SUBSCRIPTION AGREEMENT
(For Subscriptions by Investors who are Insiders of the
Company)
SUBSCRIPTION
AGREEMENT (this “Agreement” or this
“Subscription Agreement”) dated as
of _________ __, 2007 between Advanced Photonix, Inc., a
Delaware corporation (the “Company”) and the
undersigned investor (the “Investor” and together
with all other investors in the offering herein described, the
“Investors”)
The
Company is offering (the “Offering”) a limited
number of eligible investors the opportunity to purchase up to
786,725 units of its securities (the “Units”) at a
price equal to the Formula Price (as defined below), each Unit
consisting of (i) four (4) shares of its Class A Common Stock,
par value $.001 a share (“Common Stock” ), and
(ii) one (1) warrant to purchase a share of Common
Stock (the “2007 Series Warrants”).
The
Investor desires to participate in the Offering.
The
Investor has reviewed copies of the various documents referred
to in
Schedule 1 attached
hereto (the “Disclosure Documents”).
NOW,
THEREFORE, the Company and the Investor hereby agree as
follows:
Section 1.
Purchase and Sale of Units; Description of 2007 Series Warrants;
Use of Proceeds; Power of Attorney
1.1.
Purchase of Units and Payment; Description of Warrants
.
Upon the terms and subject to the conditions contained in this
Agreement, the Investor has on or prior to this day paid to the
Company, by check, by wire transfer of immediately available funds,
or by other means acceptable to the Company, the sum of money set
forth opposite the Investor’s name on the signature page to
this Agreement (the "Purchase Price"). In consideration of such
payment, by (and subject to) its acceptance of this Subscription
Agreement, the Company will issue to the Investor at the Closing
(as defined below) the number of Units determined by dividing the
Purchase Price by the Fair Market Value provided that no fractional
shares or warrants are to be issued, but rather the number of
shares and warrants to be issued shall be rounded down to the
nearest whole number. “Fair Market Value” means the
product of four (4) multiplied by the closing price of the
Company’s Common Stock on the American Stock Exchange on the
business day immediately preceding the Closing. The Investor
acknowledges that the Investor’s Purchase Price is
non-refundable except to the limited extent expressly provided by
the last sentence of the first paragraph of Section 1.5
below.
Each
2007 Series Warrant will have a term of five years (subject to
earlier exercise or termination if the closing price of the Common
Stock on the AMEX equals or exceeds $4.50 for at least twenty (20)
consecutive Business Days (as defined in 2007 Series Warrant to
Purchase Class A Common Stock)), will be exercisable for the
number of shares Common Stock stated therein at any time and from
time to time during its term at an exercise price of $1.85 per
share, subject to adjustment in certain circumstances, and will be
substantially in the form attached hereto as
Exhibit A .
The Common Stock and the 2007
Series Warrants comprising the Units shall be immediately separable
upon issuance.
1.2.
Maximum/Minimum. The
Company will not accept subscriptions having an aggregate Purchase
Price of more than $4,500,000 or less than $2,500,000, and the
Offering will terminate and be of no force and effect unless the
Company has received and accepted valid subscription agreements
from one or more Investors having an aggregate Purchase Price of at
least $2,500,000 (the “Minimum Condition”) on or prior
to the Closing.
1.3.
Use of Proceeds .
The proceeds of the Offering will provide a portion of the funds
required to discharge in full (the “Debt Retirement”)
the indebtedness under the Company’s outstanding convertible
notes as provided on
Schedule 1.3 (the
“Convertible Notes”). The balance of the funds required
to discharge such indebtedness is expected to be provided out of
cash on hand and bank indebtedness. In this connection, the Company
has received a formal commitment from Fifth Third Bank with respect
to a proposed increase in the Company’s existing credit
facility with that bank. No assurances can be given that the
financing contemplated in such commitment letter can be
consummated.
In
the unlikely event that the outstanding Convertible Notes are
converted prior to the Debt Retirement, the proceeds of the
Offering will be used to pay down other indebtedness of the
Company and/or working capital.
1.4.
Closing .
Subject to this Section 1.4 and assuming the Minimum Condition has
been met, the closing of the Offering with respect to each
individual Investor (the "Closing") shall take place at the offices
of the Company’s attorney, Dornbush Schaeffer Strongin &
Venaglia, LLP (at the address in Section 5.8, Notices) upon the
Company’s acceptance of such Investor’s Subscription
Agreement on such date as may be determined by the Company, but
which shall be no later than September 7, 2007. The Investor
understands and agrees that the Company, in its sole discretion,
has the right to reject any Subscription Agreement proffered to it
by an Investor at any time prior to the Closing, and/or to waive
any of the requirements for the purchase of the Units set forth
herein with respect to any Investor or Investors (which waivers
need not be uniform as among or between Investors). In the event
that this Subscription Agreement is not accepted by the Company on
or before the September 7, 2007 or in the event that the Company
withdraws or terminates this Offering, the Company will promptly
return to the undersigned Investor, without interest, all funds
received from the undersigned Investor in respect
hereof.
At the Closing, the Company (i) shall deliver (or
irrevocably instruct its transfer agent to deliver) to the
Investor, certificates representing the number of shares of
Common Stock and 2007 Series Warrants to be purchased by the
Investor hereunder, (ii) shall execute and deliver (or cause
to be delivered) to the Investor, a fully executed copy of
the Registration Rights Agreement attached hereto as
Exhibit B and
(iii) shall execute and deliver (or cause to be delivered) to the
Investor a signed counterpart of this Subscription Agreement. The
Investor expressly acknowledges and agrees that the certificates to
be issued to him at the Closing shall bear a legend to the
following effect:
THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER
THE ACT OR PURSUANT TO AN EXEMPTION THEREFROM.
|
Section 2. |
Representations and Warranties
|
2.1.
Representations and Warranties of the Company
.
The Company hereby represents and warrants to the Investor as of
the date hereof and the Closing Date that:
(a)
Organization, Good Standing and Qualification
.
The Company is a corporation duly incorporated and existing in good
standing under the General Corporation Law of the State of Delaware
and has all requisite corporate power and authority to own and
operate its assets and properties, to conduct its business as it is
currently being conducted, to execute and deliver this Agreement
and to consummate the transactions contemplated
herein.
(b)
Valid Issuance .
The Common Stock subscribed for hereunder and issuable upon the
exercise of the 2007 Series Warrants, when issued in accordance
with the terms hereof and thereof, will be duly authorized, validly
issued and non-assessable and free and clear of all taxes, liens,
options, calls, contracts, commitments, demands, charges, security
interests, encumbrances or restrictions on transfer, other than
restrictions on transfer under applicable state and federal
securities laws.
(c)
Authorization .
(i)
The Company has all requisite corporate power and authority to
enter into and perform its obligations under this Agreement and the
Registration Rights Agreement (collectively, the “Transaction
Documents”) and to issue the Common Stock and Warrants in
accordance with the terms hereof;
(ii)
the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated
hereby and thereby, including the issuance of the Common Stock and
Warrants, have been duly authorized by all necessary corporate
action, and no further consent or authorization of the Company or
its Board of Directors (or any committee or subcommittee thereof)
or stockholders is required;
(iii)
the Transaction Documents have been duly executed and delivered by
the Company;
(iv)
the Transaction Documents constitute valid and binding obligations
of the Company enforceable against the Company; and
(v)
the Common Stock and the Warrants, and shares of Common Stock
issuable upon the exercise of the Warrants thereof, have been duly
authorized and, upon issuance thereof and payment therefor in
accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, free and clear of any and
all liens, claims and encumbrances.
(d)
Public Information. The
Disclosure Documents as at the respective dates of filing
thereof:
(i)
complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of
the Securities Exchange Commission with respect
thereto;
(ii)
all financial statements included therein were prepared in
accordance with generally accepted accounting principles,
consistently applied during the periods involved (except (x) as may
otherwise be disclosed or indicated in such financial statements or
the notes thereto or (y) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be
condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates
thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of year end statements to
normal year-end audit adjustments); and
(iii)
did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading.
(e)
No Conflicts .
The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby and issuance of the
Common Stock and Warrants, and the shares Common Stock issuable
upon exercise of the Warrants will not:
(i)
result in a violation of the Certificate of Incorporation, any
certificate of designations, preferences and rights of any
outstanding series of preferred stock of the Company or the By-laws
that would have a material adverse effect;
(ii)
conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or
(iii)
result in a violation of any law, rule, regulation, order, judgment
or decree (including United States federal and state securities
laws and regulations and the rules and regulations of the American
Stock Exchange (“Principal Market”) or other principal
securities exchange or trading market on which the Common Stock is
traded or listed) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or
any of its subsidiaries is bound or affected that would have a
material adverse effect.
(f)
Absence of Litigation .
There is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge
of the Company or any of its subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the
Company’s subsidiaries or any of the Company’s or the
Company’s subsidiaries’ officers or directors in their
capacities as such, which would be material to the Company except
as set forth in SEC Documents which were filed at least 10 days
before the date hereof.
(g)
No Integrated Offering .
Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any
offers
| 
