4.1.  Subscription Agreements

Any investor who wishes to invest in a private placement must sign and complete a subscription agreement. The subscription agreement contains information about the offer, but it also contains information about the investor, such as suitability information and the number of shares that the investor would like to purchase. Subscription agreements are often used to conduct a suitability analysis.

The subscription agreement provides general information about the offering, such as:

•The number of shares on offer

•The price of the shares

•The minimum number of shares required to invest

•A closing date

•The amount of the proceeds that will go to the issuer

•Information about the escrow agent, including how and when the money will be returned if the private placement is cancelled

•The amount of the payment to the placement agent and whether any warrants will be offered as part of the placement agent’s payment

•A representations, warranties, and covenants letter (described below)

•A statement of whether the offering is conducted on a best-efforts or firm-commitment basis (usually it will be a best-efforts basis)

The subscriber (investor) will need to fill out the following information on the subscription agreement:

•The number of shares he wishes to purchase

•The total dollar amount of his investment

•Name, address, date, and a signature

•Suitability information

Any accompanying checks will be logged in a sales blotter and processed according to the terms listed in the PPM. This will usually involve sending the checks promptly to the escrow agent.

When an investor’s subscription documents are complete and have been approved by the issuer, an officer of the company will formally accept and sign the subscription agreement. (See Appendix A for an example of a private placement subscription agreement.)

With the subscri