SUBSCRIPTION AGREEMENT
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MENTORTECH INC.
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Up to 2,045,455 Units
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To: Mentortech Inc.
This Subscription Agreement is made by and between Mentortech Inc., a
Delaware corporation (the "Company"), and the undersigned prospective purchaser
who is subscribing hereby for 1,056,363 units of the Company (the "Units"), at a
purchase price of U.S. $1.10 per Unit (the "Purchase Price"), each unit
consisting of 2 shares of common stock of the Company, par value of $0.01 per
share (the "Common Stock") and one warrant to purchase a share of Common Stock
at an exercise price of U.S. $0.55 per warrant (the "Warrants"). Subject to the
satisfaction of certain conditions as described in Section 7(d) of the Warrant
Agreement by and between the undersigned and the Company dated December 10,
1997, the Warrants are callable at any time the market price of the Common
Stock, as determined by the closing price of the Common Stock on a national
securities exchange or the Nasdaq National or SmallCap Market (collectively,
"Nasdaq"), or, if the Common Stock is not admitted for trading on an exchange or
on Nasdaq, by the closing bid price on the Nasdaq OTC Bulletin Board, has closed
at or above U.S. $1.00 for any 20 consecutive trading day period prior to the
call. Such call may only be made by the Company within 15 business days after
the Common Stock has closed at or above U.S. $1.00 for any such 20 consecutive
trading day period. This subscription is submitted to you in accordance with and
subject to the terms and conditions described in this Subscription Agreement
relating to the offering (the "Offering") of a minimum of 909,091 Units and up
to 2,045,455 Units (the "Private Placement"). The minimum investment is 10,000
Units ($11,000), which minimum amount may be reduced at the discretion of the
Company.
In consideration of the Company's agreement to sell Units to the
undersigned upon the terms and conditions contained herein, the undersigned
agrees and represents as follows:
A. Sale of Units; Closings
(1) The undersigned hereby agrees to purchase the number of Units indicated
on the cover and signature pages hereto at a purchase price of U.S. $1.10 per
Unit. Simultaneously with the execution and delivery of this Subscription
Agreement by the undersigned and the Company, the Company shall deliver to the
undersigned a stock certificate representing the shares of Common Stock
contained in the Units and the Warrants purchased by the undersigned, against
payment of
the purchase price therefor by wire transfer of immediately available funds to
the Company in accordance with the Company's wiring instructions.
(2) The Company represents that 1,215,000 Units were sold by it on December
5, 1997, pursuant to the Memorandum (as defined below). There may be one or more
closings (each a "Closing Date") relating to the balance of 830,455 Units before
the final closing of the Offering (the "Final Closing"). The Final Closing
shall, in no event, be held later than December 15, 1997.
B. Representation and Warranties.
The undersigned hereby represents and warrants to and agrees with the
Company as follows:
(1) The undersigned has been furnished with and has carefully read the
Company's Confidential Private Placement Memorandum dated November 19, 1997
(the "Memorandum"), including the exhibits thereto and is familiar with and
understands the terms of the Offering. With respect to individual or
partnership tax and other economic considerations involved in this
investment, the undersigned has carefully considered and has, to the extent
the undersigned believes such discussion necessary, discussed with the
undersigned's professional legal, tax, accounting and financial advisers
the suitability of an investment in the Units for the undersigned's
particular tax and financial situation and has determined that the Units
being subscribed for by the undersigned are a suitable investment for the
undersigned.
(2) The undersigned acknowledges that all documents, records, and
books pertaining to this investment which the undersigned has requested
have been made available for inspection by the undersigned, and the
undersigned's attorney, accountant or advisers.
(3) The undersigned and/or the undersigned's adviser(s) has/have had a
reasonable opportunity to ask questions of and receive answers from a
person or persons acting on behalf of the Company concerning the Offering
and all such questions have been answered to the full satisfaction of the
undersigned.
(4) The undersigned is not subscribing for Units as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or meeting.
(5) The undersigned: (i) has a pre-existing business relationship with
either (a) the Company or any of its officers, directors or controlling
persons or (b) the Company's financial advisor, ▇▇▇▇▇ ▇▇▇▇▇▇, and (ii) by
reason of the business or financial experience of the undersigned or the
undersigned's professional advisers who are unaffiliated with and who are
not compensated by the Company or any affiliate of the Company, directly or
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indirectly, can be reasonably assumed to have the capacity to protect the
undersigned's interests in connection with an investment in the Units.
(6) If the undersigned is a natural person, the undersigned has
reached the age of majority in the state in which the undersigned resides,
has adequate means of providing for the undersigned's current financial
needs and contingencies, is able to bear the substantial economic risks of
an investment in the Units for an indefinite period of time, has no need
for liquidity in such investment and, at the present time, could afford a
complete loss of such investment.
(7) The undersigned or the undersigned's purchaser representative, as
the case may be, has such knowledge and experience in financial, tax and
business matters so as to enable the undersigned to utilize the information
made available to the undersigned in connection with the Offering to
evaluate the merits and risks of an investment in the Units and to make an
informed investment decision with respect thereto.
(8) The undersigned will not sell or otherwise transfer any Units,
Common Stock or Warrants without registration of such securities under the
Securities Act of 1933, as amended (the "Securities Act") and any
applicable state securities laws or an exemption therefrom. The Units,
Common Stock and Warrants have not been registered under the Securities Act
or under the securities laws of any state. The undersigned represents that
the undersigned is purchasing the Units for the undersigned's own account,
for investment and not with a view to resale or distribution except in
compliance with the Securities Act and such "blue sky" laws as may be
applicable. The undersigned has not offered or sold any portion of the
Units, Common Stock or Warrants being acquired nor does the undersigned
have any present intention of dividing such securities with others or of
selling, distributing or otherwise disposing of any portion of such
securities either currently or after the passage of a fixed or determinable
period of time or upon the occurrence or non-occurrence of any
predetermined event or circumstance in violation of the Securities Act. The
undersigned is aware that except as provided in Section D hereof, the
Company has no obligation to register the Units, Common Stock or Warrants
subscribed for hereunder, or to make available an exemption from the
registration requirements pursuant to Rule 144 or any successor rule for
resale of the Units, Common Stock or Warrants.
(9) Further, the undersigned has carefully read and considered the
matters set forth under the caption "Risk Factors" in the Memorandum
previously delivered to the undersigned, and has taken full cognizance of
and understands all of the risks related to the purchase of the Units. The
undersigned's financial condition is such that he is able to bear the risk
of holding Units for an indefinite period of time, has adequate means to
provide for his current financial needs and contingencies and can risk the
loss of his entire investment in the Units.
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(10) The undersigned acknowledges that each certificate representing
the Common Stock underlying the Units shall be stamped or otherwise
imprinted with a legend substantially in the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED
FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE,
DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE
BOOKS OF THE COMPANY, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER
ALL APPLICABLE UNITED STATES FEDERAL SECURITIES LAWS OR COMPLIANCE
WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE AT THE OPTION
OF THE COMPANY, TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S
COUNSEL, IN FORM ACCEPTABLE TO THE COMPANY, THAT NO VIOLATION OF SUCH
REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR
ASSIGNMENT"
(11) If this Subscription Agreement is executed and delivered on
behalf of a partnership, corporation, trust or estate: (i) such
partnership, corporation, trust or estate has the full legal right and
power and all authority and approval required (a) to execute and deliver,
or authorize execution and delivery of, this Subscription Agreement and all
other instruments executed and delivered by or on behalf of such
partnership, corporation, trust or estate in connection with the purchase
of its Units, (b) to delegate authority pursuant to a power of attorney and
(c) to purchase and hold such Units; (ii) the signature of the party
signing on behalf of such partnership, corporation, trust or estate is
binding upon such partnership, corporation, trust or estate; and (iii) such
partnership, corporation or trust has not been formed for the specific
purpose of acquiring such Units, unless each beneficial owner of such
entity is qualified as an accredited investor within the meaning of Rule
501(a) of Regulation D promulgated under the Securities Act ("Regulation
D") and has submitted information substantiating such individual
qualification.
(12) If the undersigned is a retirement plan or is investing on behalf
of a retirement plan, the undersigned acknowledges that investment in the
Units poses additional risks including the inability to use losses
generated by an investment in the Units to offset taxable income.
C. Understandings.
(1) The undersigned understands, acknowledges and agrees with the
Company as follows:
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(a) No Federal or state agency has made any finding or
determination as to the accuracy or adequacy of the information
provided by the Company to the undersigned in connection with the
Offering, or as to the fairness of the terms of this Offering for
investment nor any recommendation or endorsement of the Units.
(b) The Offering is intended to be exempt from registration under
the Securities Act by virtue of Section 4(2) of the Securities Act and
the provisions of Regulation D promulgated thereunder, which is in
part dependent upon the truth, completeness and accuracy of the
statements made by the undersigned herein and in the Representation
Letter.
(c) The undersigned represents and warrants that it has not
incurred any liability for, and is unaware of any claim for, any
finders' or brokers' fees or similar payments in connection with the
transactions contemplated hereby.
(d) The undersigned acknowledges that the information as to the
Offering is confidential and non-public and agrees that all such
information shall be kept in confidence by the undersigned and neither
used by the undersigned for the undersigned's personal benefit (other
than in connection with this Subscription) nor disclosed to any third
party for any reason; provided, however, that this obligation shall
not apply to any such information that (i) is part of the public
knowledge or literature and readily accessible at the date hereof,
(ii) becomes part of the public knowledge or literature and readily
accessible by publication (except as a result of a breach of this
provision) or (iii) is received from third parties (except third
parties who disclose such information in violation of any
confidentiality agreements or obligations, including, without
limitation, any Subscription Agreement entered into with the Company).
(e) The representations, warranties and agreements of the
undersigned contained herein and in any other writing delivered in
connection with the transactions contemplated hereby shall be true and
correct in all respects on and as of the Closing Date of the sale of
the Units as if made on and as of such date and shall survive the
execution and delivery of this Subscription Agreement and the purchase
of the Units.
(f) IN MAKING AN INVESTMENT DECISION PURCHASERS MUST RELY ON
THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED. THE UNITS, COMMON STOCK AND
WARRANTS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF THE OFFERING OR THIS
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SUBSCRIPTION AGREEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
(g) THE UNITS, COMMON STOCK AND WARRANTS MAY NOT BE TRANSFERRED,
RESOLD OR OTHERWISE DISPOSED OF EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME.
(h) For Residents of Florida:
IF SALES ARE MADE TO FIVE OR MORE FLORIDA PURCHASERS, EACH
PURCHASER MAY VOID THE PURCHASE OF ANY UNITS WITHIN THREE DAYS AFTER
THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE
COMPANY, AN AGENT OF THE COMPANY, OR AN ESCROW AGENT OR WITHIN THREE
DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH
PURCHASER, WHICHEVER OCCURS LATER.
(2) The Company represents to the undersigned as follows:
(a) Litigation. There are no claims, actions, suits, proceedings,
arbitrations, investigations or inquiries by or before any
governmental agency, court or tribunal, domestic or foreign, or before
any private arbitration tribunal, pending or, to the best of the
Company's knowledge, threatened against the Company or any subsidiary
of the Company (hereinafter a "Subsidiary") or involving the
properties or business of the Company or any Subsidiary which, if
determined adversely, would, individually or in the aggregate, result
in a material adverse effect on the condition (financial or
otherwise), results of operations, business, assets, or prospects of
the Company and its Subsidiaries taken as a whole (a "Material Adverse
Effect"), or which relate in any way to the validity of the capital
stock of the Company or the validity of this Agreement, or of any
action taken or to be taken by the Company pursuant to or in
connection with this Agreement. Neither the Company nor any Subsidiary
is subject to any order, writ, judgment, injunction, decree,
determination or award of any court or of any governmental agency or
instrumentality (whether federal, state, local or foreign) which could
reasonably be expected to have a Material Adverse Effect.
(b) No event has occurred since September 30, 1997 such that, if
such event had occurred during the quarter ended September 30, 1997,
the Company's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1997 would have contained any untrue statement of a
material fact or omitted to state
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a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
(c) No stockholder of the Company or other person or entity has
any preemptive right of subscription or purchase, right of first
refusal or similar right with respect to any capital stock of the
Company. Issuance of the Units (including the issuance of the shares
of Common Stock and the Warrants comprising such Units and any shares
of Common Stock underlying the Warrants) will not result in the
issuance of any additional shares of Common Stock or the triggering of
any other anti-dilution or similar rights contained in any options,
warrants, debentures or other securities, commitments or agreements of
the Company. Other than the registration rights granted to the
subscribers in the Private Placement, no person or entity has any
piggyback registration rights with respect to the Registration
Statement or any other registration rights which will be accelerated
or become exercisable as a result of the registration rights provided
for in this Subscription Agreement.
(d) The Memorandum does not contain any untrue statement of
material fact or omit a material fact required to be stated therein or
necessary in order to make such statements, in light of the
circumstances under which they were made, not misleading. The purchase
and sale of all Units on December 5, 1997, was made in compliance with
applicable laws.
D. Registration Rights; Compliance with the Securities Act.
(1) The Company shall:
(a) no later than 45 calendar days following the Final Closing,
prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Registration Statement")
covering the resale of the Common Stock underlying the Units and
issuable upon exercise of the Warrants (hereinafter the "Registrable
Shares") by the undersigned from time to time on the Nasdaq OTC
Bulletin Board, or on such securities market or system on which the
Common Stock shall then be publicly traded, or in privately negotiated
transactions;
(b) use its best efforts, subject to receipt of necessary
information from the undersigned, to cause the Registration Statement
to become effective as soon as possible thereafter;
(c) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions
of the Securities Act until the later of such time as all of the
Registrable Shares have been sold pursuant
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thereto or, by reason of Rule 144(k) under the Securities Act or any
other rule of similar effect, such Registrable Shares are no longer
required to be registered for the unrestricted sale thereof by the
Purchasers;
(d) furnish to the undersigned such number of copies of
prospectuses and preliminary prospectuses in conformity with the
requirements of the Securities Act and such other documents as the
undersigned may reasonably request, in order to facilitate the public
sale or other disposition of all or any of the Registrable Shares held
by the undersigned, provided, however, that the obligation of the
Company to deliver copies of prospectuses or preliminary prospectuses
to the undersigned shall be subject to the receipt by the Company of
reasonable assurances from the undersigned that the undersigned will
comply with the applicable provisions of the Securities Act and of
such other securities or blue sky laws as may be applicable in
connection with any use of such prospectuses or preliminary
prospectuses;
(e) file documents required of the Company for normal blue sky
clearance in all states, as required, provided, however, that the
Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so
qualified or has not so consented;
(f) bear all expenses in connection with the procedures in
paragraphs (a) through (e) of this Section D(1), other than brokerage
commissions or placement agent fees and fees and expenses, if any, of
counsel or other advisers to the undersigned with respect to the
registration and resale of the Registrable Shares; and
(g) prepare and file additional listing applications for the
Registrable Shares on the Nasdaq National or Small Cap Market or other
exchange if the Common Stock is admitted for trading on such exchange.
(h) use its best efforts to have the Registration Statement (or
any supplement or amendment to the Registration Statement, if
applicable) declared effective by the Commission as soon as
practicable after the filing thereof, but in no event later than 120
calendar days following the Final Closing (the "First Target Effective
Date"). If the Registration Statement (or any supplement or amendment
to the Registration Statement, if applicable) is not declared
effective by the First Target Effective Date, the Company shall use
its best efforts to have the Registration Statement (or any supplement
or amendment to the Registration Statement, if applicable) declared
effective by the Commission as soon as practicable after the First
Target Effective Date, but in no event later than 180 Calendar days
following the Final Closing (the "Second Target Effective Date"). If
the Registration Statement (or any supplement or amendment to the
Registration Statement, if applicable) is not declared effective by
the Second Target Effective Date, the Company shall use its best
efforts to have the Registration Statement (or any
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supplement or amendment to the Registration Statement, if applicable)
declared effective by the Commission as soon as practicable after the
Second Target Effective Date, but in no event later than 270 calendar
days following the Final Closing (the "Final Target Effective Date").
If the Registration Statement (or any supplement or amendment to the
Registration Statement, if applicable) has not become effective by the
First Target Effective Date, then the undersigned shall be entitled to
receive, in addition to any other remedies at law or in equity
available to the undersigned, such number of Units equal to 10% of the
Units purchased in the Private Placement and held by the undersigned
(and to the extent that the Common Stock underlying the Units is not
then registered under the Securities Act). If the Registration
Statement (or any supplement or amendment to the Registration
Statement, if applicable) has not become effective by the Second
Target Effective Date, then the undersigned shall be entitled to
receive, in addition to any other remedies at law or in equity
available to the undersigned, such number of Units equal to 10% of the
Units purchased in the Private Placement and held by the undersigned
(including any Units issued upon the penalty for missing the First
Target Effective Date, if any, and to the extent that the Common Stock
underlying the Units is not then registered under the Securities Act).
If the Registration Statement (or any supplement or amendment to the
Registration Statement, if applicable) has not become effective by the
Final Target Effective Date, then the undersigned shall be entitled to
receive, in addition to any other remedies at law or in equity
available to the undersigned, such number of Units equal to 10% of the
Units purchased in the Private Placement and held by the undersigned
(including any Units issued upon the penalty for missing the First
Target Effective Date and the Second Target Effective Date, as the
case may be, and to the extent that the Common Stock underlying the
Units is not then registered under the Securities Act). The Company
shall issue and deliver the Units required to be delivered by the
Company hereunder to the undersigned within 20 days following the
First Target Effective Date, the Second Target Effective Date and the
Final Target Effective Date, as the case may be.
The Company understands that the undersigned disclaims being an
underwriter, but the undersigned being deemed an underwriter shall not
relieve the Company of any of its obligations hereunder.
(2) The undersigned agrees that it will not effect any disposition of
the Registrable Shares that would constitute a sale within the meaning of
the Securities Act except as contemplated in the Registration Statement
referred to in Section D(1) or pursuant to an available exemption from
registration under the Securities Act and applicable state securities laws,
and further that as a condition to inclusion of the Registrable Shares in
the Registration Statement the undersigned agrees to provide to the Company
such information as it may reasonably request in order to include such
Registrable Shares in such Registration Statement.
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(3) The undersigned agrees not to make any sale of the Registrable
Shares, pursuant to the Registration Statement referred to in this Section
D without effectively causing the prospectus delivery requirements under
the Securities Act to be satisfied. The undersigned acknowledges that there
may occasionally be times when the Company must suspend the use of the
prospectus forming a part of the Registration Statement until such time as
an amendment to such Registration Statement has been filed by the Company
and declared effective by the Commission or until the Company has amended
or supplemented such prospectus. In the event that the Registration
Statement has been suspended, the Company shall provide written notice of
such suspension to the selling shareholders listed in the Registration
Statement. In the event that such Registration Statement is no longer
subject to such suspension, the Company shall provide written notice to
such selling shareholders that such selling shareholders may thereafter
effect sales pursuant to said Registration Statement.
(4) (a) For the purpose of this Section D(4):
(i) the term "Selling Shareholder" shall mean any person or
entity selling Registrable Shares pursuant to the Registration
Statement, and any affiliate thereof;
(ii) the term "Registration Statement" shall include any
preliminary prospectus, final prospectus, exhibit, supplement or
amendment included in or relating to the Registration Statement;
and
(iii) the term "untrue statement" shall mean any untrue
statement or alleged untrue statement of a material fact in the
Registration Statement, or any omission or alleged omission to
state in the Registration Statement a material fact required to
be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
(b) The Company agrees to indemnify and hold harmless each
Selling Shareholder from and against any losses, claims, damages or
liabilities to which such Selling Shareholder may become subject
(under the Securities Act or otherwise) insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement, or
arise out of any failure by the Company to fulfill any undertaking
included herein or in the Registration Statement, and the Company
promptly will reimburse such Selling Shareholder for any legal or
other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim; provided,
however, that the Company shall not be liable in any such case to the
extent that such loss, claim, damage or liability arises out of, or is
based upon, an untrue statement made in reliance upon and in
conformity with written information furnished to the
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Company by or on behalf of such Selling Shareholder specifically for
use in preparation of the Registration Statement, or the failure of
such Selling Shareholder to comply with the covenants and agreements
contained herein; provided further, that the indemnification contained
in this Section D(4) with respect to any prospectus after it has been
amended or supplemented, shall not inure to the benefit of any Selling
Shareholder (or any person controlling such Selling Shareholder) from
whom the person asserting such loss, claim, damage, or liability shall
have purchased Registrable Shares, that are the subject thereof if,
after copies thereof have been delivered by the Company to such
Selling Shareholder, such Selling Shareholder shall have failed to
send or give a copy of the prospectus as then amended or supplemented,
as the case may be, to such person at or prior to the confirmation of
such sale of such Registrable Shares, to such person, and, if such
loss, claim, damage or liability would not have arisen but for the
failure of such Selling Shareholder to deliver the same.
(c) The Selling Shareholder agrees to indemnify and hold harmless
the Company (and each other person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, each officer
of the Company who signs the Registration Statement and each director
of the Company) from and against any losses, claims, damages or
liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or
otherwise), insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of, or are based
upon, any failure of the Selling Shareholder to comply with its
covenants and agreements contained herein, or any untrue statement if
such untrue statement was made in reliance upon and in conformity with
written information furnished by or on behalf of the Selling
Shareholder specifically for use in preparation of the Registration
Statement, and the Selling Shareholder promptly will reimburse the
Company (or such officer, director or controlling person), as the case
may be, for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action,
proceeding or claim.
(d) Promptly after receipt by any indemnified person of a notice
of a claim or the beginning of any action in respect of which
indemnity is to be sought against an indemnifying person pursuant to
this Section D(4), such indemnified person shall notify the
indemnifying person in writing of such claim or of the commencement of
such action, and, subject to the provisions hereinafter stated, in
case any such action shall be brought against an indemnified person
and such indemnifying person shall have been notified thereof, such
indemnifying person shall be entitled to participate therein, and, to
the extent it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person. After notice from
the indemnifying person to such indemnified person of its election to
assume the defense thereof, such indemnifying person shall not be
liable to such
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indemnified person for any legal expenses subsequently incurred by
such indemnified person in connection with the defense thereof. In the
event that the indemnifying party shall have assume the defense of
such action, such indemnifying party shall not enter into any
compromise or settlement without the indemnified party's prior written
consent, which consent shall not be unreasonably withheld, delayed or
denied.
(e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this
Section D(4) is due in accordance with its terms but for any reason is
held to be unavailable or insufficient to hold harmless an indemnified
party, the Company on the one hand and the Selling Shareholder on the
other hand shall, in lieu of indemnifying such indemnified party,
contribute to the aggregate losses, claims, damages or liabilities
referred to in this Section D(4) (including costs of any investigation
and legal and other expenses reasonably incurred in connection
therewith, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted), in such proportions as is
appropriate to reflect the relative benefits received by the Company
and the Selling Shareholder from any offering of Registerable Shares
and the relative fault of the Company and the Selling Shareholder in
connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of the Company
and the Selling Shareholder shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or omission related to information supplied by the
Company (including for this purpose information supplied by any
officer, director, employee or agent of the Company) or to written
information furnished to the Company by or on behalf of the Selling
Shareholder specifically for use in the preparation of the
Registration Statement or any amendment thereof or supplement thereto,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding the provisions of this Section D(4)(e) in no case
shall the Selling Shareholder be liable or responsible for any amount
in excess of the proceeds received by the Selling Shareholder from the
sale of the Registerable Shares included in the Registration
Statement, provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For purposes of
this Section D(4)(e), each person, if any, who controls the Selling
Shareholder within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") shall have the same rights to contribution as the
Selling Shareholder, and each person, if any, who controls the Company
within the meaning of the Section 15 of the Securities Act or Section
20(a) of the Exchange Act, each director of the Company and each
officer of the Company who shall
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have signed the Registration Statement shall have the same rights to
contribution as the Company, subject to the immediately preceding
sentence of this Section D(4)(e). Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action,
suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this
Section D(4)(e), notify such party or parties from whom contribution
may be sought, and the omission so to notify such party or parties
from whom contribution may be sought shall relieve the party or
parties from whom contribution may be sought (if such party was
unaware of such action, suit, or proceeding and was materially
prejudiced by such omission) from any liability under this Section
D(4)(e), but not from any other obligation it or they may have
hereunder or other than under this Section D(4)(e). No party shall be
liable for contribution with respect to the settlement of any action,
suit, proceeding or claim effected without its written consent. The
obligations of the Selling Shareholder to contribute pursuant to this
Section D(4)(e) are several in proportion to its respective number of
Registerable Shares included in the Registration Statement and not
joint.
(5) The restrictions imposed by Sections B(8) and D(2) upon the
transferability of the Registrable Shares shall cease and terminate as to
any particular Registrable Shares when such Registrable Shares shall have
been effectively registered under the Securities Act and sold or otherwise
disposed of in accordance with the intended method of disposition set forth
in the Registration Statement or at such time as an opinion of counsel
satisfactory to the Company shall have been rendered to the effect that
such restrictions are not necessary in order to comply with the Securities
Act.
(6) So long as the Registration Statement is effective covering the
sale of Registrable Shares owned by the undersigned, the Company will
furnish to the undersigned upon request;
(a) any document filed by the Company with the SEC, with the
exception of documents for which confidential treatment has been
granted by the SEC;
(b) upon the reasonable request of the Purchaser, any other
information concerning the Company that is generally available to the
public; and
(c) an adequate number of copies of the prospectuses relating to
the resale of the Registrable Shares to supply to any party requiring
such prospectuses.
(7) With a view to making available to the undersigned the benefit of
Rule 144 promulgated under the Securities Act or any other similar rule or
regulation of the Commission that may at any time permit the undersigned to
sell Common Stock to the public without registration ("Rule 144"), the
Company agrees to:
13
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and
the Exchange Act; and
(c) furnish to the undersigned, so long as the undersigned owns
Registrable Shares, promptly upon request, (i) a written statement by
the Company that it has complied with the reporting requirements of
the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or periodic report of the Company and such other reports
and documents so filed by the Company and (iii) such other information
as may be reasonably requested to permit the undersigned to sell such
securities pursuant to Rule 144 without registration.
E. Miscellaneous.
(1) All pronouns and any variations thereof used herein shall be
deemed to refer to the masculine, feminine, impersonal, singular or plural,
as the identity of the person or persons may require.
(2) Neither this Subscription Agreement nor any provision hereof shall
be waived, modified, changed, discharged, terminated, revoked or canceled
except by an instrument in writing signed by the party effecting the same
against whom any change, discharge or termination is sought.
(3) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally
delivered or sent by registered mail, return receipt requested, addressed:
(i) if to the Company, at Mentortech Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, phone: (▇▇▇) ▇▇▇-▇▇▇▇, Attention: Chief Executive Officer,
(ii) if to the undersigned, at the address for correspondence set forth in
the Representation Letter, or at such other address as may have been
specified by written notice given in accordance with this Section E(3).
(4) Failure of the Company to exercise any right or remedy under this
Subscription Agreement or any other agreement between the Company and the
undersigned, or otherwise, or delay by the Company in exercising such right
or remedy, will not operate as a waiver thereof. No waiver by the Company
will be effective unless and until it is in writing and signed by the
Company.
(5) This Subscription Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the state of New
York, as such laws are applied
14
by New York courts to agreements entered into and to be performed in New
York by and between residents of New York, and shall be binding upon the
undersigned and the Company, and their respective heirs, estate, legal
representatives, successors and assigns and shall inure to the benefit of
the parties hereto, and their respective successors and assigns. If any
provision of this Subscription Agreement is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be
deemed modified to conform with such statute or rule of law. Any provision
hereof that may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision hereof.
F. Execution of Agreement by Power of Attorney.
THE UNDERSIGNED ACKNOWLEDGES THAT THE UNDERSIGNED HAS SIGNED THIS
SUBSCRIPTION AGREEMENT ON THE UNDERSIGNED'S OWN BEHALF, AND NOT BY POWER OF
ATTORNEY, UNLESS SUCH POWER OF ATTORNEY EXPRESSLY PROVIDES FOR THE FURTHER
DELEGATION OF SUCH POWER OF ATTORNEY BY THE HOLDER THEREOF AND, IN SUCH EVENT,
THE UNDERSIGNED REPRESENTS THAT ATTACHED HERETO IS A TRUE AND COMPLETE COPY OF
SUCH POWER OF ATTORNEY.
G. Signature.
The signature page of this Subscription Agreement is contained as part of
the applicable Subscription Package, entitled "Signature Page".
15
REPRESENTATION LETTER
To: Mentortech Inc. (the "Company")
In connection with the purchase by the undersigned purchaser (the
"Purchaser") of Units of the Company (the "Units") for a purchase price of U.S.
$1.10 per Unit, each Unit consisting of 2 shares of common stock of the Company,
par value of $0.01 per share (the "Common Stock") and one warrant to purchase a
share of Common Stock at an exercise price of U.S. $0.55 per warrant (the
"Warrants") and, subject to the satisfaction of certain conditions as described
in Section 7(d) of the Warrant Agreement by and between the undersigned and the
Company dated December 10, 1997, such Warrants being callable by the Company at
any time the market price of the Common Stock, as determined by the closing
price of the Common Stock on a national securities exchange or the Nasdaq
National or SmallCap Market (collectively, "Nasdaq"), or, if the Common Stock is
not admitted for trading on an exchange or on Nasdaq, by the closing bid price
on the Nasdaq OTC Bulletin Board, has closed at or above U.S. $1.00 for any 20
consecutive trading day period prior to the call, such call only being made by
the Company within 15 business days after the Common Stock has closed at or
above U.S. $1.00 for any such 20 consecutive trading day period, we confirm and
agree as follows:
(a) The following information regarding the Purchaser is true and
correct as of the date hereof:
Name:
--------------------------------------------------------------------------------
Social Security or Taxpayer Identification Number:
--------------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------------
(Number and Street)
--------------------------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:
--------------------------------------------------------------------------------
Area Code) (Number)
16
Type of Purchaser:
[ ] Individual [ ] Corporation
[ ] Trust [ ] Retirement Plan
[ ] Partnership
(b) we are authorized to consummate the purchase of the Units;
(c) we are purchasing the Units and will acquire the Common Stock and
Warrants underlying the Units for our own account (or for accounts as to
which we exercise investment discretion and have authority to make and do
make the statements contained in this Representation Letter), and not with
a view to any resale, distribution or other disposition of such securities,
or any part thereof in any transaction that would be in violation of the
securities laws of the United States or any state thereof, subject,
nevertheless, to the disposition of our property being at all times within
our control;
(d) we agree that if we decide to offer, sell or otherwise transfer,
pledge or hypothecate, or otherwise dispose of all or any part of the
Units, the Common Stock and the Warrants we will not offer, sell or
otherwise transfer, pledge or hypothecate or otherwise dispose of any of
them (other than pursuant to an effective registration statement under the
Securities ▇▇▇ ▇▇▇▇, as amended (the "Securities Act")), directly or
indirectly unless:
(i) the disposition is to the Company; or
(ii) the disposition is made pursuant to the exemption from
registration under the Securities Act provided by Rule 144 thereunder
if available; or
(iii) the disposition is made in a transaction that does not
require registration under the Securities Act or any applicable United
States state laws and regulations governing the offer and sale of
securities, and we have furnished to the Company an opinion of
counsel, of recognized standing reasonably satisfactory to the Company
to that effect;
(e) we understand and acknowledge that upon the original issuance
thereof, and until such time as the same is no longer required under
applicable requirements of the Securities Act or state securities laws, the
certificates representing the Units, the Common Stock and
17
the Warrants and all certificates issued in exchange therefor or in
substitution thereof, shall bear a legend substantially in the form of the
following:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED
FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE,
DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE
BOOKS OF THE COMPANY, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER
ALL APPLICABLE UNITED STATES FEDERAL SECURITIES LAWS OR COMPLIANCE
WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE AT THE OPTION
OF THE COMPANY, TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S
COUNSEL, IN FORM ACCEPTABLE TO THE COMPANY, THAT NO VIOLATION OF SUCH
REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR
ASSIGNMENT";
(f) we have been afforded the opportunity (i) to ask such questions as
we have deemed necessary of, and to receive answers from, representatives
of the Company concerning the terms and conditions of the offering of the
Units, and (ii) to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy and completeness of the information
contained in the Offering Documents; and
(g) (i) we are an "accredited investor" within the meaning of Rule
501(a) under the Securities Act as set forth in Exhibit A to this
Representation Letter, and by reason of our business and financial
experience and the business and financial experience of those persons we
retain to advise us with respect to investment in the Units we, together
with our advisors, have such knowledge, sophistication and experience in
business and financial matters that we are capable of evaluating the merits
and risks of the prospective investment; or (ii) we acknowledge that we
have received the information contained in the Company's Registration
Statement on Form SB-2, as amended, dated October 14, 1997 and the
Company's Confidential Private Placement Memorandum, dated November 19,
1997, which includes a description of the securities being offered hereby
and the use of proceeds of the offering.
We acknowledge that the representations and warranties and agreements
contained herein are made by us with the intent that they may be relied upon by
you in determining our eligibility or (if applicable) the eligibility of others
on whose behalf we are contracting hereunder to purchase the Units. We further
agree that by accepting the Units we shall be representing and warranting that
the foregoing representations and warranties are true as at the closing time
with the same force and effect as if they had been made by us at the closing
time and that they shall survive the purchase by
18
us of the Units and shall continue in full force and effect notwithstanding any
subsequent disposition by us of the Units.
You are irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
19
MENTORTECH INC.
SIGNATURE PAGE
Your signature on this Signature Page evidences the agreement by the
undersigned Purchaser to be bound by the Subscription Agreement and the
Representation Letter.
1. The undersigned hereby represents that (a) the information contained in
this Representation Letter is complete and accurate and (b) the undersigned
Purchaser will notify the Company (contact at the telephone number contained on
page 9 hereof) immediately if any material change in any of this information
occurs before the acceptance of the undersigned Purchaser's subscription and
will promptly send the Company written confirmation of such change.
2. The undersigned Purchaser hereby certifies that it has read and
understands this Subscription Agreement.
3. The undersigned Purchaser hereby represents and warrants that he or she
is an individual acting in his or her own capacity or that the person signing
this Subscription Agreement on behalf of the Purchaser has been duly authorized
by the Purchaser to acquire the Units and sign this Subscription Agreement on
behalf of the Purchaser and, further, that the undersigned Purchaser has all
requisite authority to purchase such Units and enter into this Subscription
Agreement.
-------------------------- ----------------------------
Number of Units Date
----------------------------
Name of Purchaser
(Please Type or Print)
By: _________________________________
(Signature)
Name: ________________________________
(Please Type or Print)
Title: _________________________________
20
Accepted and Agreed as of
this _____ day of December, 1997.
MENTORTECH INC.
By: _____________________________
▇▇▇ ▇▇▇▇▇▇▇
President and CEO
THE UNITS, COMMON STOCK AND WARRANTS HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN OPINION OF
COUNSEL, SATISFACTORY TO COUNSEL TO THE COMPANY, HAS BEEN DELIVERED TO THE
EFFECT THAT REGISTRATION OF SUCH SECURITIES IS NOT REQUIRED.
21
Exhibit A
1. Accredited Investor (defined in Rule 501(a) of Securities and Exchange
Commission ("SEC") Regulation D) means any person who comes within any of
the following categories, or who the Company reasonably believes comes
within any of the following categories, at the time of the sale of the
securities to that person:
Please initial next to the portion of the definition applicable to you:
(a) any bank as defined in Section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act whether acting in its
individual or fiduciary capacity; any broker or dealer registered
pursuant to Section 15 of the Exchange Act, any insurance company as
defined in Section 2(13) of the Securities Act; any investment company
registered under the Investment Company Act of 1940 (the "ICA") or a
business development company as defined in Section 2(a)(48) of the
ICA; Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and maintained
by a state, its political subdivisions, or any, agency or
instrumentality of a state or its political subdivisions for the
benefit of its employees, if such plan has total assets in excess of
$5,000,000; employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974 ("ERISA") if the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of
the ERISA, which is either a bank, savings and loan association,
insurance company or registered investment adviser, or, if the
employee benefit plan has total assets in excess of $5,000,000 or, if
a self-directed plan, with investment decisions made solely by persons
that are accredited investors;
(b) any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
(c) any organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000;
(d) any director, executive officer, or general partner of the Company or
any director, executive officer, or general partner of a general
partner of the Company;
(e) any natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of the purchase exceeds $1,000,000;
22
a (f) any natural person who had an individual income in excess of $200,000
in each of the two most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the
current year;
(g) any trust, with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the securities offered hereby, whose
purchase is directed by a sophisticated person as described in SEC
Rule 506(b)(2)(ii); and
(h) any entity in which all of the equity owners are Accredited Investors.
(i) any entity (or person) that has received the information contained in
the Company's Registration Statement on Form SB-2, as amended, dated
October 14, 1997 and the Company's Confidential Private Placement
Memorandum, dated November 19, 1997, which includes a description of
the securities being offered hereby and the use of proceeds of the
offering.
The Investor must initial beside the portion of the above definition
applicable to it.
23
W-9 TO BE INSERTED HERE
24
