STOCK SUBSCRIPTION AGREEMENT
THIS STOCK SUBSCRIPTION AGREEMENT (the "Agreement") dated December __,
1999 is made between XxxXxxxxx.xxx, Inc., a Delaware Corporation, (the
"Corporation") and ______________ (the "Investor').
1. Subscription. Subject to the terms and conditions hereof, Investor
hereby tenders a subscription for _____( ) units, each unit consisting of fifty
thousand shares of common stock of the Corporation ($.01 par value per share),
at a purchase price of one hundred thousand dollars ($100,000) or two dollars
($2.00) per share, subject to the terms and conditions as set forth herein
below. (Collectively, each 50,000 share block shall be a "Unit" or the "Units").
Full payment of the purchase price is included herewith.
2. Acceptance of Subscription. It is understood and agreed that the
Corporation shall have the right to accept or reject this Agreement, in whole or
in part, and that the same shall be deemed to be accepted on behalf of the
Corporation only when it is signed by the Corporation.
3. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Corporation, and to its respective agents and
employees, as follows:
a. Accredited Investor. The Investor is an accredited investor
("Accredited Investor") as defined in Securities and Exchange
Commission ("SEC") Rule 501(a) and as indicated on such Investor's
counterpart signature page attached hereto.
b. Adequate Disclosure. The Investor or its agents or
representatives have received, read and understand all relevant
financial statements and related material of the Corporation as
requested by the Investor.
c. No Assurances. It has been called to the attention of the
Investor in the relevant financial statements reviewed by the Investor
and by those individuals with whom the Investor has dealt, that
investment in the Corporation involves a high degree of risk and that
no assurances are or have been made regarding the profits which may or
may not inure to the benefit of the Investor.
d. Requisite Authority. The Investor, if a corporation,
partnership or trust, has the requisite authority and is otherwise duly
qualified to purchase and hold the Units.
e. Requisite Age of Investor. The Investor, if an individual,
is at least twenty-one (21) years of age.
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f. Restricted Securities.
(i) The Investor hereby confirms that the Investor has been
informed that the Units are restricted securities under
the Act and may not be resold or transferred unless the
Units are first registered under federal and state
securities laws or unless an exemption from such
registration is available. Accordingly, the Investor
hereby acknowledges that the Investor is prepared to
hold the Units for an indefinite period of time and that
the Investor is aware that Rule 144 of the Securities
and Exchange Commission (the "Commission") issued under
the Act is not presently available to exempt the sale of
the Units from the registration requirements of the Act.
(ii) The Investor is aware of the adoption of Rule 144 by the
Commission, promulgated under the Act, which permits
limited public resales of securities acquired in a
nonpublic offering, subject to the satisfaction of
certain conditions. The Investor understands that under
Rule 144, the conditions include, among other things:
the availability of certain current public information
about the issuer, the resale occurring not fewer than
one (1) year after the party has purchased and paid for
the securities to be sold, the sale being through a
broker in an unsolicited "broker's transaction" and the
amount of securities being sold during any three (3)
month period not exceeding specified limitations. The
Investor acknowledges and understands that the
Corporation may or may not be satisfying the current
public information requirement of Rule 144 at the time
the Investor wishes to sell the Units or meet other
conditions under Rule 144 which are required of the
Corporation. If so, the Investor understands that he
will be precluded from selling the securities under Rule
144 even if the one-(1) year holding period of said Rule
has been satisfied. Investor agrees not to make, without
the prior written consent of the Corporation, any public
offering or sale of the Units although permitted to do
so pursuant to Rule 144(k) promulgated under the Act,
until the date on which the Corporation effects its
secondary registered public offering pursuant to the
Act.
(iii) Prior to acquisition of the Units, the Investor acquired
sufficient information about the Corporation to reach an
informed knowledgeable decision to acquire the Units.
The Investor has such knowledge and experience in
financial and business matters as to make him capable of
evaluating the risks of the prospective investment and
to make an informed investment decision. The Investor is
able to bear the economic risk of complete and total
loss of his investment in the Units.
g. No Outside Representations or Warranties. Investor has
received no representations or warranties from the Corporation or its
officers, directors, employees, or agents other than those otherwise
set forth herein.
4. Representations and Warranties of the Corporation. The Corporation
hereby represents and warrants to the Investor as follows:
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a. This Agreement has been duly and validly authorized,
executed and delivered by or on behalf of the Corporation and
constitutes the valid, binding and enforceable agreement of the
Corporation.
b. The Corporation was duly and validly organized and is
validly existing under the laws of the State of Delaware and has full
power and authority to conduct the business in which it is engaged and
intends to engage.
c. The Units purchased pursuant to this Agreement are validly
issued and, subject to the payment of the purchase price, will be fully
paid and non-assessable.
5. Notices. The address for all parties for all purposes shall be the
address set forth on the signature pages to this Agreement or such other address
of which the other parties have received notice. Any notice to be given under
this Agreement shall be made in writing, and shall be deemed to be given when
delivered to the party at its address or when sent by first class, certified or
registered mail, return receipt requested, to such party at such address as it
shall designate.
6. Piggy-back Registration Rights.
(a) In the event of a secondary public offering of the Corporation's
securities registered pursuant to the Act (other than a registration (A) on Form
S-8 or S-4 or any successor or similar forms, (B) relating to Common Stock
issuable upon exercise of employee stock options or in connection with any
employee benefit or similar plan of the Corporation or (C) in connection with a
direct or indirect acquisition by the Corporation of another company), whether
or not for the sale of its own account, the Corporation will give at least
thirty (30) days' prior written notice of the filing thereof to all holders of
Common Stock then outstanding that (x) is not registered under the Securities
Act or (y) is not eligible for sale under circumstances in which all of the
applicable conditions of Rule 144 (or any similar provisions then in effect)
under the Securities Act are met or (z) may not be sold pursuant to Rule 144(k),
and the Corporation has not delivered a new certificate or other evidence of
ownership for such shares not bearing a restrictive legend ("Registrable
Stock").
(i) The Corporation's notice shall afford the holders
of all Registrable Stock an opportunity to elect within thirty (30) days after
receipt thereof to include in such filing their Registrable Stock.
(ii) The inclusion of Registrable Stock in any such
registration involving an underwritten public offering shall be upon the
condition that the holders thereof complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements and the
provisions hereof in respect of registration rights.
(iii) For so long as any Registrable Stock remain
outstanding, the Corporation shall be obligated under this Section 6(a) to
afford the holders thereof the right to participate in each and every such
registration of Common Stock of the Corporation. If, at any time after giving
written notice of its intention to register any Common Stock pursuant to this
Section 6(a) and prior to the effective date of the registration statement filed
in connection with such registration, the Corporation shall determine for any
reason not to register such stock, the Corporation shall give written notice to
all such holders of Registrable Stock and, thereupon, shall be relieved of its
obligation to register any Registrable Stock in connection with such
registration (without prejudice, however, to rights of any such holder under
Section 6(a) above).
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(iv) If a registration pursuant to this Section 6(a)
involves an underwritten public offering and the managing underwriter shall
advise the Corporation that, in its view, the number of shares of Common Stock
which the Corporation and such holders of Registrable Stock intend to include in
such registration exceeds the maximum offering size, the number of shares to be
included in such registration shall be limited by excluding the shares to be
registered in such offering, to the extent required by such limitation, in the
following order: (A) first, any securities or shares (other than Registrable
Stock) subject to other contractual registration rights, (B) next, the number of
shares that may be included in the registration and underwriting by holders of
Registrable Stock shall be allocated among all holders thereof, in proportion,
as nearly as practicable, to the respective amounts of securities which such
holders of Registrable Stock would otherwise be entitled to include in such
registration, and (C) last, the shares being registered by the Corporation.
(b) Expenses of Registration. The costs and expenses (other
than underwriting discount or commission) of the registrations effected pursuant
to Section 6(a) above and of all other actions which the Corporation is required
to take or effect pursuant to this Section 6 shall be paid by the Corporation
(including, without limitation, all federal, state, NYSE or NASD registration
and filing fees, printing expenses, costs of special audits incidental to or
required by any such registration, and fees and disbursements of counsel for the
Corporation and for the holders of Registrable Stock (including allocated costs
of internal counsel)), except that all such expenses in connection with any
amendment or supplement to the registration statement or the prospectus used in
connection therewith required to be filed more than nine (9) months after the
date on which such registration statement becomes effective under the Securities
Act because any holder has not effected the disposition of Registrable Stock
covered by such registration statement shall be borne by such holder or holders,
in such proportions as they may agree.
(c) Registration Procedures. Whenever holders of Registrable
Stock request that any Registrable Stock be registered pursuant to Section 6(a)
above, the Corporation will, subject to the provisions of this Section 6, use
reasonable efforts to effect the registration of such Registrable Stock in
accordance with the intended method of disposition thereof as quickly as
practicable, and in connection with any such request:
(i) The Corporation will as expeditiously as possible
prepare and file with the Commission a registration statement on any form for
which the Corporation then qualifies and which counsel for the Corporation shall
deem appropriate and which form shall be available for the sale of the
Registrable Stock to be registered thereunder in accordance with the intended
method of distribution thereof, and use reasonable efforts to cause such filed
registration statement to become and remain effective for a period of not less
than nine (9) months (or such shorter period in which all of the Registrable
Stock of the holders thereof included in such registration statement shall have
actually been sold thereunder).
(ii) The Corporation will, if requested, prior to
filing a registration statement or prospectus or any amendment or supplement
thereto, furnish to each holder of Registrable Stock and each underwriter, if
any, of the Registrable Stock covered by such registration statement copies of
such registration statement as proposed to be filed, and thereafter the
Corporation will furnish to such holder and underwriter, if any, such number of
copies of such registration statement, each amendment and supplement thereto (in
each case including all exhibits thereto and documents incorporated by reference
therein), the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such holder or underwriter
may reasonably request in order to facilitate the disposition of the Registrable
Stock owned by such holder.
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(iii) After the filing of the registration statement,
the Corporation will promptly notify each holder holding Registrable Stock
covered by such registration statement of any stop order issued or threatened by
the Commission and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered.
(iv) The Corporation will use reasonable efforts to
(A) register or qualify the Registrable Stock covered by such registration
statement under such other securities or blue sky laws of such jurisdictions in
the United States as any holder holding such Registrable Stock reasonably (in
light of such holder's intended plan of distribution) requests and (B) cause
such Registrable Stock to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Corporation and do any and all other acts and
things that may be reasonably necessary or advisable to enable such holder to
consummate the disposition of the Registrable Stock owned by such holder;
provided, that the Corporation will not be required to (A) qualify generally to
do business in any jurisdiction where it would not otherwise be required to
qualify but for this subsection (iv), or (B) subject itself to taxation in any
such jurisdiction, or (C) consent to general service of process in any such
jurisdiction.
(v) The Corporation will immediately notify each
holder holding such Registrable Stock, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the occurrence
of an event requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Stock, such prospectus will not contain an untrue statement of a
material fact or omit to state any 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 and promptly prepare and make
available to each such holder any such supplement or amendment.
(vi) The Corporation will otherwise use its best
efforts to comply with all applicable rules and regulations of the Commission,
and make available to its security holders, as soon as reasonably practicable,
an earnings statement covering a period of 12 months, beginning within three
months after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act.
(vii) The Corporation may require each such holder to
promptly furnish in writing to the Corporation such information regarding the
distribution of the Registrable Stock as the Corporation may from time to time
reasonably request and such other information as may be legally required in
connection with such registration.
(viii) Each such holder of Registrable Stock agrees
that, upon receipt of any notice from the Corporation of the happening of any
event of the kind described in Section 6(c)(iii) or 6(c)(v) above (a "Stop-sale
Notice"), such holder will forthwith discontinue disposition of Registrable
Stock pursuant to the registration statement covering such Registrable Stock
until such holder's receipt of a second notice from the Corporation that such
stop-order has been removed and/or the copies of the supplemented or amended
prospectus contemplated by Section 6(c)(v) above have been filed, and, if so
directed by the Corporation, such holder will deliver to the Corporation all
copies, other than any permanent file copies then in such holder's possession,
of the most recent prospectus covering such Registrable Stock at the time of
receipt of such Stop-sale Notice. In the event that the Corporation shall give
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such Stop-sale Notice, the Corporation shall extend the period during which such
registration statement shall be maintained effective (including the period
referred to in Section 6(e)(i) above) by the number of days during the period
from and including the date of the giving of notice pursuant to Section
6(e)(iii) or 6(e)(v) above, as applicable, to the date when the Corporation
shall give the holders of Registrable Stock notice that the Stop-sale Notice has
been removed and/or make available to such holders a prospectus supplemented or
amended to conform with the requirements of Section 6(e)(v) above.
(d) Restriction on Sale. In the event the Corporation
registers its securities under the Securities Act pursuant to a firm commitment
underwriting, each holder of Registrable Stock will not, for such period of time
specified by the managing underwriter, but not in excess of nine (9) months
following the effective date of such registration statement, sell or otherwise
transfer any of shares of Registrable Stock without the prior written consent of
such underwriter, provided that each of the Corporation's executive officers and
directors agree to the same restriction for the same period of time.
7. Accredited Investor Definition. The term "Accredited Investor" as
used herein refers to:
a. A person or entity who is a director or executive officer
of the Corporation;
b. Any bank as defined in section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; insurance company as defined in
section 2(13) of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as
defined in section 2(a)(48) of that Act; any 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; any employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as
defined in section 3(21) of such Act, 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;
c. Any private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of 1940;
d. 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;
e. Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase exceeds
$1,000,000;
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f. Any natural person who had an individual income in excess
of $200,000 in each of the two (2) 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,
whose purchase is directed by a person who has such knowledge and
experience in financial and business matters that he is capable of
evaluating the merits and risks of the prospective investment; or
h. Any entity in which all of the equity owners are accredited
investors.
As used in this Section 3.6(a), the term "net worth" means the excess
of total assets over total liabilities. For the purpose of determining a
person's net worth, the principal residence owned by an individual should be
valued at fair market value, including the cost of improvements, net of current
encumbrances. As used in this Section 3.6(a), "income" means actual economic
income, which may differ from adjusted gross income for income tax purposes.
Accordingly, the undersigned should consider whether it should add any or all of
the following items to its adjusted gross income for income tax purposes in
order to reflect more accurately its actual economic income: any amounts
attributable to tax-exempt income received, losses claimed as a limited partner
in any limited partnership, deductions claimed for depletion, contributions to
an XXX or Xxxxx retirement plan, and alimony payments.
8. Blue Sky Statements. The Subscriber agrees that the Unit or Units
being purchased are for its own account for investment, and not for distribution
or resale to others. The Subscriber represents that the Subscriber has adequate
means of providing for the Subscriber's current needs and possible personal
contingencies, and that the Subscriber has no need for liquidity of this
investment.
It is understood that all documents, records and books pertaining to
this investment have been made available for inspection by the Subscriber and/or
any representative thereof, and that the books and records of the Company will
be available upon reasonable notice, for inspection by Subscriber during
reasonable business hours at the Company's principal place of business. The
Attorney General of the State of New York does not pass upon or endorse the
merits of this or any private offering. Any representations to the contrary are
unlawful.
9. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California.
10. Parties. Except as otherwise provided herein, this Agreement shall
be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and assigns.
11. Integration. This Agreement constitutes the entire agreement among
the parties pertaining to the subject matter contained in the Agreement and
supersedes any prior understandings of the parties.
12. Offer Only. Until execution of this Agreement by the Investor and
delivery of a fully executed copy to the Corporation, this Agreement shall
constitute an offer by the Investor to purchase the number of Units indicated,
which may be accepted or rejected, in whole or in part, by the Corporation, in
its sole discretion.
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13. Form of Ownership. Please indicate the form of ownership you desire
for the Units:
_______________ Individual (One signature required)
_______________ Joint Tenants with right of survivorship (All
parties must sign)
_______________ Tenants-in-Common (All parties must sign)
_______________ Corporation (signature of authorized party or
parties)
_______________ Partnership (Signature of general partner and
additional signatures if required by partnership agreement)
_______________ Trust (Trustee must sign as follows: "[trustee
name] as trustee for [trust name] dated
_______________________")
_______________ Other entities (As required by applicable
papers)
Please PRINT the exact name Investor desires for registration of the Units. If
purchasing Jointly with a spouse or children, the registration will
automatically be recorded as "joint tenants with right of survivorship' unless
you designate otherwise.
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TO BE EXECUTED BY INDIVIDUAL INVESTORS
IN WITNESS WHEREOF, the undersigned has executed this Stock
Subscription Agreement on this _____ day of _______________.
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Signature of Investor Signature of Joint Investor
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Print Name of Investor Print Name of Joint Investor
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Soc. Sec. No. of Investor Soc. Sec. No. of Joint Investor
SUBSCRIPTION ACCEPTED ON ______________________
By:
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Xxxxxx X. Xxxxxx
Its: Chief Executive Officer
Mailing Address of Investor:
(Do not use P.O. Box)
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TO BE EXECUTED BY PARTNERSHIPS, CORPORATIONS, TRUSTS AND OTHER ENTITIES
IN WITNESS WHEREOF, the undersigned has executed this Stock
Subscription Agreement on this _____ day of ________________.
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Print Name of Partnership,
Corporation, Trust or Other Entity
By: ----------------------------------------
Signature of Authorized
Representative
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Print name of Authorized Representative
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Title of Authorized Representative
----------------------------------------
Tax Identification Number of
Partnership, Corporation, Trust or
Other Entity
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Location of Principal Place of
Business of Partnership,
Corporation, Trust, or Other Entity
SUBSCRIPTION ACCEPTED ON ______________________
Mailing Address of Investor:
(Do not use P.O. Box)
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State of Organization or Incorporation
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RISK FACTORS
Limited Operating History
The Corporation is in the early stages of operation. The operations of the
Corporation are subject to all the risks inherent in an immature business
enterprise, including the absence of an extensive operating history. There can
be no assurance that the Corporation's business activities will result in any
profits in the future. Investors should be aware that their investment is at
risk of a total loss.
Dilution
Investors participating in this Offering will incur immediate, substantial
dilution. To the extent that outstanding options and other arrangements calling
for the purchase or other acquisition of the Corporation's Common Stock are
exercised or triggered, there will be further dilution. In addition, the
Corporation will be required to sell additional equity or convertible debt
securities in order to raise the significant amounts of additional financing
which are required in order to enable the Corporation to pursue its business
plan. The sale of additional equity or convertible debt securities could result
in additional dilution to the Corporation's stockholders, as could the payment
of equity based compensation to persons assisting the Corporation in its finance
raising efforts.
Dependence on Key Personnel
In the conduct of the Corporation's business, the Corporation will be
substantially depended upon its present management personnel. The death or
continuing disability of any of these persons may have a material adverse effect
upon the Corporation's ability to conduct its business.
Financing Difficulties
There can be assurance that the proceeds of this offering (even if the maximum
number of shares are sold) will be adequate to provide sufficient funds for
working capital and other expenses associated with developing and running the
business. Such funds shall, in all likelihood, prove to be inadequate and the
Corporation will be required to seek additional capital or borrow additional
funds. However, the Corporation has made no arrangements to obtain additional
funds at this time, and there can be no assurance that additional funds will be
available.
Competition
The competitive environment has been assessed and evaluated by the management
team of the Corporation as it presently exists. This research reflects that
there is significant competition that is well funded and staffed. Due to the
receipt of significant funding and the execution of key strategic partnerships
by direct competitors, there is no assurance that the Corporation can
effectively compete. In addition, no assurances can be given that competition
from a new source or entity could not choose to enter this industry. Such entry
could have substantial impact on the future success and viability of the
Corporation.
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Xxxx Xxxx
The securities being offered hereby represent a speculative investment and a
high degree of risk. Therefore, prospective investors should thoroughly consider
all of the risk factors discussed herein and should understand that the
prospects are substantial that they may incur a total loss of their investment.
No person should consider investing who is in any way dependent upon the funds
being invested.
No Dividends
The Corporation has not paid any dividends since its inception and does not
anticipate paying any dividends on its common stock in the foreseeable future.
It is anticipated that earnings, if any, which may be generated from operations
will be used to finance the continued operations of the Corporation. Investors
who anticipate the immediate need of dividends from their investment should
refrain from purchasing any of the securities hereby.
Shares Eligible for Future Sale
The shares of common stock owned by present shareholders, Officers and Directors
upon completion of this offering will be deemed "restricted securities" as that
term is defined under the Act. Under Rule 144 (17 C.F.R. ss.230.144), a person
holding restricted securities for a period of one (1) year may sell every three
(3) months, in brokerage transactions and/or market maker transactions, an
amount equal to the greater of (a) one percent (1%) of the Corporation's issued
and outstanding common stock or (b) the average weekly trading volume of the
common stock during the four calendar weeks prior to such sale. Rule 144 also
permits, under certain circumstances, the sale of shares without any quantity
limitations by a person who is not an affiliate of the Corporation and who has
satisfied a two (2) year holding period. As any such sale would likely have a
depressive effect on the market place of the Corporation's common stock, the
Investor herein waives any and all rights to resell the securities under Rule
144 and/or Rule 144k and agrees to hold the shares until such time as the shares
become registered with the Securities and Exchange Commission under terms of the
Act.
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