SECURITIES SUBSCRIPTION AGREEMENT
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THIS SECURITIES SUBSCRIPTION AGREEMENT, dated as of September 16, 1999
("AGREEMENT"), is executed in reliance upon the exemption from registration
afforded by Rule 504 promulgated under Regulation D by the Securities and
Exchange Commission (`SEC"), under the Securities Act of 1933, as amended.
Capitalized terms used herein and not defined shall have the meanings given to
them in Rule 504 and Regulation D.
This Agreement has been executed by the undersigned buyer ("BUYER") in
connection with the private placement of 8% Series A Senior Subordinated
Convertible Debentures of Pacific Sands, Inc. a corporation organized under the
laws of Nevada, with its principal executive offices located at 000 X. Xxxx,
Xxxxx X, Xxxxxx Xxxxxxxxxx 00000 ("SELLER"). Buyer hereby represents and
warrants to, and agrees with Seller:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM
REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE
"1933 ACT"), AND RULE 504 OF REGULATION D PROMULGATED THEREUNDER.
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) SUBSCRIPTION. The undersigned buyer hereby subscribes for and
agrees to purchase the Seller's 8% Series A Senior Subordinated Convertible
Redeemable Debenture substantially in the form of the Debenture attached as
exhibit A hereto and having an aggregate original principal face amount of three
hundred thousand United States Dollars (U.S.$300,000) (singly, a "DEBENTURE,"
and collectively, the "DEBENTURES"), at an aggregate purchase price of 100% of
the face amount of such Debentures as set forth in subsection (b) herein.
(b) PAYMENT. The Purchase Price for the Debenture shall be three
hundred thousand United States Dollars (U.S. $300,000) ("PURCHASE PRICE"), which
shall be payable at closing, pursuant to paragraph c herein, in accordance with
the terms and conditions of an Escrow Agreement which shall be executed
simultaneously with this Agreement ("ESCROW AGREEMENT").
(c) CLOSING. Subject to the satisfaction of the conditions set forth in
Sections 7 and 8 hereof, the Closing of the transactions contemplated by this
Agreement shall take place when (i) Seller delivers the Debentures to the Escrow
Agent, as defined in an Escrow Agreement among
Buyer, Seller and the Escrow Agent of even date, (ii) Seller delivers the signed
Escrow Agreement and accompanying documents, and (iii) Buyer pays $100,000
towards the Purchase Price for the Debentures ("CLOSING DATE").
2. Buyer Representations and Covenants;
Access to Information
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In connection with the purchase and sale of the Debentures, Buyer
represents and warrants to, and covenants and agrees with Seller as follows:
(a) Buyer is not, and on the closing date will not be, an affiliate of
Seller;
(b) Buyer is a Colorado limited liability company, in good standing,
and is an "accredited investor" as defined in Rule 501 of Regulation D
promulgated under the 1933 Act, and is purchasing the Debentures for its own
account and Buyer is qualified to purchase the Shares under the laws of the
State of Colorado;
(c) All offers and sales of any of the Debentures by Buyer shall be
made in compliance with any applicable securities laws of any applicable
jurisdiction and in accordance with Rule 504, as applicable, of Regulation D or
pursuant to registration of securities under the 1933 Act or pursuant to an
exemption from registration;
(d) Buyer understands that the Debentures are not registered under the
1933 Act and are being offered and sold to it in reliance on specific exemptions
from the registration requirements of Federal and State securities laws, and
that Seller is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of Buyer set forth
herein in order to determine the applicability of such exemptions and the
suitability of Buyer and any purchaser from Buyer to acquire the Debentures;
(e) Buyer shall comply with Rule 504 promulgated under Regulation D;
(f) Buyer has the full right, power and authority to enter into this
Agreement and to consummate the transaction contemplated herein. This Agreement
has been duly authorized, validly executed and delivered on behalf of Buyer and
is a valid and binding agreement in accordance with its terms, subject to
general principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally;
(g) The execution and delivery of this Agreement and the consummation
of the purchase of the Debentures and the transactions contemplated by this
Agreement do not and will not conflict with or result in a breach by Buyer of
any of the terms or provisions of, or constitute a default under, the articles
of incorporation or by-laws (or similar constitutive documents) of Buyer or any
indenture, mortgage, deed of trust, or other material agreement or instrument to
which Buyer
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is a party or by which it or any of its properties or assets are bound, or any
existing applicable law, rule or regulation of the United States or any State
thereof or any applicable decree, judgment or order of any Federal or State
court, Federal or State regulatory body, administrative agency or other United
States governmental body having jurisdiction over buyer or any of its properties
or assets;
(h) All invitations, offers and sales of or in respect of, any of the
Debentures, by Buyer and any distribution by Buyer of any documents relating to
any invitation, offer or sale by it of any of the Debentures will be in
compliance with applicable laws and regulations, will be made in such a manner
that no prospectus need be filed and no other filing need be made by Seller with
any regulatory authority or stock exchange in any country or any political
sub-division of any country, and Buyer will make no misrepresentations nor
omissions of material fact in the invitation, offer or resale of the Debentures;
(i) The Buyer (or others for whom it is contracting hereunder) has been
advised to consult its own legal and tax advisors with respect to applicable
resale restrictions and applicable tax considerations and it (or others for whom
it is contracting hereunder) is solely responsible (and the Seller is not in any
way responsible) for compliance with applicable resale restrictions and
applicable tax legislation;
(j) Buyer understands that no Federal or State or foreign government
agency has passed on or made any recommendation or endorsement of the
Debentures;
(k) Buyer has had an opportunity to receive and review all material
information and financial data and to discuss with the officers of Seller, all
matters relating to the Debentures, financial condition, operations and
prospects of Seller and any questions raised by Buyer have been answered to
Buyer's satisfaction.
(l) Buyer acknowledges that the purchase of the Debentures involve a
high degree of risk. Buyer has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
purchasing the Debentures. Buyer understands that the Debentures are not being
registered under the 1933 Act, or under any state securities laws, and
therefore, Buyer must bear the economic risk of this investment for an
indefinite period of time;
(m) Buyer is not a "10-percent Shareholder" (as defined in Section
871(h)(3)(B) of the U.S. Internal Revenue Code) of Seller; and
(n) Buyer acknowledges and agrees that the transactions contemplated by
this Agreement have taken place solely and exclusively within the State of
Colorado.
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3. SELLER REPRESENTATIONS AND COVENANTS.
(a) Seller is a corporation duly organized and validly existing under
the laws of the State of Nevada, and is in good standing under such laws. The
Seller has all requisite corporate power and authority to own, lease and operate
its properties and assets, and to carry on its business as presently conducted.
The Seller is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so quality would
not have a material adverse effect on the Seller.
(b) There are 20,000,000 shares of Seller's common stock, no par value
per share ("COMMON STOCK"), authorized and approximately 8,000,000 as of August
31, 1999 outstanding. The Common Stock is quoted on National Association of
Securities Dealers OTC Electronic Bulletin Board under the symbol "PFSD". All
issued and outstanding shares of Common Stock have been authorized and validly
issued and are fully paid and non-assessable.
(c) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both), or give rise to a right of termination, cancellation or acceleration
of any obligation or to a loss of a material benefit, under, any provision of
the Articles of incorporation, and any amendments thereto, By-Laws, Stockholders
Agreements and any amendments thereto of the Seller or any material mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law ordinance, rule or
regulation applicable to the Seller, its properties or assets. There is no
action, suit or proceeding pending, or to the knowledge of the Seller,
threatened against the Seller, before any court or arbitrator or any government
body, agency or official, which would have a material adverse affect on Seller's
operations or financial condition.
(d) The Seller is not subject to the reporting requirements of Sections
13 or 15(d) of the Securities and Exchange Act, is not an investment company or
a developmental stage company that either has no specific business plan or
purpose. The Shares when issued, will be issued in compliance with all
applicable U.S. federal and state securities laws. The Seller understands and
acknowledges that, in certain, circumstances, the issuance of the Shares could
dilute the ownership interests of other stockholders of the Seller. The
execution and delivery by the Seller of this Agreement and the issuance of the
Debentures will not contravene or constitute a default under any provision of
applicable law or regulation. The Seller is in compliance with and conforms to
all statutes, laws, ordinances, rules, regulations, orders, restrictions and all
other legal requirements of any domestic or foreign government or any
instrumentality thereof having jurisdiction over the conduct of its businesses
or the ownership of its properties.
(e) There is no fact known to the Seller that has not been publicly
disclosed by the Seller or disclosed in writing to the Buyer which could
reasonably be expected to have a material
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adverse effect on the condition (financial or otherwise) or in the earnings,
business affairs, properties or assets of the Seller, or could reasonably be
expected to materially and adversely affect the ability of the Seller to perform
its obligations pursuant to this Agreement. The information furnished by the
Seller to Buyer for purposes of or in connection with this Agreement or any
transaction contemplated hereby, does not contain any untrue statement of
material fact or omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they are
made, not misleading.
(f) No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Seller
is required in connection with the valid execution and delivery of this
Agreement, or the offer, sale or issuance of the Debentures or Common Stock, or
the consummation of any other transaction contemplated hereby, except the filing
with the SEC of Form D.
(g) There is no action, proceeding or investigation pending, or to the
Seller's knowledge, threatened, against the Seller which might result either
individually or in the aggregate, in any material adverse change in the
business, prospects, conditions, affairs or operations of the Seller. The Seller
is not a party to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality. There
is no action, suit proceeding or investigation by the Seller currently pending
or which the Seller intends to initiate. The SEC has not issued any order
suspending trading in the Seller's Common Stock and the Seller is not under
investigation by the SEC or the National Association of Securities Dealers, and
there are no proceedings pending or threatened before either regulatory body.
(h) There are no other material outstanding debt or equity securities
presently convertible into Common Stock other than the Debentures.
(i) The Seller has not sold any securities within the 12 month period
prior to this Agreement in reliance on any exemption under Section 3(b) of the
1933 Act, Regulation D or its rules or in violation of Section 5(a) of the 1933
Act except for offerings of securities which do not aggregate more than
$300,000.
(j) The issuance, sale and delivery of the Debentures have been duly
authorized by all required corporate action on the part of the Seller, and when
issued, sold and delivered in accordance with the terms hereof and thereof for
the consideration expressed herein and therein, will be duly and validly issued,
fully paid and non-assessable. The Common Stock issuable upon conversion of the
Debenture has been duly and validly reserved for issuance and upon issuance in
accordance with the terms of the Debentures, shall be duly and validly issued,
fully paid, and non-assessable. There are no pre-emptive rights of any
shareholder of Seller.
(k) This Agreement has been duly authorized, validly executed and
delivered on behalf of Seller and is a valid and binding agreement in accordance
with its terms, subject to general
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principles of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally. The Seller has all requisite right, power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Seller, its directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement and the Debentures has
been taken. Upon their issuance to the Buyer and delivery to the Escrow Agent,
as defined in and pursuant to the Escrow Agreement, the Debentures will be
validly issued and nonassessable, and will be free of any liens or
encumbrances.
(l) Setter acknowledges and agrees that the transactions contemplated
by this the Agreement have taken place solely and exclusively within the State
of Colorado.
4. EXEMPTION; RELIANCE ON REPRESENTATIONS. Buyer understands that the
offer and sale of the Securities are not being registered under the 1933 Act.
Seller and Buyer are relying on the rules governing offers and sales made
pursuant to Rule 504 promulgated under Regulation D. The offer and sale of the
Shares are made solely within the State and jurisdiction of Colorado in reliance
upon an exemption under Colorado law.
5. TRANSFER AGENT INSTRUCTIONS.
(a) DEBENTURES. Upon the conversion of the Debentures, the Buyer or
holder shall give a notice of conversion to the Seller and the Seller shall
instruct its transfer agent to issue one or more Certificates representing that
number of shares of Common Stock into which the Debenture or Debentures are
convertible in accordance with the provisions regarding conversion set forth in
Exhibit A. The Seller shall act as Debenture Registrar and shall maintain an
appropriate ledger containing the necessary information with respect to each
Debenture. There shall be no need for the Purchaser to surrender the original
Debentures to the Seller until the Debentures have been paid by the Seller or
converted into Common Stock, as the case may be.
(b) COMMON STOCK TO BE ISSUED WITHOUT RESTRICTIVE LEGEND. Upon the
conversion of any Debenture, Seller shall instruct Seller's transfer agent to
issue Stock Certificates up to the total of the "Conversion Amount" (as defined
in the Debenture) and any "Interest Shares" (as defined in the Debenture)
without restrictive legend in the name of the Buyer (or its nominee) and in such
denominations to be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion, as applicable. The Common Stock
shall be immediately freely transferable on the books and records of Seller.
Seller shall also instruct its attorney to issue and render any legal opinion
which is required at any time by Seller's transfer agent to permit Seller's
transfer agent to issue any and all Stock Certificates without a restrictive
legend as required by this Agreement.
6. REGISTRATION. If upon conversion of the Debentures effected by the
Buyer pursuant to the terms of this Agreement or payment of interest pursuant to
the Debenture the Seller fails to issue certificates for shares of Common Stock
issuable upon such conversion ("UNDERLYING
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SHARES") or the Interest Shares to the Buyer bearing no restrictive legend for
any reason, then the Seller shall be requited, at the request of the Buyer and
at the Seller's expense, to effect the registration of the Underlying Shares
and/or Interest Shares issuable upon conversion of the Debentures and payment of
interest under the Act and relevant Blue Sky laws as promptly as is practicable.
The Seller and the Buyer shall cooperate in good faith in connection with the
furnishings of information required for such registration and the taking of such
other actions as may be legally or commercially necessary in order to effect
such registration. The Seller shall file such a registration statement within 30
days of Buyer's demand and shall use its good faith diligent efforts to cause
such registration statement to become effective as soon as practicable
thereafter. Such good faith diligent efforts shall include, but not be limited
to, promptly responding to all comments received from the staff of the SEC,
providing Buyer's counsel with a contemporaneous copy of all written
communications from and to the staff of the SEC with respect to such
registration statement and promptly preparing and filing amendments to such
registration statement which are responsive to the comments received from the
staff of the SEC. Once declared effective by the SEC, the Seller shall cause
such registration statement to remain effective until the earlier of (i) the
sale by the Buyer of all Underlying Shares registered or (ii) 120 days after the
effective date of such registration statement.
7. DELIVERY INSTRUCTIONS. The Debentures being purchased hereunder, and
the Purchase Price, shall be delivered to the Escrow Agent pursuant to the
Escrow Agreement.
8. CONDITIONS TO SELLER'S OBLIGATION TO SELL. Seller's obligation to
sell the Debentures is conditioned upon:
(a) The receipt and acceptance by Seller of this Agreement as executed
by Buyer.
(b) All of the representations and warranties of the Buyer contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date. The Buyer shall have
performed or complied with all agreements and satisfied all conditions on its
part to be performed, complied with or satisfied at or prior to the Closing
Date.
(c) No order asserting that the transactions contemplated by this
Agreement are subject to the registration requirements of the Act shall have
been issued, and no proceedings for that purpose shall have been commenced or
shall be pending or, to the knowledge of the Seller, be contemplated. No stop
order suspending the sale of the Debentures or Common Stock shall have been
issued, and no proceedings for that purpose shall have been commenced or shall
be pending or, to the knowledge of the Seller, be contemplated.
9. CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE. Buyers obligation to
purchase the Debentures is conditioned upon:
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(a) The confirmation of receipt and acceptance by Seller of this
Agreement as evidenced by execution of this Agreement of the duly authorized
officer of Seller.
(b) Delivery of the Debentures and the Escrow Agreement to the Escrow
Agent.
(c) The receipt of an opinion from counsel for the Seller that the laws
of the State of Colorado properly govern this transaction and that reliance on
the exemption from registration under Colorado law relied upon by the Seller is
proper in all respects.
10. NO SHAREHOLDER APPROVAL AND NO DILUTION.
(a) Seller hereby agrees that from the Closing Date until the issuance
of Common Stock upon the conversion of the Debentures, Seller will not take any
action which would require Seller to seek shareholder approval of such issuance
unless such shareholder approval is required by law or regulatory body
(including but not limited to the NASDAQ Stock Market, Inc.) as a result of the
issuance of the Debentures or Common Stock hereunder.
(b) Provided the Debentures, or any Seller Debentures from a series
which predate the Debentures remain outstanding and unpaid, at if there is any
portion of any such Debentures which have not been converted into the Seller's
Common Stock, then the Seller shall not split nor reverse split the Common
Stock, nor consolidate the outstanding number of shares of Common Stock into a
small number of shares, nor otherwise take any action, directly or indirectly,
which would have a material adverse effect on the value of the Debentures or the
trading price of the Common Stock.
11. MISCELLANEOUS.
(a) This Agreement together with the Debentures and Escrow Agreement,
constitutes the entire agreement between the parties, and neither party shall be
liable or bound to the other in any manner by any warranties, representations or
covenants except as specifically set forth herein. Any previous agreement among
the parties related to the transactions described herein is superseded hereby.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the restrictive successors and assigns of the parties hereto.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
{b) Buyer is an independent contractor and is not the agent of Seller.
Buyer is not authorized to bind Seller or to make any representation or
warranties on behalf of Seller.
(c) All representations and warranties contained in this Agreement by
Seller and Buyer shall survive the closing of the transactions contemplated by
this Agreement.
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(d) This Agreement shall be construed in accordance with the laws of
Colorado applicable to contacts made and whol1y to be performed within the State
of Colorado and shall be binding upon the successors and assigns of each party
hereto. Buyer and Seller hereby mutually waive trial by jury and consent to
exclusive jurisdiction and venue in the courts of the State of Colorado. City of
Denver. This Agreement may be executed in counterparts, and the facsimile
transmission of an executed counterpart to this Agreement shall be effective as
an original.
(e) Seller agrees to indemnify and hold Buyer harmless from any and all
claims, damages and liabilities arising from Seller's breach of its
representations and/or covenants set forth herein.
(f) Buyer agrees to indemnify and hold Seller harmless from any and all
claims, damages and liabilities arising from Buyer's breach of its
representations and warranties set forth in this Agreement.
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IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the date first set forth above.
Official Signatory of Seller:
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PACIFIC SANDS, INC.
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Accepted this 16th day of September, 1999 Title: Chief Executive Officer
Official Signatory of Buyer:
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BVH HOLDINGS, L.L.C.
By:
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