Exhibit 10.2: SUBSCRIPTION
AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this “
Agreement ”), is dated as of __________ __, 2009, by
and among CrowdGather, Inc., a Nevada corporation (the “
Company ”), and the subscribers identified on the
signature page hereto (each a “ Subscriber ” and
collectively “ Subscribers ”).
WHEREAS, the Company and the Subscribers are
executing and delivering this Agreement in reliance upon an
exemption from securities registration afforded by the provisions
of Section 4(2), Section 4(6), Regulation D (“ Regulation
D ”), and/or Regulation S (“ Regulation S
”), as promulgated by the United States Securities and
Exchange Commission (the “ Commission ”) under
the Securities Act of 1933, as amended (the “ 1933 Act
”).
WHEREAS, the parties desire that, upon the terms
and subject to the conditions contained herein, the Company shall
issue and sell to the Subscribers, as provided herein, and the
Subscribers, in the aggregate, shall purchase units of the
Company’s securities, consisting of 8% Secured Straight
Convertible Debentures substantially in the form attached hereto as
Exhibit A (1), Exhibit A (2) (the “ Debentures
”) and common stock purchase warrants substantially in the
form attached hereto as Exhibit B (the “ Warrants
,” with the Debentures, the “ Units ”)
through the conversions of outstanding principal and accrued
interest in various obligations (collectively, the “
Promissory Obligations ”) owed by the Company to one
or more of the Subscribers in the aggregate amount of approximately
$1,075,000 (following the repayment of $150,000 in principal
thereof), all as more particularly set forth on the signature page
hereto and on the signature pages of other Subscribers similarly
situated (such conversion amounts referred to hereinafter in the
aggregate as the “ Purchase Price ”);
NOW, THEREFORE, in consideration of these
presents and for such other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the
Company and the Subscribers hereby agree as follows:
1.
Closing Date . The initial “ Closing
Date ” shall be the same date as not less than
approximately $1,300,000 of new funds representing the cash
purchase price of a concurrent private placement of Units is
transmitted by wire transfer or otherwise credited to or for the
benefit of the Company. The initial “
Closing ” of the transactions contemplated herein
shall take place concurrently therewith at the offices of Baker
& Hostetler llp, 600 Anton Blvd., Suite 900, Costa Mesa,
California 92626, upon the satisfaction or waiver of all conditions
to closing set forth in this Agreement. Subject to the
satisfaction or waiver of the terms and conditions of this
Agreement, on the Closing Date, each Subscriber shall purchase, and
the Company shall sell to each Subscriber, a Debenture in the
initial principal amount as is set forth next to such
Subscriber’s name on its respective Subscription
Agreement. In connection therewith, the Company shall
grant to the Subscriber a Warrant for the purchase of shares of the
Company’s common stock, $0.001 par value per share (the
“ Common Stock ”), in an amount set forth next
to such Subscriber’s name on its respective Subscription
Agreement.
2.
The Subscribers’ Conditions to the
Initial Closing . Each of the following
shall have occurred prior to or contemporaneously with the initial
Closing, unless otherwise waived in writing by each Subscriber who
has tendered a Subscription Agreement for the Initial
Closing:
(a) Not
less than approximately $1,300,000 in new funds shall have been
received by or for the credit of the Company in connection with its
sale of Units on substantially the same terms and conditions as
those set forth herein, subject to any previously extant placement
pricing rights in favor of such converting Subscribers;
(b) The
Lock-up Agreements, as amended, substantially in the form attached
hereto as Exhibit D, shall have been executed and delivered to the
Company by those persons listed on Schedule 2(b); and
(c) The
repayment by the Company of $150,000 in principal under
the Promissory Obligations.
3.
Waiver of Provisions Contained in the Promissory Obligations
that are Inconsistent with the Provisions Hereof
. Each Subscriber and the Company hereby acknowledge and
agree that certain of the Company’s obligations contained in
one or more documents evidencing the Promissory Obligations shall
be waived in full in connection with the sale and issuance of the
Units to the Subscribers herein, such that, upon the Closing, all
extant obligations of the Company and of each Subscriber in respect
of such Promissory Obligations or hereof, including, but not
limited to, the Company’s contingent obligations to grant
equity purchase warrants to the Subscribers in connection with
their previous advance of funds to the Company and the
Company’s execution of documents evidencing each of the
Promissory Obligations, shall hereby be deemed to be waived in
full, superseded hereby, and void, such that each term and
condition of each of the parties’ respective obligations to
the other in connection with the transactions contemplated by the
Promissory Obligations and hereby shall be merged into this
Agreement and each other agreement to be executed by the parties
contemporaneously herewith.
4.
The Subscriber’s Representations and Warranties
. Each Subscriber hereby represents and warrants to and
agrees with the Company only as to such Subscriber that:
(a)
Organization and Standing of the Subscribers . If
such Subscriber is an entity, such Subscriber is a corporation,
partnership, or other entity duly incorporated or organized,
validly existing, and in good standing under the laws of the
jurisdiction of its incorporation or organization.
(b)
Authorization and Power . Such Subscriber has the
requisite power and authority to enter into and perform this
Agreement. The execution, delivery, and performance of
this Agreement by such Subscriber and the consummation by it of the
transactions contemplated hereby have been duly authorized by all
necessary corporate or partnership action, and no further consent
or authorization of such Subscriber or its board of directors,
stockholders, partners, members, or managers, as the case may be,
is required. This Agreement has been duly authorized,
executed, and delivered by such Subscriber and constitutes a valid
and binding obligation of such Subscriber enforceable against such
Subscriber in accordance with the terms hereof.
(c)
No Conflicts . The execution, delivery, and
performance of this Agreement and the consummation by such
Subscriber of the transactions contemplated hereby or relating
hereto do not and will not (i) result in a violation of such
Subscriber’s charter documents or bylaws or other
organizational documents or (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 or obligation to which such
Subscriber is a party or by which its properties or assets are
bound, or result in a violation of any law, rule, or regulation, or
any order, judgment or decree of any court or governmental agency
applicable to such Subscriber or its properties (except for such
conflicts, defaults, and violations as would not, individually or
in the aggregate, have a material adverse effect on such
Subscriber). Such Subscriber is not required to obtain
any consent, authorization, or order of, or make any filing or
registration with, any court or governmental agency in order for it
to execute, deliver, or perform any of its obligations under this
Agreement or to purchase the Units in accordance with the terms
hereof, provided that for purposes of the representation made in
this sentence, such Subscriber is assuming and relying upon the
accuracy of the relevant representations and agreements of the
Company herein.
(d)
Information on Company . Such Subscriber
has had access to the EDGAR Website of the Commission to the
periodic reports that the Company has filed with the Commission
that are available at the EDGAR website (collectively, the “
SEC Reports ”).
(e)
Information on Subscriber . Such Subscriber is an
“ accredited investor ,” as such term is defined
in Regulation D promulgated by the Commission under the 1933 Act,
is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of
United States publicly-owned companies in private placements in the
past and, with its representatives, has such knowledge and
experience in financial, tax, and other business matters as to
enable such Subscriber to utilize the information made available by
the Company to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed purchase,
which represents a speculative investment. Such
Subscriber has the authority and is duly and legally qualified to
purchase and own the Units and their component parts and is able to
bear the risk of such investment for an indefinite period and to
afford a complete loss thereof. The information set
forth on the signature page hereto regarding such Subscriber is
accurate.
(f)
Purchase of the Units . On the Closing Date, such
Subscriber will purchase the Units as principal for its own account
for investment only and not with a view toward, or for resale in
connection with, the public sale or any distribution thereof or of
any of their component parts.
(g)
Compliance with Securities Laws . Such Subscriber
understands and agrees that the Units and their component parts
have not been registered under the 1933 Act or any applicable state
securities laws, by reason of their issuance in a transaction that
does not require registration under the 1933 Act (based in part on
the accuracy of the representations and warranties of such
Subscriber contained herein), and that such Debentures and
Warrants, and the underlying shares of Common Stock must be held
indefinitely unless a subsequent disposition is registered under
the 1933 Act or any applicable state securities laws or is exempt
from such registration. Such Subscriber will comply with
all applicable rules and regulations in connection with the sales
of the Units, their component parts, and the underlying shares of
Common Stock.
(h)
Securities Legend . The Debentures, the Warrants,
and the underlying shares of Common Stock shall bear the
following or similar legend:
“THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, NOR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATE-MENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE
SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
(i)
Communication of Offer . The offer to sell the
Units was directly communicated to such Subscriber by the
Company. At no time was such Subscriber presented with
or solicited by any leaflet, newspaper or magazine article, radio
or television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional meeting
otherwise than in connection and concurrently with such
communicated offer.
(j)
Authority; Enforceability . This Agreement and
other agreements delivered together with this Agreement or in
connection herewith have been duly authorized, executed, and
delivered by such Subscriber and are valid and binding agreements
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and
similar laws of general applicability relating to or affecting
creditors’ rights generally and to general principles of
equity; and such Subscriber has full power and authority necessary
to enter into this Agreement and such other agreements and to
perform its obligations hereunder and under all other agreements
entered into by such Subscriber relating hereto.
(k)
Restricted Securities . Such Subscriber
understands that the Units, their component parts, and the
underlying shares of Common Stock, have not been registered under
the 1933 Act and such Subscriber will not sell, offer to sell,
assign, pledge, hypothecate, or otherwise transfer any of the
Units, their component parts, or the underlying shares of Common
Stock unless pursuant to an effective registration statement under
the 1933 Act, or unless an exemption from registration is
available. Notwithstanding anything to the contrary
contained in this Agreement, such Subscriber may transfer (without
restriction and without the need for an opinion of counsel) the
Units and their component parts to its Affiliates (as defined
below) provided that each such Affiliate is an “
accredited investor ” under Regulation D and such
Affiliate agrees to be bound by the terms and conditions of this
Agreement. For the purposes of this Agreement, an
“ Affiliate ” of any person or entity means any
other person or entity directly or indirectly controlling,
controlled by, or under direct or indirect common control with such
person or entity. For purposes of this definition,
“ control ” means the power to direct the
management and policies of such person or firm, directly or
indirectly, whether through the ownership of voting securities, by
contract, or otherwise.
(l)
No Governmental Review . Such Subscriber
understands that no United States federal or state agency or any
other governmental or state agency has passed on or made
recommendations or endorsement of the Units and their component
parts or the suitability of the investment in the Units nor have
such authorities passed upon or endorsed the merits of the offering
of the Units.
(m)
Correctness of Representations . Such Subscriber
represents as to such Subscriber that the foregoing representations
and warranties are true and correct as of the date hereof and,
unless such Subscriber otherwise notifies the Company prior to the
Closing Date, shall be true and correct as of the Closing
Date.
5.
Company Representations and Warranties
. The Company represents and warrants to and agrees with
each Subscriber that:
(a)
Due Incorporation . The Company is a corporation
duly incorporated, validly existing, and in good standing under the
laws of Nevada and has the requisite corporate power to own its
properties and to carry on its business as presently
conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each
jurisdiction where the nature of the business conducted or property
owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a
Material Adverse Effect. For purposes hereof, a “
Material Adverse Effect ” shall mean a material
adverse effect on the financial condition, results of operations,
prospects, properties, or business of the Company and its
Subsidiaries taken as a whole. For purposes of this
Agreement, “ Subsidiary ” means, with respect to
any entity at any date, any corporation, limited or general
partnership, limited liability company, trust, estate, association,
joint venture, or other business entity of which more than 30%
of (i) the outstanding capital stock having (in the absence of
contingencies) ordinary voting power to elect a majority of the
board of directors or other managing body of such entity, (ii) in
the case of a partnership or limited liability company, the
interest in the capital or profits of such partnership or limited
liability company or (iii) in the case of a trust, estate,
association, joint venture, or other entity, the beneficial
interest in such trust, estate, association, or other entity
business is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such
entity. The Subsidiaries as of the Closing Date are set
forth on Schedule 5(a).
(b)
Outstanding Stock . All issued and outstanding
shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid and
non-assessable.
(c)
Authority; Enforceability . This Agreement has
been duly authorized, executed, and delivered by the Company and is
a valid and binding agreement of the Company enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and similar laws
of general applicability relating to or affecting creditors’
rights generally and to general principles of
equity. The Company has full corporate power and
authority necessary to enter into and deliver this Agreement and to
perform its obligations hereunder.
(d)
Consents . No consent, approval, authorization or
order of any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, Subsidi
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