FLOOR DECOR, INC.
(hereafter, the "Company")
SUBSCRIPTION AGREEMENT
Regulation D Form
Name:_____________________________ (the "Subscriber")
Address:___________________________
Address:___________________________
State of Residence/Incorporation _______
Telephone No. _____________________
Fax No. ___________________________
Tax I.D./ Soc. Sec. #: ________________
Principal Amount of Subscription _______________ (the "Purchase Price")
Consideration To Be Issued Shares of Common Stock and Warrant Rights
1. General.
(1) Subscription. The above named Subscriber hereby subscribes to purchase the
shares of Common Stock of the Company (the "Shares") together with warrant
rights (the "Warrants") on the terms and subject to the conditions set forth in
this Subscription Agreement, and subject to the terms and conditions of the
Warrant Agreement attached hereto as Schedule 1 (the "Warrant Agreement").
(2) Registration Rights. The Common Shares (but not the shares issued pursuant
the exercise of the Warrants) are subject to registration rights pursuant to the
terms of the Registration Rights Agreement attached hereto as Schedule 2.
(3) Additional Disclosure Documents. Annexed hereto as Schedules 3 and 4
respectively are an Executive Summary of the business and operations of the
Company and a discussion of the relevant risk factors associated with investment
in the Company pursuant to this Subscription Agreement. In addition, the
undersigned subscriber has had full opportunity to make inquiries of the Company
and has had the opportunity to examine relevant documentation and information
concerning the Company, including without limitation all publicly filed
information for the Company which is readily available from applicable public
sources such as ▇▇▇▇▇.
2. Subscription, Shares and Payments.
(1) Payment. The undersigned encloses herewith a check payable to the Company in
the full amount of the Purchase Price of the Shares being subscribed for as set
forth below.
(2) Price Per Share, Number of Shares. The Price Per Share shall be $0.40 per
share. Accordingly, the Subscriber shall receive that number of Shares
represented by dividing the total Purchase Price remitted to the Company
hereunder by the Price Per Share.
(3) Amount of Warrants. In addition to the Shares subscribed for herein, each
Subscriber will also receive an equivalent number of Warrants to purchase
additional shares in an equivalent amount, which Warrants shall be governed
pursuant to the terms of the Warrant Agreement annexed hereto as Schedule 2.
(4) Acceptance of Subscription. The undersigned understands and agrees that the
Company in its sole discretion reserves the right to accept or reject this or
any other subscription for the Shares, in whole or in part, notwithstanding
prior receipt by the undersigned of any notice of acceptance of this
subscription. The Company shall have no obligation hereunder until it shall
execute and deliver to the undersigned an executed copy of this Subscription
Agreement executed by the Company along with notice of acceptance. If this
subscription is rejected in whole, all funds received from the undersigned will
be returned without interest, penalty, expense or deduction, and this
Subscription Agreement shall thereafter be of no further force or effect. If
this subscription is rejected in part, the funds for the rejected portion of
this subscription will be returned without interest, deduction, and this
Subscription Agreement shall continue in full force and effect to the extent
this subscription was accepted and the Purchase Price and the number of Shares
shall be adjusted accordingly.
3. Investor's Representations, Warranties and Covenants. The
undersigned hereby represents, warrants, acknowledges and
covenants to the Company as follows:
(1) The information provided by the undersigned to the Company in this
Agreement, or otherwise is true and correct in all respects as of the date
hereof;
The undersigned is an "Accredited Investor" as defined in Regulation D
("Regulation D") promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), (See Definition provided for hereafter), and the undersigned
acknowledges that he or she is capable of evaluating the merits and risks of the
investment in the Company;
(2) The undersigned acknowledges that he or she has examined and has had an
opportunity to examine before the date hereof all applicable documents and such
applicable information concerning the Company, its assets, technology, and its
prospects (to the extent such documents and information are relevant to this
transaction and readily available), including without limitation all publicly
filed information for the Company which is readily available from applicable
public sources such as ▇▇▇▇▇.
(3) Except as set forth in the Memorandum, a copy of which the undersigned
acknowledged having received and reviewed, or in this Agreement, no
representations or warranties of any kind including, without limitation, the
percentage of profit and/or amount of or type of consideration, profit or loss
that are to be realized, if any, as a result of this transaction have been made
to the undersigned by the Company or any of its agents, employees or affiliates
and that in entering into this transaction he or she is not relying upon any
representations or information other than those expressly set forth herein;
(4) The undersigned acknowledges that no financial projections, promises or
predictions have been made with respect to the operations of the Company.
(5) The undersigned has had an opportunity to ask questions of and receive
answers from the Company, or a person or persons authorized to act on their
behalf, concerning the terms and conditions of this investment, and all such
questions have been answered to the full satisfaction of the undersigned;
(6) The undersigned is presently a bona fide resident of the state set forth
above, and the address and Social Security Number or Federal Taxpayer
Identification set forth above are the undersigned's true and correct residence
and Social Security Number or Federal Taxpayer Identification Number. The
undersigned has no present intention of becoming a resident of any other state
or jurisdiction. If the undersigned is a corporation, partnership, trust or
other form of business or organization, it represents and warrants that it was
formed under the laws of, and its principal place of business is within, such
state and that it was not organized for the purpose of acquiring the Shares;
(7) The undersigned understands (i) that the Shares and Warrants have not been
registered under the Securities Act in reliance on exemptions therefrom for
non-public offerings under Section 4(2) thereof and further understands that the
Shares and Warrants have not been approved or disapproved by the Securities
Exchange Commission, any state securities administrator or any other federal or
state agency, nor has any such administrator or agency passed on the accuracy or
adequacy of the offering of such investment opportunities and, (ii) that the
Shares and Warrants are subject to the restrictions contained in Regulation D of
the Securities Act, and (iii) the Subscriber hereby agrees that hedging
transactions with respect to the Shares and Warrants must be conducted in
accordance with the Securities Act, including Rule 144;
(8) The undersigned (i) has adequate means of providing for his or her current
needs and possible personal contingencies and he has no need and anticipates no
need in the foreseeable future for liquidity of his investment herein, and (ii)
is able to bear the economic risk of this investment and, consequently, without
limiting the generality of the foregoing, he is able to hold his investment for
an indefinite period of time and has sufficient net worth to sustain a loss of
his entire investment in the event such loss should occur;
(9) Forward-Looking Statements. The undersigned acknowledges that the statements
contained in this document and the Private Placement Memorandum of the Company
are historical fact and may also contain projections and other "forward-looking
statements" including those expressly identified by the use of forward-looking
terminology such as "believes," "expects," may, will," "should" or
"anticipates," or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy that involve risks and uncertainties.
The undersigned acknowledges that these forward-looking statements, including
discussions of the Company's growth and operating strategies and expectations
concerning future operations, margins, revenue, profitability, liquidity and
capital resources and other matters contained in any document, or verbal,
regarding matters that are not historical facts, are only predictions. No
assurance can be given that the future results indicated, whether expressed or
implied, will be achieved. While sometimes presented with specificity, these
forward-looking statements are based upon a variety of assumptions relating to
the business of the Company, which, although considered reasonable, may not be
realized. Because of the number and range of the assumptions underlying any and
forward looking statements, many of which are subject to significant
uncertainties and contingencies that are beyond the reasonable control of the
Company, some of the assumptions inevitably will not materialize and
unanticipated events and circumstances may occur subsequent to the date hereof.
Any forward-looking statements provided to Subscriber are based on current
expectations, and the Company has no, nor assumes any, obligation to update this
information. Therefore, the actual experience of the Company and results
achieved during the period covered by any particular forward-looking statement
may differ substantially from those projected. Consequently, the provision of
any forward-looking statement should not be regarded as a representation that
any of the forward-looking statements contained herein will prove to be
accurate, and actual results may vary materially.
(10) The undersigned is making this purchase and acquiring the Shares and
Warrants for his or her own account, for investment purposes only, and not with
a view to the sale or other distribution thereof, in whole of in part, and is
aware of the following:
(1) His or her purchase of the Shares and Warrants involves a high degree
of risk which may result in the loss of his or her entire investment,
and the Subscriber acknowledges that he has reviewed the risk factors
disclosed in Schedule 4 to this Memorandum;
(2) There are substantial restrictions on the transferability of the
Shares and the Warrants; no sale of the Shares and Warrants by the
undersigned will be allowed during the first twelve (12) months after
the purchase unless such sale is made pursuant to or is exempt from
registration under the Securities Act and applicable state securities
laws; the Shares and Warrants will not be, and the undersigned has no
right to require that the Shares and Warrants be registered under the
Securities Act or any state securities laws except as expressly
provided for herein or in a separate registration rights agreement, if
any; and
(3) The undersigned further acknowledges that except as set forth herein,
or in a separate registration rights agreement, if any, neither the
Company nor its principals are under any obligation to the undersigned
to obtain any exemption from the registration requirements of the
Securities Act and that the Shares and Warrants, and any shares issued
pursuant to exercise of the Warrants may not be able to be sold by the
Subscriber without the express consent of the Company, while the
Restrictions are in effect; and (1)
(4) The undersigned shall be responsible for compliance with all
conditions on transfer imposed by any securities administrator of any
state and for any expenses incurred for legal, accounting or transfer
services in connection with reviewing such a proposed transfer and/or
issuing opinions in connection therewith.
THE FOREGOING REPRESENTATIONS, WARRANTIES, ACKNOWLEDGMENTS AND
COVENANTS SHALL BE TRUE AND ACCURATE AS OF THE DATE HEREOF AND AS OF THE DATE OF
DELIVERY OF THE NOTE TO THE COMPANY AND SHALL SURVIVE SUCH DELIVERY AND THE
ACCEPTANCE OF THIS SUBSCRIPTION.
4. Responsibility. The undersigned Subscriber acknowledges that he or she
understands the meaning and legal consequences of the representations,
warranties, acknowledgments and covenants in paragraph 3 hereof and acknowledges
that the Company relied and will rely thereon. The undersigned Subscriber hereby
agrees to indemnify and hold harmless the Company and its respective officers,
directors, partners, controlling persons, agents and employees from and against
any and all losses, cost damage or liability (including reasonable attorneys'
fees and litigation costs) due to or arising out of a breach of any such
representation, warranty, acknowledgment or covenant of the undersigned
contained herein.
5. Non-Waiver. Notwithstanding any of the representations, warranties,
acknowledgments or agreements made herein by the undersigned, the undersigned
expressly retains and does not hereby or in any other manner waive any rights
granted to him or her under federal or state securities laws.
6. Transfer Restrictions.
(1) The undersigned understands and agrees that the following restrictions and
limitations (herein referred to as the "Restrictions") are applicable to his
purchase and resale, hypothecation or other transfer of his Shares, Warrants and
any shares issued pursuant to exercise of the Warrants (and for purposes of this
Section 6, the terms "Shares" shall include any shares issued pursuant to the
exercise of the Warrants) pursuant to all Federal Securities laws and Regulation
D and Regulation S promulgated thereunder and the applicable state securities
law:
(2) A legend in substantially the following form has been or will be placed on
any certificate(s) or other document(s) evidencing the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. WITHOUT SUCH
REGISTRATIONS, SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED
OR OTHERWISE TRANSFERRED, EXCEPT WITH THE WRITTEN CONSENT OF THE
COMPANY, WHICH CONSENT MAY BE WITHHELD IN THE SOLE DISCRETION OF THE
COMPANY, AND EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATIONS ARE NOT
REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE COMPANY TO THE
EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE
SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE STATE SECURITIES LAWS OR
ANY RULE OR REGULATION PROMULGATED THEREUNDER.
(3) Stop transfer instructions to the transfer agent stopping any transfer of
the Shares, of the Shares have been, will or may be placed with respect to the
Shares so as to restrict resale, pledge, hypothecation or other transfer
thereof, subject to the further items hereof, including the provisions of the
legend set forth in subparagraph (a) above.
(4) The Subscriber understands and acknowledges that (i) the sale or resale of
the Shares has not been and is not being registered under the Securities Act or
any applicable state or foreign securities laws, and the Shares may not be
transferred, offered for sale, sold, delivered after sale, pledged,
hypothecated, assigned or otherwise disposed of unless (a) the Shares are sold
pursuant to an effective registration statement under the Securities Act, (b)
the Investor shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the Shares to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration, (c) the Shares are sold or transferred to an "affiliate" (as
defined in Rule 144 (or a successor rule) under the Securities Act ("Rule 144"))
of the Investor who agrees to sell or otherwise transfer the Shares only in
accordance with this Agreement and who is an accredited investor, as that term
is defined in Rule 501(a) of Regulation D under the Securities Act, or (d) the
Shares are sold pursuant to Rule 144 under the Securities Act; (ii) any sale of
such Shares made in reliance on Rule 144 or Regulation S may be made only in
accordance with the terms of said Rule and, further, if said Rule is not
applicable, any resale of such Shares under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the Securities Act) may require compliance with some
other exemption under the Securities Act or the rules and regulations of the
U.S. Securities and Exchange Commission thereunder; (iii) neither the Company
nor any other person is under any obligation to register such Shares under the
Securities Act or any state or foreign securities laws or to comply with the
terms and conditions of any exemption thereunder.
(5) The Subscriber understands and acknowledges that (i) the Shares are deemed
to be "restricted securities" as defined in Rule 144 and will continue to be
deemed to be "restricted securities" notwithstanding any resale of the Shares or
any exemption to the registration requirements of the Securities Act, (ii) it
will not engage in hedging transactions involving the Shares otherwise than in
compliance with the Securities Act. The Investor understands and acknowledges
that until such time as the Shares have been registered pursuant to an effective
registration statement under the Securities Act or such legend is removed in
accordance with provisions of this Agreement, each certificate or instrument
representing Shares shall be stamped or otherwise imprinted with a legend
substantially similar to the following (in addition to any legend required under
applicable state securities laws or as provided elsewhere in this Agreement)
7. Non-Assignability and Irrevocability. This Subscription is not transferable
or assignable by the undersigned Subscriber. The undersigned Subscriber hereby
acknowledges and agrees that the subscription hereunder is irrevocable by the
undersigned, except as required by applicable law, and that this Subscription
Agreement shall survive the death or disability of the undersigned and shall be
binding upon and inure to the benefit of the parties and their heirs, executors,
administrators, successors, legal representative, and permitted assigns. If the
undersigned is more than one person, the obligations of the undersigned
hereunder shall be joint and several and the agreements, representations,
warranties, and acknowledgments herein shall be deemed to be made by and be
binding upon each such person and his heirs, executors, administrators,
successors, legal representatives and permitted assigns.
8. Florida Residents. (Applicable to Florida residents only.)
FOR RESIDENTS OF FLORIDA
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE FLORIDA SECURITIES ACT. EACH OFFEREE WHO IS A FLORIDA RESIDENT
SHOULD BE AWARE THAT SECTION 517.061(11)(A)(5) OF THE FLORIDA
SECURITIES ACT PROVIDES, IN RELEVANT PART, AS FOLLOWS: "...WHEN SALES
ARE MADE TO FIVE OR MORE PERSONS IN THIS STATE, ANY SALE MADE PURSUANT
TO THIS SUBSECTION ... SHALL BE VOIDABLE BY THE PURCHASER ... WITHIN
THREE DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY THE
PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER OR AN ESCROW AGENT ..."
EACH PERSON ENTITLED TO EXERCISE THE RIGHT TO WITHDRAW GRANTED BY
SECTION 517.061(22)(A)(5) AND WHO WISHES TO EXERCISE SUCH RIGHT MUST
WITHIN THREE DAYS AFTER THE TENDER OF HIS PURCHASER PRICE TO THE
PLACEMENT AGENT, CAUSE A WRITTEN NOTICE OR TELEGRAM TO BE SENT TO THE
COMPANY. SUCH LETTER OR TELEGRAM MUST BE SENT AND POSTMARKED ON OR
PRIOR TO THE AFOREMENTIONED THIRD DAY. IF AN OFFEREE CHOOSES TO
WITHDRAW BY LETTER, IT IS PRUDENT TO SEND IT BY CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO ASSURE THAT IT IS RECEIVED AND ALSO TO EVIDENCE
THE TIME WHEN IT WAS MAILED. AN OFFEREE MAKING AN ORAL REQUEST FOR
WITHDRAWAL MUST ASK FOR WRITTEN CONFIRMATION THAT THE REQUEST HAS BEEN
RECEIVED.
9. Blue Sky Qualification. The right to purchase Shares under this Subscription
Agreement is expressly conditioned upon the exemption from qualification of the
offer and sale of the Shares from applicable federal and state securities laws.
The Company shall not be required to qualify this transaction under the
securities laws of any jurisdiction except pursuant to the RRA, and should
qualification be necessary, the Company shall be released from any and all
obligations to maintain its offer, and may rescind any sale contracted, in the
jurisdiction.
10. Confidentiality. The undersigned acknowledges and agrees that any
information or data it has acquired from or about the Company, not otherwise
properly in the public domain, was received in confidence. The undersigned
agrees not to divulge, communicate or disclose, except as may be required by law
or for the benefit of any other person or persons, or misuse in any way, any
confidential information of the Company.
11. Miscellaneous.
(1) Notice. All notices or other communication given or made hereunder shall be
in writing and shall be delivered or mailed by registered or certified mail,
return receipt requested, postage prepaid, to the undersigned at the
undersigned's address set forth in the preamble above and to the Company, at
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and notice shall be deemed
given five (5) days after mailing in accordance with the requirements hereof.
(2) Florida Law; Jurisdiction. Notwithstanding the place where this Agreement
may be executed by any of the parties hereto, the parties hereto, expressly
agree that all the terms and provisions hereof shall be construed in accordance
with and governed by the laws of the State of Florida and all applicable Federal
Securities law. This Agreement shall be construed, and the rights and
obligations of the parties hereunder determined, in accordance with and governed
by the internal laws of the State of Florida without giving effect to any choice
of law rule that would cause the application of the laws of any jurisdiction
other than the internal laws of the State of Florida to the rights and duties of
the parties. Each of the parties hereto hereby agrees that any suit, action or
proceeding for the enforcement of this agreement shall be brought only in the
state courts of, or federal courts sitting in, the City of Ft. Lauderdale, State
of Florida. Each party hereto irrevocably consents to the jurisdiction of such
courts and to service of process in any such suit, action or proceeding being
made upon such party by registered or certified mail at the address specified
herein. Each party hereto hereby waives any objection it may now or hereafter
have to the venue of any such suit, action or proceeding or any such court or
that such action or proceeding is brought in an inconvenient court.
(3) Entire Agreement. This Agreement and the documents expressly referenced
herein, if any, constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and may be amended only in writing and
executed by all parties.
(4) Counterparts. This Agreement may be executed in several counterparts, and
all counterparts so executed shall constitute one agreement, binding on all of
the parties hereto, notwithstanding that all the parties are not signatory to
the original or the same counterpart.
(5) Attorneys' Fees. Each of the parties hereto shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated, and including enforcement hereof.
(6) Severability. Each provision of this Agreement shall be considered separable
and if for any reason any provisions hereof are determined to be invalid or
contrary to applicable law, such invalidity shall not impair the operation of or
affect the remaining portions of this Agreement.
(7) Arbitration. Any dispute, controversy or claim arising out of, or in
connection with, or relating to this Agreement or any breach or alleged breach
thereof, excluding any dispute, controversy or claim relating to liabilities or
rights under federal or state securities law relating to the subscription being
made hereunder, shall, upon the request of any party involved, be submitted to
and settled by arbitration in Boca Raton, Florida, pursuant to the rules for
commercial disputes of the American Arbitration Association (or at any other
place or under any other form of arbitration mutually acceptable to the parties
so involved). Any award rendered shall be final and conclusive upon the parties
and a judgment thereon may be entered in the highest court of the forum, state
or federal, having jurisdiction, excluding liabilities or rights under federal
or state securities laws. The expenses of the arbitration shall be borne equally
by the parties to the arbitration, provided that each party shall pay for and
bear the cost of its own attorneys, experts, evidence and counsel.
(8) No Waiver. Except as herein provided, this Agreement, including the
provisions of this sentence, may be modified or amended only by a writing signed
by the Company and the Investor. Compliance with any terms of this Agreement may
be waived only by a written instrument signed by the party waiving compliance.
Accredited Investor Certification
Initial the following statements that are true and correct:
_____ (i) I am a natural person who had individual income of more than
$200,000 in each of the most recent two years or joint income with my
spouse in excess of $300,000 in each of the most recent two years and
reasonably expect to reach that same income level for the current year;
_____ (ii) I am a natural person whose individual net worth (i.e.,total
assets in excess of total liabilities), or joint net worth with my
spouse, will at the time of purchase of the Shares be in excess of
$1,000,000;
_____ (iii) The undersigned is an institutional investor satisfying the
requirements of Section 501(a)(1), (2) or (3) of Regulation D
promulgated under the Securities Act;
_____ (iv) The undersigned is an entity (other than a trust) in which all
of the equity owners meet the requirements of at least one of the
above subparagraphs;
_____ (v) The undersigned is a trust, which trust has total assets in excess
of $5,000,000, which is not formed for the specific purpose of
acquiring Shares offered hereby and whose purchase is directed by a
sophisticated person as described in Rule 506(b)(ii) of Regulation D
and who has such knowledge and experience in financial and business
matters that he is capable of evaluating the risks and merits of an
investment in the Shares; and
_____ (vi) None of the above apply to the undersigned.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this _____ day of ______________, 2002.
(If the purchaser is an INDIVIDUAL state if purchased as JOINT TENANTS, TENANTS
IN COMMON or as COMMUNITY PROPERTY:)
_____________________________
Print Name(s) Print Name(s)
_____________________________
Signature(s) of Subscriber(s) Signature(s) of Subscriber(s)
_____________________________
Address Address
_____________________________
Date Date
If the Subscriber is a COMPANY, CORPORATION or TRUST:
_____________________________
Name of Company, Federal Taxpayer
Corporation or Trust Identification Number
Date
By:
__________________________________________________ _______________________
Signature State of Organization
By:
__________________________________________________ _______________________
Signature State of Organization
Name:
________________________________________________ _______________________
Name:
________________________________________________ _______________________
Title:
________________________________________________ _______________________
Address
Title:
_________________________________________________ ________________________
Address
SUBSCRIPTION ACCEPTED AND
AGREED this _____ day of _________, 2002.
FLOOR DECOR, INC., a Delaware corporation
By:
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman of the Board
SCHEDULE 1
The Warrant Agreement
