereto as Exhibit A.

 

Affiliate means, with respect to a specified Person, any other Person, directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, control (including, with correlative meanings, controlling, controlled by and under common control with) means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

 

Agreement has the meaning set forth in the introductory paragraph.

 

Closing has the meaning set forth in Section 3.1.

 

Closing Date has the meaning set forth in Section 3.2(b).

 

Common Stock has the meaning set forth in the Recitals.

 

Common Stock Equivalents means any securities of the Company that would entitle the holder thereof to acquire shares of Common Stock, including, without limitation, any convertible debt, convertible preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable for, or otherwise entitles the holder thereof to receive, shares of Common Stock.

 

Company has the meaning set forth in the introductory paragraph.

 

Dilutive Issuance has the meaning set forth in Section 2.3(a).

 

Discounted Purchase Price has the meaning set forth in Section 2.3(a).

 

Escrow Agent has the meaning set forth in Section 2.2(b).

 

Escrow Agreement has the meaning set forth in the Offering Memorandum.

 

Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

  

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Exempt Issuance means any and all of the following issuances of shares of Common Stock and/or Common Stock Equivalents by the Company: (i) issuances made to employees, consultants, officers and/or directors of the Company in return for their services to the Company, provided that, in the case of an issuance of shares of Common Stock, such issuance is not made at a price less than the Market Price on the date of issuance, and in the case of an issuance of Common Stock Equivalents, the exercise or conversion price thereof is not less than the Market Price on the date of issuance, (ii) issuances of the Make-Up Shares (if any), (iii) issuances made upon the conversion or exercise of any Company securities outstanding as of the date hereof, (iv) issuances made pursuant to a bona fide firm commitment underwritten public offering, (v) issuances made in connection with any strategic acquisition, merger, business combination or similar transaction, the primary purpose of which is not to raise equity capital, and (vi) issuances made to former shareholders of the Subsidiary pursuant to (A) any obligation or commitment arising under applicable law or under any contract, agreement, or settlement to which the Company or the Subsidiary is bound, or (B) any injunction or other binding order of any court or other tribunal having jurisdiction over the Company or the Subsidiary.

 

Financial Statements has the meaning set forth in Section 5.6.

 

Initial Closing has the meaning set forth in Section 3.1.

 

Make-Up Shares has the meaning set forth in Section 2.3(a).

 

Market Price shall mean, as of a particular date, the (i) the closing sales price of the Common Stock on such date as reported on the national stock exchange or over-the-counter bulletin board or similar trading platform on which the Common Stock is trading on such date; (ii) if no shares of Common Stock traded on such date, the most recent closing sales price of the Common Stock prior to such date as reported on the national stock exchange or over-the-counter bulletin board or similar trading platform on which the Common Stock is trading on such prior date; or (iii) if the Common Stock is not publicly traded, then the market price will be the higher of $6.25 or the market price determined by the Company’s board of directors.

 

Material Adverse Effect means with respect to any Person (i) a material adverse effect on the legality, validity or enforceability of this Agreement or the Purchased Shares; (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of any such Person; (iii) a material adverse effect on the ability of such Person to perform in any material respect on a timely basis its obligations under this Agreement; or (iv) an event which would reasonably be expected to subject such Person to any material liability.

 

Offering Memorandum means that certain Confidential Private Offering Memorandum, dated July 26, 2010, as such document may be amended or supplemented.

 

Per Share Purchase Price means $6.25 per share, subject to (i) proportional increase for any reverse split of Common Stock effected after the date hereof and on or before the Closing Date and (ii) proportional decrease for any split of Common Stock effected after the date hereof and on or before the Closing Date.

 

Person means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or any court or other federal, state, local or other governmental authority or other entity of any kind.

 

Placement Agent means Andrew Garrett, Inc.

 

Placement Fees has the meaning set forth in Section 3.2(a).

 

Private Placement means the offering by the Company of the Purchased Shares, as more fully described in the Offering Memorandum, pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

 

Purchase Price has the meaning set forth in Section 2.1.

 

Purchased Shares has the meaning set forth in the Recitals.

 

Purchaser has the meaning set forth in the introductory paragraph.

 

Registration Rights Agreement means that certain Registration Rights Agreement, dated the date hereof, between the Company and the Purchaser.

 

SEC means the United States Securities and Exchange Commission.

  

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Securities Act means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

Subsidiary means A.D. Integrity Applications Ltd., an Israeli company.

 

Transaction Documents means this Agreement, the Registration Rights Agreement, and the certificates representing the Purchased Shares.

 

	
2.

	
Agreement to Purchase Shares.

 

2.1.         Sale and Issuance of the Purchased Shares.  Subject to the terms and conditions set forth in this Agreement, Purchaser hereby agrees to purchase at the Closing, and the Company agrees to sell and issue to Purchaser at the Closing, the number of Purchased Shares shown below Purchaser’s name on the signature page hereto, for an aggregate purchase price to be paid by Purchaser (the “Purchase Price”) in the amount shown below Purchaser’s name on the signature page hereto.

 

2.2.         Delivery of Purchase Price; Acceptance of Subscription. Purchaser understands and agrees that this subscription is made subject to the following terms and conditions:

 

(a)           Purchaser understands that separate subscription agreements will be executed with other purchasers for additional Purchased Shares to be sold by the Company in connection with the Private Placement;

 

(b)           Contemporaneously with the execution and delivery of this Agreement, Purchaser shall pay to US Bank, as escrow agent (the “Escrow Agent”), in immediately available funds using the wire instructions attached hereto, the amount equal to the Purchase Price;

 

(c)           Purchaser shall deliver a signed copy of this Agreement, the Registration Rights Agreement, and the Accredited Investor Certification to the Placement Agent at the address set forth in the Accredited Investor Certification;

 

(d)           Purchaser understands that all funds paid hereunder will be held by the Escrow Agent in accordance with the terms of the Escrow Agreement.  In the event that the Company does not meet the conditions for Closing as specified in this Agreement (or such conditions are not waived) on or before the expiration of the Private Placement, taking into account any extensions to the offering period pursuant to Section 3.1, the offering will be terminated, no Purchased Shares will be sold in this offering and all funds paid hereunder will be returned to Purchaser;

 

(e)           The subscription for the Purchased Shares shall be deemed to be accepted only when this Agreement has been signed by an authorized officer of the Company;

 

(f)           The Company shall have the right to reject this subscription, in whole or in part;

 

(g)           The payment of the Purchase Price (or, in the case of a rejection of a portion of Purchaser’s subscription, the part of the payment relating to such rejected portion) will be returned promptly, without interest, if Purchaser’s subscription is rejected in whole or in part or if the Private Placement is terminated, withdrawn or canceled; and

 

(h)           The representations and warranties of the Company and Purchaser set forth herein shall be true and correct as of the date that the Company accepts this subscription.

  

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2.3.         Per Share Purchase Price Protection.

 

(a)           If from the date hereof until the earlier to occur of (i) September 1, 2012 and (ii) the date that a particular Purchaser has sold or otherwise transferred (other than transfers to an Affiliate of such Purchaser) that number of shares of Common Stock equal to or greater than the number of Purchased Shares acquired by such Purchaser in connection with the Private Placement, the Company shall issue shares of Common Stock at, or Common Stock Equivalents entitling the holder thereof to acquire shares of Common Stock for, a price per share less than the Per Share Purchase Price (such lower issuance price being referred to herein as the Discounted Purchase Price and such issuance being referred to herein as a Dilutive Issuance), the Company shall issue to such Purchaser that number of additional shares of Common Stock (the “Make-Up Shares”) equal to: (a) the total Purchase Price paid by such Purchaser at the Closing divided by the Discounted Purchase Price less (b) the Purchased Shares acquired by such Purchaser in connection with the Private Placement.  The number of Make-Up Shares to which a particular Purchaser shall be entitled shall be subject to reduction as provided in Section 2.3(b) hereof.  If shares of Common Stock or Common Stock Equivalents are issued for a consideration other than cash, the per share issuance price shall be the fair value of such consideration as determined in good faith by the Company’s Board of Directors.  The Company shall not refuse to issue a Purchaser the Make-Up Shares based on any claim that such Purchaser or anyone associated or affiliated with such Purchaser has been engaged in any violation of law, agreement or for any other reason, unless an injunction by a court of competent jurisdiction restraining and or enjoining an issuance under this Section 2.3 shall have been sought and obtained.  Nothing herein shall limit a Purchaser’s right to pursue actual damages for the Company’s failure to deliver the Make-Up Shares and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.  Promptly after the date of closing of any Dilutive Issuance transaction, the Company shall give the Purchasers written notice thereof.  Notwithstanding anything to the contrary herein, this Section 2.3 and a Purchaser’s right to receive Make-Up Shares hereunder shall not apply to, and a Dilutive Issuance shall not be deemed to have occurred as a result of, any Exempt Issuance.

 

(b)           To the extent that a particular Purchaser has sold or otherwise transferred (other than transfers to an Affiliate of such Purchaser) any shares of Common Stock after the date hereof, the number of Make-Up Shares to which such Purchaser shall be entitled shall be reduced pro rata by the ratio of the shares of Common Stock so sold or transferred to the Purchased Shares.  For example, if (i) a particular Purchaser purchased 40,000 Purchased Shares at a per share price of $6.25 in connection with the Private Placement and then, before the date of a subsequent Dilutive Issuance, sold 10,000 shares of Common Stock, the number of Make-Up Shares would be reduced by one-fourth (1/4).  Applying that example to an instance in which the Discounted Purchase Price was $4.00 per share in connection with a Dilutive Issuance, the total number of Make-Up Shares to which such Purchaser would be entitled would be calculated as follows:

 

($240,000) ÷ ($4.00 per share) – 40,000 shares = 20,000 shares, reduced by 1/4 to 15,000 shares.

 

	
3.

	
Closing.

 

3.1.         General.  The consummation of the Private Placement (the “Closing”) will occur at one or more closings (each, a “Closing”).  The initial Closing (the “Initial Closing”) shall occur at the Company’s offices on or before 5:00 pm EST on August 9, 2010 unless extended by the Company in accordance with the Offering Memorandum.  From and after the Initial Closing, the Company may have such additional Closings as the Company may determine; provided, however, that the final Closing must occur on or before the date that is 120 days after the date of the Offering Memorandum delivered in connection with the Initial Closing unless extended by mutual agreement of the Company and the Placement Agent.

 

3.2.         Conditions to the Closing.

 

(a)           General.  Pursuant to the Escrow Agreement, the Escrow Agent shall not release the escrowed funds to the Company until the Placement Agent has received its fees (the “Placement Fees”) as set forth in the Placement Agent Agreement between the Company and the Placement Agent.  Upon receipt by the Placement Agent of the Placement Fees and the satisfaction (or waiver) of the conditions set forth in Sections 3.2(b) and 3.2(c), the Placement Agent will deliver the documents set forth in Section 2.2(c) to the Company on behalf of the Purchaser.  The Company shall not issue the Purchased Shares to the Purchaser until the Placement Fees have been received by the Placement Agent.

 

(b)           Purchaser Conditions.  The obligation of the Purchaser to purchase the Purchased Shares and to pay the Purchase Price shall be subject to the satisfaction or waiver by the Purchaser of the following conditions on or before the date of a Closing (a “Closing Date”) with such Purchaser:

  

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(i)           the representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects (except for any such representations and warranties that are qualified by their terms by a reference to materiality or material adverse effect, which representation as so qualified shall be true and correct in all respects) at and on such Closing Date as if made on such date;

 

(ii)          the Board of Directors of the Company shall have approved the Private Placement, the transactions contemplated thereby and the entry by the Company into each of the agreements, including the Transaction Documents contemplated therein;

 

(iii)         the Registration Rights Agreement shall have been executed and delivered by the Company;

 

(iv)        certificates representing the Purchased Shares have been delivered to the Purchaser;

 

(v)         the Placement Agent shall have received from Greenberg Traurig, P.A. and Matry, Meiri & Co., counsel for the Company, an opinion, dated as of the Initial Closing, in form and substance reasonably acceptable to the Placement Agent;

 

(vi)        the Minimum (as defined in the Offering Memorandum) amount of funds shall have been raised by the Company in connection with the Private Placement; and

 

(vii)       there must not have been commenced or threatened against the Company, or against any Affiliate of the Company, any proceeding, action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) (a) involving any challenge to, or seeking damages or other relief in connection with, any of the transactions contemplated hereunder or the Private Placement, or (b) that may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the transactions contemplated hereunder or the Private Placement.

 

(c)           Company’s Conditions.  The obligation of the Company to issue and sell the Purchased Shares and complete the Closing shall be subject to the satisfaction as determined by, or waiver by, the Company of the following conditions on or before the Closing Date:

 

(i)           the representations and warranties of the Purchaser contained in this Agreement shall be true and correct in all material respects (except for any such representations and warranties that are qualified by their terms by a reference to materiality or material adverse effect, which representation as so qualified shall be true and correct in all respects) at and on such Closing Date as if made at and on such date;

 

(ii)          the Company shall have received a duly executed and delivered Accredited Investor Certification from the Purchaser; and

 

(iii)         the Minimum (as defined in the Offering Memorandum) amount of funds shall have been raised by the Company in connection with the Private Placement.

  

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4.

	
Purchaser’s Representations and Warranties.  Purchaser hereby represents and warrants to the Company that:

 

4.1.         Organization; Authority; Capacity.  If Purchaser is an entity, Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and Purchaser has the requisite corporate, partnership or limited liability company power and authority to enter into this Agreement and the other Transaction Documents and to consummate the transactions hereunder and thereunder and otherwise to carry out its obligations hereunder and thereunder.  If Purchaser is an individual, Purchaser has the capacity to enter into this Agreement and the other Transaction Documents and to consummate the transactions hereunder and thereunder and otherwise carry out its obligations hereunder and thereunder.  The purchase by Purchaser of the Purchased Shares has been duly authorized by all necessary action on the part of Purchaser.  This Agreement has been, and the other Transaction Documents will be, when executed and delivered at the Closing, duly executed and delivered by Purchaser.  This Agreement constitutes, and the other Transaction Documents, when executed and delivered at the Closing will constitute, valid and binding obligations of the Purchaser, enforceable in accordance with their terms, except as limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, and (b) general principles of equity that restrict the availability of equitable remedies.

 

4.2.         Consents.  No consent, approval or authorization of, or filing, registration or qualification with, any court or governmental or regulatory department, agency or authority having jurisdiction over Purchaser or its business or properties is required for the execution and delivery of this Agreement or any other Transaction Document by Purchaser or the performance of Purchaser’s obligations and duties hereunder or thereunder.

 

4.3.         Investment Intent.  Purchaser is acquiring the Purchased Shares solely for Purchaser’s own account for investment purposes, and not with a view to, or for offer or sale in connection with, any distribution of the Purchased Shares in violation of the Securities Act.  No other person has a beneficial interest in the Purchased Shares, and no other person has furnished or will furnish directly or indirectly, any part of or guarantee the payment of any part of the Purchase Price.  Purchaser does not intend to dispose of all or any part of the Purchased Shares or the Make-Up Shares (if issued), except in strict compliance with the provisions of the Securities Act and applicable state securities laws, and understands that the Purchased Shares (and, if issued, the Make-Up Shares) are being offered pursuant to one or more specific exemptions under the provisions of the Securities Act, which exemption(s) depend(s), among other things, upon compliance with the provisions of the Securities Act.

 

4.4.         Access to Information.

 

(a)           General.  Purchaser acknowledges that it has carefully reviewed and understands the Offering Memorandum and the other documents delivered to Purchaser, and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Purchased Shares and the merits and risks of investing in the Purchased Shares; (ii) access to information about the Company and the Subsidiary and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment.  In purchasing the Purchased Shares, Purchaser has not relied on any information other than the information set forth in the Offering Memorandum, the information in the other documents delivered to the Purchaser, the Company’s representations and warranties set forth in Section 5 and the information referred to in Section 4.4(b).

 

(b)           Risk Factors.  Without limiting the acknowledgements of Purchaser contained in Section 4.4(a) in any way, Purchaser specifically acknowledges that he, she, or its representative has read, carefully considered and fully understands all of the risks associated with an investments in the Purchased Shares, including, without limitation, the risk factors set forth in the Offering Memorandum.

  

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4.5.         Nature of Purchaser.  Purchaser represents and warrants to, and covenants and agrees with, the Company that, (a) it is an accredited investor within the meaning of Rule 501 of Regulation D promulgated by the SEC pursuant to the Securities Act and (b) by reason of its business and financial experience it has such knowledge, sophistication and experience in making similar investments and in business and financial matters generally so as to be capable of evaluating the merits and risks of the prospective investment in the Purchased Shares, is able to bear the economic risk of such investment and, at the present time, would be able to afford a complete loss of such investment.

 

4.6.         Knowledge and Experience.  Purchaser is experienced in evaluating and investing in the securities of businesses in the Company’s and Subsidiary’s industry, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Purchased Shares and of protecting its interests in connection with an acquisition of the  Purchased Shares.  Purchaser understands that the acquisition of the Purchased Shares is a speculative investment and involves substantial risks and Purchaser could lose its entire investment in the Purchased Shares.

 

4.7.         Suitability and Reliance on Own Advisors.  Purchaser has carefully considered and has, to the extent Purchaser deemed it necessary, discussed with Purchaser’s own professional, legal, tax and financial advisers the suitability of an investment in the Purchased Shares for Purchaser’s particular tax and financial situation, and Purchaser has determined that the Purchased Shares are a suitable investment for Purchaser.  Purchaser has not relied upon the Company or its advisers for legal or tax advice.

 

4.8.         Ability to Bear Risk of Loss.  Purchaser is financially able to hold the Purchased Shares and the Make-Up Shares (if issued) subject to restrictions on transfer for an indefinite period of time, and is capable of bearing the economic risk of losing up to the entire amount of its Purchase Price.

 

4.9.         Non-Registered Securities.  Purchaser acknowledges that the offer and sale of the Purchased Shares have not been registered under the Securities Act or any state securities laws and the Purchased Shares and the Make-Up Shares (if issued) may be resold only if registered pursuant to the provisions thereunder or if an exemption from registration is available.  Purchaser understands that the offer and sale of the Purchased Shares is intended to be exempt from registration under the Securities Act, based, in part, upon the representations, warranties and agreements of Purchaser contained in this Agreement.

 

4.10.       Truth and Accuracy.  All representations and warranties made by Purchaser in this Agreement, any other Transaction Documents, and the Accredited Investor Certification are true and accurate as of the date hereof and shall be true and accurate as of the Closing.  If at any time prior to the Closing, any such representation or warranty shall not be true and accurate in any respect, Purchaser shall so notify the Company immediately in writing.

 

4.11.       Scope of Business.  Purchaser has been advised and understands that the Company will be exposed to numerous investment opportunities in all areas of the medical device industry and may therefore pursue various types of transactions and opportunities, even if they do not fit within the primary focus of the Company’s current business plan.

 

4.12.       Brokers or Finders.  Except for the Placement Agent, Purchaser has not dealt with any broker or finder except as disclosed in writing to the Company in connection with the transactions contemplated by the Agreement, and has not incurred, and shall not incur, directly or indirectly, any liability for any brokerage or finders’ fees or agent’s commissions or any similar charges in connection with the transactions contemplated by the Agreement.

 

4.13.       No General Solicitation.  The Purchased Shares were not offered to Purchaser through any form of general solicitation or general advertising, including, without limitation, (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.

  

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4.14.        Forward Looking Statements.   Purchaser acknowledges and understands that the Offering Memorandum includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and various provisions of the Securities Act and the Exchange Act, about the Company’s expectations, beliefs or intentions regarding its product development efforts, business, financial condition, results of operations, strategies or prospects and that all statements, other than statements of historical facts, included in the Offering Memorandum that address future activities, events or developments, including such things as future revenues, product development, market acceptance, responses from competitors, capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of the Company’s business and operations, plans, references to future success, projected performance and trends, and other such matters, are forward-looking statements.  Purchaser acknowledges and understands that these statements involve risks and uncertainties, are based on certain historical trends, current conditions and expected future developments as well as other factors the Company believes are appropriate in the circumstances and that there can be no assurance that the actual results anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business or operations.  Whether actual results will conform to the Company’s expectations and predictions is subject to a number of risks and uncertainties that may cause actual results to differ materially.

 

5.            Company’s Representations and Warranties.  The Company hereby represents and warrants to Purchaser that:

 

5.1.          Organization, Good Standing and Qualification.  The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware.  The Subsidiary is duly organized, validly existing and in good standing under the laws of Israel.  Each of the Company and the Subsidiary has all requisite power and authority to own and operate its properties and assets and, in the case of the Company, to execute and deliver the Transaction Documents and to carry out the provisions of the Transaction Documents.  Each of the Company and the Subsidiary is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a Material Adverse Effect.

 

5.2.          Authorization; Binding Obligation.  All corporate action on the part of the Company necessary for the authorization of the Transaction Documents, the issuance of the Purchased Shares, and the performance of all obligations of the Company hereunder and thereunder at the Closing has been taken or will be taken prior to the Closing.  The individual executing and delivering the Transaction Documents on behalf of the Company has been duly authorized to execute and deliver such documents on behalf of the Company, and the signature of such individual is binding upon the Company.  This Agreement has been, and the other Transaction Documents will be, when executed and delivered at the Closing, duly executed and delivered by the Company.  This Agreement constitutes, and the other Transaction Documents, when executed and delivered at the Closing will constitute, valid and binding obligations of the Company enforceable in accordance with their terms, except as limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, and (b) general principles of equity that restrict the availability of equitable remedies.

 

5.3.         Capitalization.  Except as otherwise disclosed to the Purchaser in writing,

 

(a)           The capitalization of the Company is as set forth in the Offering Memorandum.

 

(b)           All of the outstanding shares of Common Stock of the Company have been duly and validly issued and are fully paid, non-assessable and not subject to any preemptive or similar rights, and were issued in compliance with all applicable federal and state securities laws.  The Company holds no treasury stock in its treasury.  The Purchased Shares have been duly authorized and, when issued and delivered to Purchaser against payment therefor, will be validly issued, fully paid and non-assessable.  The Make-Up Shares have been duly authorized and, if and when issued and delivered to Purchaser against payment therefor, will be validly issued, fully paid and non-assessable.  The issuance of the Purchased Shares and the Make-Up Shares (if issued) will not be subject to any preemptive or similar rights.

  

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(c)           Prior to giving effect to the transactions contemplated by the Private Placement, there are no outstanding subscriptions, options, warrants, convertible securities, calls, commitments, rights of first refusal or first offer, preemptive rights, or other agreements or rights to purchase or otherwise acquire from the Company any shares of, or any securities convertible into, the capital stock of the Company except as disclosed in the Offering Memorandum.

 

(d)           Except in connection with the Private Placement and as disclosed in the Offering Memorandum, no shareholders of the Company have any right to require the registration of any securities of the Company or to participate in any such registration.

 

5.4.         Status of Subsidiary.  The Subsidiary has been duly formed and is validly existing and in good standing under the laws of Israel, with all requisite company power and authority to own or lease its properties and to conduct its business in all material respects as currently conducted.   The Subsidiary is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a Material Adverse Effect.

 

5.5.         Ownership of Subsidiary.  Except as disclosed in the Offering Memorandum, the Company owns directly all of the equity interests of the Subsidiary, free and clear of any and all liens, encumbrances and restrictions, and the issued and outstanding equity interests of the Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights.  Neither the Company nor the Subsidiary is a party to any material joint venture, nor has any ownership interest in any other entity that is material to the Company and not disclosed in the Offering Memorandum.

 

5.6.         Financial Statements.  The Company has delivered to Purchaser as part of the Offering Memorandum the Company’s (a) audited financial statements (including balance sheet, statement of operations, statements of changes in shareholders’ equity, and statement of cash flows) as of December 31, 2008 and for the fiscal year then ended and as of December 31, 2009 and for the fiscal year then ended and (b) unaudited financial statements (including balance sheet, statement of operations, and statement of cash flows) as of March 31, 2010 and for the 3-month period then ended, or such subsequent interim financial statements as may be included in the Offering Memorandum following the date hereof (collectively, the “Financial Statements”).  The Financial Statements fairly present in all material respects the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein, subject in the case of the unaudited Financial Statements to normal year-end audit adjustments.  Except as set forth in the Financial Statements, the Company has no material liabilities or obligations, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to March 31, 2010 and (ii) obligations under contracts and commitments incurred in the ordinary course of business, which, in all such cases, individually and in the aggregate would not have a Material Adverse Effect.

 

5.7.         Litigation.  Except as disclosed in the Offering Memorandum, there are no suits or proceedings pending, or to the knowledge of the Company overtly threatened, before any court or by or before any governmental or regulatory authority, commission, bureau or agency or public regulatory body against or affecting the Company or its assets (including the Subsidiary), which if adversely determined would have a Material Adverse Effect.

  

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5.8.         Approvals and Consents.  Except as disclosed in the Offering Memorandum, (a) all material authorizations, consents, approvals, franchises and licenses required under applicable law or regulation for the ownership or operation of the properties owned or operated by the Company and the Subsidiary and for the conduct of any business in which either is engaged have been duly issued and are in full force and effect, and to the Company’s knowledge neither it nor the Subsidiary is in default, nor has any event occurred which with the passage of time or the giving of notice, or both, would constitute a default, under any of the terms or provisions of any part thereof, or under any order, decree, ruling, regulation, closing agreement or other decision or instrument of any governmental commission, bureau or other administrative agency or public regulatory body having jurisdiction over the Company or the Subsidiary; and (b) no approval, consent or authorization of, or filing or registration with, any governmental commission, bureau or other regulatory authority or agency is required with respect to the execution, delivery or performance of any Transaction Document, except in each case for such consents, approvals, authorizations, orders, registrations or qualifications (i) as have been obtained, (ii) as may be required under federal or state securities or Blue Sky laws in connection with the purchase or registration of the Purchased Shares or (iii) the failure of which to obtain would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

5.9.         Compliance with Laws, Other Instruments.  Except as disclosed in the Offering Memorandum, the issuance and sale of the Purchased Shares to Purchaser as contemplated hereby and the execution, delivery and performance by the Company of the Transaction Documents will not (a) contravene, violate, result in any breach of, or constitute a default under or result in the creation of any lien in respect of any property of the Company or the Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, charter, certificate of incorporation, bylaws or other organizational or formation document or agreement of the Company or the Subsidiary, or any other material agreement or instrument to which the Company or the Subsidiary is bound or by which the Company or the Subsidiary or any of its respective properties may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or governmental authority applicable to the Company or the Subsidiary or (c) materially violate any provision of any statute or other rule or regulation of any governmental authority applicable to the Company or the Subsidiary.

 

5.10.       Taxes.  Each of the Company and the Subsidiary has filed all federal, Israeli, state, and local income and other tax returns which are required to be filed, and has paid all taxes as shown on said returns and all taxes, including any applicable withholding taxes, shown on all assessments received by it to the extent that such taxes have become due.  Neither the Company nor the Subsidiary is subject to any federal, Israeli, state, or local tax liens and has not received any notice of deficiency or other official notice to pay any taxes.  The Company and the Subsidiary have each paid all sales and excise taxes payable by it.

 

5.11.       Intellectual Property.  The Company or the Subsidiary owns or has a valid right to use all the material patents, trademarks, service marks, trade names, copyrights, licenses, registrations, franchises, permits and rights necessary to own and operate its properties and to carry on its business, without known, alleged or actual conflict with the rights of others.

 

5.12.       Permits.  Each of the Company and the Subsidiary has all franchises, permits, licenses and any similar authority necessary for the conduct of its business, the lack of which could reasonably be expected to have a Material Adverse Effect.  Neither the Company nor the Subsidiary is in default in any material respect under any of such franchises, permits, licenses or other similar authority.

 

5.13.       Title.  Except as set forth in the Offering Memorandum, the Company (a) has good title to all of the assets shown in its Financial Statements as owned by the Company, free and clear of all liens and encumbrances; and (b) has a valid leasehold interest in all properties, assets and other rights which it purports to lease or which are reflected as leased on its books and records, free and clear of all liens and encumbrances and subject to the terms and conditions of the applicable leases. All leases of property are in full force and effect without the necessity for any consent which has not previously been obtained upon consummation of the transactions contemplated by this Agreement and the other Transaction Documents, except where the failure to obtain such consent would not result in a Material Adverse Effect.  The Company and the Subsidiary are not, and nor are any of their respective assets, subject to any unpaid judgments (whether or not stayed) or any judgment liens in any jurisdiction.

 

5.14.       No Material Adverse Change.  Since the date of the Offering Memorandum, there has not been any material adverse change in the business, operations, properties, prospects, assets, or condition of the Company or the Subsidiary, and no event has occurred or circumstance exists that may result in such a material adverse change except for such changes as may have occurred in the medical devices industry generally, in the national or world economy, or from the operation by the Company and the Subsidiary of its business in the ordinary course and consistent with past practice.

  

10

  

5.15.       Observance of Agreements, Statutes and Orders.  Except as disclosed in the Offering Memorandum, neither the Company nor the Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or governmental authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation environmental laws) of any governmental authority which default or violation could reasonably be expected to have a Material Adverse Effect upon the operations or financial condition of the Company or the Subsidiary.

 

5.16.       Private Placement.  Assuming the accuracy of the representations and warranties of Purchaser contained in this Agreement, the offer, sale and issuance of the Purchased Shares to Purchaser are exempt from the registration requirements of the Securities Act, and the securities laws of any state having jurisdiction with respect thereto, and neither the Company nor the Subsidiary has taken any action that would cause the loss of such exemption.

 

5.17.       Brokers or Finders.  Except for the Placement Agent, the Company has not dealt with any broker or finder in connection with the transactions contemplated by the Transaction Documents, and the Company has not incurred, and shall not incur, directly or indirectly, any liability for any brokerage of finders’ fees or agents’ commissions or any similar charges in connection with the transactions contemplated by the Agreement.

 

5.18.       No Integrated Offering.  Neither the Company nor any of its Affiliates (including the Subsidiary), nor, to the Company’s knowledge, any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security of the Company or solicited any offers to buy any security, under circumstances that would adversely affect reliance by the Company on Section 4(2) of the Securities Act for the exemption from the registration requirements imposed under Section 5 of the Securities Act for the transactions contemplated hereby or that would require such registration the Securities Act.

 

5.19.       Full Disclosure.  No Transaction Document, nor any agreement, document, certificate or statement delivered by the Company to Purchasers, contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein not misleading.

 

6.            Restrictions on Transfer.

 

6.1.         Resale Restrictions.  Purchaser understands that the offer and sale of the Purchased Shares to Purchaser have not been registered under the Securities Act or under any state securities laws.  Purchaser agrees not to offer, sell or otherwise transfer the Purchased Shares or the Make-Up Shares (if issued), or any interest in any of the foregoing securities, unless (i) the offer and sale is registered under the Securities Act; or (ii) the Purchased Shares and the Make-Up Shares (if issued), as applicable, are sold or transferred in accordance with the applicable requirements and limitations of Rule 144 under the Securities Act and any applicable state securities laws and, if the Company requests, Purchaser delivers to the Company an opinion of counsel reasonably acceptable to the Purchaser to such effect; or (iii) Purchaser delivers to the Company an opinion of counsel (at the expense of the Purchaser) reasonably satisfactory to the Company that the offer and sale is otherwise exempt from Securities Act (and state securities laws) registration.

 

6.2.         Restrictive Legend.  Purchaser understands and agrees that a legend in substantially the following form will be placed on the certificates or other documents representing the Purchased Shares and the Make-Up Shares (if issued) unless the Purchased Shares are held for more than 12 months:

  

11

  

 

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING THE TRANSFER OF SUCH SHARES UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE OFFER AND SALE IS EXEMPT FROM SECURITIES ACT REGISTRATION, AND THE TERMS OF SECTION 6.1 OF THE SUBSCRIPTION AGREEMENT PURSUANT TO WHICH THE SECURITIES WERE ORIGINALLY PURCHASED AND APPLICABLE STATE SECURITIES LAWS HAVE BEEN COMPLIED WITH.  A COPY OF THE SUBSCRIPTION AGREEMENT IS ON FILE AT THE CORPORATE OFFICE OF THE CORPORATION.

 

6.3.         Illiquid Investment.  Purchaser acknowledges and agrees that it must bear the economic risk of its investment in the Purchased Shares and the Make-Up Shares (if issued) for an indefinite period of time, until such time as the Purchased Shares and the Make-Up Shares (if issued), as applicable, are registered or an exemption from registration is available.

 

6.4.         Legal Opinion.  On or immediately after the first anniversary of the Initial Closing, the Company shall, at its cost, cause Greenberg Traurig, P.A. to prepare and submit to the Company’s transfer agent a blanket legal opinion regarding the removal of the restrictive legend set forth in Section 6.2 hereof on any Purchased Shares held by the Purchaser pursuant to Rule 144(b)(1) (the “144 Opinion”), provided that such 144 Opinion may provide for exclusions or exceptions for Persons who are or may become affiliates affiliates within the meaning set forth in Rule 144(a)(1).  Such 144 Opinion shall be in form and substance reasonably satisfactory to the Company’s legal counsel.  If there is more than one Closing, the Company shall cause its legal counsel to prepare and submit to the Company’s transfer agent a 144 Opinion on or immediately after the first anniversary of each such Closing Date.  The Company shall provide a legal opinion to its transfer agent for resale of Purchased Shares under the registration statement(s) filed covering the resale of such securities pursuant to this agreement (the “Resale Opinion”), provided that such Resale Opinion may provide for exclusions or exceptions for Persons who are or may become affiliates within the meaning set forth in Rule 144(a)(1).  Each Resale Opinion shall be delivered to the Company’s transfer agent immediately after the respective registration statement is declared effective.

 

7.            Notices.  All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed (A) if within the United States by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, or by facsimile, or (B) if delivered from outside the United States, by International Federal Express or facsimile, and shall be deemed given (i) if delivered by first-class registered or certified mail, three business days after so mailed, (ii) if delivered by nationally recognized overnight carrier, one business day after so mailed, (iii) if delivered by International Federal Express, two business days after so mailed, (iv) if delivered by facsimile, upon electronic confirmation of receipt and shall be delivered as addressed as follows:

 

(a)           if to the Company, to:

 

Integrity Applications, Inc.

P.O. Box 432

Ashkelon 78100 Israel

Attention: Avner Gal, CEO and Chairman of the Board

Fax: 972 (8) 675-7850

(b)           if to Purchaser, at its address on the signature page hereto attached hereto, or at such other address or addresses as may have been furnished to the Company in writing.

 

8.            Reliance.  Purchaser and the Company understand and agree that the other party and its respective officers, directors, employees and agents may, and will, rely on the accuracy of the other party’s respective representations and warranties in this Agreement to establish compliance with applicable securities laws.  Purchaser and the Company agree to indemnify and hold harmless all such parties against all losses, claims, costs, expenses and damages or liabilities which they may suffer or incur caused or arising from their reliance on such representations and warranties.

  

12

  

9.           Miscellaneous.

 

9.1.          Assignment.  This Agreement is not transferable or assignable.

 

9.2.          Titles.  The titles of the sections and subsections of this Agreement are for the convenience of reference only and are not to be considered in construing this Agreement.

 

9.3.          Severability.  The invalidity or unenforceability of any particular provision of this Agreement shall not affect or limit the validity or enforceability of the remaining provisions of this Agreement.

 

9.4.          Entire Agreement.  This Agreement, together with the other Transaction Documents, constitutes the entire agreement and understanding between the parties with respect to the subject matters herein and supersedes and replaces any prior agreements and understandings, whether oral or written, between them with respect to such matters.

 

9.5.          Waiver and Amendment.  Except as otherwise provided herein, the provisions of this Agreement may be waived, altered, amended or repealed, in whole or in part, only upon the mutual written agreement of the Company and Purchaser.

 

9.6.          Survival.  Purchaser’s obligations under this Agreement shall survive Purchaser’s death, insanity, incapacity, bankruptcy or insolvency.

 

9.7.          Counterparts.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement.  In the event that this Agreement is delivered by facsimile transmission or by e-mail delivery of a .pdf format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or .pdf signature page were an original thereof.

 

9.8.          Governing Law.  This Agreement is governed by and shall be construed in accordance with the laws of the State of New York without regard to its conflict of laws principals.

 

*    *    *    *

  

13

  

How to subscribe to the private offering of securities

for Integrity Applications, Inc.

 

	
  

	
1.

	
Date and Fill in the number of Purchased Shares being purchased and Complete and Sign the Subscription Agreement. Needs to be completed by Retail and Institutional Investors.

 

	
  

	
2.

	
Initial the Accredited Investor Certification page.  Needs to be completed by Retail and Institutional Investors (Schedule 1).

 

	
  

	
3.

	
Complete and return the Investor Profile.  Section A of the Investor Profile is for Retail Investors. Section B of the Investor Profile is for Institutional Investors.  Section C and D of the Investor Profile is for both Retail and Institutional Investors.

 

	
  

	
4.

	
Complete and Return Wire Transfer Authorization – Andrew Garrett Retail Clients only.

 

	
  

	
5.

	
Complete and return Form W-9. If the subscription is from a foreign citizen or entity, we will forward the appropriate Form W-8. Needs to be completed by Retail and Institutional Investors.

 

	
  

	
6.

	
Patriot Act Regulations require us to have a valid photo ID in our file for ALL subscriptions.  Please return with the original documents a copy of your valid Driver’s License or Passport. We would prefer a scanned copy of the original document for our records.

	
  

	
7.

	
Fax all forms to Jamie Mitchell at (646) 708-9671 and then send all signed and completed original documents with check to:

Jamie Mitchell

Chief Operations Officer

Andrew Garrett, Inc.

Two Grand Central Tower, 11th Floor

140 East 45th Street

New York, NY 10017

	 	
8.

	
Please make your subscription payment by check payable to the order of US Bank, Escrow Agent for Integrity Applications, Inc.

	 	
9.

	
Wire Transfer instruction should be directed as follows:

   Bank Name:       US Bank

                                60 Livingston Avenue

                            St. Paul, MN 55107

ABA#:     091000022

Account Name:   US Bank Trust

Trust Clearing Account #:

F/F/C:

Attention Linh Tran:        (651) 495-3567

FBO:      Name of Subscriber

  

14

  

ANTI MONEY LAUNDERING REQUIREMENTS

	
The USA PATRIOT Act

	 	
What is money laundering?

	 	
How big is the problem and

why is it important?

	
 

The USA PATRIOT Act is designed to detect, deter, and punish terrorists in the United States and abroad.  The Act imposes new anti-money laundering requirements on brokerage firms and financial institutions.  Since April 24, 2002 all brokerage firms have been required to have new, comprehensive anti-money laundering programs.

 

To help you understand these efforts, we want to provide you with some information about money laundering and our steps to implement the USA PATRIOT Act.

	 	
 

Money laundering is the process of disguising illegally obtained money so that the funds appear to come from legitimate sources or activities.  Money laundering occurs in connection with a wide variety of crimes, including illegal arms sales, drug trafficking, robbery, fraud, racketeering, and terrorism.

	 	
 

The use of the U.S. financial system by criminals to facilitate terrorism or other crimes could well taint our financial markets.  According to the U.S.  State Department, one recent estimate puts the amount of worldwide money laundering activity at $1 trillion a year.

	
What are we required to do to eliminate money laundering?

	
 

Under new rules required by the USA PATRIOT Act, our anti-money laundering program must designate a special compliance officer, set up employee training, conduct independent audits, and establish policies and procedures to detect and report suspicious transaction and ensure compliance with the new laws.

	 	
 

As part of our required program, we may ask you to provide various identification documents or other information.  Until you provide the information or documents we need, we may not be able to effect any transactions for you.

  

15

  

SUBSCRIPTION AGREEMENT

Needs to be completed by Retail and Institutional Investors

Purchaser hereby elects to subscribe under the Subscription Agreement for a total of

_____ Purchased Shares at a price of $6.25 per Share (NOTE: to be completed by Purchaser)

Purchase Price: $                                                                          .

Date (NOTE: To be completed by Purchaser): __________________, 2010

If the Purchaser is an Individual, and if purchased as JOINT TENANTS, as TENANTS IN COMMON, or as COMMUNITY PROPERTY:

	
  

	  	
  

	
 

Print Name(s)

	  	
 

Social Security Number(s)

	  	  	  
	
  

	  	
  

	
 

Signature(s) of Purchaser(s)

	  	
 

Signature

	  	  	  
	
  

	  	
  

	
 

Date

	  	
 

Address

If the Purchaser is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY or TRUST:

	
   

	  	
  

	
Name of Partnership,

	  	
Federal Taxpayer

	
Corporation, Limited

	  	
Identification Number

	
Liability Company or Trust

	  	  
	  	  	  	  
	
By:

	
  

	  	
  

	  	
Name:

	  	
State of Organization

	  	
Title:

	  	  
	  	  	  	  
	
  

	  	
  

	
Date

	  	
Address

	
INTEGRITY APPLICATIONS, INC.

	  	  
	
By:

	
  

	  	
Avner Gal

CEO and Chairman of the Board

  

16

  

SCHEDULE 1

INTEGRITY APPLICATIONS, INC.

ACCREDITED INVESTOR CERTIFICATION

Needs to be completed by Retail and Institutional Investors

For Individual Accredited Investors Only

(all Individual Accredited Investors must INITIAL where appropriate):

	
Initial _______

	
I have a net worth (excluding the value of my primary residence) in excess of $1 million either individually or through aggregating my individual holdings and those in which I have a joint, community property or other similar shared ownership interest with my spouse.

 

	
Initial _______

	
I have had an annual gross income for the past two years of at least $200,000 (or $300,000 jointly with my spouse) and expect my income (or joint income, as appropriate) to reach the same level in the current year.

 

	
Initial _______

	
I am a director or executive officer of the issuer.

For Non-Individual Accredited Investors

(all Non-Individual Accredited Investors must INITIAL where appropriate):

	
Initial _______

	
The investor certifies that it is a partnership, corporation, limited liability company or business trust that is 100% owned by persons who meet at least one of the criteria for Individual Investors set forth above.

 

	
Initial _______

	
The investor certifies that it is a partnership, corporation, limited liability company or business trust that has total assets of at least $5 million and was not formed for the purpose of investing in the Company.

 

	
Initial _______

	
The investor certifies that it is an employee benefit plan whose investment decision is made by a plan fiduciary (as defined in ERISA §3(21)) that is a bank, savings and loan association, insurance company or registered investment adviser.

 

	
Initial _______

	
The investor certifies that it is an employee benefit plan whose total assets exceed $5,000,000 as of the date of this Agreement.

 

	
Initial _______

	
The undersigned certifies that it is a self-directed employee benefit plan whose investment decisions are made solely by persons who meet either of the criteria for Individual Investors.

 

	
Initial _______

	
The investor certifies that it is a U.S. bank, U.S. savings and loan association or other similar U.S. institution acting in its individual or fiduciary capacity.

 

	
Initial _______

	
The undersigned certifies that it is a broker-dealer registered pursuant to §15 of the Securities Exchange Act of 1934.

 

	
Initial _______

	
The investor certifies that it is an organization described in §501(c)(3) of the Internal Revenue Code with total assets exceeding $5,000,000 and not formed for the specific purpose of investing in the Company.

 

	
Initial _______

	
The investor certifies that it is a trust with total assets of at least $5,000,000, not formed for the specific purpose of investing in the Company, and whose purchase is directed by a person with such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment.

 

	
Initial _______

	
The investor certifies that it is a plan established and maintained by a state or its political subdivisions, or any agency or instrumentality thereof, for the benefit of its employees, and which has total assets in excess of $5,000,000.

 

	
Initial _______

	
The investor certifies that it is an insurance company as defined in §2(13) of the Securities Act, or a registered investment company.

  

17

  

CERTAIN DEFINITIONS

Investment Objectives: The typical investment listed with each objective are only some examples of the kinds of investments that have historically been consistent with the listed objectives.  However, neither Integrity Applications, Inc. nor Andrew Garrett, Inc. can assure that any investment will achieve your intended objective.  You must make your own investment decisions and determine for yourself if the investments you select are appropriate and consistent with your investment objectives.

Neither Integrity Applications, Inc. nor Andrew Garrett, Inc. assume responsibility to you for determining if the investments you selected are suitable for you.

 

Preservation of Capital: An investment objective of Preservation of Capital indicates you seek to maintain the principal value of your investments and are interested in investments that have historically demonstrated a very low degree of risk of loss of principal value.  Some examples of typical investments might include money market funds and high quality, short-term fixed income products.

 

Income:  An investment objective of Income indicates you seek to generate from investments and are interested in investments that have historically demonstrated a low degree of risk of loss of principal value.  Some examples of typical investments might include high quality, short and medium-term fixed income products, short-term bond funds and covered call options.

 

Capital Appreciation:  An investment objective of Capital Appreciation indicates you seek to grow the principal value of your investments over time and are willing to invest in securities that have historically demonstrated a moderate to above average degree of risk of loss of principal value to pursue this objective.  Some examples of typical investments might include common stocks, lower quality, medium-term fixed income products, equity mutual funds and index funds.

 

Trading Profits: An investment objective of Trading Profits indicates you seek to take advantage of short-term trading opportunities, which may involve establishing and liquidating positions quickly.  Some examples of typical investments might include short-term purchases and sales of volatile or low priced common stocks, put or call options, spreads, straddles and/or combinations on equities or indexes.  This is a high-risk strategy.

 

Speculation:  An investment objective of Speculation indicates you seek a significant increase in the principal value of your investments and are willing to accept a corresponding greater degree of risk by investing in securities that have historically demonstrated a high degree of risk of loss of principal value to pursue this objective.  Some examples of typical investments might include lower quality, long-term fixed income products, initial public offerings, volatile or low priced common stocks, the purchase of sale of put or call options, spreads, straddles and/or combinations on equities or indexes, and the use of short-term or day trading strategies.

 

Other: Please specify.

  

18

  

Investor Questionnaire

(Must be completed by Retail and Institutional Investors)

Section A - Retail Investor Information

Investor Name(s): ___________________________________________________________________________________

 

Individual executing Profile or Trustee: __________________________________________________________________

 

Social Security Numbers / Federal I.D. Number: ___________________________________________________________

 

	
Date of Birth:

	   	 	
Marital Status: ___________________________

	
Joint Party Date of Birth:

	     	 	
Investment Experience (Years):______________

	
Annual Income:

	     	 	
Liquid Net Worth:                                                    

	
Net Worth:

	     	 	  
	
Tax Bracket:

	
_______ 15% or below

	 	_____ 25% - 35%        _____ Over 35%

	
Investment Objectives (circle one or more):

	
Preservation of Capital, Income, Capital Appreciation, Trading   Profits, Speculation or Other (please specify) * See definitions on preceding page

Home Street Address:                                                                                                                                                                     

Home City, State & Zip Code:                                                                                                                                                       

Home Phone: ________________________ Home Fax: _____________________  Home Email:                                         

Cellular Phone:                                                                                                                                                                               

Employer:                                                                                                                                                                                          

Employer Street Address:                                                                                                                                                              

Employer City, State & Zip Code:                                                                                                                                               

Bus. Phone: __________________________ Bus. Fax: __________________________ Bus. Email:                             

Type of Business:                                                                                                                                                                           

Andrew Garrett Account Executive / Outside Broker/Dealer:                                                                                                      

 

If you are a United States citizen, please list the number and jurisdiction of issuance of any other government-issued document evidencing residence and bearing a photograph or similar safeguard (such as a driver’s license or passport), and provide a photocopy of each of the documents you have listed.

If you are NOT a United States citizen, for each jurisdiction of which you are a citizen or in which you work or reside, please list (i) your passport number and country of issuance or (ii) alien identification card number AND (iii) number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard, and provide a photocopy of each of these documents you have listed.  These photocopies must be certified by a lawyer as to authenticity.

  

19

  

Section B – Institutional Investor Information

Investor Name(s):                                                                                                                                                                                                                    

Authorized Individual (incl. title) executing on behalf of Institution:                                                                                            

Federal I.D. Number:                                                                                                                                                                      

Jurisdiction of Organization:                                                                                                                                                          

Source of Investment Funds:                                                                                                                                                           

 U.S. Financial Institution from which Funds are to be Transferred:                                                                                             

 

(If funds are to be transferred from non-U.S. account, a supplemental questionnaire will be required)

Principal Place of Business

Street Address:                                                                                                                                                                                                           

City, State & Zip Code:                                                                                                                                                                  

Phone: ________________________ Fax: _____________________  Email:                                                                           

Cellular Phone:                                                                                                                                                                                                           

Type of Institution:                                                                                                                                                                        

Andrew Garrett Account Executive / Outside Broker/Dealer:                                                                                                        

If the general partner or other person(s) authorized to sign on behalf of the institution are United States citizens, please list the number and jurisdiction of issuance of any other government-issued document evidencing residence and bearing a photograph or similar safeguard (such as a driver’s license or passport), and provide a photocopy of each of the documents you have listed.

 

_____________________________            _________________________________

 

Please provide a photocopy of the organizational documents governing the institution, such as a partnership agreement or limited liability company operating agreement.

Section C – Share Certificate Delivery Instructions (Retail and Institutional Investors)

____ Please deposit Share Certificate in my Andrew Garrett Account #______________________________________________.

____ Please open an Andrew Garrett account and subsequently deposit my Share Certificate in it.

____ Please deliver Purchased Shares to the Employer Address listed in Section A.

____ Please deliver  Purchased Shares to the Home Address listed in Section A.

____ Please deliver  Purchased Shares to the following address:

__________________________________________.

Section D – Form of Payment – Check or Wire Transfer (Retail and Institutional Investors

____ Check payable to US Bank, as Escrow Agent for Integrity Applications, Inc.

____ Wire funds from my outside account according to the How to subscribe for Purchased Shares Page.

____ Wire funds from my Andrew Garrett Account - See Following Page.

  ____ The funds for this investment are rolled over, tax deferred from __________ within the allowed 60 day window.

Please check if you are a FINRA member or affiliate of a FINRA member firm:

________________________

 

Investor Signature

  

20

  

Memorandum

Wire Transfer Authorization

Jamie Mitchell

Chief Administrative Officer

Andrew Garrett, Inc

140 East 45th Street, 11th Floor

New York, NY 10017 

RE: Wire Transfer Instructions for the subscription to purchased shares of the Private Placement of Securities for Integrity Applications, Inc.

Dear Mr. Mitchell:

I am subscribing for ___  Shares of the common stock, par value $0.001 per share, of Integrity Applications, Inc. ($______________ of the private placement of securities for Integrity Applications, Inc.).  This is my letter of authorization to execute a wire transfer for _____________ from my account at Andrew Garrett 800-_______ to the escrow agent for the offering per the instructions below:

US Bank

60 Livingston Avenue

St. Paul. MN 55107

ABA # 091000022

F/B/O: US Bank Trust

Trust Clearing Account #

F/F/C:

Ref: ___________________

Attention: Linh Tran (651) 495-3567

Please call me at (____) _____- ______ if you have any questions on my instructions.

Sincerely,

Customer Name

Subscribed and sworn to before this ___ day of _____________, 2010.

_____________________

Signature of Notary

_____________________

Print Name

My Commission expires: _____________

  

21

  

  

22Exhibit 10.3

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is made and entered into as of this 16th day of December, 2010 by and among INTEGRITY APPLICATIONS, INC., a Delaware corporation (the “Company”), ANDREW GARRETT, INC. a broker-dealer registered with the Financial Industry Regulatory Authority, Inc., (the “Placement Agent”), and each of the undersigned investors (collectively with the Placement Agent, the “Investors”) who has executed and delivered either (i) a subscription agreement, dated on or about the date hereof, by and between the Company and such Investor (the “Subscription Agreement”), in connection with the offering by the Company of up to $12.5 million of shares of its Common Stock, or (ii) that certain Note Purchase Agreement, dated March 9, 2010 (the “Note Purchase Agreement”), among A.D. Integrity Applications Ltd, an Israeli company (“Integrity-Israel”), such Investor, and the other signatories thereto, in connection with the sale and issuance by Integrity-Israel of its Senior Secured Promissory Notes which may be repaid in whole or in part through the issuance of shares of the Company’s Common Stock.

 

The parties hereby agree as follows:

 

	
  

	
1.

	
Certain Definitions.

 

As used in this Agreement, the following terms shall have the following meanings:

 

Common Stock means the Company’s common stock, par value $0.001 per share, and any securities into which such shares may hereinafter be reclassified.

 

Final Closing Date means the date of the last closing under any Subscription Agreement to which the Company and any of the Investors is a party.

 

Investors means the Investors who have executed and delivered the Subscription Agreement or the Note Purchase Agreement, and any Affiliate or permitted transferee (pursuant to Section 6.7(c)) of any Investor who is a subsequent holder of any Registrable Securities.

 

Legal Counsel has the meaning set forth in Section 2(b) of this Agreement.

 

Note Purchase Agreement has the meaning set forth in the Preamble of this Agreement.

 

Prospectus means (i) the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus, and (ii) any free writing prospectus as defined in Rule 405 under the 1933 Act.

 

Register, registered and registration refer to a registration made by preparing and filing a Registration Statement or similar document in compliance with the 1933 Act (as defined below), and the declaration or ordering of effectiveness of such Registration Statement or document.

 

Registrable Securities means (i) all of the shares of Common Stock issued pursuant to the Subscription Agreement and pursuant to the Note Purchase Agreement, (ii) any additional shares of Common Stock issuable in connection with any anti-dilution provisions set forth in the Subscription Agreement or otherwise associated with such Common Stock, (iii) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided that any security described in clauses (i), (ii) or (iii) above shall cease to be a Registrable Security upon (A) sale pursuant to a Registration Statement or Rule 144 under the 1933 Act, or (B) such security becoming eligible for sale without restriction by the Investors pursuant to Rule 144, and (iv) any shares of Common Stock underlying warrants granted to the Placement Agent.

 

Registration Statement means any registration statement of the Company filed under the 1933 Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement.

 

Required Investors means the Investors holding a majority of the Registrable Securities.

 

  

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SEC means the U.S. Securities and Exchange Commission.

 

Subscription Agreement has the meaning set forth in the Preamble of this Agreement.

 

1933 Act means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

1934 Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

	
  

	
2.

	
Registration.

 

	
  

	
(a)

	
Registration Statements.

 

(i)           Promptly following the Final Closing Date, but no later than 20 days after the Final Closing Date (the “Filing Deadline”), the Company shall prepare and file with the SEC one Registration Statement on Form S-1 covering the resale of the Registrable Securities.  Subject to any SEC comments, such Registration Statement shall include the plan of distribution attached hereto as Exhibit A; provided, however, that no Investor shall be named as an underwriter in the Registration Statement without the Investor’s prior written consent.  Such Registration Statement also shall cover, to the extent allowable under the 1933 Act and the rules promulgated thereunder (including Rule 416), such indeterminate number of additional shares of Common Stock resulting from stock splits, stock dividends or similar transactions with respect to the Registrable Securities.  Such Registration Statement shall not include any shares of Common Stock or other securities for the account of any other holder without the prior written consent of the Required Investors.  The Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided in accordance with Section 3(c) to the Investors and their counsel prior to its filing or other submission.  If a Registration Statement covering the Registrable Securities is not filed with the SEC on or prior to the Filing Deadline, the Company will make pro rata payments to each Investor, as liquidated damages and not as a penalty, in an amount equal to 1.5% of the aggregate purchase price paid by such Investor under the Subscription Agreement and the Note Purchase Agreement for each 30-day period or pro rata for any portion thereof following the Filing Deadline for which no Registration Statement is filed with respect to the Registrable Securities.  Such payments shall constitute the Investors’ exclusive monetary remedy for such events, but shall not affect the right of the Investors to seek injunctive relief.  Such payments shall be made to each Investor in cash no later than five (5) Business Days after the end of each 30-day period.

 

(b)    Expenses.  The Company will pay all reasonable expenses associated with each registration, including filing and printing fees, the Company’s counsel and accounting fees and expenses, costs associated with clearing the Registrable Securities for sale under applicable state securities laws, listing fees, fees and expenses of one counsel to the Investors, which shall be Shulman, Rogers, Gandal, Pordy & Ecker, P.A. or such other counsel as thereafter designated by the Required Investors (the “Legal Counsel”), and the Investors’ reasonable expenses in connection with the registration, but excluding discounts, commissions, fees of underwriters, selling brokers, dealer managers or similar securities industry professionals with respect to the Registrable Securities being sold.

 

	
  

	
(c)

	
Effectiveness.

 

(i)           The Company shall use commercially reasonable efforts to have the Registration Statement declared effective as soon as practicable.  The Company shall notify the Investors by facsimile or e-mail as promptly as practicable, and in any event, within twenty-four (24) hours, after any Registration Statement is declared effective and shall simultaneously provide the Investors with copies of any related Prospectus to be used in connection with the sale or other disposition of the securities covered thereby.  If (A) a Registration Statement covering the Registrable Securities is not declared effective by the SEC prior to the earlier of (i) five (5) Business Days after the SEC shall have informed the Company that no review of the Registration Statement will be made or that the SEC has no further comments on the Registration Statement or (ii) the 120th day after the Closing Date; or (B) after a Registration Statement has been declared effective by the SEC, sales cannot be made pursuant to such Registration Statement for any reason (including without limitation by reason of a stop order, or the Company’s failure to update the Registration Statement), but excluding any Allowed Delay or Rule 415 Cutback (each as defined below) or the inability of any Investor to sell the Registrable Securities covered thereby due to market conditions, then the Company will make pro rata payments to each Investor, as liquidated damages and not as a penalty, in an amount equal to 1.5%, of the aggregate purchase price paid by such Investor under the Subscription Agreement and the Note Purchase Agreement for each 30-day period or pro rata for any portion thereof following the date by which such Registration Statement should have been effective (the “Blackout Period”).  The total amount of liquidated damages to be paid for such Blackout Period shall not exceed 8.0% of the aggregate purchase price paid by such Investor under the Subscription Agreement and the Note Purchase Agreement.  Such payments shall constitute the Investors’ exclusive monetary remedy for such events, but shall not affect the right of the Investors to seek injunctive relief.  The amounts payable as liquidated damages pursuant to this paragraph shall be paid monthly within three (3) Business Days of the last day of each month following the commencement of the Blackout Period until the termination of the Blackout Period.

 

  

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(ii)           For not more than thirty (30) consecutive days or for a total of not more than sixty (60) days in any twelve (12) month period, the Company may suspend the use of any Prospectus included in any Registration Statement contemplated by this Section in the event that (A) the representative of the underwriters of an underwritten offering of primary shares by the Company has advised the Company that the offer or sale of shares of Common Stock under the Registration Statement would have a material adverse effect on such underwritten offering of primary shares; (B) a majority of the independent members of the Company’s board of directors determines in good faith that (i) the offer or sale of any shares of Common Stock under the Registration Statement would materially impede, delay or interfere with any proposed financing, offer or sale of securities, acquisition, corporate reorganization or other significant transaction involving us, (ii) upon the advice of counsel, the sale of such shares pursuant to the Registration Statement would require disclosure of non-public material information not otherwise required to be disclosed under applicable law, and (iii) either (x) the Company has a bona fide business purpose for preserving the confidentiality of the proposed transaction or information, or (y) disclosure would have a material adverse effect on the Company or the Company’s ability to consummate the proposed transaction, in each case under circumstances that would make it impractical or inadvisable to cause the Registration Statement (or such filings) to become effective or to promptly amend or supplement the Registration Statement on a post-effective basis, as applicable; or (C) a majority of the independent members of the Company’s board of directors determines in good faith, upon the advice of counsel, that the Company is required by law, rule or regulation, or that it is in the Company’s best interests, to supplement the Registration Statement or file a post-effective amendment to the Registration Statement in order to incorporate information into the Registration Statement for the purpose of: (i) including in the Registration Statement any prospectus required under Section 10(a)(3) of the Securities Act; (ii) reflecting in the Prospectus included in the Registration Statement any facts or events arising after the effective date of the Registration Statement in the Prospectus (or of the most-recent post-effective amendment) that, individually or in the aggregate, represents a fundamental change in the information set forth in the Prospectus; (iii) correcting any misstatement or omission in the Registration Statement or the Prospectus included therein; or (iv) including in the Prospectus included in the Registration Statement any material information with respect to the plan of distribution not disclosed in the Registration Statement or any material change to such information (an Allowed Delay); provided that the Company shall promptly (a) notify each Investor in writing of the commencement of and the reasons for an Allowed Delay, but shall not (without the prior written consent of an Investor) disclose to such Investor any material non-public information giving rise to an Allowed Delay, (b) advise the Investors in writing to cease all sales under the Registration Statement until the end of the Allowed Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay as promptly as practicable.

 

(d)      Rule 415; Cutback  If at any time the SEC takes the position that the offering of some or all of the Registrable Securities in a Registration Statement is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415 under the 1933 Act or requires any Investor to be named as an underwriter, the Company shall use its commercially reasonable efforts to persuade the SEC that the offering contemplated by the Registration Statement is a valid secondary offering and not an offering by or on behalf of the issuer as defined in Rule 415 and that none of the Investors is an underwriter.  The Investors shall have the right to have the Legal Counsel participate in any meetings or discussions with the SEC regarding the SEC’s position and to comment or have Legal Counsel comment on any written submission made to the SEC with respect thereto.  No such written submission shall be made to the SEC to which the Legal Counsel reasonably objects.  In the event that, despite the Company’s commercially reasonable efforts and compliance with the terms of this Section 2(d), the SEC refuses to alter its position, the Company shall (i) remove from the Registration Statement such portion of the Registrable Securities (the “Cut Back Shares”) and/or (ii) agree to such restrictions and limitations on the registration and resale of the Registrable Securities as the SEC may require to assure the Company’s compliance with the requirements of Rule 415 (collectively, the “SEC Restrictions”); provided, however, that the Company shall not agree to name any Investor as an underwriter in such Registration Statement without the prior written consent of such Investor.  Any cut-back imposed on the Investors pursuant to this Section 2(d) shall be allocated among the Investors on a pro rata basis, unless the SEC Restrictions otherwise require or provide or the Investors otherwise agree.  No liquidated damages shall accrue as to any Cut Back Shares until such date as the Company is able to effect the registration of such Cut Back Shares in accordance with any SEC Restrictions (such date, the “Restriction Termination Date” of such Cut Back Shares).  From and after the Restriction Termination Date applicable to any Cut Back Shares, all of the provisions of this Section 2 (including the liquidated damages provisions) shall again be applicable to such Cut Back Shares; provided, however, that (i) the Filing Deadline for the Registration Statement including such Cut Back Shares shall be ten (10) Business Days after such Restriction Termination Date, and (ii) the date by which the Company is required to obtain effectiveness with respect to such Cut Back Shares under Section 2(c) shall be the 90th day after the Restriction Termination Date.

  

  

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3.     Company Obligations.  The Company will use commercially reasonable efforts to effect the registration of the Registrable Securities in accordance with the terms hereof, and pursuant thereto the Company will, as expeditiously as possible:

 

(a)       use commercially reasonable efforts to cause such Registration Statement to become effective and to remain continuously effective for a period that will terminate upon the earliest of (i) the date on which all Registrable Securities covered by such Registration Statement as amended from time to time, have been sold, (ii) the date on which all Registrable Securities covered by such Registration Statement may be sold without restriction pursuant to Rule 144 and (iii) two years from the Final Closing Date (the “Effectiveness Period”) and advise the Investors in writing when the Effectiveness Period has expired;

 

(b)       prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement and the Prospectus as may be necessary to keep the Registration Statement effective for the Effectiveness Period and to comply with the provisions of the 1933 Act and the 1934 Act with respect to the distribution of all of the Registrable Securities covered thereby;

 

(c)       provide copies to and permit Legal Counsel to review each Registration Statement and all amendments and supplements thereto no fewer than three (3) Business Days prior to their filing with the SEC and not file any such document to which such counsel reasonably objects on a timely basis;

 

(d)       furnish to the Investors and the Legal Counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company (but not later than two (2) Business Days after the filing date, receipt date or sending date, as the case may be) one electronic copy of any Registration Statement and any amendment thereto, each preliminary prospectus and Prospectus and each amendment or supplement thereto, and each letter written by or on behalf of the Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion of any thereof which contains information for which the Company has sought confidential treatment), and (ii) such number of copies of a Prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as each Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Investor that are covered by the related Registration Statement;

 

(e)       use commercially reasonable efforts to (i) prevent the issuance of any stop order or other suspension of effectiveness and, (ii) if such order is issued, obtain the withdrawal of any such order at the earliest possible moment;

 

(f)       prior to any public offering of Registrable Securities, use commercially reasonable efforts to register or qualify or cooperate with the Investors and Legal Counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions reasonably requested by the Investors and do any and all other commercially reasonable acts or things necessary or advisable to enable the distribution in such jurisdictions of the Registrable Securities covered by the Registration Statement; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(f), (ii) subject itself to general taxation in any jurisdiction where it would not otherwise be so subject but for this Section 3(f), or (iii) file a general consent to service of process in any such jurisdiction;

 

  

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(g)       use commercially reasonable efforts to cause all Registrable Securities covered by a Registration Statement to be listed on each securities exchange, interdealer quotation system or other market on which similar securities issued by the Company are then listed;

 

(h)       immediately notify the Investors, at any time prior to the end of the Effectiveness Period, upon discovery that, or upon the happening of any event as a result of which, the Prospectus includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare, file with the SEC and furnish to such Investor a supplement to or an amendment of such Prospectus as may be necessary so that 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 in light of the circumstances then existing;

 

(i)       otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act, including, without limitation, Rule 172 under the 1933 Act, file any final Prospectus, including any supplement or amendment thereof, with the SEC pursuant to Rule 424 under the 1933 Act, promptly inform the Investors in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Investors are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder; and make available to its security holders, as soon as reasonably practicable, but not later than the Availability Date (as defined below), an earnings statement covering a period of at least twelve (12) months, beginning after the effective date of each Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act, including Rule 158 promulgated thereunder (for the purpose of this Section 3(i), Availability Date means the 45th day following the end of the fourth fiscal quarter that includes the effective date of such Registration Statement, except that, if such fourth fiscal quarter is the last quarter of the Company’s fiscal year, Availability Date means the 90th day after the end of such fourth fiscal quarter); and

 

(j)       Solely for the purpose of making available to the Investors the benefits of Rule 144 (or its successor rule) and any other rule or regulation of the SEC that may at any time permit the Investors to sell shares of Common Stock to the public without registration, the Company covenants and agrees to:  (i) make and keep public information available, as those terms are understood and defined in Rule 144, until the earlier of (A) six months after such date as all of the Registrable Securities may be sold without restriction by the holders thereof pursuant to Rule 144 or any other rule of similar effect or (B) such date as all of the Registrable Securities shall have been resold; (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the 1934 Act; and (iii) furnish to each Investor upon request, as long as such Investor owns any Registrable Securities, (A) a written statement by the Company that it has complied with the reporting requirements of the 1934 Act, (B) a copy of the Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other information as may be reasonably requested in order to avail such Investor of any rule or regulation of the SEC that permits the selling of any such Registrable Securities without registration.

 

4.     Due Diligence Review; Information.  Upon receipt of an appropriate confidentiality agreement, the Company shall make available, during normal business hours and upon reasonable advance notice, for inspection and review by the Investors, advisors to and representatives of the Investors (who may or may not be affiliated with the Investors and who are reasonably acceptable to the Company), all financial and other records, all filings with the SEC, and all other corporate documents and properties of the Company as may be reasonably necessary for the purpose of such review, and cause the Company’s officers, directors and employees, within a reasonable time period, to supply all such information reasonably requested by the Investors or any such representative, advisor or underwriter in connection with such Registration Statement (including, without limitation, in response to all questions and other inquiries reasonably made or submitted by any of them), prior to and from time to time after the filing and effectiveness of the Registration Statement for the sole purpose of enabling the Investors and such representatives, advisors and underwriters and their respective accountants and attorneys to conduct initial and ongoing due diligence with respect to the Company and the accuracy of such Registration Statement.

 

  

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Notwithstanding the foregoing, the Company shall not disclose material nonpublic information to the Investors, or to advisors to or representatives of the Investors, unless prior to disclosure of such information the Company identifies such information as being material nonpublic information and provides the Investors, such advisors and representatives with the opportunity to accept or refuse to accept such material nonpublic information for review and any Investor wishing to obtain such information enters into an appropriate confidentiality agreement with the Company with respect thereto.

 

	
  

	
5.

	
Obligations of the Investors.

 

(a)       Each Investor shall furnish in writing to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.  At least five (5) Business Days prior to the first anticipated filing date of any Registration Statement, each Investor shall provide the Company with a completed Selling Stockholder Questionnaire in the form attached hereto as Exhibit B.  It shall be a condition precedent to the obligations of the Company to complete any registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect and maintain the effectiveness of the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.

 

(b)       Each Investor, by its acceptance of the Registrable Securities agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Investor has notified the Company in writing of its election to exclude all of its Registrable Securities from such Registration Statement.

 

(c)       Each Investor agrees that, upon receipt of any notice from the Company of either (i) the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the happening of an event pursuant to Section 3(h) hereof, such Investor will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until the Investor is advised by the Company that such dispositions may again be made.

 

	
  

	
6.

	
Indemnification.

 

(a)       Indemnification by the Company.  The Company will indemnify and hold harmless each Investor and its officers, directors, members, employees and agents, successors and assigns, and each other person, if any, who controls such Investor within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, any preliminary Prospectus or final Prospectus, or any amendment or supplement thereof; (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Registrable Securities under the securities laws thereof (any such application, document or information herein called a Blue Sky Application); (iii) the omission or alleged omission to state in a Blue Sky Application a material fact required to be stated therein or necessary to make the statements therein, under the circumstances in which made, not misleading; (iv) any violation by the Company or its agents of any rule or regulation promulgated under the 1933 Act applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration; or (v) any failure to register or qualify the Registrable Securities included in any such Registration Statement in any state where the Company or its agents has affirmatively undertaken or agreed in writing that the Company will undertake such registration or qualification on an Investor’s behalf and will reimburse such Investor, and each such officer, director or member and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Investor or any such controlling person in writing specifically for use in such Registration Statement, Prospectus, or Blue Sky Application.

 

  

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(b)       Indemnification by the Investors.  Each Investor agrees, severally but not jointly, to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors, officers, employees, stockholders and each person who controls the Company (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities and expense (including reasonable attorney fees) resulting from any untrue statement of a material fact or any omission of a material fact required to be stated in the Registration Statement or Prospectus or preliminary Prospectus or amendment or supplement thereto or necessary to make the statements therein not misleading, to the extent, but only to the extent that such untrue statement or omission is contained in any information furnished in writing by such Investor to the Company specifically for inclusion in such Registration Statement or Prospectus or amendment or supplement thereto.  In no event shall the liability of an Investor be greater in amount than the dollar amount of the proceeds (net of all expense paid by such Investor in connection with any claim relating to this Section 6 and the amount of any damages such Investor has otherwise been required to pay by reason of such untrue statement or omission) received by such Investor upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.

 

(c)       Conduct of Indemnification Proceedings.  Any person entitled to indemnification hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (a) the indemnifying party has agreed to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person or (c) in the reasonable judgment of any such person, based upon written advice of its counsel, a conflict of interest exists between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person); and provided, further, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation.  It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties.  No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation.

 

(d)       Contribution.  If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless, other than as expressly specified therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations.  No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution from any person not guilty of such fraudulent misrepresentation.  In no event shall the contribution obligation of a holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such holder in connection with any claim relating to this Section 6 and the amount of any damages such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.

 

	
  

	
7.

	
Miscellaneous.

 

(a)       Amendments and Waivers.  This Agreement may be amended only by a writing signed by the Company and the Required Investors.  The Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the Required Investors.

 

  

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(b)       Notices.  All notices and other communications provided for or permitted hereunder shall be made as set forth in Section 7 of the  Subscription Agreement or Section 7.7 of the Note Purchase Agreement, as applicable.

 

(c)       Assignments and Transfers by Investors.  The provisions of this Agreement shall be binding upon and inure to the benefit of the Investors and their respective successors and assigns.  An Investor may transfer or assign, in whole or from time to time in part, to one or more persons its rights hereunder in connection with the transfer of Registrable Securities by such Investor to such person, provided that such Investor complies with all laws applicable thereto and provides written notice of assignment to the Company promptly after such assignment is effected.

 

(d)       Assignments and Transfers by the Company.  This Agreement may not be assigned by the Company (whether by operation of law or otherwise) without the prior written consent of the Required Investors; provided, however, that the Company may assign its rights and delegate its duties hereunder to any surviving or successor corporation in connection with a merger or consolidation of the Company with another corporation, or a sale, transfer or other disposition of all or substantially all of the Company’s assets to another corporation, without the prior written consent of the Required Investors.

 

(e)       Benefits of the Agreement.  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

(f)        Counterparts; Faxes.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may also be executed via facsimile, which shall be deemed an original.

 

(g)       Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

(h)       Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provisions hereof prohibited or unenforceable in any respect.

 

(i)        Further Assurances.  The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

 

(j)        Entire Agreement.  This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein.  This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

 

  

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(k)       Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.  This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the choice of law principles thereof.  Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby.  Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement.  Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court.  Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

(l)       Independent Nature of Investors’ Obligations and Rights. The obligations of each Investor hereunder are several and not joint with the obligations of any other Investor hereunder, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor hereunder.  Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement.  Each Investor shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose.

 

*    *    *    *

 

  

9

  

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Registration Rights Agreement as of the date first above written.

 

	
The Company:

	
INTEGRITY APPLICATIONS, INC.

	  	  	  
	  	
By:

	  
	  	
Name:

	  
	  	
Title:

	  

	
Investor:

	  
	  	
(Print Name of Investor)

	  	
By:

	  
	  	
Name:

	  
	  	
Title:

	  

 

  

10

  

SCHEDULE A

PLAN OF DISTRIBUTION

The selling stockholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling shares of common stock or interests in shares of common stock received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock or interests in shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions.  These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.

The selling stockholders may use any one or more of the following methods when disposing of shares or interests therein:

- ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

- block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;

- purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

- an exchange distribution in accordance with the rules of the applicable exchange;

- privately negotiated transactions;

- short sales effected after the date the registration statement of which this Prospectus is a part is declared effective by the SEC;

- through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

- broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;

- a combination of any such methods of sale; and

- any other method allowed by law.

The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.  The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume.  The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities.  The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

  

A-1

  

The aggregate proceeds to the selling stockholders from the sale of the common stock offered by them will be the purchase price of the common stock less discounts or commissions, if any.  Each of the selling stockholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents.  We will not receive any of the proceeds from this offering.

The selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet the criteria and conform to the requirements of that rule.

The selling stockholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock or interests therein may be underwriters within the meaning of Section 2(11) of the Securities Act.  Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act.  Selling stockholders who are underwriters within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.

To the extent required, the shares of our common stock to be sold, the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.

In order to comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers.  In addition, in some states the common stock may not be sold unless it has been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.

We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders and their affiliates.  In addition, to the extent applicable we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act.  The selling stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.

We have agreed to indemnify the selling stockholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus.

We have agreed with the selling stockholders to keep the registration statement of which this prospectus constitutes a part effective until the earlier of (1) such time as all of the shares covered by this prospectus have been disposed of pursuant to and in accordance with the registration statement or (2) the date on which the shares may be sold without restriction pursuant to Rule 144 of the Securities Act.

 

  

A-2

  

SCHEDULE B

 

SELLING STOCKHOLDER NOTICE AND QUESTIONNAIRE

 

The undersigned holder of common stock, par value $0.001 per share, (the “Registrable Securities”), of Integrity Applications, Inc., a Delaware corporation (the “Company”), issued pursuant to either (i) a certain Subscription Agreement by and between the Company and the undersigned or (ii) that certain Note Purchase Agreement, dated March 9, 2010 (the “Note Purchase Agreement”), among A.D. Integrity Applications Ltd, an Israeli company (“Integrity-Israel”), the undersigned, and the other signatories thereto, understands that the Company intends to file with the Securities and Exchange Commission a registration statement on Form S-1 (the “Resale Registration Statement”) for the registration and the resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities in accordance with the terms of that certain Registration Rights Agreement between the Company and the undersigned.  All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Agreement.

 

In order to sell or otherwise dispose of any Registrable Securities pursuant to the Resale Registration Statement, a holder of Registrable Securities generally will be required to be named as a selling stockholder in the related prospectus or a supplement thereto (as so supplemented, the “Prospectus”), deliver the Prospectus to purchasers of Registrable Securities and be bound by the provisions of the Agreement (including certain indemnification provisions, described in the Plan of Distribution attached to the Registration Rights Agreement).  Holders must complete and deliver this Notice and Questionnaire in order to be named as selling stockholders in the Prospectus.  Holders of Registrable Securities who do not complete, execute and return this Notice and Questionnaire at least five (5) Business Days prior to the first anticipated filing date of a Registration Statement (1) will not be named as selling stockholders in the Resale Registration Statement or the Prospectus and (2) may not use the Prospectus for resales of Registrable Securities.

 

Certain legal consequences arise from being named as a selling stockholder in the Resale Registration Statement and the Prospectus.  Holders of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not named as a selling stockholder in the Resale Registration Statement and the Prospectus.

 

NOTICE

 

The undersigned holder (the “Selling Stockholder”) of Registrable Securities hereby gives notice to the Company of its intention to sell or otherwise dispose of Registrable Securities owned by it and listed below in Item (3), unless otherwise specified in Item (3), pursuant to the Resale Registration Statement.  The undersigned, by signing and returning this Notice and Questionnaire, understands and agrees that it will be bound by the terms and conditions of this Notice and Questionnaire and the Agreement.

 

The undersigned hereby provides the following information to the Company and represents and warrants that such information is materially accurate and complete:

 

  

B-1

  

QUESTIONNAIRE

 

1.           Name.

 

(a)           Full Legal Name of Selling Stockholder:

 

	  

 

(b)           Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities listed in Item 3 below are held:

 

	  

 

(c)           Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by the questionnaire):

 

	  

 

2.          Address for Notices to Selling Stockholder:

 

	  
	 
	  
	 
	  
	 	 
	
Telephone:

	  
	 	 
	
Fax:

	  
	 	 
	
Contact Person:

	  
	 	 
	
E-mail address of

Contact Person:     

	  

3.           Beneficial Ownership of Registrable Securities Issuable Pursuant to the Purchase Agreement:

 

(a)           Type and Number of Registrable Securities beneficially owned and issued pursuant to the Agreement:

 

	  
	 
	  
	 
	  

 

(b)           Number of shares of Common Stock to be registered pursuant to this Notice for resale:

 

	  
	  
	 
	  
	 
	  
	 

 

  

B-2

  

4.           Broker-Dealer Status:

 

(a)           Are you a broker-dealer?

 

Yes    ̈   No    ̈

 

(b)           If yes to Section 4(a), did you receive your Registrable Securities as compensation for investment banking services to the Company?

 

Yes    ̈   No    ̈

 

Note:           If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

(c)           Are you an affiliate of a broker-dealer?

 

Yes    ̈   No    ̈

 

Note:           If yes, provide a narrative explanation below:

 

(c)           If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?

 

Yes    ̈   No    ̈

 

Note:           If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

5.           Beneficial Ownership of Other Securities of the Company Owned by the Selling Stockholder.

 

Except as set forth below in this Item 5, the undersigned is not the beneficial or registered owner of any securities of the Company other than the Registrable Securities listed above in Item 3.

 

(a)           Type and Amount of other securities beneficially owned:

 

6.           Relationships with the Company:

 

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.

 

State any exceptions here:

 

	  

  

7.           Plan of Distribution:

 

The undersigned has reviewed the form of Plan of Distribution attached as Annex A to the Registration Rights Agreement, and hereby confirms that, except as set forth below, the information contained therein regarding the undersigned and its plan of distribution is correct and complete.

 

State any exceptions here:

 

	  

 

  

B-3

  

***********

 

The undersigned agrees to promptly notify the Company of any material inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof and prior to the effective date of any applicable Resale Registration Statement. All notices hereunder and pursuant to the Agreement shall be made in writing, by hand delivery, confirmed or facsimile transmission, first-class mail or air courier guaranteeing overnight delivery at the address set forth below.  In the absence of any such notification, the Company shall be entitled to continue to rely on the material accuracy of the information in this Notice and Questionnaire.

 

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items (1) through (7) above and the inclusion of such information in the Resale Registration Statement and the Prospectus.  The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of any such Registration Statement and the related prospectus.

 

The undersigned also acknowledges that it understands that the answers to this Questionnaire are furnished for use in connection with the Registration Statement filed pursuant to the Registration Rights Agreement and any amendments or supplements thereto filed with the Commission pursuant to the Securities Act.

 

By returning this Questionnaire, the undersigned will be deemed to be aware of the foregoing interpretation.

 

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Questionnaire to be executed and delivered either in person or by its duly authorized agent.

 

	
Dated:   

	  	  	

Beneficial

	  
	 	 	 
Owner:       

	 
	 	 	 	 
	  	  	

By:

	  
	 	 	 	 
	  	  	
Name:

	  
	 	 	 	 
	  	  	
Title:

	  

 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

 

  

B-4

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