THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO PURCHASE ANY OF THE SECURITIES REFERRED TO HEREIN. SUBSCRIPTION AGREEMENT
Exhibit 10.1
THIS
SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO PURCHASE ANY OF THE SECURITIES REFERRED TO HEREIN.
This
SUBSCRIPTION AGREEMENT (this “Subscription Agreement”) is entered into by and
between the party signing the Signature Page attached hereto (the “Investor”)
and Blackwater Midstream Corp., a Nevada corporation (the “Corporation” or the
“Company”). The Corporation is offering up to $1,650,000.00 of convertible debt,
which may be converted into Company common stock (‘Share” or “Shares”) at the
option of the Investor at a conversion price of $0.50 per share (the
“Convertible Debt”). The Investor subscribes for and agrees to purchase the
following:
|
Name
of Investor:
|
|
|
Convertible
Debt Subscribed For:
|
|
|
Address
of Investor:
|
|
|
|
The
amount of cash or good funds as tender of the purchase price for the Convertible
Debt is enclosed (in the case of a check, the check should be payable to the
order of “Blackwater Midstream Corp.”) or will be sent via wire transfer to the
Corporation’s account.
INVESTOR
RIGHTS
Conditions
of the Convertible Debt:
|
Maturity
Date
|
March
31st, 2012
|
|
Interest
|
10%
per annum, to be paid quarterly
|
|
Principal
|
To
be repaid upon Maturity Date
|
|
Conversion
Price:
|
$
0.50 per share into common stock
|
|
Conversion
Period
|
Any
time prior to Maturity Date upon the option of the
investor
|
|
Transfer
Restrictions:
|
Converted
shares of common stock are “restricted securities” and may only be
transferred pursuant to registration, qualification, or exemption under
United States federal and applicable state securities
laws.
|
|
Closing
Date
|
March
31st, 2010
|
The
Corporation will make quarterly interest payments, beginning 3 months after the
Closing Date on June 30, 2010. The Investor has the right to convert
all or part of the remaining Convertible Debt into shares of the Corporation’s
common stock at $0.50 (fifty cents) prior to the Maturity Date. Upon the
Maturity Date, 2 years from Closing Date, the Corporation will repay the
principal to the Investor.
If and
when an Investor decides to convert their Convertible Debt into Shares of the
Corporation’s common stock, the Investor shall send a written request to the
Corporation indicating the amount of Convertible Debt to be converted. The
Corporation will respond within 10 working days after having received this
request and initiate the conversion. Per request date, interest will be
recalculated per remaining principal, if any.
1
COST OF
OFFERING
The
Company has engaged Falcon Capital to assist with the Convertible Debt offering.
Falcon Capital will receive a cash commission of 10% on capital raised through
its own clientele, and a cash commission of 5% on capital raised through
clientele of the Company, approached by Falcon. In addition, Falcon Capital will
receive 10% in shares of the Company’s common stock, at the stock’s price on the
closing day of the capital raise, on capital raised thru its own clientele and
5% in shares of the Company’s common stock at the stock’s price on the closing
day of the capital raise, on capital raised through clientele of the Company,
approached by Falcon. Falcon Capital will also receive reimbursement of
expenses, with a maximum of 2% of capital raised by Falcon.
INVESTOR
REPRESENTATIONS
The
Investor hereby represents and warrants to, and covenants with, the Corporation
as follows, recognizing that the Corporation will rely to a material degree on
such representations, warranties and covenants, each of which shall survive any
acceptance of this subscription in whole or in part by the Corporation and the
issuance and sale of any Shares to the Investor:
1. Organization and Good
Standing. The Investor, if the Investor is a corporation, partnership,
trust or other entity, is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has full power,
authority and legal right to execute, deliver and perform its obligations under
this Subscription Agreement.
2. Agreement Duly
Authorized. The execution, delivery and performance by the Investor of
this Subscription Agreement has been duly authorized by all necessary action,
this Subscription Agreement has been duly executed and delivered, and, when
executed and delivered by the Corporation, this Subscription Agreement will
constitute the legal, valid, binding and enforceable obligation of the Investor,
subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws, regulations or procedures of general
applicability now or hereafter in effect relating to or affecting creditors’ or
other obligees’ rights generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
3. Sophistication of
Investor. The Investor either (i) has a pre-existing personal or business
relationship with the Corporation or its controlling persons, such as would
enable a reasonably prudent purchaser to be aware of the character and general
business and financial circumstances of the Corporation or its controlling
persons, or (ii) by reason of the Investor's business or financial experience,
individually or in conjunction with the Investor's unaffiliated professional
advisors who are not compensated by the Corporation or any affiliate or selling
agent of the Corporation, directly or indirectly, is capable of evaluating the
merits and risks of an investment in the Shares, making an informed investment
decision and protecting the Investor's own interests in connection with the
transactions contemplated hereby.
4. Statements of Investor True
and Accurate. All statements and representations made in Annex I
attached hereto (“Nature of Investor; Form of Ownership”), which has been or is
being furnished concurrently herewith to the Corporation by the Investor,
continue to be and are true, accurate and complete as of the date hereof. The
Investor agrees to provide such additional information as reasonably may be
required by the Corporation for compliance with the securities laws of the state
in which the Investor is located.
2
5. Investor Aware of
Risks. The Investor has been informed and is aware that a loan to the
Company involves a high degree of risk and speculation, and the Investor has
read carefully and considered any information provided by the Corporation and
its affiliates in their entirety. The Investor has read and
understands the “Risk Factors” attached hereto as Exhibit A.
6. Investor
Relying Upon Own Advisors.
The Investor confirms that the Investor has been advised that the Investor
should rely on, and that the Investor has consulted and relied on, the
Investor’s own accounting, legal and financial advisors with respect to this
loan to the Company. The Investor and the Investor’s professional advisor(s), if
any, have been afforded an opportunity to meet with the officers and directors
of the Corporation and to ask and receive answers to all questions about this
offering and the proposed business and affairs of the Corporation and to obtain
any additional information that the Corporation possesses or can acquire without
unreasonable effort or expense, and the Investor and the Investor’s professional
advisor(s) therefore have obtained, in the judgment of the Investor and/or the
Investor’s professional advisor(s), sufficient information to evaluate the
merits and risks of investment in the Company.
7. Suitability. The
Investor understands and has fully considered for purposes of this investment
the risks of this investment and understands that (i) this investment is
suitable only for an investor who is able to bear the economic consequences of
losing the Investor's entire investment; (ii) the Corporation is a growing a new
business and has no significant operating history in such business; (iii) the
purchase of the Convertible Debt is a speculative investment which involves a
high degree of risk of loss by the Investor of the Investor's entire investment,
and (iv) upon optional conversion there are substantial restrictions on the
transferability of, and there will be no public market for, the Company’s
shares, and accordingly, it may not be possible for the Investor to liquidate
the Investor's investment in the Company’s shares.
8. Accredited Investor.
The Investor is an "Accredited Investor" within the meaning of Rule 501 of
Regulation D.
9. Lack of Liquidity.
The Investor is able (i) to bear the economic risk of this investment, and (ii)
to afford a complete loss of the Investor's investment; and represents that the
Investor has sufficient liquid assets so that the lack of liquidity associated
with this investment will not cause any undue financial difficulties or affect
the Investor's ability to provide for the Investor's current needs and possible
financial contingencies.
10. Investment
Information. At the request of the Investor, the Corporation may provide
to the Investor various offering documents related to the Corporation and the
terms of the offer and sale of Convertible Debt (the “Offering
Documents”). The Investor acknowledges that such Offering Documents,
if any, contain the views of the management of the Corporation, and that the
analysis of the market and of the Corporation's strategy contained therein
represents a subjective assessment about which reasonable persons could
disagree.
11. Access to
Information. The Investor, in making the Investor's decision to purchase
the Convertible Debt, has relied solely upon independent investigations made by
the Investor and the representations and warranties of the Corporation contained
herein and the Investor has been given (i) access to all material books and
records of the Corporation; (ii) access to all material contracts and documents
relating to this offering; and (iii) an opportunity to ask questions of, and to
receive answers from, the appropriate executive officers and other persons
acting on behalf of the Corporation concerning the Corporation and the terms and
conditions of this offering, and to obtain any additional information, to the
extent such persons possess such information or can acquire it without
unreasonable effort or expense, necessary to verify the accuracy of the
information set forth in the Offering Documents. The Investor acknowledges that
no valid request to the Corporation by the Investor for information of any kind
about the Corporation has been refused or denied by the Corporation or remains
unfulfilled as of the date thereof. The Investor has carefully read the Offering
Documents, including without limitation this Subscription Agreement. In
evaluating the suitability of an investment in the Corporation, the Investor has
not relied upon any representations or other information (whether oral or
written) other than as set forth in the Offering Documents or as contained in
any documents or answers to questions furnished by the Corporation.
3
12. No Endorsement by Federal or
State Agencies. The Investor understands and acknowledges that no federal
or state agency has made any finding or determination as to the fairness or
suitability for investment in, or any recommendation or endorsement of, the
Corporation or the Convertible Debt.
13. Investor has Evaluated
Risks. Based on the review of the materials and information described
above, and relying solely thereon and on the knowledge and experience of the
Investor and/or the Investor’s professional advisor(s), if any, in business and
financial matters, the Investor has evaluated the merits and risks of investing
in the Convertible Debt and has determined that the Investor is both willing and
able to undertake the economic risk of this investment.
14. Convertible Debt Acquired
for Personal Account, No View to Distribution. The Investor is acquiring
the Convertible Debt for the personal account of the Investor for investment and
not with a view to, or for resale in connection with, any distribution thereof
or of any interest therein, and no one else has any beneficial ownership or
interest in the Convertible Debt being acquired by the Investor, nor is any of
the Convertible Debt being acquired by the Investor to be subject to any lien or
pledge. The Investor has no present obligation, indebtedness or commitment
pending, nor is any circumstance in existence, that will compel the Investor to
secure funds by the sale, transfer or other distribution of any of the
Convertible Debt or any interest therein.
15. Restricted
Securities. The Investor understands and acknowledges that upon optional
Conversion the Company’s shares will be offered pursuant to one or more
exemptions from the registration and qualification requirements of the
Securities Act of 1933, as amended, and the securities laws of the various
states in which the Company’s shares are sold, the availability of which depend
(in part) on the truth and completeness of the information provided to the
Corporation in Annex I attached hereto and the bona fide nature of the
foregoing representations and warranties. With such realization, the Investor
hereby authorizes the Corporation to act as the Corporation may see fit in
reliance on such information, representations and warranties, including the
placement of the following or any substantially similar legend on any stock
certificate issued to the Investor in addition to any other legend that may be
imposed thereon that, in the opinion of the Corporation’s counsel, may be
required by applicable securities laws:
4
“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
APPLICABLE STATE SECURITES LAWS, RULES AND REGULATIONS. THESE SECURITIES MAY NOT
BE PLEDGED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACTS COVERING THE SECURITIES OR AN OPINION OF QUALIFIED
COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED.”
16. Indemnification. The
Investor hereby indemnifies and holds harmless the Corporation and the
Corporation’s respective officers, directors, shareholders, employees, attorneys
and agents, as the case may be, from and against all damages suffered and
liabilities of any kind incurred by any of them (including costs of
investigation and defense and attorneys’ fees) arising out of any inaccuracy in
the agreements, representations, covenants and warranties made by the Investor
in this Subscription Agreement.
17. Fiduciary
Representations. If the Investor is purchasing the Convertible Debt
subscribed for hereby in a fiduciary capacity, then all of the foregoing
representations, warranties and covenants shall be deemed to have been made on
behalf of the person or persons for whom the Investor is so
purchasing.
18. Subscription
Irrevocable. The Investor hereby acknowledges and agrees that the
Investor is not entitled to cancel, terminate or revoke this subscription or any
agreement of the Investor hereunder and that such subscription and agreement
shall survive the death or disability of the Investor.
19. Acceptance or Rejection by
Corporation. The Investor understands and acknowledges that this
subscription may be accepted or rejected by the Corporation in its sole and
absolute discretion. If a subscription is rejected by the Corporation, written
notice will be sent to the Investor along with the Subscription Agreement and
all funds (without interest or deduction) submitted by the
Investor.
NEITHER
THE CORPORATION NOR ANY OFFICER, DIRECTOR, SHAREHOLDER, EMPLOYEE, ATTORNEY OR
AGENT OF ANY OF THEM SHALL BE LIABLE TO ANY PERSON FOR THE REJECTION, IN WHOLE
OR IN PART, OF ANY OFFER TO SUBSCRIBE TO PURCHASE CONVERTIBLE DEBT,
NOTWITHSTANDING THAT THE INVESTOR MAY OTHERWISE BE QUALIFIED AS A PROSPECTIVE
INVESTOR.
20. Changes in Status.
If, before the sale of any Convertible Debt to the Investor, the Investor’s
investment intent as expressed herein materially changes, or if any change
occurs that would make either the representations or warranties made by the
Investor herein or the information provided by the Investor in any of the forms
attached hereto (including Annex I attached hereto) materially untrue or
misleading, then the Investor shall immediately so notify the Corporation, and
any prior acceptance of the subscription of the Investor shall be voidable at
the option of the Corporation in its sole and absolute discretion.
5
21. Forward Looking
Statements. The Offering Documents to the Investor contain
forward-looking statements within the meaning of Section 27A of the Securities
Act. Such forward-looking statements are indicated by the use of such words as
“intends,” “expects,” “may,” “anticipates,” “estimates,” “desires,” “believes,”
“projections” and similar expressions. Actual results may differ from those
described by forward-looking statements as a result of many risks and
uncertainties.
22. Material Non-Public
Information; No Trading. The Investor acknowledges and agrees
that he or she may have received material non-public information that has been
disclosed to the Investor for the purpose of evaluating the Corporation and the
Convertible Debt. The Investor agrees that he or she shall not
purchase or sell any securities of the Corporation until such time as all
material information provided to the Investor has been made publicly
available.
6
IN WITNESS WHEREOF, the
Investor executes and agrees to be bound by this Subscription Agreement by
executing the Signature Page attached hereto to be effective as of the date
therein indicated.
INDIVIDUAL
INVESTOR
|
Print
Name of Purchaser
|
Signature
of Purchaser
|
|
Print
Name of Spouse
|
Signature
of Spouse
|
|
(if
funds are to be invested in joint
|
(if
funds are to be invested in joint
|
|
name
or are community property)
|
name
or are community property)
|
|
$_______________________________
|
|
|
Amount
of immediately available funds transferred herewith
|
|
|
Please
PRINT the exact name(s) (registration) investor(s) desire(s) for the Loan
Note
|
|
|
______________________________________
|
(_____)
_______-____________
|
|
Occupation
|
Tel.
No.
|
|
___________________________US
Social Security or other Tax I.D. No.
|
|
|
Street
Address
|
|
|
City State/County Zip Code/Postal Code Country |
|
|
SUBSCRIPTION
ACCEPTED:
|
|
|
Dated:
_______________, 2010
|
By:
___________________________
|
|
Its:
___________________________
|
7
IN WITNESS WHEREOF, the
Investor executes and agrees to be bound by this Subscription Agreement by
executing the Signature Page attached hereto to be effective as of the date
therein indicated.
ENTITY
INVESTOR
I have
checked the appropriate boxes in Annex I (“Nature of Investor; Form of
Ownership”) as a qualifying entity and have completed the purchasing entity
representation letter.
__________________________
Print
Name of Partnership,
Corporation
or Trust
|
By:
______________________________________
|
___________________________
|
|
Signature
of authorized representative
|
Capacity
of authorized representative
|
$____________________
Amount of
immediately available funds transferred herewith
_____________________________
Please
PRINT the exact name(s) (registration) investor(s) desire(s) for the Loan
Note
(_____)
_______-______________
Tel.
No.
__________________________________
Tax I.D.
No.
Street
Address
City
State/County
Zip
Code/Postal
Code
Country
|
SUBSCRIPTION
ACCEPTED:
|
|
|
Dated:
_______________, 2010
|
By:
__________________________
|
|
Its:
______________________________
|
8
Annex I.
Accredited Investor Form
Each prospective investor in the
Convertible Debt of Blackwater Midstream Corp. that is a US resident must meet
one or more of the standards enumerated below. By your signature
below, you certify that you are an Accredited Investor as defined by Regulation
D of the Act:
If you
are not a US resident, indicate by initialing
here:________________________________________
(a) You
are a natural person whose individual net worth or joint net worth with your
spouse at the time of your purchase of the Securities exceeds
$1,000,000.00;
____________________________
(Signature
of Investor)
(b) You
are a natural person who had an individual income in excess of $200,000.00 in
each of the two most recent years or joint income with your spouse in excess of
$300,000.00 in each of those years and you have a reasonable expectation of
reaching the same income level in the current year;
____________________________
(Signature
of Investor)
(c) You
are a trustee for a trust that is revocable by the grantor at any time
(including an XXX) and the grantor qualified under either (a) or (b)
above. A copy of the declaration of trust or trust agreement and a
representation as to the net worth or income of the grantor is
enclosed;
___________________________
(Signature
of Investor)
(d) You
are a trustee of a trust, with total assets in excess of $5,000,000.00, not
formed for the specific purpose of acquiring the debt offered whose purchase is
directed by a sophisticated person as described in Rule 506 (B)(2)(ii) of the
Act;
___________________________
(Signature
of Investor)
(e) You
are an organization described in Section 501(c)(3) of the Internal Revenue Code,
corporation, business trust, or partnership, not formed for the specific purpose
of acquiring the debt offered, with total assets in excess of
$5,000,000.00;
___________________________
(Signature
of Investor)
(f) You
are a director or officer of Blackwater Midstream Corp.; or
___________________________
(Signature
of Investor)
(g) Investor
is an employee benefit plan within the meaning of ERISA having total assets in
excess of Five Million Dollars ($5,000,000.00).
___________________________
(Signature
of Investor)
9
(h) Investor
is a self-directed employee benefit plan within the meaning of ERISA with
investment decisions made solely by persons who are accredited investors as
defined in Rule 501(a) of Regulation D.
__________________________
(Signature
of Investor)
(i) Investor
is an entity all the equity owners of which are “accredited investors” within
one or more of the above categories, other than Category (e). If relying upon this category alone,
each equity owner must complete a separate copy of this Subscription
Agreement.
___________________________
(Signature
of Investor)
Additionally,
you represent and warrant that (i) if you are an individual or individuals, none
of you have been convicted of a felony; or (ii) if you are a corporation,
partnership, limited liability company, trust or other entity, none of the
beneficial owners thereof have been convicted of a felony.
___________________________
(Signature
of Investor)
The
Investor is/are (INITIAL AND CHECK ALL
APPLICABLE ANSWERS):
|
INITIAL
|
CHECK
|
|
|
_____1.
|
[ ] Individual
(one signature required)
|
|
|
_____2.
|
[ ] Joint
Tenants with right of survivorship (both parties must
sign)
|
|
|
_____3.
|
[ ] Tenants
in Common (both parties must sign)
|
|
|
_____4.
|
[ ] Community
Property (one signature required if the Convertible Debt is held in one
name, i.e.,
managing spouse; two signatures required if the Convertible Debt is held
in both names or if purchaser is a resident of
California)
|
|
|
_____5.
|
[ ] Corporation
(signature of authorized party or parties required)
|
|
|
_____6.
|
[ ] Partnership
(signature of general partner required and all additional signatures
required by Partnership Agreement)
|
|
|
_____7.
|
[ ] Trust
(Trust must sign as follows:
__________________
as trustee for ___________________,
dated
______________________).
|
|
|
_____8.
|
[ ] Other
Entities (signatures as required by applicable organization
documents)
|
DATE:_______________________________________,
2010
|
PRINT
NAME
|
PRINT
NAME
|
|
|
|
|
SIGNATURE
|
SIGNATURE
|
10
EXHIBIT
A
RISK
FACTORS
You should carefully consider the
risks and uncertainties described below and the other information in the
Investment Memorandum dated January 2010 before deciding whether to invest in
the Convertible Debt of Blackwater Midstream Corp. The occurrence of any
of the following risks could materially and adversely affect the Company’s
business, financial condition and operating results. In any such
case, you may lose part or all of your investment.
Risks
Inherent in the Company’s Business
The
Company may not attain its projections if it is unable to obtain, on
commercially acceptable terms, additional equity capital that it may require
from time to time in the future to finance its acquisitions.
The
proceeds of the current Convertible Debt offering are expected to be sufficient
to sustain a cash flow positive operation. However, the Company needs additional
capital to expand the business. The Company does not currently have
sufficient cash reserves or revenue from operations to do so. Without
additional capital the Company will not be able to acquire additional
facilities. The Company is unable to provide any assurance or
guarantee that additional capital will be available when needed by the Company,
or that such capital will be available under terms acceptable to the Company or
on a timely basis.
The
Company may be unable to compete successfully against existing and future
competitors, which could harm its margins and its business.
The fuel
and chemical storage business is highly competitive. The Company expects the
competitive environment to continue in the future. The Company faces competition
from a number of existing storage facilities. The Company believes that with
relatively strong financial performance of fuel and related industries, this
industry will continue to attract new competitors and encourage existing
competitors to increase their involvement.
The
Company can provide no assurance that it will be able to compete successfully
against current or potential competitors. Many of its current and
potential competitors have longer operating histories, better brand recognition
and significantly greater financial, technical and marketing resources than the
Company. Many of these competitors may have well-established
relationships with customers and other key partners and can devote substantially
more resources to marketing and sales. As a result, they may be able
to secure customers on more favorable terms. Larger competitors may enjoy
significant competitive advantages that result from, among other things, a lower
cost of capital and enhanced operating efficiencies. In addition, the number of
entities and the amount of funds competing for customers may increase. This will
result in reduced prices and increased cost of sales. The Company’s
profitability may be reduced and you may experience a lower return on your
investment.
The
Company’s inability to retain its executive officers and other key personnel may
harm its business and impede the implementation of its business
strategy.
The
Company’s future success depends to a significant degree on the skills,
experience and efforts of its key management personnel. The Company’s
principal managers are Xxxxxxx Xxxxx, Xxxx Xxxxxxxxxx and Xxxxx Xxxxxxxx. The
Company has executed five-year employment agreements with each of them and has
granted them substantial equity incentives to remain with the
Company. However, it cannot guarantee that they will remain
employees. The loss of their services could harm the Company’s
business and operations. In addition, the Company has not obtained
key person life insurance on any of its key employees as of the date of this
memorandum. If any executive officers or key employees left, died or
was seriously injured and unable to work and the Company was unable to find a
qualified replacement and/or to obtain adequate compensation for such loss, the
Company may be unable to manage its business, which could harm its operating
results and financial condition. However, the Company believes that qualified
replacement personnel could be found to continue to execute the business
plan.
The
economic performance and value of the Company’s facility depend on many factors
beyond its control.
The
economic performance and value of the Company’s facility can be affected by many
factors, including the following:
|
|
·
|
economic
downturns and recessions;
|
|
|
·
|
declines
in revenue due to loss of customers or reduced
volume;
|
11
|
|
·
|
reduced demand in the surrounding
geographic regions due to general economic
conditions;
|
|
|
·
|
construction of competitive
properties nearby and competition from other available
facilities;
|
|
|
·
|
increased
operating costs and expenses; and
|
|
|
·
|
availability of long term
financing at reasonable
rates.
|
The
Company’s facility is subject to environmental laws and environmental
risks.
Under
various federal, state and local laws, ordinances and regulations, the Company
is considered to be an owner or operator of real property or to have arranged
for the disposal or treatment of hazardous or toxic substances. As a result, it
could become liable for the costs of removal or remediation of certain hazardous
substances released on or in its property. The Company could also be liable for
other costs that relate to hazardous or toxic substances (including governmental
fines and injuries to persons and property). Many if not all of the
chemicals and fuels the Company intends to store are considered to be hazardous
materials. Inadvertent releases or spills can subject the Company to
costly remediation expenses and/or fines.
Risks
Relating to This Offering
There
is no guarantee that the Company will be able to make quarterly interest
payments and/or repay the principal on the maturity date.
The
Company will make every effort to make quarterly interest payments and to be
able to repay the principal on maturity date. However, the risk factors outlines
above are not under the control of the Company. Also, management might need to
decide to defer interest payments for some time in the interest of the cash
situation of the Company.
There
is no guarantee that the assets owned by the Company are sufficient to cover the
outstanding debt of the Company.
The
assets of the Company are pledged against other debt. These debtors will be
first in line to receive cash from a possible sale of assets in case of a
liquidation of the Company. Although the total value of the assets has been
appraised and as such is larger than the Company’s total debt position, there is
no guarantee that in the event of a forced sale, the appraised value will be met
by the market.
You
may experience immediate and substantial dilution in the value of your Shares
upon Conversion of debt following this offering.
Dependent upon the Company stock price
when the Convertible Debt is converted to Shares, an Investor may experience
immediate and substantial book value dilution, in that the price paid per Share
may be substantially greater than the Company’s net tangible book value per
share or the per share value of Company assets after subtracting
liabilities.
Your
ownership percentage will be diluted by future issuances of capital
stock.
The
Company’s business strategy requires it to raise additional equity capital
through the sale of common stock or preferred stock, or the issuance of debt,
which may be convertible into equity securities. Your percentage of
ownership will become diluted as the Company issues new shares of stock. The
Company may issue common stock, convertible debt or common stock pursuant to a
public offering or a private placement, upon exercise of warrants or options, or
to sellers of properties it directly or indirectly acquires instead of, or in
addition to, cash consideration. Investors receiving Shares by converting the
debt in this offering and who do not participate in any future stock issues will
experience dilution in the percentage of the issued and outstanding stock they
own.
The
conversion price of the Shares is arbitrary.
The
conversion price of the Convertible Debt was arbitrarily determined by
management of the Company, and bears no relationship to earnings, asset values,
book value or any other recognized criteria of value.
Converted
shares are restricted and transferability is limited.
Upon
optional conversion, the Shares are offered and sold pursuant to one or more
exemptions from registration under the Securities Act of 1933 and without
qualification or registration under the securities laws of the various
states. Consequently, the Shares that you would be purchasing are
restricted and may not be sold, transferred or hypothecated without registration
under the Securities Act of 1933 and applicable state laws or without an
exemption from such registration or qualification. The Shares you
will receive will bear a legend restricting their transfer
accordingly.
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