SUBSCRIPTION AGREEMENT
Avenue Entertainment Group, Inc.
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Ladies and Gentlemen:
1. Subscription. Xxxxxxx Enterprises, Inc., a California corporation
("REI"), hereby agrees to purchase from Avenue Entertainment Group, Inc., a
Delaware corporation (the "Company"), six hundred thousand (600,000) shares (the
"Shares") of common stock of the Company (the "Common Stock"), par value $.01
per share, for a purchase price of $1.00 per Share (the "Purchase Price")
pursuant to the terms and conditions set forth below.
2. Closing. Upon execution of this Subscription Agreement (the "Closing"),
REI shall pay to the Company the sum of Fifty Thousand Dollars ($50,000.00) as
the portion of the Purchase Price for the initial fifty thousand (50,000) Shares
(the "Initial Shares"). On or before the last business day of each month
commencing on the month following the month in which the Closing occurs, REI
shall purchase at least fifty thousand (50,000) of the five hundred and fifty
thousand (550,000) remaining Shares (the "Remaining Shares") until such time as
all such Remaining Shares have been purchased by REI.
All payments due from REI to the Company as part of the Purchase Price
shall be made by electronic wire transfer in accordance with the following
instructions:
Account Name: Avenue Entertainment Group, Inc.
Bank Name: City National Bank
ABA #: 1220-16066
Account #: 0101-618072
or by delivery of a bank check or certified check made payable to "Avenue
Entertainment Group, Inc." against delivery by the Company to REI of
certificates representing the purchased Shares. Notwithstanding the foregoing,
REI shall have the right to purchase in excess of fifty thousand (50,000) of the
Remaining Shares, up to the total unpurchased Remaining Shares, in any month by
notifying the Company in writing of its desire to do so at least ten (10)
business days prior to the date on which payment for such Remaining Shares is to
be made, specifying in such written notice the number of Remaining Shares REI
desires to purchase in excess of the required fifty thousand (50,000) Remaining
Shares for such month.
3. Designation of Board Member. Following the Closing, REI shall have the
right to designate one member of the board of directors of the Company (the
"Board"); provided, however, that unless otherwise agreed by Company, following
any Default by REI, as hereinafter defined, such right will terminate and the
remaining shareholders of Company shall have the right to immediately remove
such Board member and (and REI hereby agrees to vote its shares in favor of such
removal in such event) and immediately replace such Board member with another
member nominated by Company, in its sole discretion.
4. Default. In the event REI fails to purchase at least fifty thousand
(50,000) Remaining Shares from the Company by the last day of any month that REI
is required to purchase such Remaining Shares pursuant to Sections 1 and 2 above
and to pay to Company the applicable portion of the Purchase Price therefor by
said date then, in addition to any and all other rights and remedies to which
Company may be entitled hereunder, at law, in equity or otherwise, such failure
shall constitute a default of this Subscription Agreement by REI ("Default").
Upon the occurrence of a Default, in addition to all other rights and remedies
available to Company hereunder, at law, in equity or otherwise, the Company
shall have the right, at its sole discretion, to do any or all of the following:
(a) commence charging interest on the entire unpaid portion of the Purchase
Price calculated at the maximum legal rate allowable; (b) declare any and all
unpaid portion of the Purchase Price to be immediately due and payable, and (c)
terminate this Subscription Agreement by giving REI ten (10) days written notice
of such Default; provided that such Default is not cured within said ten (10)
day period. In the event that this Subscription Agreement is terminated by the
Company pursuant to this Section 4, REI's rights to purchase Remaining Shares
pursuant to this Subscription Agreement shall be terminated and all outstanding
Remaining Shares shall be immediately returned to the Company without further
instruction required from REI. Nothing contained in this Section 4 or elsewhere
in this Agreement shall be deemed or construed to limit or waive any rights or
remedies to which the Company may be entitled in the event of a Default by REI.
5. Transfer Restrictions.
(a) REI realizes that, as of the Closing, the Shares are not registered
under the Securities Act of 1933, as amended (the "Act"), or any foreign or
state securities laws. REI agrees that the Shares will not offer, pledge,
hypothecate, sell, contract to sell, grant any option for the sale of, or
otherwise dispose of, directly or indirectly (collectively "Dispose Of") any of
the Shares, except in compliance with the Act, if applicable, and applicable
foreign and state securities laws and the restrictions set forth in Section
5(a). Purchasers of Shares can only Dispose Of the Shares pursuant to
registration under the Act or pursuant to an exemption therefrom. REI
understands that to Dispose Of the Shares may require in some jurisdictions
specific approval by the appropriate governmental agency or commission in such
jurisdiction. REI has been advised that, except as provided in Section 7, the
Company has no obligation, and does not intend, to cause the Shares to be
registered under the Act or the securities law of any other jurisdiction or to
comply with the requirements for any exemption under the Act, including but not
limited to those provided by Rule 144 and Rule 144A promulgated under the Act,
or under the securities law of any other jurisdiction. REI understands the legal
consequences of the foregoing to mean that REI may have to bear the economic
risk of its investment in the Company for an indefinite period of time.
(b) To enable the Company to enforce the transfer restrictions contained in
Sections 5(a) and 5(b), REI hereby consents to the placing of appropriate
legends upon the certificates representing the Common Stock with respect to the
Shares.
6. Representations and Warranties. To induce the Company to accept REI's
subscriptions, REI hereby represents and warrants to the Company that:
(a) it is duly authorized to execute this Subscription Agreement and this
Subscription Agreement, when executed and delivered by REI, will constitute a
legal, valid, and binding obligation enforceable against REI in accordance with
its terms; and the execution, delivery, and performance of this Subscription
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all requisite corporate or other necessary action on the part
of REI;
(b) the Shares subscribed for hereby are being acquired by REI for
investment purposes only, for the account of REI and not with the view to any
resale or distribution thereof, and REI is not participating, directly or
indirectly, in a distribution of such Shares and will not take, or cause to be
taken, any action that would cause REI to be deemed an "underwriter" of such
Shares as defined in Section 2(11) of the Act;
(c) REI has had access to all materials, books, records, documents, and
public information relating to the Company, including but not limited to (i) the
Annual Report on Form 10-KSB for the year ended December 31, 1999, (ii) the
Quarterly Report on Form 10-QSB for the quarter ended June 30, 2000;
(d) REI acknowledges and understands that investment in the Shares involves
a high degree of risk, including, but not limited to, all of the risks expressly
set forth herein;
(e) REI acknowledges that it and its advisors have been given an
opportunity to ask questions of, and receive answers from, officers of the
Company concerning all material aspects of the Company and its business, and
that any request for such information has been fully complied with to the extent
the Company possesses such information or can acquire it without unreasonable
effort or expense;
(f) REI has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of an investment in the
Company and can afford a complete loss of its investment in the Company;
(g) REI has never been notified by the Internal Revenue Service that it is
subject to backup withholding;
(h) REI recognizes that an investment in the Company involves a high degree
of risk and that no governmental agency has passed upon the issuance of the
Shares or made any finding or determination as to the fairness of this
investment;
(i) if REI is purchasing the Shares subscribed for hereby in a
representative or fiduciary capacity, the representations and warranties
contained herein shall be deemed to have been made on behalf of the person or
persons for whom such Shares are being purchased;
(j) REI has not entered into any agreement to pay commissions to any person
with respect to the purchase or sale of the Shares, except commissions for which
REI will be responsible;
(k) REI, either alone or with a purchaser representative (as such term is
defined in Rule 501(h) under the Securities Act), has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Shares it will receive pursuant
hereto. REI, and its advisors, have been given access to public information to
permit them to fairly and adequately analyze the respective businesses,
properties, assets and liabilities of Company, and to make an informed
assessment as to the appropriateness and commercial reasonableness of the
transactions contemplated hereby. Based upon their independent review of such
information, REI has determined to proceed with the transactions contemplated
hereby without reliance upon any representations or warranties of Company except
as specifically set forth herein and in the public records and securities
filings of Company.
7. Registration of Shares Under the Act.
(a) The Company shall, (i) not later than December 31, 2000 file a
registration statement (the "Registration Statement") and (ii) after the
Registration Statement is declared effective under the Act, furnish REI with
such number of copies of the prospectus included in the Registration Statement
as REI may reasonably request to facilitate the disposition of the Shares owned
by REI.
(b) If at any time during the period that REI owns any Shares an event (an
"Event") shall have occurred that has caused the Registration Statement to
contain an untrue statement of a material fact or to omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made, the
Company shall (i) give REI a notice (the "No-Sell Notice") that an Event has
occurred, (ii) promptly (or, if in the reasonable judgment of the Company
disclosure of the Event would be detrimental to the Company, promptly after
disclosure of the Event would not be detrimental to the Company) take all
commercially reasonable efforts to cause the Registration Statement not to
contain an untrue statement of a material fact or to omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made, and
(iii) give REI a notice (the "Sell Notice") when the Registration Statement does
not contain an untrue statement of a material fact or to omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made.
REI shall not sell any Shares pursuant to the Registration Statement after it
has received a No-Sell Notice until it has received a subsequent Sell Notice.
(c) In connection with the Registration Statement, REI shall furnish to the
Company such information as the Company shall reasonably request.
8. Indemnification. REI understands the meaning and legal consequences of
the representations and warranties made by REI in this Agreement, and agrees to
indemnify and hold harmless the Company and each of the Company's directors,
officers, stockholders, employees, counsel, agents, successors, and assigns, if
any, from and against any and all loss, damage, liability, or expense
(including, without limitation, attorneys' fees), as and when incurred, due to
or arising out of (in each case in whole or in part) any breach of any
representation or warranty made by REI set forth herein or in any other
agreement or other document furnished by REI to any of the foregoing in
connection with this transaction, any failure by REI to fulfill any of its
covenants or agreements set forth herein or therein, or arising out of the
resale or distribution by REI of the Shares or any portion thereof in violation
of the Act or any applicable foreign or state securities or "blue sky" law.
9. Further Documents. REI agrees that it will execute such other documents
as may be necessary or desirable in connection with the transactions
contemplated hereby.
10. Modification. Neither this Subscription Agreement nor any provisions
hereof shall be waived, modified, discharged, or terminated except by an
instrument in writing signed by the party against whom any such waiver,
modification, discharge, or termination is sought.
11. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar telecommunications equipment) against receipt to the party to
whom it is to be given, (i) if to the Company, at its address set forth on the
first page hereof, (ii) if to REI, at its address set forth on the signature
page hereto, or (iii) in either case, to such other address as the party shall
have furnished in writing in accordance with the provisions of this Section 11.
Any notice or other communication given by certified mail shall be deemed given
at the time of certification thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof. Any notice
given by other means permitted by this Section 11 shall be deemed given at the
time of receipt thereof.
12. Counterparts. This Subscription Agreement may be executed through the
use of separate signature pages or in any number of counterparts, and each such
counterpart shall, for all purposes, constitute one agreement binding on all
parties, notwithstanding that all parties are not signatories to the same
counterpart.
13. Entire Agreement. This Subscription Agreement contains the entire
agreement of the parties with respect to the subject matter hereof and there are
no representations, covenants, or other agreements except as stated or referred
to herein.
14. Severability. Each provision of this Subscription Agreement is intended
to be severable from every other provision, and the invalidity or illegality of
any portion hereof shall not affect the validity or legality of the remainder
hereof.
15. Assignability. This Subscription Agreement is not transferable or
assignable by REI.
16. Applicable Law. This Subscription Agreement has been negotiated and
consummated in the State of New York and shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflict of laws.
17. Choice of Jurisdiction. Any action or proceeding arising, directly,
indirectly, or otherwise, in connection with, out of or from this Subscription
Agreement, any breach hereof or any transaction covered hereby shall be resolved
within the City of Xxx Xxxx, Xxxxx xx Xxx Xxxx, Xxxxxx Xxxxxx of America.
Accordingly, the parties consent and submit to the jurisdiction of the United
States federal and state courts located within the City of Xxx Xxxx, Xxxxx xx
Xxx Xxxx, Xxxxxx Xxxxxx of America.
18. Taxpayer Identification Number. Each verifies under penalties of
perjury that any Taxpayer Identification Number or Social Security Number shown
on the signature page hereto is true, correct, and complete.
19. Pronouns. Any personal pronoun shall be considered to mean the
corresponding masculine, feminine, or neuter personal pronoun, as the context
requires.
IN WITNESS WHEREOF, the undersigned have executed this Subscription
Agreement, the __ day of November, 2000.
XXXXXXX ENTERPRISES, INC.
By:
Name:
Title:
Address:
C/O Law Offices of A. Xxxxxxxx Xxxxxx
0000 Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
00-0000000
(Tax I.D. Number)
ACCEPTED:
Avenue Entertainment Group, Inc.
By:
Name: Xxxx Xxxxxx, President
Date: November __, 2000
