Exhibit
10.1
SUBSCRIPTION
AGREEMENT
THIS SUBSCRIPTION AGREEMENT
(this “ Agreement
”), is dated as of September 16, 2009, by and between Clear
Skies Solar, Inc., a Delaware corporation (the “
Company ”), and the subscribers listed on
Schedule I hereto (the “ 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) and/or Regulation D (“ Regulation D
”) 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 shall purchase for an aggregate of $250,000 (the
“ Purchase Price ”) (i) $275,000 principal
amount (“ Principal Amount ”) of
secured promissory notes of the Company (“
Note ” or “ Notes ”), a form of
which is annexed hereto as Exhibit A , convertible into
shares of the Company’s Common Stock, $0.001 par value (the
“ Common Stock ”) at a per share conversion
price set forth in the Notes (“ Conversion Price
”); (ii) 1,250,000 shares of the Company’s Common Stock
(“ Incentive Shares ”); and (iii) share purchase
warrants (the “ Warrants ”) in the form attached
hereto as Exhibit B, to purchase shares of the
Company’s Common Stock (the “ Warrant Shares
”) (the “ Offering ”). The
Notes, shares of Common Stock issuable upon conversion of the Notes
(the “ Conversion Shares ”), the Incentive
Shares, the Warrants and the Warrant Shares are collectively
referred to herein as the “ Securities. ”;
and
WHEREAS , the aggregate proceeds of the sale of the
Notes and the Warrants contemplated hereby shall be held in escrow
by Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New
York, New York 10176 (the “ Escrow Agent ”)
pursuant to the terms of an Escrow Agreement to be executed by the
parties substantially in the form attached hereto as Exhibit
C (the “ Escrow Agreement ”).
NOW, THEREFORE , in consideration of the mutual covenants and
other agreements contained in this Agreement the Company and the
Subscribers hereby agree as follows:
1.
Closing Date . The “ Closing
Date ” shall be the date that the Purchase Price is
transmitted by wire transfer or otherwise credited to or for the
benefit of the Company. The consummation of the transactions
contemplated herein shall take place at the offices of Grushko
& Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New
York 10176, 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, Subscribers shall purchase and the
Company shall sell to Subscribers the Notes and Warrants as
described in Section 2 of this Agreement.
2.
Notes, Warrants and Incentive Shares .
(a)
Notes . 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 the Subscriber a Note in the Principal Amount designated on
Schedule I hereto for such Subscriber’s
Purchase Price indicated thereon.
(b)
Warrants . On the Closing Date, the Company will
issue and deliver the Warrants to the Subscribers. One
Warrant will be issued for each Share which would be issued on the
Closing Date assuming the complete conversion of the Notes on the
Closing Date at the Conversion Price. The exercise price
to acquire a Warrant Share upon exercise of a Warrant shall be
equal to $0.16, subject to reduction as described in the
Warrants. The Warrants shall be exercisable until three
(3) years after the issue date of the Warrants.
(c)
Incentive Shares . On the Closing Date, the
Company will issue to the Subscribers, an aggregate 1,250,000
Incentive Shares. The Incentive Shares will be fully
paid and non-assessable.
(d)
Allocation of Purchase Price . The Purchase
Price will be allocated among the components of the Securities so
that each component of the Securities will be fully paid and
non-assessable.
3.
Security Interest . The Subscribers and
certain other holders of promissory notes issued by the Company
have been granted a security interest in the assets of the Company,
including ownership of the Subsidiaries, which security interest
was memorialized in a “ Security Agreement ”
dated as of May 8, 2009 and as amended on July 28,
2009. The Notes and all sums due under the Notes
and the Transaction Documents (as defined in Section 5(c) below)
are included in the term “ Obligations ” as
defined in the Security Agreement and are secured by the Collateral
(as defined in the Security Agreement) in the same manner and
having the same priority as granted to the Subscriber pursuant to
the Security Agreement. The Company will execute such
other agreements, documents and financing statements reasonably
requested by the Subscriber, affirm such security agreement which
may be filed at the Company’s expense with the jurisdictions,
states and counties designated by the Subscriber
herein. The Company will also execute all such documents
reasonably necessary in the opinion of the Subscriber to
memorialize and further protect the security interest described
herein.
4.
Subscriber Representations and Warranties . Each
of the Subscribers hereby represents and warrants to and agrees
with the Company that:
(a)
Organization and Standing of the Subscriber
. Subscriber, to the extent applicable, is a corporation
duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation.
(b)
Authorization and Power . Subscriber has the
requisite power and authority to enter into and perform this
Agreement and the other Transaction Documents and to purchase the
Note and Warrant being sold to it hereunder. The
execution, delivery and performance of this Agreement and the other
Transaction Documents by Subscriber and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action, and no further
consent or authorization of Subscriber or its Board of Directors or
stockholders, if applicable, is required. This Agreement
and the other Transaction Documents have been duly authorized,
executed and when delivered by Subscriber and constitute, or shall
constitute when executed and delivered, a valid and binding
obligation of Subscriber, enforceable against Subscriber in
accordance with the terms thereof.
(c)
No Conflicts . The execution, delivery and
performance of this Agreement and the other Transaction Documents
and the consummation by Subscriber of the transactions contemplated
hereby and thereby or relating hereto do not and will not (i)
result in a violation of Subscriber’s charter documents,
bylaws or other organizational documents, if applicable, (ii)
conflict with nor constitute a default (or an event which with
notice or lapse of time or both would become a default) under any
agreement to which Subscriber is a party, nor (iii) result in a
violation of any law, rule, or regulation, or any order, judgment
or decree of any court or governmental agency applicable to
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 Subscriber). 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 and the other Transaction
Documents nor to purchase the Securities in accordance
with the terms hereof, provided that for purposes of the
representation made in this sentence, Subscriber is assuming and
relying upon the accuracy of the relevant representations and
agreements of the Company herein.
(d)
Information on Company . Subscriber has
been furnished with or has had access at the EDGAR Website of the
Commission to the Company's filings made with the Commission
(hereinafter referred to collectively as the " Reports
"). In addition, Subscriber may have received in writing
from the Company such other information concerning its operations,
financial condition and other matters as Subscriber has requested
in writing, identified thereon as OTHER WRITTEN INFORMATION (such
other information is collectively, the " Other Written
Information "), and considered all factors Subscriber deems
material in deciding on the advisability of investing in the
Securities.
(e)
Information on Subscriber . Subscriber is,
and will be at the time of the conversion of the Notes and exercise
of the Warrants, 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 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. Subscriber has the authority and is duly and
legally qualified to purchase and own the
Securities. Subscriber 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 Schedule
I hereto regarding Subscriber is
accurate.
(f)
Purchase of Notes, Incentive Shares and Warrants
. On the Closing Date, Subscriber will purchase its
Note, Incentive Shares and Warrants 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.
(g)
Compliance with Securities Act . Subscriber
understands and agrees that the Securities 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 the Subscriber contained
herein), and that such Securities 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. In any event, and subject to compliance with
applicable securities laws, the Subscriber may enter into lawful
hedging transactions in the course of hedging the position they
assume and the Subscriber may also enter into lawful short
positions or other derivative transactions relating to the
Securities, or interests in the Securities, and deliver the
Securities, or interests in the Securities, to close out their
short or other positions or otherwise settle other transactions, or
loan or pledge the Securities, or interests in the Securities, to
third parties who in turn may dispose of these
Securities.
(h)
Conversion Shares, Incentive Shares and Warrant Shares
Legend . The Conversion Shares, Incentive Shares and
Warrant Shares shall bear the following or similar
legend:
" THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAS 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
STATEMENT 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. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
"
(i)
Notes and Warrants Legend . The Notes and
Warrants shall bear the following legend:
" NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[CONVERTIBLE –OR-EXERCISABLE] HAVE 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 (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT 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. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES
."
(j)
Communication of Offer . The offer to sell the
Securities was directly communicated to Subscriber by the
Company. At no time was 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.
(k)
Restricted Securities . Subscriber
understands that the Securities have not been registered under the
1933 Act and Subscriber will not sell, offer to sell, assign,
pledge, hypothecate or otherwise transfer any of the Securities
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, Subscriber may transfer (without
restriction and without the need for an opinion of counsel) the
Securities 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. Affiliate includes each Subsidiary of
the Company. 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 . 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 Securities or the suitability of the
investment in the Securities nor have such authorities passed upon
or endorsed the merits of the offering of the
Securities.
(m)
Correctness of Representations . Subscriber
represents that the foregoing representations and warranties are
true and correct as of the date hereof and, unless Subscriber
otherwise notifies the Company prior to the Closing Date, shall be
true and correct as of the Closing Date.
(n)
Survival . The foregoing representations and
warranties shall survive 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 the jurisdiction of its incorporation 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 of this
Agreement, 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. As of the Closing Date, all of the
Company’s Subsidiaries and the Company’s ownership
interest therein is set forth on Schedule 5(a)
.
(b)
Outstanding Stock . All issued and outstanding
shares of capital stock and equity interests in the Company have
been duly authorized and validly issued and are fully paid and
non-assessable.
(c)
Authority; Enforceability . This Agreement, the
Notes, Conversion Shares, Incentive Shares, Warrants, Security
Agreement, the Escrow Agreement, and any other agreements
delivered together with this Agreement or in connection herewith
(collectively “ Transaction Documents ”) have
been duly authorized, executed and delivered by the Company and are
valid and binding agreements of the Company 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. The
Company has full corporate power and authority necessary to enter
into and deliver the Transaction Documents and to perform its
obligations thereunder.
(d)
Capitalization and Additional Issuances
. The authorized and outstanding capital stock of
the Company and Subsidiaries 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 5(d)
. Except as set forth on Schedule 5(d) ,
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 5(d) . There are no outstanding
agreements or preemptive or similar rights affecting the Company's
Common Stock.
(e)
Consents . No consent, approval, authorization or
order of any court, governmental agency or body or arbitrator
having jurisdiction over the Company, or any of its Affiliates, the
OTC Bulletin Board (the “ Bulletin Board ”) or
the Company's shareholders is required for the execution by the
Company of the Transaction Documents and compliance and performance
by the Company of its obligations under the Transaction Documents,
including, without limitation, the issuance and sale of the
Securities. The Transaction Documents and the
Company’s performance of its obligations thereunder have been
unanimously approved by the Company’s Board of
Directors. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or
filing with, any governmental authority in the world, including
without limitation, the United States, or elsewhere is required by
the Company or any Affiliate of the Company in connection with the
consummation of the transactions contemplated by this Agreement,
except as would not otherwise have a Material Adverse Effect or the
consummation of any of the other agreements, covenants or
commitments of the Company or any Subsidiary contemplated by the
other Transaction Documents. Any such qualifications and filings
will, in the case of qualifications, be effective on the Closing
and will, in the case of filings, be made within the time
prescribed by law.
(f)
No Violation or Conflict . Assuming the
representations and warranties of the Subscriber in Section 4 are
true and correct, neither the issuance and sale of the Securities
nor the performance of the Company’s obligations under this
Agreement and all other agreements entered into by the Company
relating thereto by the Company will:
(i) violate,
conflict with, result in a breach of, or constitute a default (or
an event which with the giving of notice or the lapse of time or
both would be reasonably likely to constitute a default) under (A)
the articles or certificate of incorporation, charter or bylaws of
the Company, (B) to the Company's knowledge, any decree, judgment,
order, law, treaty, rule, regulation or determination applicable to
the Company of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or over the
properties or assets of the Company or any of its Affiliates, (C)
the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan,
indenture, lease, mortgage, deed of trust or other instrument to
which the Company or any of its Affiliates is a party, by which the
Company or any of its Affiliates is bound, or to which any of the
properties of the Company or any of its Affiliates is subject, or
(D) the terms of any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company, or any of
its Affiliates is a party except the violation, conflict, breach,
or default of which would not have a Material Adverse Effect;
or
(ii) result
in the creation or imposition of any lien, charge or encumbrance
upon the Securities or any of the assets of the Company or any of
its Affiliates except in favor of Subscribers as described herein;
or
(iii) except
as described on Schedule 5(f)(iii) , result in the
activation of any anti-dilution rights or a reset or repricing of
any debt, equity or security instrument of any creditor or equity
holder of the Company, or the holder of the right to receive any
debt, equity or security instrument of the Company nor result in
the acceleration of the due date of any obligation of the Company;
or
(iv) except
as described on Schedule 5(f)(iv) , result in the
triggering of any piggy-back or other registration rights of any
person or entity holding securities of the Company or having the
right to receive securities of the Company.
(g)
The Securities . The Securities upon
issuance:
(i) are,
or will be, free and clear of any security interests, liens, claims
or other encumbrances, subject only to restrictions upon transfer
under the 1933 Act and any applicable state securities
laws;
(ii) have
been, or will be, duly and validly authorized and on the dates of
issuance of the Conversion Shares upon conversion of the Notes, and
the Warrant Shares upon exercise of the Warrants, such Conversion
Shares and Warrant Shares will be duly and validly issued, fully
paid and non-assessable and if registered pursuant to the 1933 Act
and resold pursuant to an effective registration statement or
exempt from registration will be free trading, unrestricted and
unlegended;
(iii) will
not have been issued or sold in violation of any preemptive or
other similar rights of the holders of any securities of the
Company or rights to acquire securities of the Company;
(iv) will
not subject the holders thereof to personal liability by reason of
being such holders; and
(v) assuming
the representations and warranties of the Subscribers as set forth
in Section 4 hereof are true and correct, will not result in a
violation of Section 5 under the 1933 Act.
(h)
Litigation . There is no pending or, to the best
knowledge of the Company, threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its
Affiliates that would affect the execution by the Company or the
complete and timely performance by the Company of its obligations
under the Transaction Documents. Except as disclosed in
the Reports, there is no pending or, to the best knowledge of the
Company, basis for or threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its
Affiliates which litigation if adversely determined would have a
Material Adverse Effect.
(i)
No Market Manipulation . The Company and its
Affiliates have not taken, and will not take, directly or
indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of
the Securities or affect the price at which the Securities may be
issued or resold.
(j)
Information Concerning Company . The Reports and
Other Written Information contain all material information relating
to the Company and its operations and financial condition as of
their respective dates which information is required to be
disclosed therein. Since December 31, 2008 and
except as modified in the Reports and Other Written Information or
in the Schedules hereto, there has been no Material Adverse Event
relating to the Company's business, financial condition or affairs.
The Reports and Other Written Information including the financial
statements included therein do not contain any untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, taken
as a whole, not misleading in light of the circumstances and when
made.
(k)
Solvency . Based on the financial condition of
the Company as of the Closing Date, (i) the Company’s fair
saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company’s assets do not
constitute unreasonably small capital to carry on its business for
the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the
Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the
Company, together with the proceeds the Company would receive, were
it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its debt when such amounts are required
to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in
respect of its debt).
(l)
Defaults . The Company is not in violation of its
articles of incorporation or bylaws. Except as set
forth in Schedule 5(l) , the Company is (i) not in
default under or in violation of any other material agreement or
instrument to which it is a party or by which it or any of its
properties are bound or affected, which default or violation would
have a Material Adverse Effect, (ii) not in default with respect to
any order of any court, arbitrator or governmental body or subject
to or party to any order of any court or governmental authority
arising out of any action, suit or proceeding under any statute or
other law respecting antitrust, monopoly, restraint of trade,
unfair competition or similar matters, or (iii) not in violation of
any statute, rule or regulation of any governmental authority which
violation would have a Material Adverse Effect.
(m)
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
of the Company nor solicited any offers to buy any security of the
Company under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior
offerings by the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the Bulletin
Board. No prior offering will impair the exemptions
relied upon in this Offering or the Company’s ability to
timely comply with its obligations hereunder. Neither
the Company nor any of its Affiliates will take any action or steps
that would cause the offer or issuance of the Securities to be
integrated with other offerings which would impair the exemptions
relied upon in this Offering or the Company’s ability to
timely comply with its obligations hereunder. The
Company will not conduct any offering other than the transactions
contemplated hereby that may be integrated with the offer or
issuance of the Securities that would impair the exemptions relied
upon in this Offering or the Company’s ability to timely
comply with its obligations hereunder.
(n)
No General Solicitation . Neither the Company,
nor any of its Affiliates, nor to its knowledge, any person acting
on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or
sale of the Securities.
(o)
No Undisclosed Liabilities . The Company has no
liabilities or obligations which are material, individually or in
the aggregate, other than those incurred in the ordinary course of
the Company businesses since December 31, 2008 and which,
individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect, except as disclosed in the Reports
or on Schedule 5(o) .
(p)
No Undisclosed Events or Circumstances . Since
December 31, 2008, except as disclosed in the Reports, no event or
circumstance has occurred or exists with respect to the Company or
its businesses, properties, operations or financial condition,
that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company
but which has not been so publicly announced or disclosed in the
Reports.
(q)
Banking . Schedule 5(q) contains a
list of all financial institutions at which the Company and
Subsidiaries maintain deposit, checking and other accounts. The
list includes the accurate addresses of such financial institutions
and account numbers of such accounts.
(r)
Dilution . The Company's executive officers
and directors understand the nature of the Securities being sold
hereby and recognize that the issuance of the Securities will have
a potential dilutive effect on the equity holdings of other holders
of the Company’s equity or rights to receive equity of the
Company. The board of directors of the Company has
concluded, in its good faith business judgment, that the issuance
of the Securities is in the best interests of the
Company. The Company specifically acknowledges that its
obligation to issue the Incentive Shares, Conversion Shares upon
conversion of the Notes and the Warrant Shares upon exercise of the
Warrants is binding upon the Company and enforceable regardless of
the dilution such issuance may have on the ownership interests of
other shareholders of the Company or parties entitled to receive
equity of the Company.
(s)
No Disagreements with Accountants and Lawyers. Except
as set forth on Schedule 5(s) , there are no material
disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise between the Company and the
accountants and lawyers previously and presently employed by the
Company, including but not limited to disputes or conflicts over
payment owed to such accountants and lawyers, nor have there been
any such disagreements during the two years prior to the Closing
Date.
(t)
Investment Company . Neither the Company
nor any Affiliate of the Company is an “investment
company” within the meaning of the Investment Company Act of
1940, as amended.
(u)
Foreign Corrupt Practices. Neither the Company,
nor to the knowledge of the Company, any agent or other person
acting on behalf of the Company, has (i) directly or indirectly,
used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses related to foreign or domestic political
activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic
political parties or campaigns from corporate funds, (iii) failed
to disclose fully any contribution made by the Company (or made by
any person acting on its behalf of which the Company is aware)
which is in violation of law, or (iv) violated in any
material respect any provision of the Foreign Corrupt Practices Act
of 1977, as amended.
(v)
Reporting Company/Shell Company . The Company is
a publicly-held company subject to reporting obligations pursuant
to Section 13 of the Securities Exchange Act of 1934, as amended
(the " 1934 Act ") and has a class of Common Stock
registered pursuant to Section 12(g) of the 1934
Act. Pursuant to the provisions of the 1934 Act, the
Company has timely filed all reports and other materials required
to be filed thereunder with the Commission during the preceding
twelve months. As of the Closing Date, the Company is
not a “shell company” but is a “former shell
company” as those terms are employed in Rule 144 under the
1933 Act. However, more than twelve months have elapsed
since the filing of the “Form 10” information as such
term is employed in Rule 144 under the 1933 Act.
(w)
Listing . The Company's Common Stock is quoted on
the Bulletin Board under the symbol CSKH. The Company
has not received any pending oral or written notice that its Common
Stock is not eligible nor will become ineligible for quotation on
the Bulletin Board nor that its Common Stock does not meet all
requirements for the continuation of such quotation and (ii) the
Company satisfies all the requirements for the continued quotation
of its Common Stock on the Bulletin Board.
(x)
DTC Status . The Company’s transfer
agent is a participant in, and the Common Stock is eligible for
transfer pursuant to, the Depository Trust Company Automated
Securities Transfer Program. The name, address, telephone number,
fax number, contact person and email address of the Company
transfer agent is set forth on Schedule 5(x)
hereto.
(y)
Company Predecessor and Subsidiaries . The
Company makes each of the representations contained in Sections
5(a), (b), (c), (d), (e), (f), (h), (j), (l), (o), (p), (q), (s),
(t) and (u) of this Agreement, as same relate or could be
applicable to each Subsidiary. All representations made
by or relating to the Company of a historical or prospective nature
and all undertakings described in Sections 9(g) through 9(l) shall
relate, apply and refer to the Company and its predecessors and
successors. The Company represents that it owns all of
the equity of the Subsidiaries and rights to receive equity of the
Subsidiaries identified on Schedule 5(a) , free and
clear of all liens, encumbrances and claims, except as set forth on
Schedule 5(a) . No person or entity other
than the Company has the right to receive any equity interest in
the Subsidiaries. The Company further represents that
the Subsidiaries have not been known by any other name for the
prior five years.
(z)
Correctness of Representations . The Company
represents that the foregoing representations and warranties are
true and correct as of the date hereof in all material respects,
and, unless the Company otherwise notifies the Subscribers prior to
the Closing Date, shall be true and correct in all material
respects as of the Closing Date; provided, that, if such
representation or warranty is made as of a different date, in which
case such representation or warranty shall be true as of such
date.
(AA)
Survival . The foregoing representations and
warranties shall survive the Closing Date.
6.
Regulation D Offering/Legal Opinion . The offer
and issuance of the Securities to the Subscribers is being made
pursuant to the exemption from the registration provisions of the
1933 Act afforded by Section 4(2) or Section 4(6) of the 1933 Act
and/or Rule 506 of Regulation D promulgated
thereunder. On the Closing Date, the Company will
provide an opinion reasonably acceptable to the Subscribers from
the Company's legal counsel opining on the availability of an
exemption from registration under the 1933 Act as it relates to the
offer and issuance of the Securities and other matters reasonably
requested by Subscribers. A form of the legal opinion is
annexed hereto as Exhibit D . The Company will
provide, at the Company's expense, to the Subscriber and
Subscriber’s counsel in relation to the Fee Shares [as
defined in Section 8(b)], such other legal opinions, if any, as are
reasonably necessary in each Subscriber’s and such
counsel’s opinion for the issuance and resale of the
Conversion Shares, Warrant Shares and Fee Shares pursuant to an
effective registration statement, Rule 144 under the 1933 Act or an
exemption from registration.
7.1.
Conversion of Notes .
(a) Upon
the conversion of a Note or part thereof, the Company shall, at its
own cost and expense, take all necessary action, including
obtaining and delivering an opinion of counsel, to assure that the
Company's transfer agent shall issue stock certificates in the name
of a Subscriber (or its permitted nominee) or such other persons as
designated by Subscriber and in such denominations to be specified
at conversion representing the number of shares of Common Stock
issuable upon such conversion. The Company warrants that
no instructions other than these instructions have been or will be
given to the transfer agent of the Company's Common Stock and that
the certificates representing such shares shall contain no legend
other than the legend set forth in Section 4(h). If and
when a Subscriber sells the Conversion Shares, assuming (i) a
registration statement including such Conversion Shares for
registration has been filed with the Commission, is effective and
the prospectus, as supplemented or amended, contained therein is
current and (ii) Subscriber or its agent confirms in writing to the
transfer agent that Subscriber has complied with the prospectus
delivery requirements, the Company will reissue the Conversion
Shares without restrictive legend and the Conversion Shares will be
free-trading, and freely transferable. In the event that
the Conversion Shares are sold in a manner that complies with an
exemption from registration, the Company will promptly instruct its
counsel to issue to the transfer agent an opinion permitting
removal of the legend indefinitely, if pursuant to Rule
144(b)(1)(i) of the 1933 Act, provided that Subscriber delivers all
reasonably requested representations in support of such
opinion.
(b) Each
Subscriber will give notice of its decision to exercise its right
to convert its Note, interest, or part thereof by telecopying or
otherwise delivering a completed Notice of Conversion (a form of
which is annexed as Exhibit A to the Note) to the Company
via confirmed telecopier transmission or otherwise pursuant to
Section 13(a) of this Agreement. Subscriber will not be
required to surrender the Note until the Note has been fully
converted or satisfied. Each date on which a Notice of
Conversion is telecopied to the Company in accordance with the
provisions hereof by 6 PM Eastern Time (“ET”) (or if
received by the Company after 6 PM ET, then the next business day)
shall be deemed a “ Conversion Date
.” The Company will itself or cause the
Company’s transfer agent to transmit the Company's Common
Stock certificates representing the Conversion Shares issuable upon
conversion of the Note to Subscriber via express courier for
receipt by Subscriber within five (5) business days after the
Conversion Date (such fifth day being the " Delivery Date
"). In the event the Conversion Shares are
electronically transferable, then delivery of the Shares
must be made by electronic transfer provided request for
such electronic transfer has been made by the
Subscriber. A Note representing the balance of the
Note not so converted will be provided by the Company to Subscriber
if requested by Subscriber, provided Subscriber delivers the
original Note to the Company.
(c) The
Company understands that a delay in the delivery of the Conversion
Shares in the form required pursuant to Section 7.1 hereof later
than the Delivery Date could result in economic loss to the
Subscribers. As compensation to Subscribers for such
loss, the Company agrees to pay (as liquidated damages and not as a
penalty) to each applicable Subscriber for late issuance of
Conversion Shares in the form required pursuant to Section 7.1
hereof upon Conversion of the Note, the amount of $100 per business
day after the Delivery Date for each $10,000 of Note principal
amount and interest (and proportionately for other amounts) being
converted of the corresponding Conversion Shares which are not
timely delivered. The Company shall pay any payments
incurred under this Section upon demand. Furthermore, in
addition to any other remedies which may be available to the
Subscribers, in the event that the Company fails for any reason to
effect delivery of the Conversion Shares within seven (7) business
days after the Delivery Date, the relevant Subscriber will be
entitled to revoke all or part of the relevant Notice of Conversion
by delivery of a notice to such effect to the Company whereupon the
Company and Subscriber shall each be restored to their respective
positions immediately prior to the delivery of such notice, except
that the damages payable in connection with the Company’s
default shall be payable through the date notice of revocation or
rescission is given to the Company.
7.2.
[intentionally omitted]
7.3.
Maximum Conversion . A Subscriber shall not be
entitled to convert on a Conversion Date that amount of a Note nor
may the Company make any payment including principal, interest, or
liquidated or other damages by delivery of Conversion Shares in
connection with that number of Conversion Shares which would be in
excess of the sum of (i) the number of shares of Common Stock
beneficially owned by such Subscriber and its Affiliates on a
Conversion Date or payment date, and (ii) the number of Conversion
Shares issuable upon the conversion of the Note 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 Conversion
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
conversions of only 4.99% and aggregate conversions 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%.
7.4.
Injunction Posting of Bond . In the event a
Subscriber shall elect to convert a Note or part thereof, the
Company may not refuse conversion based on any claim that
Subscriber or any one associated or affiliated with Subscriber has
been engaged in any violation of law, or for any other reason,
unless, a final non-appealable injunction from a court made on
notice to Subscriber, restraining and or enjoining conversion of
all or part of such Note shall have been sought and obtained by the
Company or the Company has posted a surety bond for the benefit of
Subscriber in the amount of 120% of the outstanding principal and
accrued but unpaid interest of the Note, or aggregate purchase
price of the Conversion Shares which are sought to be subject to
the injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to Subscriber to the extent the
judgment or decision is in Subscriber’s favor.
7.5.
Buy-In . In addition to any other rights
available to Subscribers, if the Company fails to deliver to a
Subscriber Conversion Shares by the Delivery Date and if after the
Delivery Date Subscriber or a broker on Subscriber’s behalf
purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by Subscriber of
the Common Stock which Subscriber was entitled to receive upon such
conversion (a " Buy-In "), then the Company shall pay to
Subscriber (in addition to any remedies available to or elected by
the Subscriber) the amount by which (A) Subscriber's total purchase
price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (B) the aggregate principal
and/or interest amount of the Note for which such conversion
request was not timely honored together with interest thereon at a
rate of 15% per annum, accruing until such amount and any accrued
interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example,
if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of $10,000 of Note principal and/or interest,
the Company shall be required to pay Subscriber $1,000 plus
interest. Subscriber shall provide the Company written notice and
evidence indicating the amounts payable to Subscriber in respect of
the Buy-In.
7.6
Adjustments. The Conversion Price, Warrant
exercise price and amount of Conversion Shares and Warrant Shares
shall be equitably adjusted and as otherwise described in this
Agreement, the Notes and Warrants.
7.7.
Redemption . The Note shall not be
redeemable or callable by the Company, except as described in the
Note.
(a)
Brokers . The Company represents that there
are no parties entitled to receive fees, commissions, credit
enhancement fees, due diligence fees, lead investor fees, or
similar payments in connection with the Offering.
(b)
Subscriber’s Legal Fees . The Company
shall pay to Subscribers’ counsel, Grushko & Mittman,
P.C., a fee of 200,000 shares of restricted Common Stock (“
Fee Shares ”) as reimbursement for services rendered
to the Subscribers in connection with this Agreement and the
Offering. Subscribers’ counsel is hereby granted
all of the registration rights and other rights granted to the
Subscribers in Section 11, including but not limited to,
indemnification rights and liquidated damages. For the
purpose of calculating liquidated damages pursuant to this
Agreement and not for tax purposes, each share issued to
Subscribers’ counsel shall have an attributed value of
$0.10.
(c)
Company’s Legal Fees . The Company
shall pay to Sichenzia Ross Friedman Ference LLP (“
Company Counsel ”), a fee of 200,000 shares of
restricted Common Stock as reimbursement for services rendered to
the Company in connection with this Agreement and the
Offering. Such fee shall be delivered upon or after
Closing.
(d)
Due Diligence Fee . The Company will pay a
due diligence fee (“ Due Diligence Fee ”) of
100,000 shares of restricted Common Stock to the parties identified
on Schedule 8(d) hereto (“ Due Diligence Fee
Recipient ”). Such fee shall be delivered upon
or after Closing.
9.
Covenants of the Company . The Company covenants
and agrees with the Subscribers as follows:
(a)
Stop Orders . Subject to the prior notice
requirement described in Section 9(n), the Company will advise the
Subscribers, within twenty-four hours after it receives notice of
issuance by the Commission, any state securities commission or any
other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the Common
Stock of the Company for offering or sale in any jurisdiction, or
the initiation of any proceeding for any such
purpose. The Company will not issue any stop transfer
order or other order impeding the sale, resale or delivery of any
of the Securities, except as may be required by any applicable
federal or state securities laws and unless contemporaneous notice
of such instruction is given to the Subscribers.
(b)
Listing/Quotation . The Company shall promptly
secure the quotation or listing of the Conversion Shares, Incentive
Shares and Warrant Shares upon each national securities exchange,
or automated quotation system upon which the Company’s Common
Stock is quoted or listed and upon which such Conversion Shares,
Incentive Shares and Warrant Shares are or become eligible for
quotation or listing (subject to official notice of issuance) and
shall maintain same so long as any Notes and Warrants are
outstanding. The Company will maintain the quotation or
listing of its Common Stock on the American Stock Exchange, Nasdaq
Capital Market, Nasdaq Global Market, Nasdaq Global Select Market,
Bulletin Board, or New York Stock Exchange (whichever of the
foregoing is at the time the principal trading exchange or market
for the Common Stock (the “ Principal Market ”),
and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the
Principal Market, as applicable. The Company will provide
Subscribers with copies of all notices it receives notifying the
Company of the threatened and actual delisting of the Common Stock
from any Principal Market. As of the date of this
Agreement and the Closing Date, the Bulletin Board is and will be
the Principal Market.
(c)
Market Regulations . If required, the Company
shall notify the Commission, the Principal Market and applicable
state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all
other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Securities to the Subscribers and promptly
provi
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