EXHIBIT 4.1
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SUBSCRIPTION AGREEMENT
Western Power & Equipment Corp.
▇▇▇▇ ▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned (the "Investor") is writing to advise you of the
following terms and conditions under which the undersigned hereby offers to
subscribe (the "Offer") for the securities of this private placement (the
"Offering") offered by Western Power & Equipment Corp., a Delaware corporation
(the "Company"). The exclusive placement agent for the Offering is Westrock
Advisors Inc. (the "Placement Agent"). The Company is issuing shares of common
stock of the Company, par value $0.001 per share (the "Common Stock") at a
purchase price of $1.87 per share.
The Company may issue a minimum (the "Minimum Offering") of Nine
Hundred Fifty Thousand (950,000) shares of Common Stock and a maximum (the
"Maximum Offering") of One Million Fifty Thousand (1,050,000) shares of Common
Stock (such shares of Common Stock as contemplated to be offered hereunder, the
"Shares") in this offering (the "Offering"). The undersigned understands that
the Shares are being issued pursuant to the exemption from registration
requirements of the Securities Act of 1933, as amended (the "Securities Act" or
the "Act"), provided by Section 4(2) of the Act. As such, the Shares are
"restricted securities."
The Shares are being offered on a "best efforts, all or none" basis by
the Company through the Placement Agent with respect to the Minimum Offering,
during a period (the "Offering Period"); commencing on February 10, 2006 (the
"Commencement Date") and continuing until February 28, 2006 (the "Termination
Date"), when the Offering will expire or earlier if prior thereto all the Shares
constituting the Maximum Offering shall have been sold (any such date, the
"Final Closing").
All proceeds received from subscribers for the Shares offered hereby
will be deposited by the Placement Agent in a special non-interest bearing
escrow account (the "Escrow Account") with ▇▇▇▇▇ Fargo Bank (the "Bank") and
will be released to the Company against delivery by the Company to the Placement
Agent of certificates representing the Shares (each such date, a "Closing
Date").
1. Subscription.
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Subject to the terms and conditions hereinafter set forth in this
subscription agreement (the "Subscription Agreement"), the undersigned hereby
offers to purchase Shares as set forth in the Investor Signature Page attached
hereto.
If the Offer is accepted, the Shares shall be paid for by the delivery
of such amount by wire transfer or check payable to the order of "▇▇▇▇▇ Fargo
Bank, as Escrow Agent for Western Power & Equipment Corp.", which is being
delivered contemporaneously herewith.
Once a minimum of Nine Hundred Fifty Thousand (950,000) Shares have
been subscribed for and a minimum of $1,776,500.00 in cleared subscription funds
are on deposit in the Escrow Account (the "Minimum Escrow Date") and such
subscriptions are accepted by the Company, a closing will be held as soon as
practicable thereafter. Additional closings will be held, at the discretion of
the Company and the Placement Agent, at reasonable intervals during the Offering
Period, but in no event later than the Final Closing.
2. Conditions to Offer.
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The Offering is made subject to the following conditions: (i) that the
Company shall have the right to accept or reject this Offer, in whole or in
part, for any reason whatsoever; and (ii) that the undersigned agrees to comply
with the terms of this Subscription Agreement.
Acceptance of this Offer shall be deemed given by the countersigning of
this Subscription Agreement on behalf of the Company.
3. Representations and Warranties of the Undersigned.
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The undersigned, in order to induce the Company to accept this Offer,
hereby warrants and represents as follows:
(A) The undersigned represents that he, she or it (i) has
adequate means of providing for his current financial needs and
possible personal contingencies, and has no need for liquidity of
investment in the Shares; (ii) can afford to (a) hold unregistered
securities for an indefinite period of time as required and (b) sustain
a complete loss of the entire amount of the subscription; and (iii) has
not made an overall commitment to investments which are not readily
marketable which is disproportionate so as to cause such overall
commitment to become excessive.
(B) The undersigned represents that he, she or it is an
Accredited Investor as that term is defined in Regulation D promulgated
under the Securities Act of 1933, as amended. In general, an
"Accredited Investor" is deemed to be an institution with assets in
excess of $5,000,000 or individuals with net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly with
their spouse.
(C) The Company has not made any other representations or
warranties to the undersigned with respect to the Company except as
contained herein.
(D) The undersigned has not authorized any person or
institution to act as his Purchaser Representative (as that term is
defined in Regulation D of the General Rules and Regulations under the
Act) in connection with this transaction. The undersigned has such
knowledge and experience in financial, investment and business matters
that he, she or it is capable of evaluating the merits and risks of the
prospective investment in the Shares. The undersigned has consulted
with such independent legal counsel or other advisers as he, she or it
has deemed appropriate to assist the undersigned in evaluating the
proposed investment in the Shares.
(E) The undersigned has reviewed, or been given the
opportunity to review, the Company's SEC Reports (as defined below).
The undersigned has also been afforded the opportunity to ask questions
of, and receive answers from, the officers and/or directors of the
Company concerning the terms and conditions of the Offering and to
obtain any additional information, to the extent that the Company
possesses such information or can acquire it without unreasonable
effort or expense, necessary to verify the accuracy of the information
furnished; and has availed himself of such opportunity to the extent
he, she or it considers appropriate in order to permit the undersigned
to evaluate the merits and risks of an investment in the Shares.
(F) The undersigned acknowledges that none of the Shares has
been registered under the Act in reliance on an exemption for
transactions by an issuer not involving a public offering based on the
undersigned's representations set forth herein, and further understands
that the undersigned is purchasing the Shares without being furnished
any prospectus or offering memorandum setting forth all of the
information that would be required to be furnished under the Act.
(G) The undersigned further acknowledges that this Offering
has not been passed upon or the merits thereof endorsed or approved by
any state or federal authorities.
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(H) The Shares being subscribed for are being acquired solely
for the account of the undersigned for personal investment and not with
a view to, or for resale in connection with, any distribution in any
jurisdiction where such sale or distribution would be precluded. By
such representation, the undersigned means that no other person has a
beneficial interest in the Shares subscribed for hereunder, and that no
other person has furnished or will furnish directly or indirectly, any
part of or guarantee the payment of any part of the consideration to be
paid to the Company in connection therewith. The undersigned does not
intend to dispose of all or any part of the except in compliance with
the provisions of the Act and applicable state securities laws and
understands that the Shares are being offered pursuant to a specific
exemption under the provisions of the Act, which exemption(s) depends,
among other things, upon compliance with the provisions of the Act. By
making the foregoing representation, the undersigned is not agreeing to
hold the securities for any particular period of time.
(I) Unless the Shares are subject to an effective registration
statement, the undersigned further represents and agrees that the
undersigned will not sell, transfer, pledge or otherwise dispose of or
encumber the Shares unless prior to any such sale, transfer, pledge,
disposition or encumbrance, the undersigned will, if requested, furnish
the Company and its transfer agent with an opinion of counsel
satisfactory to the Company in form and substance that registration
under the Act or applicable state securities laws is not required.
(J) The undersigned hereby agrees that the following or
similar legend shall be on the face of the certificates evidencing the
Shares:
"These securities have not been registered under the
Securities Act of 1933, as amended (the "Act") or under the
securities laws of any state. They may not be sold, offered
for sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the
securities under such act or an opinion of counsel reasonably
satisfactory to the company that such registration is not
required pursuant to a valid exemption therefrom under the
Act."
In addition, the undersigned agrees that the Company may place
"stop transfer" orders with its transfer agents with respect to each
certificate evidencing the Shares in order to implement the
restrictions set forth in this Subscription Agreement.
Certificates evidencing the Shares shall not contain any
legend (including the legend set forth above), (i) after the
declaration of effectiveness of a registration statement and thereafter
while such registration statement (including the Registration
Statement, as defined in Section 5(B)(1) below) covering the resale of
such security remains in effect under the Securities Act, or (ii)
following any sale of such Shares pursuant to Rule 144, or (iii) if
such Shares are eligible for sale under Rule 144(k), or (iv) if such
legend is not required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued by
the Staff of the Commission). The Company shall cause its counsel to
issue a legal opinion to the Company's transfer agent promptly after
the Effective Date if required by the Company's transfer agent to
effect the removal of the legend hereunder. The Company agrees that
following the Effective Date or at such time as such legend is no
longer required under this Section (3)(J), it will, no later than five
Trading Days following the delivery by an Investor to the Company or
the Company's transfer agent (provided, in such case, that notice of
the same have been furnished to the Company) of a certificate
representing Shares issued with a restrictive legend (such date, the
"Legend Removal Date"), exercise its best efforts to deliver or cause
to be delivered to such Investor a certificate representing such
Securities that is free from all restrictive and other legends. The
Company may not make any notation on its records or give instructions
to any transfer agent of the Company that enlarge the restrictions on
transfer set forth in this Section
(K) The undersigned hereby acknowledges that the Placement
Agent, its affiliates and/or its beneficial owners may subscribe for
Shares.
(L) The undersigned has completed or caused to be completed
the Investor Suitability Questionnaire attached to this Subscription
Agreement as Appendix I and the Selling Security Holder Questionnaire,
attached to this Subscription Agreement as Appendix II (collectively,
the "Questionnaires"), for use in preparation of the Registration
Statement, and the answers to such Questionnaires are true and
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correct as of the date of this Subscription Agreement and will be true
and correct as of the effective date of the Registration Statement;
provided that the undersigned shall be entitled to update such
information by providing written notice thereof to the Company before
the effective date of such Registration Statement.
The undersigned certifies that each of the foregoing representations
and warranties set forth in subsection (A) through (L) inclusive of this Section
3 are true as of the date hereof and shall survive such date.
4. Representations and Warranties of the Company.
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The Company hereby makes the following representations and
warranties to the Investors:
(A) Subsidiaries. Other than as disclosed in the SEC Reports,
the Company has no direct or indirect subsidiaries.
(B) Organization and Qualification. The Company is an entity
duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of the State of Delaware,
with the requisite power and authority to own and use its properties
and assets and to carry on its business as currently conducted. The
Company is not in violation of any of the provisions of its certificate
of incorporation, bylaws or other organizational or charter documents.
(C) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
Offering. The execution and delivery of this Subscription Agreement by
the Company and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of
the Company and no further consent or action is required by the
Company, other than the Required Approvals. This Subscription
Agreement, when executed and delivered by both parties hereto in
accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and general
principles of equity. The Company is not in violation of any of the
provisions of its certificate of incorporation, by-laws or other
organizational or charter documents.
(D) No Conflicts. The execution, delivery and performance of
this Subscription Agreement by the Company and the consummation by the
Company of the Offering do not and will not: (i) conflict with or
violate any provision of the Company's certificate of incorporation,
bylaws or other organizational or charter documents, or (ii) subject to
obtaining the Required Approvals (as defined below), conflict with, or
constitute a default (or an event that 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 (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing a Company debt or otherwise) or other
understanding to which the Company is a party or by which any property
or asset of the Company is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority as
currently in effect to which the Company is subject (including federal
and state securities laws and regulations), or by which any property or
asset of the Company is bound or affected; except in the case of each
of clauses (ii) and (iii), such as could not, individually or in the
aggregate (a) adversely affect the legality, validity or enforceability
of the Offering, (b) have or result in or be reasonably likely to have
or result in a material adverse effect on the results of operations,
assets, prospects, business or condition (financial or otherwise) of
the Company , taken as a whole, or (c) adversely impair the Company's
ability to perform fully on a timely basis its obligations under this
Subscription Agreement (any of (a), (b) or (c), a "Material Adverse
Effect").
(E) Filings, Consents and Approvals. The Company is not
required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other
person in connection with the execution, delivery and performance by
the Company of this Subscription Agreement, other than (i) the filing
with the Commission of the Registration Statement, (ii) the filing with
the Commission of a Form D pursuant to Commission Regulation D, and
(iii) applicable Blue Sky filings (collectively, the "Required
Approvals").
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(F) Issuance of the Securities. The Shares are duly authorized
and, when issued and paid for in accordance with this Subscription
Agreement, will be duly and validly issued, fully paid and
non-assessable, free and clear of all liens, and not subject to any
preemptive rights. The Company has reserved from its duly authorized
capital stock a number of shares of Common Stock required for issuance
of the Shares.
(G) Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock of the Company is as
set forth in the Company's SEC Reports. No person has any right of
first refusal, preemptive right, right of participation, or any similar
right to participate in the Offering. Except as set forth in the SEC
Reports, and for options and shares of capital stock issued or issuable
under the Company's option plans, there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any person any right to
subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company is or
may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common
Stock. The issuance and sale of the Shares will not obligate the
Company to issue shares of Common Stock or other securities to any
person (other than the Investors and the Placement Agent) and will not
result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such securities.
(H) SEC Reports; Financial Statements. The Company has filed
all reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two (2) years preceding the date hereof (or such shorter period as
the Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC Reports")
in accordance with the time requirements of the Securities Act and the
Exchange Act. As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and
the Exchange Act and the rules and regulations of the Commission
promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading. The Company has advised Investor(s)
that a correct and complete copy of each of the SEC Reports (together
with all exhibits and schedules thereto and as amended to date) is
available at ▇▇▇▇://▇▇▇.▇▇▇.▇▇▇, a website maintained by the Commission
where Investor(s) may view the SEC Reports. The financial statements of
the Company included in the SEC Reports comply in all material respects
with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise
specified in such financial statements or the notes thereto, and fairly
present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
(I) Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports: (i) there has been no event,
occurrence or development that has had a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made
with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not
declared or made any dividend or distribution of cash or other property
to its stockholders except in the ordinary course of business
consistent with prior practice, or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock except
consistent with prior practice or pursuant to existing Company stock
option or similar plans, and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to
existing Company stock option or similar plans.
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(J) Litigation. Except as set forth in the SEC Reports, there
is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its properties before or by
any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign)
(collectively, an "Action") which: (i) adversely affects or challenges
the legality, validity or enforceability of this Subscription Agreement
or the Shares or (ii) would, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect. The Company is not and has not
been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws. The Company does not
have pending before the Commission any request for confidential
treatment of information. There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation by
the Commission involving the Company. The Commission has not issued any
stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.
(K) Compliance. Except as described in the SEC Reports, the
Company: (i) is not in default under or in violation of (and no event
has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company received notice of a claim that
it is in default under or that it is in violation of, any material
indenture, loan or credit agreement or any other material agreement or
instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been
waived), which default or violation would have or result in a Material
Adverse Effect, (ii) is not in violation of any order of any court,
arbitrator or governmental body, or (iii) is not and has not been in
violation of any statute, rule or regulation of any governmental
authority, except in each case as would not, individually or in the
aggregate, have or result in a Material Adverse Effect.
(L) Regulatory Permits. The Company possesses all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct its business as described in the SEC Reports, except where the
failure to possess such permits would not, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect ("Material Permits"), and the Company has not received
any notice of proceedings relating to the revocation or modification of
any Material Permit.
(M) Listing and Maintenance Requirements. The Company's Common
Stock currently trades on the OTC BB. The Company is, and has no reason
to believe that it will not in the foreseeable future continue to be,
in compliance with the periodic SEC reporting requirements necessary to
maintain trading on the OTC BB.
(N) Internal Accounting Controls. The Company maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only
in accordance with management's general or specific authorization, and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. As disclosed in the SEC Reports, the
Company has established disclosure controls and procedures (as defined
in Exchange Act Rules Rule 13a-15(e) or Rule 15d-15(e)) for the Company
and designed such disclosures controls and procedures to ensure that
material information relating to the Company is made known to the
certifying officers by others within those entities.
(O) Disclosure. The disclosure provided to the Investor
regarding the Company, its business and the transactions contemplated
hereby, furnished by or on behalf of the Company, including all of the
SEC Reports, does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they
were made, not misleading. The Company acknowledges and agrees that the
Investor makes or has made no representations or warranties with
respect to the transactions contemplated hereby other than those
specifically set forth in this Subscription Agreement.
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5. Covenants of the Company.
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(A) Board Approval. The Company has held a meeting of its
board of directors ("Board") which has authorized the issuance of the
Shares in this Offering.
(B) Registration Rights. The Company grants registration
rights to the Investor(s) under the following terms and conditions:
(1) The Company will prepare and file, at its own expense,
within five (5) days of the Final Closing, a registration statement
under the Securities Act (the "Registration Statement") with the
Commission sufficient to permit the non-underwritten public offering
and resale of the Shares (subject to adjustment as set forth in Section
5(C) below) (the "Registrable Securities") through the facilities of
all appropriate securities exchanges, if any, on which the Company's
Common Stock is being sold or on the over-the-counter market if the
Company's Common Stock is traded thereon.
(2) The Company will use commercially reasonable-efforts to
cause such Registration Statement to become effective within forty-five
(45) days from the filing of the Registration Statement or, if earlier,
within five (5) days of Commission clearance to request acceleration of
effectiveness. The number of shares designated in the Registration
Statement to be registered shall include all of the Registrable
Securities and shall include appropriate language regarding reliance
upon Rule 416 to the extent permitted by the Commission. The Company
will notify the Investors of the effectiveness of the Registration
Statement within three (3) business days of such event. In the event
that the number of Shares so registered shall prove to be insufficient
to register the resale of all of the Registrable Securities, then the
Company shall be obligated to file, within five (5) days of notice from
any Investor, a further Registration Statement registering such
remaining shares and shall use commercially reasonable efforts to
prosecute such additional Registration Statement to effectiveness
within forty-five (45) days of the date of filing of such additional
Registration Statement.
(3) The Company will maintain the Registration Statement or
post-effective amendment filed under the terms of this Subscription
Agreement effective under the Securities Act until the earlier of (i)
the date that all of the Registrable Securities have been sold pursuant
to such Registration Statement, (ii) all Registrable Securities have
been otherwise transferred to persons who may trade such shares without
restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not
bearing a restrictive legend, or (iii) all Registrable Securities may
be sold at any time, without volume or manner of sale limitations
pursuant to Rule 144(k) or any similar provision then in effect under
the Securities Act in the opinion of counsel to the Company (the
"Effectiveness Period").
(4) If, at any time during which the Registration Statement
required by Section 5(B)(1) and 5(B)(2) above is not effective, the
Company shall determine to proceed with the preparation and filing of a
separate registration statement pursuant to the Securities Act in
connection with the proposed offer and sale of any of its securities by
it or any of its security holders (other than with respect to an
underwritten offering or on a registration statement on Form ▇-▇, ▇-▇,
or other limited purpose form), the Company will give written notice of
its determination to all the Investors. Upon receipt of a written
request from any Investor, within thirty (30) days after receipt of any
such notice from the Company, the Company will cause all such
Registrable Securities requested by the Investor to be included in such
registration statement, all to the extent required to permit the sale
or other disposition by such Investors, of such shares. The obligation
of the Company under this Section 5(B)(4) shall be unlimited as to the
number of registration statements to which it applies, unless the
Effectiveness Period has ended.
(5) All fees, disbursements and out-of-pocket expenses and
costs incurred by the Company in connection with the preparation and
filing of the Registration Statement and in complying with applicable
federal securities and Blue Sky laws (including, without limitation,
all attorneys' fees of the Company) shall be borne by the Company. The
Investors shall bear the cost of underwriting and/or brokerage
discounts, fees and commissions, if any, applicable to the Registrable
Securities being registered and the fees and expenses of their counsel.
The Company shall use its reasonable best efforts to qualify any of the
Securities for sale in such states as any Investor reasonably
designates and shall furnish indemnification. However, the Company
shall not be required to qualify in any state which will require an
escrow or other restriction relating to the Company and/or the sellers,
or which will require the Company to qualify to do business in such
state or require the Company to file therein any general consent to
service of process. The Company at its expense will supply the
Investors with copies of the applicable
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Registration Statement and any prospectus included therein and other
related documents in such quantities as may be reasonably requested by
the Investors.
(6) In the event that (i) the Registration Statement is not
filed with the Commission within ten (10) days of the Final Closing, or
(ii) such Registration Statement is not declared effective by the
Commission within the earlier of forty-five (45) days from the filing
of the Registration Statement or five (5) days of clearance by the
Commission to request effectiveness, or (iii) such Registration
Statement is not maintained as effective by the Company for the
Effectiveness Period or as allowed by 5(B)(9) below or (iv) the
additional Registration Statement referred to in Section 5(B)(2) is not
filed within ten (10) days or declared effective within forty-five (45)
days as set forth therein (each a "Registration Default"), then the
Company will pay Investor (pro rated on a daily basis), as partial
compensation for such failure and not as a penalty one and one half
(1.5%) of the purchase price of the Registrable Securities purchased
from the Company and held by the Investor for each month (or portion
thereof) until such Registration Statement has been filed (in the case
of clause (i) and clause (iv)), and in the event of late effectiveness
(in case of clause (ii) above) or lapsed effectiveness (in the case of
clause (iii) above), one and one half percent (1.5%) of the purchase
price of the Registrable Securities purchased from the Company and held
by the Investor each month (or portion thereof) (regardless of whether
one or more such Registration Defaults are then in existence, but
without duplication of such partial compensatory payments) until such
Registration Statement has been declared effective. Such compensatory
payments shall be made to the Investors in cash no later than the tenth
(10th) business day following the month in which such Registration
Default(s) occurred, provided, however, that the payment of such
amounts shall not relieve the Company from its obligations to register
the Securities pursuant to this Section.
(7) If the Company does not remit the payment to the Investors
as set forth in Section 5(B)(6) above, the Company will pay the
Investors interest at the rate of twelve percent (12%) per annum, or
the highest rate permitted by law, if less, until such sums have been
paid in full, and reasonable costs of collection, including attorneys'
fees, in addition to the liquidated damages. The registration of the
Registrable Securities pursuant to this provision or payment of such
compensatory amounts shall not affect or limit the Investors' other
rights or remedies as set forth in this Subscription Agreement or at
law.
(8) In the event a registration statement is not effective at
any time after one (1) year following the Final Closing date (other
than an Allowed Delay, as defined in Section 5(B)(9)(ii) below),
compensatory payments as defined in Section 5(B)(6) above shall cease.
At such time, the Company shall cause its counsel to issue such legal
opinions as may be reasonably requested by the Investors in connection
with any sales of the Shares in accordance with Rule 144 under the
Securities Act. In addition, the Investors shall be entitled to
unlimited piggyback registration rights until the Effectiveness Period
has ended.
(9) In the case of each registration effected by the Company
pursuant to any section herein, the Company will keep each Investor
advised in writing as to the initiation of each registration and as to
the completion thereof. At its expense, the Company will:
(i) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus
used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act
with respect to a disposition of all securities covered by
such registration statement;
(ii) Notify the Investors at any time when a prospectus
relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading or incomplete in light of the circumstances then
existing, and at the request of the shareholders, prepare and
furnish to them a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the Investors, such
prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading or incomplete in light of the circumstances then
existing; provided that, for not more than thirty (30)
consecutive calendar days (or a total of not more than
seventy-five (75) calendar days in any twelve (12) month
period), the Company may delay the disclosure of material
non-public information concerning the Company the public
disclosure of which at the time is not,
8
in the good faith opinion of the Company in the best interests
of the Company and which may, based on the written advice of
outside counsel, be delayed under applicable law or regulation
(an "Allowed Delay"); provided, further, that the Company
shall promptly (i) notify each Investor in writing of the
existence of (but in no event shall the Company disclose to
such Investor any of the facts or circumstances regarding)
material non-public information giving rise to an Allowed
Delay and (ii) advise each Investors in writing to cease all
sales under such registration statement until the termination
of the Allowed Delay;
(iii) Use its commercially reasonable efforts to prevent the
issuance of any stop order or other suspension of
effectiveness of a registration statement, and, if such an
order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify Investor (and, in the
event of an underwritten offering, the managing underwriter)
of the issuance of such order and the resolution thereof;
(iv) Cause all Registrable Securities which are registered in
accordance with the provisions herein, to be listed or
included for quotation on each exchange on which the Company's
shares of Common Stock are then listed or included for
quotation;
(v) Provide a transfer agent and registrar for all such shares
and CUSIP number for all such shares of Common Stock in each
case not later than the effective date of such registration
statement; and
(vi) Otherwise use its commercially reasonable best efforts to
comply with all applicable rules and regulations of the
Commission.
(vii) In the event of a transfer of the Registrable Securities
utilizing the prospectus included within any of the
registration statements covered by this Section 5(B), cause
its counsel to issue a legal opinion permitting such transfer
and cause its transfer agent to reissue a new certificate
representing such Shares without a restrictive legend within
ten business days, time being of the essence, in each case
without charge to the Investor other than customary transfer
fees which may be charged by the transfer agent or
broker-dealer.
(10) To the extent Investor includes any Shares in a
registration statement pursuant to the terms hereof, the Company will
indemnify and hold harmless Investor, its directors and officers, and
each person, if any, who controls Investor within the meaning of the
Securities Act, from and against, and will reimburse Investor, its
directors and officers and each controlling person with respect to, any
and all loss, damage, liability, cost and expense to which Investor or
such controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, damages, liabilities, costs or
expenses are caused by any untrue statement or alleged untrue statement
of any material fact contained in such registration statement, any
prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
in which they were made, not misleading; provided, however, that the
Company will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expense arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by Investor
or any such controlling person in writing specifically for use in the
preparation thereof.
(11) To the extent Investor includes any Shares in a
registration statement pursuant to the terms hereof, Investor will
indemnify and hold harmless the Company, its directors and officers and
any controlling person from and against, and will reimburse the
Company, its directors and officers and any controlling person with
respect to, any and all loss, damage, liability, cost or expense to
which the Company, its directors and officers or such controlling
person may become subject under the Securities Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, any prospectus
contained therein or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was so made in reliance upon and in
conformity with written information furnished by or on behalf of the
Investor specifically for use in the preparation thereof and provided
further, that the maximum amount that may be recovered from Investor
shall be limited to the amount of proceeds received by Investor from
the sale of such shares of Common Stock.
9
(12) To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to
make the maximum contribution with respect to any amounts for which it
would otherwise be liable hereunder to the extent permitted by law,
provided that (i) no contribution shall be made under circumstances
where the indemnifying party would not have been liable for
indemnification pursuant to the provisions hereof, (ii) no seller of
securities guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of securities who was not guilty of such
fraudulent misrepresentation, and (iii) the amount of the contribution
together with any other payments made in respect of such loss, damage,
liability or expense, by any seller of securities shall be limited to
the net amount of proceeds received by such seller from the sale of
such securities.
(13) The Investor will cooperate with the Company in
connection with this Subscription Agreement, including timely supplying
all information and executing and returning all documents requested by
the Company which are required to enable the Company to perform its
obligations to register the Shares (which shall include all information
regarding the Investor and proposed manner of sale of securities
required to be disclosed in any registration statement filed in
accordance with this Section 5).
(C) Certain Adjustments. The Shares shall receive customary
adjustment in connection with forward or reverse stock splits, stock
dividends, recapitalizations, reclassification, mergers or
consolidations and the like
6. State Legends.
-------------
FOR RESIDENTS OF ALL STATES: THE SECURITIES OFFERED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES ARE SUBJECT
TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH 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 HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, 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. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
7. No Waiver.
---------
Notwithstanding any of the representations, warranties, acknowledgments
or agreements made herein by the undersigned, the undersigned does not thereby
or in any manner waive any rights granted to the undersigned under federal or
state securities laws.
8. Revocation.
----------
The undersigned agrees that he shall not cancel, terminate or revoke
this Subscription Agreement or any agreement of the undersigned made hereunder
other than as set forth herein, and that this Subscription Agreement shall
survive the death or disability of the undersigned.
9. Termination of Subscription Agreement.
-------------------------------------
If the Company elects to cancel this Subscription Agreement, provided
that it returns to the undersigned, without interest and without deduction, all
sums paid by the undersigned, this Offer shall be null and void and of no
further force and effect, and no party shall have any rights against any other
party hereunder.
10
10. Miscellaneous.
-------------
(A) All notices or other communications given or made hereunder shall
be in writing and shall be mailed by registered or certified mail, return
receipt requested, postage prepaid, or by overnight courier service to the
undersigned at his address set forth on the Investor Signature Page, and to the
Company and the Placement Agent at the addresses set forth herein.
(B) This Subscription Agreement constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof and may be amended
only by a writing executed by all parties.
(C) The provisions of this Subscription Agreement shall survive the
execution thereof.
(D) This Subscription Agreement shall be governed by the laws of the
State of New York as an agreement between residents of New York.
(E) All other expenses incident to the Investor's purchase of Shares,
whether or not the purchase of such Shares is consummated, will be borne
exclusively by the party making the expenditure or incurring the expense,
including any expenses incurred prior to the date hereof, as well as those
incurred after the date hereof. Other than as specifically set forth herein,
neither the Company nor the Investor shall be liable for any costs or expenses
incurred by the other.
(F) This Subscription Agreement may be executed in multiple
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same document.
11. Certification.
-------------
The undersigned certifies that he has read this entire Subscription
Agreement and that every statement on his part made and set forth herein is true
and complete.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK - SIGNATURE PAGE FOLLOWS]
11
INVESTOR SIGNATURE PAGE FOR WESTERN POWER & EQUIPMENT CORP.
SUBSCRIPTION AGREEMENT
PLEASE PRINT OR TYPE, USE INK ONLY. (ALL PARTIES MUST SIGN)
The undersigned investor hereby certifies that he (i) has received and relied
solely upon the Securities and Exchange filings, this Subscription Agreement and
their respective exhibits and schedules, (ii) agrees to all the terms and
conditions of this Subscription Agreement, (iii) meets the suitability standards
set forth herein and (iv) is a resident of the state or foreign jurisdiction
indicated below.
Number of Shares Subscribed for:___________________
Dollar Amount of Shares Subscribed for: $_________________________
----------------------------------------- If other than individual check one and indicate
Name of Investor (Print) capacity of signatory under the signature:
[_] Trust
----------------------------------------- [_] Estate
Name of Joint Investor (if any) (Print) [_] Uniform Gifts to Minors Act, State of __________
[_] Attorney-in-fact
[_] Corporation
----------------------------------------- [_] Other
Signature of Investor
If Joint Ownership, Check one:
[_] Joint Tenants with Right of Survivorship
----------------------------------------- [_] Tenants in Common
Signature of Joint Investor (if any) [_] Tenants by the Entirety
[_] Community by Property
-----------------------------------------
Capacity of Signatory (if applicable) Backup Withholding Statement:
[_] Please check this box only if the investor is subject to
----------------------------------------- backup withholding
Social Security or Taxpayer Identification Number
Foreign Person:
Investor Address: [_] Please check this box only if the investor is a
nonresident alien, foreign corporation, foreign
----------------------------------------- partnership, foreign trust or foreign estate
Street Address
Country ________________ Passport # _______________
-----------------------------------------
City State Zip Code ID #____________________ ID Type __________________
Telephone: ( ) Fax: ( )
Email:-----------------------------------
Address for Delivery of Shares (if different from above):
__________________________________________________
__________________________________________________
City State Zip Code
Broker:
[_] Registered Rep._______________________ [_] Other Investor Representative: _________________
Placement Agent:__________________
Westrock Advisors LLC
The investor agrees to the terms of this Subscription Agreement and, as required
by the Regulations pursuant to the Internal Revenue Code, certifies under
penalty of perjury that (1) the Social Security Number or Taxpayer
Identification Number and address provided above is correct, (2) the investor
is not subject to backup withholding (unless the Backup Withholding Statement
box is checked) either because he has not been notified that he is subject to
backup withholding as a result of a failure to report all interest or dividends
or because the Internal Revenue Service has notified him that he is no longer
subject to backup withholding and (3) the investor (unless, the Foreign Person
box above is checked) is not a nonresident alien, foreign partnership, foreign
trust or foreign estate.
THE SUBSCRIPTION FOR SHARES OF WESTERN POWER & EQUIPMENT CORP. BY THE
ABOVE NAMED INVESTOR(S) IS ACCEPTED THIS ________ DAY OF ______________________,
2006.
Western Power & Equipment Corp.
By:_____________________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
