OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
1. Xxxxxx Xxxxxx Holding Corporation, a Texas corporation (the
"Company"), has offered for sale outside the United States (as that term
is defined in Regulation S) ("Regulation S") of the United States
Securities Act of 1933, as amended (the "Act"), and the undersigned
purchaser (the "Purchaser") hereby tenders this subscription and applies
for the purchase of Fifteen Hundred (1,500) shares of Series L, Class A
Preference Shares (the "Class A Preferred Stock") of the Company,
[together with the shares of the Company's common stock issuable upon
conversion of the Series L, Class A Preference Shares (the "Shares")] at
a purchase price per Share of $1,000 (the "Offering"). Together with
this Subscription Agreement, the Purchaser is delivering to the Escrow
Agent by wire transfer the full amount of the purchase price for the
Shares for which it is subscribing pursuant hereto ($1,500,000) against
delivery of the Class A Preferred Certificates. Time is of the essence
in connection with this Subscription Agreement.
2. Representations and Warranties of Purchaser. In order to
induce the Company to accept this subscription, the Purchaser hereby
represents and warrants to, and covenants with, the Company as follows:
A. (i) The Purchaser is not a U.S. person as that term is
defined under Regulation S;
(ii) At the time the buy order for the Class A Preferred
Stock was originated, Purchaser was outside the United States and is
outside of the United States as of the date of the execution and
delivery of this Agreement;
(iii) Purchaser is purchasing the Class A Preferred
Stock for its own account and not on behalf of any U.S. person or
any other person, and the transaction has not been pre-arranged with
a purchaser in the United States (see Appendix A attached hereto for
definitions of "U.S. person" and "United States" under Regulation S)
and Purchaser is acquiring the Class A Preferred Stock for
investment purposes and not with a view towards distribution and has
no present arrangement or intention to sell the Class A Preferred
Stock or the common stock issuable upon conversion of the Class A
Preferred Stock;
(iv) The Purchaser represents and warrants and hereby
agrees that all offers and sales of the Class A Preferred Stock
prior to the expiration of a period commencing on the date hereof
and ending 40 days thereafter (the "Restricted Period") shall only
be made in compliance with the safe harbor provisions contained in
Regulation S, with which Purchaser is familiar, or pursuant to the
registration of such securities under the Act or pursuant to an
exemption from registration under the Act, and the Purchaser shall
not take a short position directly or indirectly with respect to the
Company's common stock during the Restricted Period, and that all
offers and sales after the expiration of the Restricted Period in
the United States or to U.S. Person shall be made only pursuant to
such a registration or to such exemption from registration;
(v) The Purchaser acknowledges and agrees that the Class
A Preferred Stock has not been registered under the Act and may not
be offered or sold in the United States or to U.S. Persons unless
the Shares are registered under the Act or an exemption from the
registration requirements of the Act is available;
(vi) The Purchaser is not an officer, director or
"affiliate" (as that term is defined in Rule 405 under the Act) of
the Company;
B. (i) The purchaser has received and carefully reviewed the
Company's most recent Annual Report on Form 10-K, its subsequent
Quarterly Reports on Form 10-Q, and its Current Reports on Form 8-K
(collectively, the "SEC Reports"), and a copy of the Certificate of
Designation for the Series L Class A Preferred Stock;
(ii) The Purchaser has had a reasonable opportunity to ask
questions of and receive answers from the Company concerning the
Company and the Offering, and all such questions, if any, have been
answered to the full satisfaction of the Purchaser;
(iii) The Purchaser is an accredited investor and has
such knowledge and expertise in financial and business matters that
the Purchaser is capable of evaluating the merits and risks involved
in an investment in the Class A Preferred Stock and acknowledges
that an investment in the Class A Preferred Stock entails a number
of very significant risks and funds should only be invested by
persons able to withstand the total loss of their investment;
(iv) Except as set forth in this Agreement, no
representations or warranties have been made to the Purchaser by the
Company or any agent, employee or affiliate of the Company and in
entering into this transaction the Purchaser is not relying upon any
information, other than that contained in this Agreement, the SEC
Reports and the results of independent investigation by the
Purchaser;
(v) The Purchaser understands that the Class A Preferred
Stock is being offered and sold to it in reliance on specific
exemptions from the registration requirements of the United States
Federal and State securities laws and that the Company is relying
upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the applicability of such
exemptions and the suitability of the Purchaser to acquire the Class
A Preferred Stock, and the Purchaser acknowledges that it is
Purchaser's responsibility to satisfy itself as to the full
observance by this Offering and the sale of the Class A Preferred
Stock to Purchaser of the laws of any jurisdiction outside the
United States and Purchaser has done so;
(vi) The Purchaser has full power and authority to execute
and deliver this Agreement and to perform its obligations hereunder;
and this Agreement is a legally binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms; and
(vii) Purchaser understands that in the view of the
SEC the statutory basis for the exemption claimed for the
transaction would not be present if the Offering, although in
technical compliance with Regulation S, is part of a plan or scheme
to evade the registration provisions of the 1933 Act and Purchaser
confirms that its purchaser is not part of any such plan or scheme.
Purchaser is acquiring the Class A Preferred Stock for investment
purposes and has no present intention to sell the Class A Preferred
Stock in the United States or to a U.S. person or for the account or
benefit of a U.S. Person.
3. Representations of the Company. The Company represents and
warrants:
A. The Company is a Reporting Issuer as defined by Rule 902
of Regulation S. The Company is in full compliance, to the extent
applicable, with all reporting obligations under either Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
B. Offshore Transaction,
(i) The Company has not offered the Class A Preferred
Stock to any person in the United States or to any U.S. person as
that term is defined in Regulation S;
(ii) At the time the buy order was received, the Company
and/or its agents reasonably believed that the purchasers in the
Offering were outside of the United States and were not U.S.
persons; and
(iii) The Company reasonably believes that the
purchase of the Class A Preferred Stock pursuant to the Offering has
not been pre-arranged with a purchaser in the United States;
C. In connection with the Offering neither the Company nor
any of its agents has engaged in any "directed selling efforts" (as
that term is defined in Regulation S) nor has the Company or any of
its agents conducted any general solicitation relating to the
Offering to persons residing within the United States or to U.S.
persons.
D. The execution, delivery and performance of this Agreement
by the Company and the performance of its obligations hereunder do
not and will not constitute a breach or violation of any of the
terms and provisions of, or constitute a default under or conflict
with or violate any provision of (i) the Company's Certificate of
Incorporation or By-laws, (ii) any indenture, mortgage, deed of
trust, agreement or other instrument to which the Company is a party
or by which it or any of its property is bound, (iii) any applicable
statute of regulation, (iv) or any judgment, decree or order of any
court or governmental body having jurisdiction over the Company or
any of its property.
E. The Company is a corporation duly organized, validly
existing and in good standing under the law of its jurisdiction of
incorporation and is duly qualified as a foreign corporation in all
jurisdictions where the failure to be so qualified would have a
materially adverse effect on its business, taken as a whole.
F. The execution, delivery and performance of this Agreement
and the consummation of the issuance of the Class A Preferred Stock
and the transactions contemplated by this Agreement are within the
Company's corporate powers and have been duly authorized by all
necessary corporate and stockholder action on behalf of the Company.
G. There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now
pending or, to the knowledge of the Company, threatened, against or
affecting the Company, or any of its properties, which might result
in any material adverse change in the condition (financial or
otherwise) or in the earnings, business affairs or business
prospects of the Company, or which might materially and adversely
affect the properties or assets thereof.
H. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or
other material instrument or agreement to which it is a party or by
which it or its property may be bound; and neither the execution,
nor the delivery by the Company, nor the performance by the Company
of its obligations under, this Agreement or, the Class A Preferred
Stock will conflict with or result in the breach or violation of any
of the terms or provisions of, or constitute a default or result in
the creation or imposition of any lien or charge on any assets or
properties of the Company under, any material indenture, mortgage,
deed of trust or other material agreement or instrument to which the
Company is a party or by which it is bound or any statute or the
Certificate of Incorporation or Bylaws of the Company, or any
decree, judgment, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or
its properties.
I. None of the Company's filings with the Securities and
Exchange Commission contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statement therein in light of the
circumstances under which they were made, not misleading. The
Company has timely filed all requisite forms, reports and exhibits
thereto with the Securities and Exchange Commission.
J. There has been no material adverse change in the financial
condition, earnings, business affairs or business prospects of the
Company since the date of the Company's most recent Quarterly Report
on Form 10-Q, if applicable, filed with the Securities and Exchange
Commission.
K. As of the date hereof, the conduct of the business
complies in all material respects with all statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees
applicable thereto. The Company has not received notice of any
alleged violation of any statute, law, regulation ordinance, rule,
judgment, order or decree from any governmental authority which
would materially adversely affect the business of the Company.
L. There is no fact known to the Company (other than general
economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser that (i) could reasonably be
expected to have a material adverse effect on the condition
(financial or otherwise) or in the earnings, business affairs,
business prospects, properties or assets of the Company or (ii)
could reasonably be expected to materially and adversely affect the
ability of the Company to perform its obligations pursuant to this
Agreement and the Class A Preferred Stock.
M. Issuer will not engage in any similar offering of its
securities pursuant to Regulation S for a period of 120 days from
the date of the Closing of this transaction unless Subscriber has
been previously offered such Shares in writing on the same terms and
has refused to take up the offer within ten (10) days.
N. There is no action pending for delisting of the Common
Stock nor is the Company aware of any threatened action relating
thereto.
4. The Purchaser understands that this subscription is not binding
upon the Company until the Company accepts it, which acceptance is at the
sole discretion of the Company and is to be evidenced by the Company's
execution of this Agreement where indicated. This Agreement shall be
null and void if the Company does not accept it as aforesaid. Upon
acceptance by the Company and receipt of the total purchase price, the
Company will issue one or more certificates for the full number of shares
of Class A Preferred Stock subscribed for.
5. Covenants of the Company. For so long as any Class A Preferred
Stock held by the Purchaser remain outstanding, the Company covenants and
agrees with the Purchaser that:
(a) It will reserve from its authorized but unissued shares of
Common Stock a sufficient number of shares of Common Stock to permit
the conversion in full of the outstanding Class A Preferred Stock.
(b) It will maintain the listing of its Common Stock on
NASDAQ.
(c) It will not issue stock transfer instructions to its
transfer agent with respect to and will not place a restrictive
legend on the certificates representing shares of Common Stock
issued upon conversion of the Class A Preferred Stock.
6. Conversion. For the purposes of conversion, the Series L
Class A Shares shall be valued at $1,000 per share ("Value"), and, if
converted, the Series L Class A Shares shall be converted into such
number of Common Shares of the Company $.01 par value (the "Conversion
Shares") as is obtained by dividing the aggregate Value of the shares of
Series L Class A Shares being so converted by the "Conversion Price."
For purposes of this Part 6, the "Conversion Price" means Seventy-five
percent (75%) of the average daily closing bid price of Common Shares as
reported on NASDAQ level 1 at 4:00 P.M. EST for the period of 5
consecutive trading days immediately preceding the date of the conversion
of the Series L Class A Shares in respect of which such Conversion Price
is determined. The number of Conversion Shares so determined shall be
rounded to the nearest whole number of shares. Any holder of Series L
Class A Shares (an "Eligible Holder") may at any time commencing 41 days
after the issuance of any Series L Class A Shares convert any whole
number of shares of Series L Class A Shares in accordance with this Part.
6.1 The conversion right provided by the above section may be
exercised only by an Eligible Holder of Series L Class A Shares, in whole
or in part, by the surrender of the share certificate or share
certificates representing the Series L Class A Shares to be converted at
the principal office of the Corporation (or at such other place as the
Corporation may designate in a written notice sent to the holder by first-
class mail, postage prepaid, at its address shown on the books of the
Corporation) against delivery of that number of whole Common Shares as
shall be computed by dividing (1) the aggregate Value of the Series L
Class A Shares so surrendered, if any, by (2) the Conversion Price. Each
Series L Class A Share certificate surrendered for conversion shall be
endorsed by its holder. In the event of any exercise of the conversion
right of the Series L Class A Shares granted herein (i) share
certificates representing the Common Shares purchased by virtue of such
exercise shall be delivered to such holder within 5 days of notice of
conversion free of restrictive legend or stop transfer orders, and (ii)
unless the Series L Class A Shares has been fully converted, a new share
certificate representing the Series L Class A Shares not so converted, if
any, shall also be delivered to such holder within 5 days of notice of
conversion, or carried on the Corporation's ledger, at holder's option.
Any Eligible Holder may exercise its right to convert the Series L Class
A Shares by telecopying an executed and completed Notice of Conversion to
the Corporation, and within 72 hours thereafter, delivering the original
Notice of Conversion and the certificate representing the Series L Class
A Shares to the Corporation by express courier. Each date on which a
telecopied Notice of Conversion is received by the Corporation in
accordance with the provisions hereof shall be deemed a Conversion Date.
The Corporation will transmit the Common Shares certificates issuable
upon conversion of any Series L Class A Shares (together with the
certificates representing the Series L Class A Shares not so converted)
to the Eligible Holder via express courier within three business days
after the conversion date if the Corporation has received the original
Notice of Conversion and Series L Class A Shares certificate being so
converted by such date.
6.2 All Common Shares which may be issued upon conversion of
Series L Class A Shares will, upon issuance, be duly issued, fully paid
and nonassessable and free from all taxes, liens, and charges with
respect to the issue thereof. At all times that any Series L Class A
Shares are outstanding, the Corporation shall have authorized, and shall
have reserved for the purpose of issuance upon such conversion, a
sufficient number of Common Shares to provide for the conversion into
Common Shares of all Series L Class A Shares then outstanding at the then
effective Conversion Price. Without limiting the generality of the
foregoing, if, at any time, the Conversion Price is decreased, the number
of Common Shares authorized and reserved for issuance upon the conversion
of the Series L Class A Shares shall be proportionately increased.
7. Registration. If upon conversion of Class A Preferred Stock
effected by the Purchaser pursuant to the terms of this Agreement and the
terms of the Class A Preferred Stock the Company fails to issue
certificates for shares of Common Stock issuable upon such conversion
(the "Underlying Shares") to the Purchaser bearing no restrictive legend
for any reason other than (i) the Company's reasonable good faith belief
that the representations and warranties made by the Purchaser in this
Agreement or the Notice of Conversion were untrue when made, or (ii) the
inability of the Company to lawfully issue such Common Stock due to a
change in SEC regulations, then the Company shall be required, at the
request of the Purchaser and at the Company's expense, to effect the
registration of the Underlying Shares issuable upon conversion of the
Class A Preferred Stock under the Act and relevant Blue Sky laws as
promptly as is practicable. The Company and the Purchaser shall
cooperate in good faith in connection with the furnishing 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. In such case, the Company shall file a registration
statement within 45 days of Purchaser's demand therefor and shall use its
best efforts to cause such registration statement to become effective as
soon as practicable thereafter. Such best efforts shall include, but not
be limited to, promptly responding to all comments received from the
staff of the Securities and Exchange Commission 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 Securities and Exchange Commission. Once declared
effective by the Securities and Exchange Commission the Company shall
cause such registration statement to remain effective until the earlier
of (i) the sale by the Purchaser of all Underlying Shares registered or
(ii) 120 days after the effective date of such registration statement.
In the event the Company fails to issue Common Stock to the Purchaser in
accordance with paragraph 6, the current twenty-five percent (25%)
discount provided in the Conversion Price shall increase by two percent
(2%) and such discount shall continue to increase by two percent (2%) for
each thirty (30) day period thereafter until the Registration Statement
is declared effective by the SEC, or until the discount reached is thirty-
five percent (35%), and additional Common Stock shall be issued to the
Purchaser in accordance with such additional discounts.
8. Indemnification.
A. The Purchaser agrees to indemnify the Company and hold it
harmless from and against any and all losses, damages, liabilities,
costs and expenses which it may sustain or incur in connection with
the breach by the Purchaser of any representation, warranty or
covenant made by it herein.
B. The Company agrees to indemnify the Purchaser and hold it
harmless from and against any and all losses, damages, liabilities,
costs and expenses which it may sustain or incur in connection with
the breach by the Company of any representation, warranty or
covenant made by it herein.
9. Neither this Agreement nor any of the rights of the Purchaser
hereunder may be transferred or assigned by the Purchaser.
10. This Agreement (i) may only be modified by a written instrument
executed by the Purchaser and the Company; (ii) sets forth the entire
agreement of the Purchaser and the Company with respect to the subject
matter hereof; (iii) shall be governed by the laws of Texas applicable to
contracts made and to be wholly performed therein; and (iv) shall inure
to the benefit of, and be binding upon the Company and the Purchaser and
their respective heirs, legal representatives, successors and permitted
assigns.
11. Unless the context otherwise requires, all personal pronouns
used in this Agreement, whether in the masculine, feminine or neuter
gender, shall include all other genders.
12. All notices or other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered
personally or mailed by certified or registered mail, return receipt
requested, postage prepaid, as follows: If to Purchaser, to the address
set forth on the signature page of this Agreement and if to the Company,
to Xxxxxx Xxxxxx Holding Corporation, 00000 Xxxxx Xxxxxx, Xxxxxx, Xxxxx
00000, or to such other address as the Company or the Purchaser shall
have designated to the other by like notice.
13. Restricted Period; Legend. The transaction restriction in
connection with this offshore offer and sale restrict Purchaser from
offering and selling the Class A Preferred Stock to U.S. persons or for
the account or benefit of a U.S. person for the Restricted Period. Rule
903(c)(2) governs the Restricted Period. Purchaser understands that the
Company will instruct its transfer agent to place a stop transfer order
(which shall be effective to prohibit transfers to U.S. persons or for
the account or benefit of U.S. persons solely during the Restricted
Period) with respect to the certificates representing the Class A
Preferred Stock and that such certificates will bear the following
legend: "The shares represented by this certificate have been issued
pursuant to Regulation S promulgated under the Securities Act of 1933, as
amended ("Act"), and have not been registered under the Act. These
shares may not be offered or sold within the United States or to, or for
the account of a "U.S. Person" (as that term is defined in Regulation S)
until after the 40th day following completion of the offering. After
such date, this legend shall have no further effect." Following the
expiration of the Restricted Period, the Company will, at the request of
the Purchaser, cause its transfer agent to issue certificates
representing the Class A Preferred Stock or the common stock as may be
applicable without any restrictive legend or stop transfer instructions.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of May _______, 1997.
The Purchaser declares under penalty of perjury that the statements,
representations and warranties contained in the foregoing Securities
Purchase Agreement and in the following Purchaser Acknowledgments are
true, correct and complete.
Investor
______________________________
(Signature)
______________________________
(Print Name)
______________________________
(Title)
Exact Name(s) in which ownership of Securities is to be registered:
_____________________________________
Principal Place of Business: _________________________________________
_________________________________________
_________________________________________
Federal Tax ID Number: __________________________________________
Original Number of Shares of Series L Preferred Stock Purchased: 1,500
Amount $1,500,000
AGREED AND ACCEPTED:
XXXXXX XXXXXX HOLDING CORPORATION
By:______________________________
APPENDIX "A"
Pursuant to Rule 902(o) and (p) of Regulation S, the terms "U.S.
Person" and "United States" are defined as follows:
(o) U.S. Person. (1) "U.S. Person" means:
(i) Any natural person resident in the United States;
(ii) Any partnership or corporation organized or incorporated
under the laws of the United States;
(iii) Any estate of which any executor or administrator is
a U.S. person;
(iv) Any trust of which any trustee is a U.S. person;
(v) Any agency or branch of a foreign entity located in the
United States;
(vi) Any non-discretionary account or similar account (other
than an estate or trust) held by a dealer or other fiduciary
organized, incorporated or (if an individual) resident in the United
States; and
(vii) Any partnership or corporation if: (A) organized or
incorporated under the laws of any foreign jurisdiction; and (B)
formed by a U.S. person principally for the purpose of investing in
securities not registered under the Securities Act of 1933, unless
it is organized or incorporated and owned, by accredited investors
(as defined in Rule 501(a)) who are not natural persons, estates or
trusts.
(1) Notwithstanding paragraph (o)(1) of this rule, any
discretionary account or similar account (other than an estate or trust)
held for the benefit or account of a non-U.S. person by a dealer or other
professional fiduciary organized, incorporated, or (if an individual)
resident in the United States shall not be deemed a "U.S. person."
(2) Notwithstanding paragraph (o)(1); any estate of which any
professional fiduciary acting as executor or administrator is a U.S.
person shall not be deemed a U.S. person if:
(i) An executor or administrator of the estate who is not a
U.S. person has sole or shared investment discretion with respect to
the corpus of the estate; and
(ii) The estate is governed by foreign law.
(3) Notwithstanding paragraph (o)(1), any trust of which any
professional fiduciary acting as trustee is a U.S. person shall not be
deemed a U.S. person if a trustee who is not a U.S. person has sole or
shared investment discretion with respect to the trust assets, and no
beneficiary of the trust (and no settlor if the trust is revocable) is a
U.S. person.
(4) Notwithstanding paragraph (o)(1), an employee benefit plan
established and administered in accordance with the law of a country
other than the United States and customary practices and documentation of
such country shall not be deemed a U.S. person.
(5) Notwithstanding paragraph (o)(1), any agency or branch of a
U.S. person located outside the United States shall not be deemed a "U.S.
person" if:
(i) The agency or branch operates for valid business reasons;
and
(ii) The agency or branch is engaged in the business of
insurance or banking and is subject to substantive insurance or
banking regulation, respectively, in the jurisdiction where located.
(6) The International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development Bank, the
Asian Development Bank, the African Development Bank, the United Nations,
and their agencies, affiliates and pension plans, any other similar
international organizations, their agencies, affiliates and pension plans
shall not be deemed "U.S. persons."
(p) United States. "United States" means the United States of
America, its territories and possessions, any State of the United States,
and the District of Columbia.
