Document:

SCHN EX10.2_2011.5.31 Q3

Execution Version

Exhibit 10.2
SCHNITZER STEEL INDUSTRIES, INC. 
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
John D. Carter – Executive
Schnitzer Steel Industries, Inc. – Company  
3200 NW Yeon Avenue 
Portland, Oregon 97210
WHEREAS, Executive previously entered into an employment agreement, dated as of February 17, 2006, which was amended and restated effective as of December 1, 2008;
WHEREAS, Executive currently serves as the Chairman of the Board of the Company; and
WHEREAS, the Company desires to continue the services of Executive, and Executive desires to provide such continuing services, in each case, pursuant to the terms and conditions as amended and restated herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties to this Agreement hereby agree as follows:
1.Effective Date and Term. The effective date of this Amended and Restated Employment Agreement (the “Agreement”) is June 29, 2011, and this Agreement governs the terms and conditions of Executive’s employment through December 1, 2014 (the “Term”).  This Agreement has been approved by the Compensation Committee (the “Committee”) of the Company’s Board of Directors (the “Board”) and supersedes any prior employment agreements between Executive and the Company.
2.Employment At Will.  During the Term, the Company will employ Executive as the Chairman of the Board on the terms and conditions set forth in this Agreement.  Executive will serve in such position at the pleasure of the Board.  Executive’s employment is at will and may be terminated at any time, for any reason or no reason, upon notice by either the Company or Executive, subject to the obligations of the Company and Executive as provided in this Agreement and any other agreement between Executive and the Company then in effect.  Unless otherwise terminated in accordance with the terms and conditions set forth in this Agreement, Executive’s employment with the Company shall terminate upon the expiration of the Term. Termination of Executive for any reason shall constitute the resignation by Executive, effective upon such termination, as a director and officer of the Company.  Upon request, Executive shall provide the Company with additional written evidence of any such resignation.  At any time during the Term, Executive may request that the Board reduce his duties and time commitment to the Company.  If the Board agrees to any such request, Executive’s Base Salary (as defined in Section 4 below) shall be proportionally reduced by a mutually agreed upon amount that appropriately reflects the extent by which Executive’s duties and time commitment to the Company have been reduced.   

3.Change In Control Severance Agreement.  The parties hereto agree that the Amended and Restated Change in Control Severance Agreement, dated October 29, 2008, between Executive and the Company is terminated effective as of June 1, 2011.
4.Annual Salary and Bonus.
(a)Base Salary.  Effective as of June 1, 2011, Executive’s base salary (the “Base Salary”) shall be at the annual rate of $650,000. Base Salary shall be payable in installments on regular Company paydays, subject to withholding for taxes and other proper deductions.  Base Salary for any partial period of employment shall be prorated.  Executive’s performance and the amount of the Base Salary shall be reviewed annually in connection with the Company’s normal compensation review and bonus cycle for executive officers, and the Base Salary may be increased (but not decreased) from time to time in the sole discretion of the Committee.
(b)Bonus.  Executive hereby acknowledges and agrees that, on the effective date of this Agreement, he is no longer eligible to participate in the Company’s fiscal 2011 Annual Performance Bonus Program.
5.Stock Award and Other Benefits.
(a)Annual RSU Award.  During the Term, the Company shall grant Executive annually, on or before each October 31st following the end of the Company’s fiscal year, a restricted stock unit award consisting of that number of units having an aggregate grant date fair market value of not less than $750,000 (the “Threshold Value”) and, unless the Committee determines otherwise, not greater than $900,000, with the actual dollar amount of the award to be determined by the Committee in its sole discretion within the parameters set forth above (each such restricted stock unit award, an “Annual RSU Award”).  Each Annual RSU Award will vest and thereby become non-forfeitable on the earlier of (i) the second anniversary of the grant date of such Annual RSU Award or (ii) a termination of Executive’s services hereunder by the Company without Cause (as defined below) or due to Disability (as defined below), by Executive for Good Reason (as defined below) or due to Retirement (as defined below), or due to Executive’s death (each, a “Qualifying Termination”); provided, however, that no vested units subject to an Annual RSU Award shall be settled in shares of Company common stock prior to the earliest of (A) the second anniversary of the grant date of the applicable Annual RSU Award, (B) that date which is six months after the date on which Executive experiences a “Separation from Service” as defined in regulations under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) or if earlier, the date of Executive’ death, or (C) the date on which the Company experiences a “change in control event” as defined in regulations under Section 409A of the Code.  Each Annual RSU Award shall be evidenced by a Restricted Stock Unit Award Agreement substantially in the form attached hereto as Exhibit A. 
(b)Pro Rata RSU Award.  In the event Executive experiences a Qualifying Termination in any fiscal year prior to being granted the Annual RSU Award in respect of such fiscal year, the Company shall grant to Executive, on the date of such Qualifying Termination and pursuant to the Company’s long term incentive program, a fully vested restricted stock unit award consisting of that number of shares of the Company’s common stock having an aggregate grant date fair market value as is determined by multiplying the Threshold Value by a fraction, the numerator of which shall be the number of days Executive was employed in the fiscal year in which such termination occurs and the denominator of which is 365.  The shares subject to this award shall be issued to Executive on the earliest of (A) the date six months after the date of Executive’s “Separation from Service” as defined in regulations under Section 409A of the Code, or if earlier, the date of Executive’ death, or (B) the date on which the 

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Company experiences a “change in control event” as defined in regulations under Section 409A of the Code.  
(c)Benefits. Executive shall be entitled to participate in the Company’s employee benefit plans, insurance, executive medical coverage, sick leave, holidays, auto allowance and such other benefits as the Company from time to time may generally provide to its most senior officers, including, without limitation, the Company’s Supplemental Executive Retirement Bonus Plan (“SERBP”). 
6.Definitions. The following terms shall have the following meanings for purposes of this Agreement:
(a)“Cause” shall mean (i) the willful and continued failure by Executive to perform substantially Executive’s assigned duties with the Company (other than any such failure resulting from Executive’s incapacity due to physical or mental illness) after a demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed Executive’s duties or (ii) the willful engaging by Executive in illegal conduct which is materially and demonstrably injurious to the Company.  For purposes of Section 6(a)(ii), no act, or failure to act, on Executive’s part shall be considered “willful” unless done, or omitted to be done, by Executive in knowing bad faith and without reasonable belief that his action or omission was in, or not opposed to, the best interests of the Company.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding Executive) at a meeting of the Board called and held for the purpose (after reasonable notice to Executive and an opportunity for Executive, together with Executive’s counsel, to be heard before the Board), finding that in its good faith opinion Executive was guilty of the conduct set forth above in (i) or (ii) of this Section 6(a)) and specifying the particulars thereof in detail.
(b)“Disability” shall mean Executive’s absence from his duties with the Company on a full-time basis for one hundred eighty (180) consecutive days as a result of his incapacity due to physical or mental illness, unless within thirty (30) days after notice of termination is given to Executive following such absence he shall have returned to the full-time performance of his duties.
(c)“Good Reason” shall mean termination by Executive of Executive’s employment with the Company based on any of the following events:
(i)an adverse change or diminution in Executive’s status, title, positions or responsibilities as Chairman of the Board, as applicable, or the assignment to Executive of any duties, reporting requirements or responsibilities which are inconsistent with such status, title or positions, or any removal of Executive from or any failure to reappoint or reelect Executive to such positions, in each case except in connection with the termination of Executive’s employment for Cause or Disability or as a result of Executive’s death or by Executive other than for Good Reason;
(ii)a reduction by the Company in the Base Salary;
(iii)a failure by the Company to provide to Executive the compensation and benefits as provided in Section 4 or Section 5 of this Agreement;
(iv)a failure by the Company to provide and credit Executive with the number 

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of paid vacation days to which Executive is then entitled in accordance with the Company’s normal vacation policy;
(v)the Company’s requiring Executive to be based more than 30 miles from where Executive’s office is located as of the date of this Agreement except for required travel on the Company’s business to an extent substantially consistent with the business travel obligations which Executive undertook as of June 1, 2011;
(vi)a failure by the Company to obtain from any Successor (as defined in Section 10 of this Agreement) the assent to this Agreement contemplated by Section 10; or
(vii)a failure by the Company to pay Executive any portion of Executive’s current compensation, to credit any deferred compensation plan account of Executive in accordance with Executive’s previous election, or to pay Executive any portion of an installment of deferred compensation under any plan in which Executive participated, within seven days of the date such compensation is due.
Notwithstanding any provision in this Agreement to the contrary, Executive may terminate his employment for Good Reason only if (1) within 90 days after the first occurrence of the circumstances giving rise to Good Reason, Executive gives written notice to the Company of Executive’s belief that Good Reason exists and of his intention to terminate his employment for Good Reason, (2) within 30 days of such notice from Executive the circumstances giving rise to Good Reason are not fully corrected, and (3) such termination occurs no later than 180 days following the first occurrence of the circumstances giving rise to Good Reason.
(d)“Retirement” shall mean termination by Executive of Executive’s employment with the Company other than for Good Reason.  Since Executive has already attained age 65, Retirement can occur at any time.
7.Effect of Termination of Employment.
(a)Termination by the Company for Cause.  If the Company terminates Executive’s employment for Cause, Executive shall be entitled to receive only (i) the Base Salary, any other compensation or benefits which have been earned or become payable as of the date of termination but which have not yet been paid to Executive, (ii) all paid time off accrued but untaken through the effective date of such termination, and (iii) reimbursement of expenses incurred through the effective date of such termination pursuant to the Company’s normal expense reimbursement policy, which reimbursement shall be paid promptly and in any event within 30 days after submission in accordance with Company policy; provided that Executive shall submit all outstanding unreimbursed business expenses no later than 15 days following the date of termination.  The amounts described in clauses (i) through (iii) of the foregoing are referred to as the “Accrued Obligations.”
(b)Termination by the Company Without Cause or by Executive for Good Reason.  If the Company terminates Executive’s employment without Cause or Executive terminates his employment for Good Reason at any time during the Term:
(i)Executive shall be entitled to receive the Accrued Obligations; 
(ii)Executive shall be entitled to receive a severance payment (subject to applicable taxes and withholding) in a lump sum in an amount equal to the sum of (A) three times Executive’s annualized rate of Base Salary in effect immediately prior to the time of termination plus (B) three times the Threshold Value;

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(iii)for a 24-month period after the date of termination, the Company shall arrange to provide Executive, his spouse and dependents with life, accident and health insurance benefits substantially similar to those which Executive was receiving immediately prior to such termination (including, without limitation, under the Company’s executive health plan); provided, that the Company shall not provide any benefit otherwise receivable by Executive pursuant to this Section 7(b)(iii) to the extent that a similar benefit is actually received by Executive from a subsequent employer during such 24-month period, and any such benefit actually received by Executive shall be reported to the Company; and
(iv)all options to purchase Company common stock then held by Executive shall become immediately vested and exercisable in full, all restricted stock then held by Executive shall become immediately vested and all related forfeiture provisions shall lapse, and all performance shares then held by Executive shall vest to the extent provided in the applicable plan and award agreement pursuant to which such performance shares were granted.
(c)Death.  If Executive’s employment is terminated as a result of Executive’s death, Executive shall be entitled to receive the Accrued Obligations.
(d)Disability.  If Executive’s employment is terminated as a result of Executive’s Disability, Executive shall be entitled to receive the Accrued Obligations.
(e)Retirement.  If Executive’s employment is terminated as a result of Executive’s Retirement, Executive shall be entitled to receive the Accrued Obligations, and in addition:
(i)for a 24-month period after the date of termination, the Company shall arrange to provide Executive and his spouse with life, accident and health insurance benefits substantially similar to those which the Executive was receiving immediately prior to such termination (including, without limitation, under the Company’s executive health plan); provided, that the Company shall not provide any benefit otherwise receivable by the Executive pursuant to this Section 7(e)(i) to the extent that a similar benefit is actually received by Executive from a subsequent employer during such 24-month period, and such benefit actually received by Executive shall be reported to the Company; and
(ii)all options to purchase Company common stock then held by Executive shall become immediately vested and exercisable in full, all restricted stock then held by Executive shall become immediately vested and all related forfeiture provisions shall lapse, and all performance shares then held by Executive shall vest to the extent provided in the applicable plan and award agreement pursuant to which such performance shares were granted.
(f)Date of Payment.  Except as otherwise provided in this Agreement, all cash payments required to be made pursuant to the provisions of this Section 7 shall be paid (i) in the case of the Accrued Obligations, no later than the 30th day following such termination of employment and (ii) in the case of the payments described in Section 7(b)(ii), on the first business day following the date on which Executive has delivered an executed copy of a release of claims in the form attached hereto as Exhibit B and the revocation period has expired with no revocation of such release.  Executive must deliver the release and the revocation period must expire within the 60-day period commencing on the date of termination (the “Release Period”).  If the Release Period spans two calendar years, then, notwithstanding clause (ii) herein, the payments described in Section 7(b)(ii) will be made on the first business day of the second calendar year but in all events after the revocation period has expired with no revocation of the release.
(g)Options, Performance Shares and Restricted Stock. The options, performance 

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shares, restricted stock units and restricted stock awarded to Executive by the Company shall, in the event of a termination of Executive’s employment, be governed by the provisions of the applicable plan and award agreement; provided that the accelerated vesting provisions of Section 5(a), Section 7(b)(iv) and Section 7(e)(ii) shall, if triggered, control in the event of any inconsistency with any such agreement.
(h)No Obligation of Executive to Mitigate. The amount of any payment provided for in this Section 7 shall not be reduced, offset or subject to recovery by the Company by reason of any compensation earned by Executive as the result of employment by another employer after the date of termination.
(i)280G Excise Tax Gross Up Provision.  If any of the payments or benefits provided for in Section 7 of this Agreement, under any other agreement between Executive and the Company or otherwise (collectively, the “Payments”) will be subject to the tax imposed by section 4999 of the Code, or any similar tax that may hereafter be imposed (the “Excise Tax”), the Company shall pay to Executive at the time any such Payment is paid an additional amount (the “Gross-Up Payment”) such that the net amount retained by Executive, after deduction of any Excise Tax on the Payments and any federal, state and local income tax and Excise Tax upon the Gross-Up Payment, shall be equal to the Payments. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive’s personal residence on the date of termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder, Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment directly and indirectly attributable to such reduction plus interest on the amount of such repayment at the rate provided for in section 1274(d) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest and penalties payable to the taxing authorities with respect to such excess) at the time that the amount of such excess is finally determined. The Company shall withhold the Excise Tax in accordance with section 4999(b) of the Code, and shall withhold federal, state and local income taxes from the Payments and Gross-Up Payments as required by law.
(j)Compliance with Code Section 409A.  Notwithstanding anything herein to the contrary, (i) if at the time of Executive’s termination of employment with the Company Executive is a “specified employee” as defined in Section 409A of the Code and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Executive) until the date that is six months following Executive’s termination of employment with the Company (or the earliest date as is permitted under Section 409A of the Code) and (ii) if any other payments of money or other benefits due to Executive hereunder could cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Board, that does not cause such an accelerated or additional tax.  In the event that payments under this Agreement are deferred pursuant to this Section 7(j) in order to prevent any accelerated tax or additional tax under 

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Section 409A of the Code, then such payments shall be paid at the time specified under this Section 7(j) (together with interest for any additional deferral period resulting from this Section 7(j) at the applicable federal rate under Section 7872(f)(2)(A) of the Code in effect on the date of termination).  The Company shall consult with Executive in good faith regarding the implementation of this Section 7(j).  For purposes of Section 409A of the Code, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.  Notwithstanding anything to the contrary herein, to the extent required by Section 409A of the Code, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of amounts or benefits upon or following a termination of employment unless such termination is also a “Separation from Service” within the meaning of Section 409A of the Code and, for purposes of any such provision of this Agreement, references to a “resignation,” “termination,” “termination of employment” or like terms shall mean Separation from Service.
8.Restrictive Covenants.
(a)Noncompetition.  In consideration of the payments, benefits and other obligations of the Company to Executive pursuant to this Agreement, including, without limitation, the Company’s obligation to provide Executive with Confidential Information pursuant to Section 8(c), and in order to protect such Confidential Information and preserve the goodwill of the Company and its subsidiaries (collectively, the “Company Group”), Executive hereby covenants and agrees that, during the “Restricted Period” (as defined below), Executive shall not, anywhere in the world where any member of the Company Group conducts business, directly or indirectly, own any interest in, manage, control, participate in (whether as an officer, director, manager, employee, partner, equity holder, member, agent, representative or otherwise), consult with, render services for, or in any other manner engage in any business in which a member of the Company Group is materially engaged at the time of such termination (collectively, a “Competing Business”); provided that nothing herein shall prohibit Executive from (i) investing in stocks, bonds, or other securities in any business if such stocks, bonds, or other securities are listed on any United States securities exchange or are publicly traded in an over the counter market, and such investment does not exceed, in the case of any capital stock of any one issuer two percent (2%) of the issued and outstanding capital stock or in the case of bonds or other securities, two percent (2%) of the aggregate principal amount thereof issued and outstanding or (ii) working for a subsidiary, affiliate or division of a Competing Business if such subsidiary, affiliate or division is not itself engaged in a Competing Business and Executive does not provide services to such Competing Business.  For purposes of this Section 8(a), the “Restricted Period” shall mean all times during which Executive is employed by the Company and the period commencing on the date of the termination of Executive’s employment with the Company for any reason and ending on the first anniversary of the date of such termination.
(b)Nonsolicitation.  In further consideration of the payments by the Company to Executive pursuant to this Agreement, Executive hereby covenants and agrees that, during Executive’s employment with the Company and for the two-year period following the date of Executive’s termination for any reason, Executive shall not attempt to influence, persuade or induce, or assist any other person in so influencing, persuading or inducing, (i) any customer of the Company Group to give up, or to not commence, a business relationship with the Company Group and shall not otherwise directly or indirectly solicit any such customer except on behalf of the Company Group, and (ii) any employee of the Company Group to cease such employee’s employment with the Company Group and shall not otherwise directly or indirectly solicit for employment any such employee.
(c)Confidential Information.  Executive acknowledges that the Company Group has a legitimate and continuing proprietary interest in the protection of its confidential information and that it has invested substantial sums and will continue to invest substantial sums to develop, maintain and protect 

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such confidential information.  During the Term and at all times thereafter, Executive shall not, except with the written consent of the Company or in connection with carrying out Executive’s duties or responsibilities hereunder, furnish or make accessible to anyone or use for Executive’s own benefit any trade secrets, confidential or proprietary information of the Company Group (all such information, “Confidential Information”), including its business plans, marketing plans, strategies, systems, programs, methods, employee lists, computer programs, insurance profiles and client lists; provided, that Confidential Information shall not include information known to the public or otherwise in the public domain without violation by Executive of this Section 8(c).  Notwithstanding the foregoing, Executive may disclose Confidential Information when required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business of the Company Group or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible such information; provided, further, that in the event that Executive is ordered by a court or other government agency to disclose any Confidential Information, Executive shall (i) promptly notify the Company of such order, (ii) at the written request of the Company, diligently contest such order at the sole expense of the Company as expenses occur, and (iii) at the written request of the Company, seek to obtain, at the sole expense of the Company, such confidential treatment as may be available under applicable laws for any information disclosed under such order.
(d)Enforcement.  Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Sections 8(a), (b) or (c) herein would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.  It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in Sections 8(a) and 8(b) to be reasonable, if a judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable.  Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.
9.Withholding.  Payment of all compensation under this Agreement, including but not limited to the Base Salary, shall be subject to all applicable federal, state and local tax withholding.
10.Attorneys’ Fees.  The Company shall pay to Executive all reasonable legal fees and related expenses incurred by Executive in good faith as a result of Executive seeking to obtain or enforce in good faith any right or benefit provided by this Agreement.  In addition, upon proper substantiation, the Company shall reimburse Executive for reasonable legal fees and expenses incurred by Executive in connection with the negotiation and preparation of this Agreement.
11.Successors; Binding Agreement.
(a)Upon Executive’s written request, the Company will seek to have any Successor (as hereinafter defined), by agreement in form and substance satisfactory to Executive, assent to the fulfillment by the Company of its obligations under this Agreement. For purposes of this Agreement, “Successor” shall mean any person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company’s business directly, by merger, consolidation or 

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purchase of assets, or indirectly, by purchase of the Company’s voting securities or otherwise.
(b)This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amount would still be payable to Executive hereunder if Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee or other designee or, if there be no such designee, to Executive’s estate.
12.Survival. The respective obligations of, and benefits afforded to, the Company and Executive as provided in Sections 7-13 and 16 of this Agreement shall survive termination of Executive’s employment and this Agreement.
13.Notice. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid and addressed to the address of the Company as set forth on the first page of this Agreement or to Executive as set forth in the Company’s records, provided that all notices to the Company shall be directed to the attention of the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
14.Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in a writing signed by Executive and a duly authorized officer of the Company (other than Executive).  No waiver by either party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party that are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the internal laws of the State of Oregon, without regard to conflicts of law principles.
15.Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
16.Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Portland, Oregon by three arbitrators in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrators’ award, which award shall be a final and binding determination of the dispute or controversy, in any court having jurisdiction; provided, that Executive shall be entitled to seek specific performance of Executive’s right to be paid until the date of termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. The Company shall bear all costs and expenses of the arbitrators arising in connection with any arbitration proceeding pursuant to this Section 16.
17.Related Agreements. To the extent that any provision of any other agreement between the Company or any of its subsidiaries and Executive, shall limit, qualify or be inconsistent with any provision of this Agreement, then for purposes of this Agreement, while the same shall remain in force, 

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the provision of this Agreement shall control and such provision of such other agreement shall be deemed to have been superseded, and to be of no force or effect, as if such other agreement had been formally amended to the extent necessary to accomplish such purpose.
18.Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument.
Dated:  June 29, 2011 

	
				
	SCHNITZER STEEL INDUSTRIES, INC.

	 
	 
	 
	 

	By:
	 
	 
	 

	Name: Judith Johansen
	 
	John D. Carter

	Title:   Chair, Compensation Committee of the Board of Directors
	 
	 

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EXHIBIT A

RESTRICTED STOCK UNIT 
AWARD AGREEMENT

Pursuant to Section 8 of the 1993 Stock Incentive Plan (the “Plan”) of Schnitzer Steel Industries, Inc., an Oregon corporation (the “Company”), on <<Date>> the Compensation Committee of the Board of Directors of the Company authorized and granted to John D. Carter (the “Recipient”) an award of restricted stock units with respect to the Company’s Class A Common Stock (“Common Stock”), subject to the terms and conditions of this agreement between the Company and the Recipient (this “Agreement”).  By accepting this award, the Recipient  agrees to all of the terms and conditions of this Agreement.   
  
1.    Award and Terms of Restricted Stock Units.  The Company awards to the Recipient under the Plan «RSU_Amount» restricted stock units (the “Award”), subject to the restrictions, terms and conditions set forth in this Agreement. 
  
(a)    Rights under Restricted Stock Units.  A restricted stock unit (a “RSU”) obligates the Company, upon vesting in accordance with this Agreement, to issue to the Recipient one share of Common Stock for each RSU.  The number of shares of Common Stock issuable with respect to each RSU is subject to adjustment as determined by the Board of Directors of the Company as to the number and kind of shares of stock deliverable upon any merger, reorganization, consolidation, recapitalization, stock dividend, spin-off or other change in the corporate structure affecting the Common Stock generally. 
  
(b)    Vesting Date.  The RSUs awarded under this Agreement shall initially be 100% unvested and subject to forfeiture.  The Vesting Reference Date of this Award is <<Vesting Reference Date>>.  Subject to Sections 1(c), (d), (e) and (f), the RSUs shall become 100% vested on the second anniversary of the Vesting Reference Date.

(c)    Acceleration on Death, Disability or Retirement, or Termination Without Cause or for Good Reason.  If the Recipient ceases to be an employee of the Company or a parent or subsidiary of the Company by reason of the Recipient’s death, disability or retirement, all outstanding but unvested RSUs shall become immediately vested.  If the Recipient’s employment with the Company or a parent or subsidiary of the Company is terminated by the Company without cause or by the Recipient for good reason, all outstanding but unvested RSUs shall become immediately vested.  The terms “cause,” “disability,” “good reason” and “retirement” shall have the meanings ascribed to such terms in Section 6 of the Amended and Restated Employment Agreement dated June 29, 2011 between the Recipient and the Company.

(d)    Certain Transactions.  Notwithstanding any provision in this Agreement (but subject to the last sentence of this Section 1(d)), in the event of dissolution of the Company or a merger, consolidation or plan of exchange affecting the Company, the Compensation Committee of the Board of Directors (the “Compensation Committee”) may, in its sole discretion and to the extent possible under the structure of the applicable transaction, select one or a combination of the following alternatives for treating this Award of RSUs:
(i)    The Award shall remain in effect in accordance with its terms; 

(ii)    All or a portion of the RSUs shall, to the extent then still subject to the vesting restrictions, be released from the vesting restrictions in connection with the closing of the applicable transaction; or

093331-3924-13924-Active.12399356.5

(iii)    The RSUs shall be converted into restricted stock units or restricted stock of one or more of the corporations that are the surviving or acquiring corporations in the applicable transaction.  The amount and type of converted restricted stock units or restricted stock shall be determined by the Company, taking into account the relative values of the companies involved in the applicable transaction and the exchange rate, if any, used in determining shares of the surviving corporation(s) to be held by holders of shares of the Company following the applicable transaction. Unless otherwise determined by the Company, by action of the Compensation Committee, the converted restricted stock units or restricted stock shall continue to be subject to the forfeiture provisions applicable to the RSUs at the time of the applicable transaction.

Notwithstanding the foregoing provisions of this Section 1(d) to the contrary, no such alternative shall occur with respect to the RSUs to the extent that, if it did, a 20% tax would be imposed under Section 409A of the Internal Revenue Code on the Recipient.

(e)    Special Acceleration in Certain Events.  Notwithstanding any other provision in this Agreement, upon a change in control of the Company, all outstanding but unvested RSUs shall become immediately vested.  The term “change in control of the Company” means the occurrence of any of the following events:

(i)    The consummation of:

(A)    any consolidation, merger or plan of share exchange involving the Company (a “Merger”) as a result of which the holders of outstanding securities of the Company ordinarily having the right to vote for the election of directors (“Voting Securities”) immediately prior to the Merger do not continue to hold at least 50% of the combined voting power of the outstanding Voting Securities of the surviving corporation or a parent corporation of the surviving corporation immediately after the Merger, disregarding any Voting Securities issued to or retained by such holders in respect of securities of any other party to the Merger; or

(B)    any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company; 

(ii)    At any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (“Incumbent Directors”) shall cease for any reason to constitute at least a majority thereof; provided, however, that the term “Incumbent Director” shall also include each new director elected during such two-year period whose nomination or election was approved by two-thirds of the Incumbent Directors then in office; or 

(iii)    Any person shall, as a result of a tender or exchange offer, open market purchases or privately negotiated purchases from anyone other than the Company, have become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of Voting Securities representing 20% or more of the combined voting power of the then outstanding Voting Securities.  For purposes of this Section 1(e), the term “person” means and includes any individual, corporation, partnership, group, association or other “person,” as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than the Company or any employee benefit plan sponsored by the Company.

Notwithstanding anything in this Section 1(e) to the contrary, unless otherwise determined by the Board of Directors of the Company, no change in control of the Company shall be deemed to have occurred for purposes of this Agreement if (1) the Recipient acquires (other than on the same basis as all other holders 

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of shares of Common Stock of the Company) an equity interest in an entity that acquires the Company in a change in control of the Company otherwise described under subparagraph (i) of this Section 1(e), or (2) the Recipient is part of a group that constitutes a person which becomes a beneficial owner of Voting Securities in a transaction that otherwise would have resulted in a change in control of the Company under subparagraph (iii) of this Section 1(e).

(f)    Forfeiture of RSUs on Termination of Service.  If the Recipient ceases to be an employee of the Company or a parent or subsidiary of the Company under circumstances where the RSUs have not previously vested and do not become vested pursuant to Section 1(c) or 1(d), the Recipient shall immediately forfeit all outstanding but unvested RSUs awarded pursuant to this Agreement and the Recipient shall have no right to receive the related Common Stock.  

(g)    Restrictions on Transfer.  The Recipient may not sell, transfer, assign, pledge or otherwise encumber or dispose of the RSUs subject to this Agreement.  The Recipient may designate beneficiaries to receive the shares of Common Stock underlying the RSUs subject to this Agreement if the Recipient dies before delivery of the shares of Common Stock by so indicating on a form supplied by the Company.  If the Recipient fails to designate a beneficiary, such Common Stock will be delivered to the person or persons establishing rights of ownership by will or under the laws of descent and distribution.

(h)    No Voting Rights; Dividends.  The Recipient shall have no rights as a shareholder with respect to the RSUs or the Common Stock underlying the RSUs until the underlying Common Stock is issued to the Recipient.  The Recipient will be entitled to receive any cash dividends declared on the Common Stock underlying the RSUs after the RSUs have vested and the Common Stock has been issued.  The Company shall accrue and pay to the Recipient on the vesting of the RSUs an amount in cash equal to dividends that would have been paid on the Common Stock underlying the RSUs after the date of the issuance of the RSUs.  No interest shall be paid by the Company on accrued amounts.

(i)    Delivery Date for the Shares Underlying the RSUs.  As soon as practicable, but in no event later than thirty days, following a date on which any RSUs vest, the Company will issue the Recipient the Common Stock underlying the then vested RSUs in the form of uncertificated shares in book entry form; provided, however, that if accelerated vesting of the RSU occurs pursuant to Section 1(c) by reason of the Recipient’s retirement or disability, the date of issuance of the shares underlying the RSUs shall be delayed until the date that is six months after the date of the Recipient’s separation from service (within the meaning of Section 409A of the Internal Revenue Code); provided further, however, that if accelerated vesting of the RSUs occurs pursuant to Section 1(d) or 1(e), the date of issuance of the shares underlying the RSUs shall occur as soon as practicable, but in no event later than thirty days, following the earliest to occur of (1) the date that is six months after the date of the Recipient’s separation from service (within the meaning of Section 409A of the Internal Revenue Code), (2) the Recipient’s death or (3) a change in ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A(a)(2)(A)(v) of the Internal Revenue Code.  The shares of Common Stock will be issued in the Recipient’s name or, in the event of the Recipient’s death, in the name of either (i) the beneficiary designated by the Recipient on a form supplied by the Company or (ii) if the Recipient has not designated a beneficiary, the person or persons establishing rights of ownership by will or under the laws of descent and distribution.

(j)    Taxes and Tax Withholding.  The Recipient acknowledges that, except as provided below, on each date that shares underlying the RSUs are issued to the Recipient (the “Payment Date”), the Value (as defined below) on that date of the shares so issued will be treated as ordinary compensation income for federal and state income tax purposes, and that the Company will be required to withhold taxes on these income amounts.  To satisfy the required minimum withholding 

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amount, the Company shall withhold from the shares otherwise issuable the number of shares having a Value equal to the minimum withholding amount.  For purposes of this Section 6, the “Value” of a share shall be equal to the closing market price for the Common Stock on the last trading day preceding the Payment Date.  Alternatively, the Company may, at its option, permit the Recipient to pay such withholding amount in cash under procedures established by the Company.  The Recipient acknowledges that under current tax law, the Company is required to withhold FICA taxes with respect to the RSUs at the date of grant of the RSUs since the Recipient was eligible for retirement at the time the RSUs were granted).  To satisfy the required minimum FICA withholding due at the date of grant, the Recipient shall, immediately upon notification of the amount due, pay to the Company in cash or by check amounts necessary to satisfy applicable FICA withholding requirements.  If the Recipient fails to pay the amount demanded, the Company or the Recipient’s employer may withhold that amount from other amounts payable to the Recipient, including salary, subject to applicable law.
(k)    Not a Contract of Employment.  Nothing in the Plan or this Agreement shall confer upon Recipient any right to be continued in the employment of the Company or any parent or subsidiary of the Company, or to interfere in any way with the right of the Company or any parent or subsidiary by whom Recipient is employed to terminate Recipient’s employment at any time or for any reason, with or without cause, or to decrease Recipient’s compensation or benefits.

2.    Miscellaneous. 
  
(a)    Entire Agreement; Amendment.  This Agreement and the Plan constitute the entire agreement of the parties with regard to the subjects hereof.

(b)    Interpretation of the Plan and the Agreement.  The Compensation Committee shall have the sole authority to interpret the provisions of this Agreement and the Plan and all determinations by it shall be final and conclusive.

(c)    Electronic Delivery.  The Recipient consents to the electronic delivery of notices and any prospectus and any other documents relating to this Award in lieu of mailing or other form of delivery. 
  
(d)    Rights and Benefits.  The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns and, subject to the restrictions on transfer of this Agreement, be binding upon the Recipient’s heirs, executors, administrators, successors and assigns. 
  
(e)    Further Action.  The parties agree to execute such instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement. 

(f)    Governing Law.  This Agreement and the Plan will be interpreted under the laws of the state of Oregon, exclusive of choice of law rules.  

	
				
	 
	SCHNITZER STEEL INDUSTRIES, INC.

	 
	 

	 
	By:
	 
	 

	 
	 
	Authorized Officer

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EXHIBIT B
GENERAL RELEASE
THIS AGREEMENT AND RELEASE, dated as of _______ __, 201_ (this “Agreement”), is entered into by and between John D. Carter (“Executive”) and Schnitzer Steel Industries, Inc. (the “Company”).
WHEREAS, Executive is currently employed with the Company; and
WHEREAS, Executive’s employment with the Company will terminate effective as of __________ __, 201_;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement and other good and valuable consideration, Executive and the Company hereby agree as follows:
1.Subject to Executive’s execution, delivery and non-revocation of this Agreement within 60 days following the date of termination, Executive shall be provided severance pay and other benefits (the “Severance Benefits”) in accordance with the terms and conditions of Section 7 of the amended and restated employment agreement by and between Executive and the Company, dated as of ________ __, 2011 (the “Employment Agreement”); provided that, no such Severance Benefits shall be paid or provided if Executive revokes this Agreement pursuant to Section 4 below.
2.Executive, for and on behalf of himself and Executive’s heirs, successors, agents, representatives, executors and assigns, hereby waives and releases any common law, statutory or other complaints, claims, demands, expenses, damages, liabilities, charges or causes of action (each, a “Claim”) arising out of or relating to Executive’s employment or termination of employment with, Executive’s serving in any capacity in respect of, or Executive’s status at any time as a holder of any securities of, any of the Company and any of its affiliates (collectively, the “Company Group”), both known and unknown, in law or in equity, which Executive may now have or ever had against any member of the Company Group or any equityholder, agent, representative, administrator, trustee, attorney, insurer, fiduciary, employee, director or officer of any member of the Company Group, including their successors and assigns (collectively, the “Company Releasees”), including, without limitation, any claim for any severance benefit which might have been due Executive under any previous agreement executed by and between any member of the Company Group and Executive, and any complaint, charge or cause of action arising out of his employment with the Company Group under the Age Discrimination in Employment Act of 1967 (“ADEA,” a law which prohibits discrimination on the basis of age against individuals who are age 40 or older, and including the Older Workers Benefit Protection Act), the National Labor Relations Act, the Civil Rights Act of 1991, the Americans with Disabilities Act of 1990, Title VII of the Civil Rights Act of 1964, the Employee Retirement Income Security Act of 1974, the Family Medical Leave Act, the Equal Pay Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Rehabilitation Act of 1973, the Worker Adjustment and Retraining Notification Act, and chapters 652, 653 and 659A of the Oregon Revised Statutes, all as amended; and all other federal, state and local statutes, ordinances and regulations.  By signing this Agreement, Executive acknowledges that Executive intends to waive and release any rights known or unknown Executive may have against the Company Releasees under these and any other laws; provided that, Executive does not waive or release Claims (i) with respect to the right to enforce this Agreement or those provisions of the Employment Agreement that expressly survive the termination of Executive’s employment with the Company, (ii) with respect to any vested right Executive may have under any employee pension or welfare benefit plan of the Company Group, (iii) any rights to indemnification under any applicable indemnification agreement, any D&O insurance policy applicable to Executive and/or the Company’s certificates of incorporation, charter and by-laws, or (iv) with respect to any claims that cannot legally be waived.
		
	3.
	Executive acknowledges that Executive has been given twenty-one (21) days from the date of

093331-3924-13924-Active.12399356.5

        

receipt of this Agreement to consider all of the provisions of the Agreement and, to the extent he has not used the entire 21-day period prior to executing the Agreement, he does hereby knowingly and voluntarily waive the remainder of said 21-day period.  EXECUTIVE FURTHER ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT CAREFULLY, HAS BEEN ADVISED BY THE COMPANY TO CONSULT AN ATTORNEY, AND FULLY UNDERSTANDS THAT BY SIGNING BELOW HE IS GIVING UP CERTAIN RIGHTS WHICH HE MAY HAVE TO SUE OR ASSERT A CLAIM AGAINST ANY OF THE COMPANY RELEASEES, AS DESCRIBED HEREIN AND THE OTHER PROVISIONS HEREOF.  EXECUTIVE ACKNOWLEDGES THAT HE HAS NOT BEEN FORCED OR PRESSURED IN ANY MANNER WHATSOEVER TO SIGN THIS AGREEMENT AND EXECUTIVE AGREES TO ALL OF ITS TERMS VOLUNTARILY.
4.Executive shall have seven (7) days from the date of Executive’s execution of this Agreement to revoke the release, including with respect to all claims referred to herein (including, without limitation, any and all claims arising under ADEA).  If Executive revokes the Agreement, Executive will be deemed not to have accepted the terms of this Agreement.
5.This Agreement (a) shall be governed by and construed and enforced in accordance with the internal laws of the State of Oregon, without regard to choice of law rules and (b) contains the entire agreement of the parties with respect to its subject matter and is intended to fully integrate the parties’ understandings and agreement on the subject matter of this Agreement.  
[Signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
                	
				
	 
	SCHNITZER STEEL INDUSTRIES, INC.

	 
	 
	 

	 
	By:
	 
	 

	 
	Its:
	 

	 
	 
	 
	 

	 
	EXECUTIVE

	 
	 
	 

	 
	John D. Carter
	 

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093331-3924-13924-Active.12399356.5exhibit10_1.htm

 

 

Exhibit 10.1

 

 

 

 

SUBSCRIPTION AGREEMENT

 

This Subscription Agreement (this “Agreement”) is being delivered to the purchaser identified on the signature page to this Agreement (the “Subscriber”) in connection with its investment in MEDL Mobile Holdings, Inc., a Nevada corporation (the “Company”). The Company is conducting a private placement (the “Offering”) of units (“Units”), each Unit consisting of 40,000 shares of the Company’s Common Stock, as more fully described below, at a purchase price of ten thousand dollars ($10,000) per Unit. Each Unit will consist of: (i)  40,000 shares of the Company’s common stock (the “Common Stock”), par value $0.0001 per share (the “Shares” or the “Securities”) Subscribers may subscribe for Units through cancellation of Bridge Notes issued by the Company on or about April 18, 2011 (the “Bridge Notes”) in the aggregate principal amount of $300,000, and may acquire Securities in the Offering by converting the full amount of principal and accrued interest of such Bridge Note into this Offering.

 

IMPORTANT INVESTOR NOTICES

 

NO OFFERING LITERATURE OR ADVERTISEMENT IN ANY FORM MAY BE RELIED UPON IN THE OFFERING OF THESE SECURITIES EXCEPT FOR THIS SUBSCRIPTION AGREEMENT AND ANY SUPPLEMENTS HERETO (THE “AGREEMENT”), AND NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY REPRESENTATIONS EXCEPT THOSE CONTAINED HEREIN.

 

THIS AGREEMENT IS CONFIDENTIAL AND THE CONTENTS HEREOF MAY NOT BE REPRODUCED, DISTRIBUTED OR DIVULGED BY OR TO ANY PERSONS OTHER THAN THE RECIPIENT OR ITS REPRESENTATIVE, ACCOUNTANT OR LEGAL COUNSEL, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY.  EACH PERSON WHO ACCEPTS DELIVERY OF THIS AGREEMENT, ACKNOWLEDGES AND AGREES TO THE FOREGOING RESTRICTIONS.

 

THIS AGREEMENT DOES NOT PURPORT TO BE ALL-INCLUSIVE OR TO CONTAIN ALL OF THE INFORMATION THAT YOU MAY DESIRE IN EVALUATING THE COMPANY, OR AN INVESTMENT IN THE OFFERING. THIS SUBSCRIPTION AGREEMENT DOES NOT CONTAIN ALL OF THE INFORMATION THAT WOULD NORMALLY APPEAR IN A PROSPECTUS FOR AN OFFERING REGISTERED UNDER THE SECURITIES ACT.  YOU MUST CONDUCT AND RELY ON YOUR OWN EVALUATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED, IN DECIDING WHETHER TO INVEST IN THE OFFERING.

 

THIS AGREEMENT CONTAINS A SUMMARY OF CERTAIN PROVISIONS OF VARIOUS DOCUMENTS RELATING TO THE OPERATIONS OF THE COMPANY.  THESE SUMMARIES DO NOT PURPORT TO BE COMPLETE AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE TEXTS OF THE ORIGINAL DOCUMENTS.

 

THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION OF AN OFFER TO ANY PERSON OR IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS UNLAWFUL OR NOT AUTHORIZED.  EACH PERSON WHO ACCEPTS DELIVERY OF THIS SUBSCRIPTION AGREEMENT AGREES TO RETURN IT AND ALL RELATED DOCUMENTS IF SUCH PERSON DOES NOT PURCHASE ANY OF THE SECURITIES DESCRIBED HEREIN.

 

NEITHER THE DELIVERY OF THIS AGREEMENT AT ANY TIME NOR ANY SALE OF SECURITIES HEREUNDER SHALL IMPLY THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.  THE COMPANY WILL EXTEND TO EACH PROSPECTIVE INVESTOR (AND TO ITS REPRESENTATIVE, ACCOUNTANT OR LEGAL COUNSEL, IF ANY) THE OPPORTUNITY, PRIOR TO ITS PURCHASE OF UNITS, TO ASK QUESTIONS OF AND RECEIVE ANSWERS FROM THE COMPANY CONCERNING THE OFFERING AND TO OBTAIN ADDITIONAL INFORMATION, TO THE EXTENT THE COMPANY  

 

 

 

  

  

  

 

 

POSSESSES THE SAME OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE, IN ORDER TO VERIFY THE ACCURACY OF THE INFORMATION SET FORTH HEREIN.  ALL SUCH ADDITIONAL INFORMATION SHALL ONLY BE PROVIDED IN WRITING AND IDENTIFIED AS SUCH BY THE COMPANY THROUGH ITS DULY AUTHORIZED OFFICERS AND/OR DIRECTORS ALONE; NO ORAL INFORMATION OR INFORMATION PROVIDED BY ANY BROKER OR THIRD PARTY MAY BE RELIED UPON.

 

NO REPRESENTATIONS, WARRANTIES OR ASSURANCES OF ANY KIND ARE MADE OR SHOULD BE INFERRED WITH RESPECT TO THE ECONOMIC RETURN, IF ANY, THAT MAY ACCRUE TO AN INVESTOR IN THE COMPANY.

 

THIS AGREEMENT CONTAINS FORWARD-LOOKING STATEMENTS REGARDING THE COMPANY’S PERFORMANCE, STRATEGY, PLANS, OBJECTIVES, EXPECTATIONS, BELIEFS AND INTENTIONS.  THE OUTCOME OF THE EVENTS DESCRIBED IN THESE FORWARD-LOOKING STATEMENTS IS SUBJECT TO SUBSTANTIAL RISKS, AND ACTUAL RESULTS COULD DIFFER MATERIALLY.  THE SECTIONS ENTITLED “EXECUTIVE SUMMARY,” “RISK FACTORS,” AND “DESCRIPTION OF BUSINESS,” IN ANY SEC FILING OR REPORT, AS WELL AS THIS AGREEMENT GENERALLY, CONTAINS DISCUSSIONS OF SOME OF THE FACTORS THAT COULD CONTRIBUTE TO THESE DIFFERENCES.

 

THIS SUBSCRIPTION AGREEMENT AND THE SEC FILINGS AND REPORTS INCLUDE DATA OBTAINED FROM INDUSTRY PUBLICATIONS AND REPORTS, WHICH THE COMPANY BELIEVES TO BE RELIABLE SOURCES; HOWEVER, NEITHER THE ACCURACY NOR COMPLETENESS OF THIS DATA IS GUARANTEED. WE HAVE NEITHER INDEPENDENTLY VERIFIED THIS DATA NOR SOUGHT THE CONSENT OF SUCH SOURCES TO REFER TO THEIR REPORTS IN THIS SUBSCRIPTION AGREEMENT.

 

THE OFFERING PRICE OF THE UNITS HAS BEEN DETERMINED ARBITRARILY.  THE PRICE OF THE UNITS AND THE COMMON STOCK DOES NOT NECESSARILY BEAR ANY RELATIONSHIP TO THE ASSETS, EARNINGS OR BOOK VALUE OF THE COMPANY, OR TO POTENTIAL ASSETS, EARNINGS, OR BOOK VALUE OF THE COMPANY.  THERE IS NO ACTIVE TRADING MARKET IN THE COMPANY’S COMMON STOCK AND THERE CAN BE NO ASSURANCE THAT AN ACTIVE TRADING MARKET IN ANY OF THE COMPANY’S SECURITIES WILL DEVELOP OR BE MAINTAINED.  A LIMITED NUMBER OF SHARES OF COMMON STOCK MAY BE ELIGIBLE FOR TRADING PRIOR TO REGISTRATION OF THE SECURITIES SOLD IN THE OFFERING, AND SUCH REGISTRATION MAY BE DELAYED IN CERTAIN CIRCUMSTANCES.  THE PRICE OF SHARES QUOTED ON THE OTC BULLETIN BOARD OR TRADED ON ANY EXCHANGE MAY BE IMPACTED BY A LACK OF LIQUIDITY OR AVAILABILITY OF SHARES FOR PUBLIC SALE AND ALSO WILL NOT NECESSARILY BEAR ANY RELATIONSHIP TO THE ASSETS, EARNINGS, BOOK VALUE OR POTENTIAL PROSPECTS OF THE COMPANY OR APPLICABLE QUOTED OR TRADING PRICES THAT MAY EXIST FOLLOWING REGISTRATION OR THE LAPSE OF RESTRICTIONS ON THE SECURITIES SOLD PURSUANT TO THE OFFERING OR UPON THE LAPSE OF ANY LOCKUP AGREEMENTS OR OTHER RESTRICTIONS. SUCH PRICES SHOULD NOT BE CONSIDERED ACCURATE INDICATORS OF FUTURE QUOTED OR TRADING PRICES THAT MAY SUBSEQUENTLY EXIST FOLLOWING REGISTRATION OR WHEN SUCH LOCKUP AGREEMENTS OR RESTRICTIONS LAPSE.

 

THE COMPANY RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO REJECT ANY SUBSCRIPTION IN WHOLE OR IN PART FOR ANY REASON OR FOR NO REASON. THE COMPANY IS NOT OBLIGATED TO NOTIFY RECIPIENTS OF THIS SUBSCRIPTION AGREEMENT WHETHER ALL OF THE UNITS OFFERED HEREBY HAVE BEEN SOLD.

 

 

 

  

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SUBSCRIBERS MAY BE DEEMED TO BE IN POSSESSION OF MATERIAL NON-PUBLIC INFORMATION WITHIN THE MEANING OF THE UNITED STATES SECURITIES LAWS AND REGULATIONS REGARDING A PUBLIC COMPANY. THIS AGREEMENT CONTAINS CONFIDENTIAL INFORMATION CONCERNING THE COMPANY, AND HAS BEEN PREPARED SOLELY FOR USE IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN. ANY USE OF THIS INFORMATION FOR ANY PURPOSE OTHER THAN IN CONNECTION WITH THE CONSIDERATION OF AN INVESTMENT IN THE SECURITIES OF THE COMPANY THROUGH THE OFFERING DESCRIBED HEREIN MAY SUBJECT THE USER TO CIVIL AND/OR CRIMINAL LIABILITY. THE RECIPIENT, BY ACCEPTING THIS SUBSCRIPTION AGREEMENT, AGREES NOT TO: (I) DISTRIBUTE OR REPRODUCE THIS SUBSCRIPTION AGREEMENT, IN WHOLE OR IN PART, AT ANY TIME, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY; (II) TO KEEP CONFIDENTIAL THE EXISTENCE OF THIS DOCUMENT AND THE INFORMATION CONTAINED HEREIN OR MADE AVAILABLE IN CONNECTION WITH ANY FURTHER INVESTIGATION OF THE COMPANY; AND (III) REFRAIN FROM TRADING IN THE PUBLICLY-TRADED SECURITIES OF THE COMPANY OR ANY OTHER RELEVANT COMPANY FOR SO LONG AS SUCH RECIPIENT IS IN POSSESSION OF THE MATERIAL NON-PUBLIC INFORMATION CONTAINED HEREIN. SUBSCRIBERS ARE ADVISED THAT THEY SHOULD SEEK THEIR OWN LEGAL COUNSEL PRIOR TO EFFECTUATING ANY TRANSACTIONS IN THE PUBLICLY TRADED COMPANY’S SECURITIES.

 

FOR RESIDENTS OF ALL STATES

 

THIS OFFERING IS BEING MADE SOLELY TO “ACCREDITED INVESTORS,” AS SUCH TERM IS DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).  THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE AND WILL BE OFFERED AND SOLD IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2) THEREUNDER AND REGULATION D (RULE 506) OF THE SECURITIES ACT AND CORRESPONDING PROVISIONS OF STATE SECURITIES LAWS.

 

THE SECURITIES OFFERED HEREBY ARE SUBJECT TO RESTRICTION ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.  INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

 

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (“SEC”), ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS SUBSCRIPTION AGREEMENT.  ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

 

PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS AGREEMENT AS INVESTMENT, LEGAL, BUSINESS, OR TAX ADVICE.  EACH INVESTOR SHOULD CONTACT HIS, HER OR ITS OWN ADVISORS REGARDING THE APPROPRIATENESS OF THIS INVESTMENT AND THE TAX CONSEQUENCES THEREOF, WHICH MAY DIFFER DEPENDING ON AN INVESTOR’S PARTICULAR FINANCIAL SITUATION.  IN NO EVENT SHOULD THIS AGREEMENT BE DEEMED OR CONSIDERED TO BE TAX ADVICE PROVIDED BY THE COMPANY.

 

 

 

  

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FOR FLORIDA RESIDENTS ONLY

 

THE UNITS REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER § 517.061 OF THE FLORIDA SECURITIES ACT.  THE UNITS HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA.  IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE COMPANY, AN AGENT OF THE COMPANY, OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER

 

 

 

  

-4-

  

 

1.           SUBSCRIPTION AND PURCHASE PRICE

 

(a)           Subscription.  Subject to the conditions set forth in Section 2 hereof, the Subscriber hereby subscribes for and agrees to purchase the number of Units indicated on page 17 hereof on the terms and conditions described herein.

 

(b)           Purchase of Units.  The Subscriber understands and acknowledges that the purchase price to be remitted to the Company in exchange for the Units shall be set at ten thousand dollars ($10,000.00) per Unit, for an aggregate purchase price as set forth on page 17 hereof (the “Aggregate Purchase Price”). The Subscriber’s delivery of this Agreement to the Company shall be accompanied by payment for the Units subscribed for hereunder, payable in United States Dollars, by wire transfer of immediately available funds delivered contemporaneously with the Subscriber’s delivery of this Agreement to the Company in accordance with the wire instructions provided on Exhibit A and pursuant to and in accordance with the Escrow Agreement, attached hereto as Exhibit B (the “Escrow Agreement”). The Subscriber understands and agrees that, subject to Section 2 and applicable laws, by executing this Agreement, it is entering into a binding agreement.

 

2.           ACCEPTANCE, OFFERING TERM AND CLOSING PROCEDURES

 

(a)           Acceptance or Rejection. Subject to full, faithful and punctual performance and discharge by the Company of all of its duties, obligations and responsibilities as set forth in this Agreement and any other agreement entered into between the Subscriber and the Company relating to this subscription (collectively, the "Transaction Documents"), the Subscriber shall be legally bound to purchase the Units pursuant to the terms and conditions set forth in this Agreement.  For the avoidance of doubt, upon the occurrence of the failure by the Company to fully, faithfully and punctually perform and discharge any of its duties, obligations and responsibilities as set forth in any of the Transaction Documents, which shall have been performed or otherwise discharged prior to the Closing, the Subscriber may, on or prior to the Closing (as defined below), at its sole and absolute discretion, elect not to purchase the Units and provide instructions to the escrow agent under the Escrow Agreement to receive the full and immediate refund of the Aggregate Purchase Price. The Subscriber understands and agrees that the Company reserves the right to reject this subscription for Units in whole or part in any order at any time prior to the Closing for any reason, notwithstanding the Subscriber’s prior receipt of notice of acceptance of the Subscriber’s subscription.  In the event the Closing does not take place because of (i) the rejection of subscription for Units by the Company; or (ii) the election not to purchase the Shares by the Subscriber; or (iii) failure to effectuate the Initial Closing on or prior to June 24, 2011 (unless extended in the discretion of the Board of Directors) (the “Initial Closing Date”)  for any reason or no reason, this Agreement and any other Transaction Documents shall thereafter be terminated and have no force or effect, and the parties shall take all steps, including the execution of instructions to the escrow agent, to ensure that the Aggregate Purchase Price held in accordance with the Escrow Agreement shall promptly be returned or caused to be returned to the Subscriber without interest thereon or deduction therefrom.

 

(b)           Closing.  The closing of the purchase and sale of the Units hereunder (the “Closing”) shall take place at the offices of Sichenzia Ross Friedman Ference, LLP, 61 Broadway, 32nd Floor, New York, NY 10006 or such other place as determined by the Company and may take place in one of more closings, provided the Minimum Offering (as defined in Section 5(h) below) has been reached.  Closings shall take place on a Business Day promptly following the satisfaction of the conditions set forth in Section 7 below, as determined by the Company (the “Closing Date”). “Business Day” shall mean from the hours of 9:00 a.m. (Eastern Time) through 5:00 p.m. (Eastern Time) of a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required to be closed. The Shares purchased by the Subscriber will be delivered by the Company promptly following the Final Closing Date (as defined in Section 5(h) below) of the Offering.

(c)           Following Acceptance or Rejection.  The Subscriber acknowledges and agrees that this Agreement and any other documents delivered in connection herewith will be held by the Company. In the event that this Agreement is not accepted by the Company for whatever reason, which the Company expressly reserves the right to do, this Agreement, the Aggregate Purchase Price received (without interest thereon) and any other documents delivered in connection herewith will be returned to the Subscriber at the address of the Subscriber as set forth in this Agreement. If this Agreement is accepted by the Company, the Company is entitled to treat the Aggregate Purchase Price received as an interest free loan to the Company until such time as the Subscription is accepted.

 

 

 

  

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(d)           Favored Nations Provision.  Other than in connection with (i) full or partial consideration in connection with a strategic merger, acquisition, consolidation or purchase of substantially all of the securities or assets of a corporation or other entity which holders of such securities or debt are not at any time granted registration rights equal to or greater than those granted to the Subscribers, (ii) the Company’s issuance of securities in connection with strategic license agreements and other partnering arrangements so long as such issuances are not for the purpose of raising capital and which holders of such securities or debt are not at any time granted registration rights equal to or greater than those granted to the Subscribers, (iii) the Company’s issuance of Common Stock or the issuances or grants of options to purchase Common Stock to employees, directors, and consultants, pursuant to plans that have been approved by a majority of the independent members of the board of directors of the Company or in existence as such plans are constituted on the date of this Agreement, (iv) securities upon the exercise or exchange of or conversion of any securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement on the terms in effect on the Closing Date,  (v) the Company’s issuance of Common Stock or the issuances or grants of options to purchase Common Stock to consultants and service providers approved by a majority in amount of the Shares sold in the Offering, held as of the date of approval (“Subscriber Consent”), and (v) any and all securities required to be assumed by the Company by the terms thereof as a result of any of the foregoing even if issued by a predecessor acquired in connection with a business combination, merger or share exchange (collectively, the foregoing (i) through (v) are “Excepted Issuances”), if at any time for a period of eighteen (18) months from the date of the Final Closing Date of the Offering with respect to the Shares (the “Expiration Date”), the Company shall agree to or issue any Common Stock or securities convertible into or exercisable for shares of Common Stock (or modify any of the foregoing which may be outstanding) to any person or entity at a price per share or conversion or exercise price per share which shall be less than $0.25 per share, being the price of Common Stock hereunder  without the consent of the Subscribers (the “Lower Price Issuance”), then the Company shall issue such additional number of Shares to reflect such other lower price for the Shares.  Common Stock issued or issuable by the Company for no consideration or for consideration that cannot be determined at the time of issue will be deemed issuable or to have been issued for $0.0001 per share of Common Stock.  The rights of Subscribers set forth in this Section 2(d) are in addition to any other rights the Subscribers have pursuant to this Agreement, and any other agreement referred to or entered into in connection herewith or to which Subscribers and Company are parties.  Notwithstanding anything herein or in any other agreement to the contrary, the Company shall only be required to make a single adjustment with respect to any Lower Price Issuance, regardless of the existence of multiple basis therefore.  Prior to the Expiration Date, the Company agrees not to file any registration statement on Form S-8 with the Securities and Exchange Commission without Subscriber Consent.

(e)           Maximum Exercise of Rights.   In the event the exercise of the rights described in Section 2  would or could result in the issuance of an amount of Common Stock of the Company that would exceed the maximum amount that may be issued to Subscribers calculated in the manner as described in Section 2(f) of this Agreement, then the issuance of such additional shares of Common Stock of the Company to Subscribers will be deferred in whole or in part until such time as Subscribers are able to beneficially own such Common Stock without exceeding the applicable maximum amount set forth calculated in the manner described in Section 2(f) of this Agreement and notifies the Company accordingly.

(f)           Maximum Conversion.  A Subscriber shall not be entitled to any payment for a Lower Priced Issuance, or otherwise, by delivery of shares of Common Stock which would be in excess of the number of shares of Common Stock beneficially owned by such Subscriber and its Affiliates on a payment date, with respect to which the determination of this provision is being made on a calculation date, which would result in beneficial ownership by Subscriber and its Affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such date.  For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 thereunder.  Subject to the foregoing, the Subscriber shall not be limited to aggregate beneficial ownership of only 4.99% and aggregate beneficial ownership by the Subscriber may exceed 4.99%.  The Subscriber may increase the permitted beneficial ownership amount up to 9.99% upon and effective after 61 days prior written notice to the Company.  Subscriber may allocate which of the equity of the Company deemed beneficially owned by Subscriber shall be included in the 4.99% amount described above and which shall be allocated to the excess above 4.99%.

(g)           Intentionally Omitted.

 

(h)           Extraordinary Events Regarding Common Stock.  In the event that the Company shall (a) issue additional shares of Common Stock as a dividend or other distribution on outstanding Common Stock, (b) subdivide 

 

 

 

  

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its outstanding shares of Common Stock, or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of Common Stock, then, in each such event, the Unit Purchase Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Purchase Price then in effect. The Purchase Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein. The number of Shares that the Subscriber shall thereafter, be issued and obtain on the exercise hereof, be entitled to receive shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section) be issuable on such exercise by a fraction of which (a) the numerator is the Purchase Price that would otherwise (but for the provisions of this Section) be in effect, and (b) the denominator is the Purchase Price in effect on the date of such exercise.

 

(i)           Certificate as to Adjustments.  In each case of any adjustment or readjustment in the Shares, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms hereof and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price and the number of Shares to be received, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided herein. The Company will forthwith mail a copy of each such certificate to the Subscriber and any Agent of the Company.

 

3.           THE SUBSCRIBER’S REPRESENTATIONS, WARRANTIES AND COVENANTS

 

The Subscriber hereby acknowledges, agrees with and represents, warrants and covenants to the Company, as follows:

 

(a)           The Subscriber has full power and authority to enter into this Agreement, the execution and delivery of which has been duly authorized, if applicable, and this Agreement constitutes a valid and legally binding obligation of the Subscriber, except as may be limited by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors, and except as enforceability of the obligations hereunder are subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law).

 

(b)           The Subscriber acknowledges its understanding that the Offering and sale of the Securities is intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by virtue of Section 4(2) of the Securities Act and the provisions of Regulation D promulgated thereunder (“Regulation D”).  In furtherance thereof, the Subscriber represents and warrants to the Company and its affiliates as follows:

 

(i)           The Subscriber realizes that the basis for the exemption from registration may not be available if, notwithstanding the Subscriber’s representations contained herein, the Subscriber is merely acquiring the Securities for a fixed or determinable period in the future, or for a market rise, or for sale if the market does not rise. The Subscriber does not have any such intention.

 

(ii)           The Subscriber realizes that the basis for exemption would not be available if the Offering is part of a plan or scheme to evade registration provisions of the Securities Act or any applicable state or federal securities laws.

 

(iii)           The Subscriber is acquiring the Securities solely for the Subscriber’s own beneficial account, for investment purposes, and not with a view towards, or resale in connection with, any distribution of the Securities.

 

(iv)           The Subscriber has the financial ability to bear the economic risk of the Subscriber’s investment, has adequate means for providing for its current needs and contingencies, and has no need for liquidity with respect to an investment in the Company.

 

 

 

  

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(v)           The Subscriber and the Subscriber’s attorney, accountant, purchaser representative and/or tax advisor, if any (collectively, the “Advisors”) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of a prospective investment in the Securities. If other than an individual, the Subscriber also represents it has not been organized solely for the purpose of acquiring the Securities.

 

(vi)           The Subscriber (together with its Advisors, if any) has received all documents requested by the Subscriber, if any, has carefully reviewed them and understands the information contained therein, prior to the execution of this Agreement.

 

(c)           The Subscriber is not relying on the Company or any of its employees, agents, sub-agents or advisors with respect to the legal, tax, economic and related considerations involved in this investment. The Subscriber has relied on the advice of, or has consulted with, only its Advisors. Each Advisor, if any, has disclosed to the Subscriber in writing (a copy of which is annexed to this Agreement) the specific details of any and all past, present or future relationships, actual or contemplated, between the Advisor and the Company or any affiliate or sub-agent thereof.

 

(d)           The Subscriber has carefully considered the potential risks relating to the Company and a purchase of the Securities, and fully understands that the Securities are a speculative investment that involves a high degree of risk of loss of the Subscriber’s entire investment. Among other things, the Subscriber has carefully considered each of the risks described under the heading “Risk Factors” in the Company’s SEC Filings, which risk factors are incorporated herein by reference, and any additional disclosures in the nature of Risk Factors described herein, including, without limitation, the additional disclosures in Section 3(u), below.

 

 (e)           The Subscriber will not sell or otherwise transfer any Securities without registration under the Securities Act or an exemption therefrom, and fully understands and agrees that the Subscriber must bear the economic risk of its purchase because, among other reasons, the Securities have not been registered under the Securities Act or under the securities laws of any state and, therefore, cannot be resold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and under the applicable securities laws of such states, or an exemption from such registration is available.  In particular, the Subscriber is aware that the Securities are “restricted securities,” as such term is defined in Rule 144 promulgated under the Securities Act (“Rule 144”), and they may not be sold pursuant to Rule 144 unless all of the conditions of Rule 144 are met. The Subscriber also understands that the Company is under no obligation to register the Securities on behalf of the Subscriber or to assist the Subscriber in complying with any exemption from registration under the Securities Act or applicable state securities laws. The Subscriber understands that any sales or transfers of the Securities are further restricted by state securities laws and the provisions of this Agreement.

 

(f)           No oral or written representations or warranties have been made, or information furnished, to the Subscriber or its Advisors, if any, by the Company or any of its officers, employees, agents, sub-agents, affiliates, advisors or subsidiaries in connection with the Offering, other than any representations of the Company contained herein, and in subscribing for the Units, the Subscriber is not relying upon any representations other than those contained herein.

 

(g)           The Subscriber’s overall commitment to investments that are not readily marketable is not disproportionate to the Subscriber’s net worth, and an investment in the Securities will not cause such overall commitment to become excessive.

 

(h)           The Subscriber understands and agrees that the certificates for the Securities shall bear substantially the following legend until (i) such Securities shall have been registered under the Securities Act and effectively disposed of in accordance with a registration statement that has been declared effective or (ii) in the opinion of counsel for the Company, such Securities may be sold without registration under the Securities Act, as well as any applicable “blue sky” or state securities laws:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS.  SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED 

 

 

 

  

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OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED BY THE ISSUER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.

 

(i)           Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved the Securities or passed upon or endorsed the merits of the Offering. There is no government or other insurance covering any of the Securities.

 

(j)           The Subscriber and its Advisors, if any, have had a reasonable opportunity to ask questions of and receive answers from a person or persons acting on behalf of the Company concerning the Offering and the business, financial condition, results of operations and prospects of the Company, and all such questions have been answered to the full satisfaction of the Subscriber and its Advisors, if any.

 

(k)           The Subscriber is unaware of, is in no way relying on, and did not become aware of, the Offering through or as a result of, any form of general solicitation or general advertising, including, without limitation, any article, notice, advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or electronic mail over the Internet, in connection with the Offering and is not subscribing for Units and did not become aware of the Offering through or as a result of any seminar or meeting to which the Subscriber was invited by, or any solicitation of a subscription by, a person not previously known to the Subscriber in connection with investments in securities generally.

 

(l)           The Subscriber has taken no action that would give rise to any claim by any person for brokerage commissions, finders’ fees or the like relating to this Agreement or the transactions contemplated hereby.

 

(m)           The Subscriber is not relying on the Company or any of its employees, agents, or advisors with respect to the legal, tax, economic and related considerations of an investment in the Shares, and the Subscriber has relied on the advice of, or has consulted with, only its own Advisors.

 

(n)           The Subscriber acknowledges that any estimates or forward-looking statements or projections furnished by the Company to the Subscriber were prepared by the management of the Company in good faith, but that the attainment of any such projections, estimates or forward-looking statements cannot be guaranteed by the Company or its management and should not be relied upon.

 

(o)           No oral or written representations have been made, or oral or written information furnished, to the Subscriber or its Advisors, if any, in connection with the Offering that are in any way inconsistent with the information contained herein.

 

(p)           (For ERISA plans only) The fiduciary of the ERISA plan (the “Plan”) represents that such fiduciary has been informed of and understands the Company’s investment objectives, policies and strategies, and that the decision to invest “plan assets” (as such term is defined in ERISA) in the Company is consistent with the provisions of ERISA that require diversification of plan assets and impose other fiduciary responsibilities. The Subscriber or Plan fiduciary (i) is responsible for the decision to invest in the Company; (ii) is independent of the Company and any of its affiliates; (iii) is qualified to make such investment decision; and (iv) in making such decision, the Subscriber or Plan fiduciary has not relied primarily on any advice or recommendation of the Company or any of its affiliates.

 

(q)           This Agreement is not enforceable by the Subscriber unless it has been accepted by the Company, and the Subscriber acknowledges and agrees that the Company reserves the right to reject any subscription for any reason.

 

(r)           The Subscriber will indemnify and hold harmless the Company and, where applicable, its directors, officers, employees, agents, advisors, affiliates and shareholders, and each other person, if any, who controls any of the foregoing from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) (a “Loss”) arising out of or based upon any representation or warranty of the Subscriber contained 

 

 

 

  

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herein or in any document furnished by the Subscriber to the Company in connection herewith being untrue in any material respect or any breach or failure by the Subscriber to comply with any covenant or agreement made by the Subscriber herein or therein; provided, however, that the Subscriber shall not be liable for any Loss that in the aggregate exceeds the Subscriber’s Aggregate Purchase Price tendered hereunder.

 

(s)           The Subscriber is, and on each date on which the Subscriber continues to own restricted Securities from the Offering will be, an “Accredited Investor” as defined in Rule 501(a) under the Securities Act. In general, an “Accredited Investor” is deemed to be an institution with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 (excluding such person’s residence) or annual income exceeding $200,000 or $300,000 jointly with his or her spouse.

 

(t)           The Subscriber, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the Offering, and has so evaluated the merits and risks of such investment. The Subscriber has not authorized any person or entity to act as its Purchaser Representative (as that term is defined in Regulation D of the General Rules and Regulations under the Securities Act) in connection with the Offering. The Subscriber is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(u)           The Subscriber has reviewed, or had an opportunity to review, all of the SEC Filings (as defined below), and all “Risk Factors” and “Forward Looking Statements” disclaimers contained therein.  In addition, the Subscriber has reviewed and acknowledges it has such knowledge, sophistication, and experience in securities matters, and understands the following additional Risk Factor related to the Company:

 

SPECIAL RISK FACTOR INVOLVING INVESTOR RELATIONS ACTIVITIES, NOMINAL “FLOAT” AND SUPPLY AND DEMAND FACTORS THAT MAY AFFECT THE PRICE OF OUR STOCK.

 

The Company expects to utilize various techniques such as non-deal road shows and investor relations campaigns in order to create investor awareness for the Company.  These campaigns may include personal, video and telephone conferences with investors and prospective investors in which our business practices are described.  The Company may provide compensation to investor relations firms and pay for newsletters, websites, mailings and email campaigns that are produced by third-parties based upon publicly-available information concerning the Company.  The Company will not be responsible for the content of analyst reports and other writings and communications by investor relations firms not authored by the Company or from publicly available information.  The Company does not intend to review or approve the content of such analysts’ reports or other materials based upon analysts’ own research or methods.  Investor relations firms should generally disclose when they are compensated for their efforts, but whether such disclosure is made or complete is not under our control.   In addition, investors in the Company may, from time to time, also take steps to encourage investor awareness through similar activities that may be undertaken at the expense of the investors.  Investor awareness activities may also be suspended or discontinued which may impact the trading market our common stock.

  

 The SEC and FINRA enforce various statutes and regulations intended to prevent manipulative or deceptive devices in connection with the purchase or sale of any security and carefully scrutinize trading patterns and company news and other communications for false or misleading information, particularly in cases where the hallmarks of “pump and dump” activities may exist, such as rapid share price increases or decreases.  We, and our shareholders may be subjected to enhanced regulatory scrutiny due to the small number of holders who initially will own the registered shares of our common stock publicly available for resale, and the limited trading markets in which such shares may be offered or sold which have often been associated with improper activities concerning penny-stocks, such as the OTC Bulletin Board or the OTCQB Marketplace (Pink OTC) or pink sheets.  Until such time as the common stock sold in the Offering is registered and until such time as our restricted shares are registered or available for resale under Rule 144, there will continue to be a small percentage of shares held by a small number of investors, many of whom acquired such shares in privately negotiated purchase and sale transactions, that will constitute the entire available trading market.  The Supreme Court has stated that manipulative action is a term of art connoting intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities.  Often times, manipulation is associated by regulators with

 

 

 

  

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forces that upset the supply and demand factors that would normally determine trading prices.  Since a small percentage of the outstanding common stock of the Company will initially be available for trading, held by a small number of individuals or entities, the supply of our common stock for sale will be extremely limited for an indeterminate amount of time, which could result in higher bids, asks or sales prices than would otherwise exist.  Securities regulators have often cited factors such as thinly-traded markets, small numbers of holders, and awareness campaigns as hallmarks  of claims of price manipulation and other violations of law when combined with manipulative trading, such as wash sales, matched orders or other manipulative trading timed to coincide with false or touting press releases.  There can be no assurance that the Company’s or third-parties’ activities, or the small number of potential sellers or small percentage of stock in the “float,” or determinations by purchasers or holders as to when or under what circumstances or at what prices they may be willing to buy or sell stock will not artificially impact (or would be claimed by regulators to have affected) the normal supply and demand factors that determine the price of the stock.

 

PURCHASE OF UNITS BY AFFILIATES OF THE PLACEMENT AGENTS AND/OR THE COMPANY MAY BE USED TO SATISFY THE MINIMUM OFFERING, AND OUR RAISING THE MINIMUM OFFERING AMOUNT SHOULD NOT BE DEEMED EVIDENCE OF AN ENDORSEMENT OF THE OFFERING BY INDEPENDENT PURCHASERS.

Units may be purchased by Placement Agents, if any, and their officers, employees and affiliates, and by the Company’s officers, directors, employees and affiliates (including current stockholders and their respective affiliates) and such purchases shall be applied in reaching the Minimum Offering.  Accordingly, investors in the Offering should understand and recognize that not all subscribers will necessarily have made an independent investment decision with no affiliation with either the Company or the Placement Agents.

 

4.           THE COMPANY’S REPRESENTATIONS, WARRANTIES AND COVENANTS

 

The Company hereby acknowledges, agrees with and represents, warrants and covenants to the Subscriber, as follows:

 

(a)           Organization and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada.  The Company is duly qualified to do business, and is in good standing in the states required due to (a) the ownership or lease of real or personal property for use in the operation of the Company's business or (b) the nature of the business conducted by the Company.  The Company has all requisite power, right and authority to own, operate and lease its properties and assets, to carry on its business as now conducted, to execute, deliver and perform its obligations under this Agreement and the other Transaction Documents to which it is a party, and to carry out the transactions contemplated hereby and thereby.  All actions on the part of the Company and its officers and directors necessary for the authorization, execution, delivery and performance of this Agreement and the other Transaction Documents, the consummation of the transactions contemplated hereby and thereby, and the performance of all of the Company's obligations under this Agreement and the other Transaction Documents have been taken or will be taken prior to the Closing.  This Agreement has been, and the other Transaction Documents to which the Company is a party on the Closing will be, duly executed and delivered by the Company, and this Agreement is, and each of the other Transaction Documents to which it is a party on the Closing will be, a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

 

(b)           Issuance of Securities.  The Securities to be issued to the Subscriber pursuant to this Agreement, when issued and delivered in accordance with the terms of this Agreement, will be duly and validly issued and will be fully paid and non-assessable.

 

(c)           Authorization; Enforcement.  The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company, and the consummation of the transactions contemplated hereby and thereby, will not (a) constitute a violation (with or without the giving of notice or lapse of time, or both) of any provision of any law or any judgment, decree, order, regulation or rule of any court, agency or other governmental authority applicable to the Company, (b) require any consent, approval or authorization of, or declaration, filing or registration with, any person, (c) result in a default (with or without the giving of notice or lapse of time, or both) under, acceleration or termination of, or the creation in any party of the right to accelerate, terminate, modify or 

 

 

 

  

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cancel, any agreement, lease, note or other restriction, encumbrance, obligation or liability to which the Company is a party or by which it is bound or to which any assets of the Company are subject, (d) result in the creation of any lien or encumbrance upon the assets of the Company, or upon any Shares or other securities of the Company, (e) conflict with or result in a breach of or constitute a default under any provision of those certain articles of incorporation or those certain bylaws of the Company, or (f) invalidate or adversely affect any permit, license, authorization or status used in the conduct of the business of the Company.

 

(d)           SEC Filings. The Company is subject to, and in full compliance with, the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company has made available to each Subscriber through the EDGAR system true and complete copies of each of the Company’s Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K, in each case filed since May 16, 2011 (collectively, the “SEC Filings”), and all such SEC Filings are incorporated herein by reference.  The SEC Filings, when they were filed with the SEC (or, if any amendment with respect to any such document was filed, when such amendment was filed), complied in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder and did not, as of such date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. All reports and statements required to be filed by the Company under the Securities Act and the Exchange Act have been filed, together with all exhibits required to be filed therewith. The Company and each of its direct and indirect subsidiaries, if any (collectively, the “Subsidiaries”), are engaged in all material respects only in the business described in the SEC Filings, and the SEC Filings contain a complete and accurate description in all material respects of the business of the Company and the Subsidiaries.

 

(e)           No Financial Advisor. The Company acknowledges and agrees that the Subscriber is acting solely in the capacity of an arm’s length purchaser with respect to the Securities and the transactions contemplated hereby. The Company further acknowledges that the Subscriber is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by the Subscriber or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to the Subscriber’s purchase of the Units. The Company further represents to the Subscriber that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

(f)           Indemnification.  The Company will indemnify and hold harmless the Subscriber and, where applicable, its directors, officers, employees, agents, advisors and shareholders, from and against any and all Loss arising out of or based upon any representation or warranty of the Company contained herein or in any document furnished by the Company to the Subscriber in connection herewith being untrue in any material respect or any breach or failure by the Company to comply with any covenant or agreement made by the Company to the Subscriber in connection therewith; provided, however, that the Company’s liability shall not exceed the Subscriber’s Aggregate Purchase Price tendered hereunder.

 

(g)           Capitalization and Additional Issuances.  The authorized and outstanding capital stock of the Company on a fully diluted basis as of the date of this Agreement and the Closing Date (not including the Securities) are set forth on Schedule 4(g).  Except as set forth on Schedule 4(g), there are no options, warrants, or rights to subscribe to, securities, rights, understandings or obligations convertible into or exchangeable for or giving any right to subscribe for any shares of capital stock or other equity interest of the Company or any of the Subsidiaries.  The only officer, director, employee and consultant stock option or stock incentive plan or similar plan currently in effect or contemplated by the Company is described on Schedule 4(g).  There are no outstanding agreements or preemptive or similar rights affecting the Company's Common Stock.

 

 

(h)           Private Placements.  Assuming the accuracy of the Subscriber’s representations and warranties set forth in Section 3, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Subscribers as contemplated hereby.

(j)           Investment Company.  The Company is not, and is not an affiliate of, and immediately after receipt of payment for the Shares will not be or be an affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.  The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act.

 

 

 

  

-12-

  

 

 

5.           OTHER AGREEMENTS OF THE PARTIES

 

 

(a)           Furnishing of Information.  As long as any Subscriber owns Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act.  As long as any Subscriber owns Securities, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Subscribers and make publicly available in accordance with Rule 144(c) under the Securities Act such information as is required for the Subscribers to sell the Securities under Rule 144.  The Company further covenants that it will take such further action as any holder of Securities may reasonably request, all to the extent required from time to time to enable such person to sell such Securities without registration under the Securities Act within the limitation of the exemptions proved by Rule 144 under the Securities Act.

 

(b)           Shareholder Rights Plan.  No claim will be made or enforced by the Company or, to the knowledge of the Company, any other person that any Subscriber is an “Acquiring Person” under any shareholder rights plan or similar plan or arrangement in effect or hereafter adopted by the Company, or that any Subscriber could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Subscribers.

 

(c)           Securities Laws Disclosure; Publicity.  The Company and each Subscriber shall consult with each other in issuing any press releases with respect to the transactions contemplated hereby, and neither the Company nor any Subscriber shall issue any such press release or otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Subscriber, or without the prior consent of each Subscriber, with respect to any press release of the Company, which consent shall not unreasonably be withheld.  Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Subscriber, or include the name of any Subscriber in any filing with the SEC or any regulatory agency, without the prior written consent of such Subscriber, except (i) as required by federal securities law in connection with the registration statement contemplated by the Registration Rights Agreement and (ii) to the extent such disclosure is required by law.

 

(d)           Integration.  The Company shall not, and shall use its best efforts to ensure that no affiliate of the Company shall, after the date hereof, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Subscribers.

 

(e)           Reservation of Securities.  The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may be required to fulfill its obligations in full under the Transaction Documents.  In the event that at any time the then authorized shares of Common Stock are insufficient for the Company to satisfy its obligations in full under the Transaction Documents, the Company shall promptly take such actions as may be required to increase the number of authorized shares.

 

(f)           Reimbursement.  If any Subscriber or any of its affiliates or any officer, director, partner, controlling person, employee or agent of a Subscriber or any of its affiliates (a “Related Person”) becomes involved in any capacity in any proceeding brought by or against any person in connection with or as a result of any misrepresentation, breach or inaccuracy of any representation, warranty, covenant or agreement made by the Company in any Transaction Documents, the Company will indemnify and hold harmless such Subscriber or Related Person for its reasonable legal and other expenses (including the costs of any investigation, preparation and travel) and for any losses incurred in connection therewith, as such expenses or losses are incurred, excluding only losses that result directly from such Subscribers’ or Related Person’s gross negligence or willful misconduct.  The indemnification obligations of the Company under this paragraph shall be in addition to any liability that the Company may otherwise have and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Subscribers and any such Related Persons.  The Company also agrees that neither the Subscribers nor any Related Persons shall have any liability to the Company or any person asserting claims on behalf of or in right of the Company in connection with or as a result of the transactions contemplated by the Transaction Documents, except to the extent that any losses incurred by the Company result from the gross negligence or willful misconduct of the applicable Subscriber or Related Person in connection with such transactions; provided, however, that the Subscriber shall not be liable for any Loss that in the aggregate exceeds the Subscriber’s Aggregate Purchase Price tendered hereunder.  If the Company breaches its obligations under any Deal Document, then, in addition to any other liabilities the Company may have under any Deal Document or applicable law, the Company shall pay or reimburse the Subscribers on demand for all costs for collection and enforcement 

 

 

 

  

-13-

  

 

 

(including reasonable attorneys’ fees and expenses).  Without limiting the generality of the foregoing, the Company specifically agrees to reimburse the Subscribers on demand for all costs of enforcing the indemnification obligations in this paragraph.  Notwithstanding anything in this Section 5(f) to the contrary, the Company’s liability to the Subscriber hereunder shall not exceed the Subscriber’s Aggregate Purchase Price.

 

(g)           Use of Proceeds.  The Company anticipates using the gross proceeds from the Offering as set forth on Schedule A, annexed hereto.

 

(h)           Minimum Offering; Purchases by Insiders.  During the Offering, subscriptions will be placed and held in a non-interest bearing escrow account Citibank, NA.  The Initial Closing shall be held upon receipt and acceptance of subscriptions for $2,200,000 (the “Minimum Offering”) prior to June 24, 2011. The date of the Initial Closing is sometimes referred to as the “Initial Closing Date.”  Subsequent closings (each a “Subsequent Closing”) will be held until the earlier to occur of: (i) the date on which the entire Offering has been subscribed for and accepted by the Company (the “Final Closing Date”), and (ii) June 24, 2011.  The Offering may be extended up to July 15, 2011, without additional notice to Subscribers.  Officers, directors and affiliates of the Company and the Placement Agent, if any, may purchase securities in the Offering which shall count towards satisfaction of the Minimum Offering.

6. INTENTIONALLY OMITTED.

7.           CONDITIONS TO ACCEPTANCE OF SUBSCRIPTION

 

The Company’s right to accept the subscription of the Subscriber is conditioned upon satisfaction of the following conditions precedent on or before the date the Company accepts such subscription:

 

(a)           As of the Closing, no legal action, suit or proceeding shall be pending that seeks to restrain or prohibit the transactions contemplated by this Agreement.

 

(b)           The representations and warranties of the Company contained in this Agreement shall have been true and correct in all material respects on the date of this Agreement and shall be true and correct as of the Closing as if made on the Closing Date.

 

	
8.

	
MISCELLANEOUS PROVISIONS

 

(a)           All parties hereto have been represented by counsel, and no inference shall be drawn in favor of or against any party by virtue of the fact that such party’s counsel was or was not the principal draftsman of this Agreement.

 

(b)           Each of the parties hereto shall be responsible to pay the costs and expenses of its own legal counsel in connection with the preparation and review of this Agreement and related documentation.

 

(c)           Neither this Agreement, nor any provisions hereof, shall be waived, modified, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, modification, discharge or termination is sought.

 

(d)           The representations, warranties and agreement of the Subscriber and the Company made in this Agreement shall survive the execution and delivery of this Agreement and the delivery of the Securities.

 

(e)           Any party may send any notice, request, demand, claim or other communication hereunder to the Subscriber at the address set forth on the signature page of this Agreement or to the Company at its primary office (including personal delivery, expedited courier, messenger service, fax, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication will be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other parties written notice in the manner herein set forth.

 

(f)           Except as otherwise provided herein, this Agreement shall be binding upon, and inure to the benefit of, the parties to this Agreement and their heirs, executors, administrators, successors, legal representatives 

 

 

 

  

-14-

  

 

 

 

and assigns.  If the Subscriber is more than one person or entity, the obligation of the Subscriber shall be joint and several and the agreements, representations, warranties and acknowledgments contained herein shall be deemed to be made by, and be binding upon, each such person or entity and its heirs, executors, administrators, successors, legal representatives and assigns. This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.

 

(g)           This Agreement is not transferable or assignable by the Subscriber.

 

(h)           This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of law principles.

 

(i)           The Company and the Subscriber hereby agree that any dispute that may arise between them arising out of or in connection with this Agreement shall be adjudicated before a court located in the City of New York, Borough of Manhattan, and they hereby submit to the exclusive jurisdiction of the federal and state courts of the State of New York located in the City of New York, Borough of Manhattan with respect to any action or legal proceeding commenced by any party, and irrevocably waive any objection they now or hereafter may have respecting the venue of any such action or proceeding brought in such a court or respecting the fact that such court is an inconvenient forum, relating to or arising out of this Agreement or any acts or omissions relating to the sale of the securities hereunder, and consent to the service of process in any such action or legal proceeding by means of registered or certified mail, return receipt requested, postage prepaid, in care of the address set forth herein or such other address as either party shall furnish in writing to the other.

 

(j)           WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

(j)           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.

 

[Signature Pages Follow]

 

 

  

-15-

  

 

ALL SUBSCRIBERS MUST COMPLETE THIS PAGE

IN WITNESS WHEREOF, the Subscriber has executed this Agreement on the ____ day of _____, 2011.

 

	  	
x           $10,000.00  for each Unit           =

	  
	
Units subscribed for

	  	
      Aggregate Purchase Price

The undersigned Subscriber hereby elects to purchase Units consisting of

 

Manner in which Title is to be held (Please Check One):

 

	
1.

	
___

	
Individual

	
7.

	
___

	
Trust/Estate/Pension or Profit sharing Plan

Date Opened:______________

	
2.

	
___

	
Joint Tenants with Right of Survivorship

	
8.

	
___

	
As a Custodian for

________________________________

Under the Uniform Gift to Minors Act of the State of

________________________________

	
3.

	
___

	
Community Property

	
9.

	
___

	
Married with Separate Property

	
4.

	
___

	
Tenants in Common

	
10.

	
___

	
Keogh

	
5.

	
___

	
Corporation/Partnership/ Limited Liability Company

	
11.

	
___

	
Tenants by the Entirety

	
6.

	
___

	
IRA

	  	  	  

ALTERNATIVE DISTRIBUTION INFORMATION

 

To direct distribution to a party other than the registered owner, complete the information below. YOU MUST COMPLETE THIS SECTION IF THIS IS AN IRA INVESTMENT.

 

Name of Firm (Bank, Brokerage, Custodian):

 

Account Name:

 

Account Number:

 

Representative Name:

 

Representative Phone Number:

 

Address:

 

City, State, Zip:

 

 

 

 

[SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT – MEDL MOBILE HOLDINGS, INC.]

 

 

 

  

-16-

  

 

IF MORE THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN.

 

INDIVIDUAL SUBSCRIBERS MUST COMPLETE THIS PAGE 18.

 

SUBSCRIBERS WHICH ARE ENTITIES MUST COMPLETE PAGE 19.

 

EXECUTION BY NATURAL PERSONS

 

	
_____________________________________________________________________________

Exact Name in Which Title is to be Held

	
_________________________________

Name (Please Print)

	  	
_________________________________

Name of Additional Purchaser

	
_________________________________

Residence: Number and Street

	  	
_________________________________

Address of Additional Purchaser

	
_________________________________

City, State and Zip Code

	  	
_________________________________

City, State and Zip Code

	
_________________________________

Social Security Number

	  	
_________________________________

Social Security Number

	
_________________________________

Telephone Number

	  	
_________________________________

Telephone Number

	
_________________________________

Fax Number (if available)

	  	
________________________________

Fax Number (if available)

	
_________________________________

E-Mail (if available)

	  	
________________________________

E-Mail (if available)

	
__________________________________

(Signature)

 

 

	  	
________________________________

(Signature of Additional Purchaser)

	
ACCEPTED this ___ day of _________ 2011, on behalf of the Company.

	  	
 

By:_________________________________

Name: Andrew Matlin

        Title: President and Chief Executive Officer

	  	  

[SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT – MEDL MOBILE HOLDINGS, INC.]

 

 

 

  

-17-

  

 

 

 

EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY

(Corporation, Partnership, LLC, Trust, Etc.)

 

	
_____________________________________________________________________________

Name of Entity (Please Print)

	
Date of Incorporation or Organization:

	
State of Principal Office:

	
Federal Taxpayer Identification Number:

____________________________________________

Office Address

 

____________________________________________

City, State and Zip Code

 

____________________________________________

Telephone Number

 

____________________________________________

Fax Number (if available)

 

____________________________________________

E-Mail (if available)

 

	  	
By: _________________________________

Name:

Title:

	
[seal]

Attest: _________________________________

                   (If Entity is a Corporation)

	
_________________________________

_________________________________

Address

	  	  
	
ACCEPTED this ____ day of __________ 2011, on behalf of the Company.

	  	
 

 

By: _________________________________

Name: Andrew Matlin

Title: President and Chief Executive Officer

 

 

 

 

[SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT – MEDL MOBILE HOLDINGS, INC.]

 

 

 

  

-18-

  

 

 

 

 

INVESTOR QUESTIONNAIRE

 

Instructions:  Check all boxes below which correctly describe you.

 

	
o

	
You are (i) a bank, as defined in Section 3(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), (ii) a savings and loan association or other institution, as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in an individual or fiduciary capacity, (iii) a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (iv) an insurance company as defined in Section 2(13) of the Securities Act, (v) an investment company registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), (vi) a business development company as defined in Section 2(a)(48) of the Investment Company Act, (vii) a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301 (c) or (d) of the Small Business Investment Act of 1958, as amended, (viii) a plan established and maintained by a state, its political subdivisions, or an agency or instrumentality of a state or its political subdivisions, for the benefit of its employees and you have total assets in excess of $5,000,000, or (ix) an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and (1) the decision that you shall subscribe for and purchase shares of common stock and warrants to purchase common stock (the “Units”), is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or (2) you have total assets in excess of $5,000,000 and the decision that you shall subscribe for and purchase the Shares is made solely by persons or entities that are accredited investors, as defined in Rule 501 of Regulation D promulgated under the Securities Act (“Regulation D”) or (3) you are a self-directed plan and the decision that you shall subscribe for and purchase the Units is made solely by persons or entities that are accredited investors.

 

	
o

	
You are a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended.

 

	
o

	
You are an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation, Massachusetts or similar business trust or a partnership, in each case not formed for the specific purpose of making an investment in the Units and its underlying securities in excess of $5,000,000.

 

	
o

	
You are a director or executive officer of the Company.

 

	
o

	
You are a natural person whose individual net worth, or joint net worth with your spouse, exceeds $1,000,000 (excluding residence) at the time of your subscription for and purchase of the Units.

 

	
o

	
You are a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with your spouse in excess of $300,000 in each of the two most recent years, and who has a reasonable expectation of reaching the same income level in the current year.

 

	
o

	
You are a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Units and whose subscription for and purchase of the Units is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D.

 

	
o

	
You are an entity in which all of the equity owners are persons or entities described in one of the preceding paragraphs.

 

 

 

  

-19-

  

 

 

 

Check all boxes below which correctly describe you.

 

With respect to this investment in the Units, your:

 

Investment Objectives:                                  p Aggressive Growth                    p Speculation

 

Risk Tolerance:                                            o Low Risk                                  o Moderate Risk           p High Risk

 

Are you associated with a FINRA Member Firm?       o Yes                       o No

 

	
  

	
Your initials (purchaser and co-purchaser, if applicable) are required for each item below:

 

	
____   ____ 

	
I/We understand that this investment is not guaranteed.

 

	
____   ____ 

	
I/We are aware that this investment is not liquid.

 

	
____   ____ 

	
I/We are sophisticated in financial and business affairs and are able to evaluate the risks and merits of an investment in this offering.

 

	
____   ____ 

	
I/We confirm that this investment is considered “high risk.” (This type of investment is considered high risk due to the inherent risks including lack of liquidity and lack of diversification.  Success or 

failure of private placements such as this is dependent on the corporate issuer of these securities and is outside the control of the investors. While potential loss is limited to the amount invested, such loss is possible.)

 

 

The Subscriber hereby represents and warrants that all of its answers to this Investor Questionnaire are true as of the date of its execution of the Subscription Agreement pursuant to which it purchased the Units.

 

	
 

 

___________________________________

Name of Purchaser  [please print]

___________________________________

Signature of Purchaser (Entities please

provide signature of Purchaser’s duly

authorized signatory.)

___________________________________

Name of Signatory (Entities only)

___________________________________

Title of Signatory (Entities only)

	
 

 

___________________________________

Name of Co-Purchaser  [please print]

___________________________________

Signature of Co-Purchaser

 

 

 

 

[SIGNATURE PAGE TO INVESTOR QUESTIONAIRRE AGREEMENT – MEDL MOBILE HOLDINGS, INC.]

 

 

 

  

-20-

  

 

 

 

 

VERIFICATION OF INVESTMENT ADVISOR/BROKER

 

I state that I am familiar with the financial affairs and investment objectives of the investor named above and reasonably believe that a purchase of the securities is a suitable investment for this investor and that the investor, either individually or together with his or her purchaser representative, understands the terms of and is able to evaluate the merits of this offering.  I acknowledge:

 

	
  

	
(a)

	
that I have reviewed the Subscription Agreement and forms of securities presented to me, and attachments (if any) thereto;

 

	
  

	
(b)

	
that the Subscription Agreement and attachments thereto have been fully completed and executed by the appropriate party; and

 

	
  

	
(c)

	
that the subscription will be deemed received by the Company upon acceptance of the Subscription Agreement.

 

	
Deposit securities from this offering directly to purchaser’s account?

	
o Yes 

	
o No

 

	
  

	
If “Yes,” please indicate the account number: _____________________________________

 

 

	________________________________________	 	________________________________________
	 Broker/Dealer	 	Account Executive
	 	 	 
	 ________________________________________	 	 ________________________________________
	 (Name of Broker/Dealer)	 	(Signature)
	 	 	 
	 ________________________________________	 	 ________________________________________
	 (Street Address of Broker/Dealer Office)	 	(Print Name)
	 	 	 
	 ________________________________________	 	 ________________________________________
	 (City of Broker/Dealer Office)  (State)  (Zip)  	 	(Representative I.D. Number)
	 	 	 
	 ________________________________________	 	 ________________________________________
	 (Telephone Number of Broker/Dealer Office)	 	(Date)
	 	 	 
	 ________________________________________	 	 ________________________________________
	 (Fax Number of Broker/Dealer Office) 	 	(E-mail Address of Account Executive)
	 	 	 

 

 

 

 

 

  

-21-

  

 

 

 

Schedule 4(g)

 

Subsequent to our Share Exchange Transaction (“the “Exchange”) with Medl Mobile, Inc. (“MMI”), a Delaware corporation, whereby MMI became our wholly-owned subsidiary, the following securities to be outstanding of the Company (after giving effect to a forward split by way of a dividend  of common stock for each one share of common stock outstanding):

	
Shares issued to shareholders of MMI

	
20,000,000

	
Existing Shareholders prior to Exchange*

	
10,000,000

	
Shares Reserved under our 2011 Equity Incentive Plan

	
6,000,000

	
PIPE $0.25 @ $2,500,000 **

	
10,000,000

* Excludes shares of Common Stock cancelled.

** Assumes $2,500,000 of proceeds from Securities offered hereby, including $300,000 of Bridge Loan conversions.  Subject to increase.

500,000,000 shares of common stock, par value $0.0001 per share, authorized

10,000,000 shares of , par value $0.0001 per share, authorized.

Schedule 5(g)

$200,000 for investor relations/public relations.

Company shall engage such firms as shall be determined by Subscriber Consent.

$50,000 for legal fees for share exchange and initial Form 8-K.

Exhibit A

 

 

 

  

-22-

  

Wire Instructions

 

 

Citibank

666 Fifth Avenue

New York, NY 10103

A/C of Sichenzia Ross Friedman Ference LLP

A/C#:                 92883436

ABA#:                021000089

SWIFT Code:     CITIUS33

Ref:                   MEDL Mobile

Exhibit B

 

 

 

  

-23-

  

Escrow Agreement

See Attached.

 

 

 

-24-

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