THE SECURITIES BEING OFFERED HAVE NOT BEEN REGISTERED UNDER UNITED STATES
FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE
SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, UNLESS PURSUANT TO
REGISTRATION UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE SECURITIES LAWS
OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM.
FEE ARRANGEMENT AGREEMENT
XXXXXXX X. XXXXXXX, P.C.
XXXXXXXX X. XXXXX, P.C.
SurfNet Media Group, Inc. ("Company") is issuing, pursuant to the terms of this
agreement ("Agreement"), shares of its common stock ("Shares") to Xxxxxxx X.
XxXxxxx and Xxxxxxxx X. Xxxxx, P.C. (each individually, "Subscriber," and
collectively "Subscribers") in lieu of cash payment for certain professional
fees for services previously rendered by Xxxxx & XxXxxxx, P.L.C.
WHEREAS:
(i) The Subscribers have provided certain legal services to the
Company.
(ii) The Company currently owes the Subscribers professional fees for
services rendered in the amount of $64,767.20 as reflected on
Xxxxx & XxXxxxx, P.L.C. Invoice # 1003 dated October 9, 2003, as
adjusted.
(iii)The Company proposed issuing equity interests in the Company in
lieu of cash payment for professional fees, and the Subscribers,
having considered the Company's cash needs and other relevant
factors, regard the proposal as being in the Company's best
interest.
(iv) The Subscribers have not advised the Company regarding whether
the proposal is in the Company's best interest, although the
Subscribers and the Company both believe that the proposal is
fair and reasonable for the Company.
(v) The Company desires to satisfy $54,767.20 of the professional
fees it owes to the Subscribers by issuing equity interests in
the Company to the Subscribers.
(vi) The Company desires to issue 27,384 shares of common stock
("Shares") to the Subscribers in lieu of a cash payment in the
amount of $54,767.20, or at $2.00 per Share.
NOW, THEREFORE, in consideration of the representations, warranties, mutual
covenants and agreements of the parties contained in this Agreement, the parties
agree as follows:
1
1. FEE ARRANGEMENT
On the terms and subject to the conditions of this Agreement, the Subscribers
hereby accept, and irrevocably agree to purchase, 27,384 Shares (13,692 Shares
to Xxxxxxxx X. Xxxxx, P.C. and 13,692 Shares to Xxxxxxx XxXxxxx, P.L.C.) in lieu
of cash payment for $54,767.20 of the Company's obligation to the Subscribers
for the services previously rendered by Xxxxx & XxXxxxx, P.L.C. The Company will
issue 27,384 Shares in satisfaction of $54,767.20 of the Company's obligation to
the Subscribers for the services previously rendered by Xxxxx & XxXxxxx, P.L.C.
Simultaneously with the execution of this Agreement, the Subscribers will credit
the Company's account in the amount of $54,767.20, which will be applied to
payment for the Shares. The Subscribers will also complete sign and deliver to
the Company the investor questionnaire in the form attached hereto as Appendix
I.
2. DELIVERY OF SHARES
Upon the satisfaction of all the conditions set forth in Section 1 of this
Agreement, the Company will record the Subscribers' Share ownership in the books
and records of the Company to reflect the investment. The Company will cause to
be delivered to the Subscribers certificates representing the Shares purchased,
registered in the name of "Xxxxxxxx X. Xxxxx, P.C." and "Xxxxxxx XxXxxxx." The
Company and the Subscribers agree to execute and deliver such other documents as
may be necessary to complete the issuance of the Shares. The Company will also
complete, sign and deliver to the Subscribers a counterpart of the signature
page of the Client Acknowledgment and Consent, attached as Appendix II (the
"Client Acknowledgment and Consent").
BY EXECUTING BELOW, THE SUBSCRIBERS ACKNOWLEDGE THAT THE COMPANY IS RELYING UPON
THE ACCURACY AND COMPLETENESS OF THE REPRESENTATIONS CONTAINED HEREIN IN
COMPLYING WITH ITS OBLIGATIONS UNDER APPLICABLE SECURITIES LAWS.
3. THE SUBSCRIBERS' REPRESENTATIONS AND WARRANTIES
The Subscribers makes the following representations and warranties to the
Company:
(a) Each of the Subscribers is purchasing the Shares for the Subscriber's
own account and for investment purposes only and has no present
intention, agreement, or arrangement for the distribution, transfer,
assignment, resale, or subdivision thereof. Each of the Subscribers
also represents that the entire legal and beneficial interest of the
Shares that the Subscriber is purchasing is being purchased for, and
will be held for, the Subscribers' account only.
(b) Each of the Subscribers recognizes that investment in the Shares
involves substantial risks and has taken full cognizance of and
understands all of the risks related to the purchase of the Shares. In
making the decision to invest in the Shares, each of the Subscribers
has relied on the information provided by the Company and certain
documents and materials delivered by the Company, and on the
Subscriber's own independent investigations and/or those of the
2
Subscriber's own professional tax and other advisors. Each of he
Subscribers has been given the opportunity to obtain information and
to examine all documents relating to the Company, and to ask questions
of, and to receive answers from, the officers of the Company
concerning the Company, the officers and directors and the terms and
conditions of this investment and to obtain any additional
information, to the extent the Company possesses such information or
could acquire it without unreasonable effort or expense, to verify the
accuracy of any information previously furnished. All such questions
have been answered to the full satisfaction of each of the
Subscribers, and all information and documents, records and books
pertaining to this investment, which the Subscriber has requested have
been made available to the Subscriber.
(c) Each of the Subscribers believes that he has such knowledge and
experience in financial and business matters to evaluating the merits
and risks of the prospective investment in the Shares.
(d) Each of the Subscribers is able to (i) hold the Shares for an
indefinite period of time, (ii) bear the economic risk of the
Subscriber's investment in the Shares, and (iii) withstand a complete
loss of such investment.
(e) Each of the Subscribers is aware that the Shares have not been
registered under the Securities Act of 1933, as amended ("Securities
Act"), or the securities laws of any state, based in part upon
representations set forth herein. Each of the Subscribers understands
that the Shares subscribed for hereunder may not be offered, sold,
transferred, pledged or hypothecated to any person in the absence of
registration under the Securities Act or an opinion of counsel
satisfactory to the Company that such registration is not required.
The Subscriber understands that the Company does not plan, and is
under no obligation to provide for, registration of the Shares in the
future. Accordingly, any subsequent sale of part or all of the
Subscriber's interest in the Shares will be permissible only if an
exemption from the applicable registration provisions of federal and
state law is available at the time of the proposed disposition. Even
if such an exemption is available, the assignability and transfer of
the Shares is subject to limitations imposed by this Agreement.
(f) Each of the Subscribers further understands that a legend in
substantially the following form will be placed upon all documents
evidencing the Shares and that similar notations may be made on the
Company records as a means of preventing the disposition of the Shares
other than in accordance with this Agreement and applicable law:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED
FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE,
DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE
BOOKS OF THE CORPORATION, WITHOUT REGISTRATION UNDER ALL APPLICABLE
3
UNITED STATES FEDERAL OR STATE SECURITIES LAWS OR COMPLIANCE WITH AN
APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE
CORPORATION, TO BE EVIDENCED BY AN OPINION OF THE HOLDER'S COUNSEL, IN
FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH
REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR
ASSIGNMENT."
(g) Each of the Subscribers has the power and authority to execute and
comply with the terms of this Agreement and the person executing said
documents on its behalf has the necessary power to do so.
(h) Each of the Subscribers represents and warrants that he is an
"Accredited Investor" as that term is defined in Rule 501(a) of
Regulation D of the Securities Act, or the Subscriber, either alone or
with his purchaser representative, has such knowledge and experience
in business and financial matters that he is capable of evaluating the
merits and risks of an investment in the Shares.
4. THE COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Subscribers that, as of the date of
this Agreement:
(a) All issued and outstanding Shares of the Company have been duly
authorized and validly issued and are fully paid and nonassessable.
(b) The Company has been notified by the Subscribers that, and the Company
has considered whether, it should retain independent counsel, as well
as such other advice as may be appropriate, to independently determine
that this Agreement is fair and reasonable to the Company. The Company
also acknowledges that it has had the opportunity for such
consultation and has been aware that such consultation may be
desirable.
(c) The Company acknowledges that it had duly considered the disclosures
and considerations stated on the attached Client Acknowledgment and
Consent.
(d) The Company has the full power and lawful authority to consummate its
obligations and transactions contemplated by this Agreement on the
terms and conditions set forth in this Agreement, and no permit,
consent, approval, authorization or other order of or filing with any
other person or entity is required in connection with such
authorization, execution, delivery, and consummation; and the
execution, delivery and performance by the Company of this Agreement
and the transactions contemplated by this Agreement constitute the
valid and binding obligations of the Company, enforceable against the
Company in accordance with the terms of this Agreement, and will not
result in the violation or breach of any term or provision of, or
constitute (with or without due notice or lapse of time or both) a
4
default under any agreement or instrument to which the Company is a
party or by which the Company is bound. The Shares issued to the
Subscribers will be validly issued, fully paid and nonassessable.
(e) The Company is not subject to, or a party to, any agreement, contract,
order, judgment or decree or any other restriction of any kind or
character, which would prevent consummation of the transactions
contemplated by this Agreement.
5. MISCELLANEOUS
(a) This Agreement is governed by and construed in accordance with the
laws of the State of Arizona applicable to contracts made and wholly
performed in that jurisdiction.
(b) This Agreement constitutes the entire agreement among the parties
hereto with respect to its subject matter and may be amended only by a
written document executed by the party to be bound.
(c) This Agreement may be signed in counterparts, any one of which will be
deemed to be an original and all of which, when taken together, will
constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telephone
facsimile transmission will be effective as delivery of a manually
executed counterpart of this Agreement.
THE SUBSCRIBERS REPRESENT THAT THE INFORMATION CONTAINED IN THIS SUBSCRIPTION
AGREEMENT IS COMPLETE AND ACCURATE AND COVENANT THAT THE SUBSCRIBERS WILL
CONTACT THE COMPANY IMMEDIATELY IF ANY MATERIAL CHANGE IN ANY OF THE INFORMATION
OCCURS PRIOR TO THE ACCEPTANCE OF THIS SUBSCRIPTION AGREEMENT.
IN WITNESS WHEREOF, the undersigned have carefully reviewed this Agreement, and
has executed this Agreement this 10th day of December, 2003
XXXXX & XxXXXXX, P.L.C.
/s/ Xxxxxxxx X. Xxxxx
By:_________________________
Xxxxxxxx X. Xxxxx
/s/ Xxxxxxx X. XxXxxxx
By: _________________________
Xxxxxxx X. XxXxxxx
5
XXXXXXXX X. XXXXX, P.C.
/s/ Xxxxxxxx X. Xxxxx
By:_________________________
Xxxxxxxx X. Xxxxx
Tax Identification Number: _________________________
Address: 0000 X. Xxxxxx Xx.,
Xxxxx X
Xxxxxxx, XX 00000
XXXXXXX XXXXXXX, P.C.
/s/ Xxxxxxx X. XxXxxxx
By: _________________________
Xxxxxxx X. XxXxxxx
Tax Identification Number: _________________________
Address: 0000 X. Xxxxxx Xx.,
Xxxxx X
Xxxxxxx, XX 00000
6
Acceptance
The Company hereby accepts the Subscribers's offer to purchase 27,384 Shares of
SurfNet Media Group, Inc. at $2.00 per Share as of the date indicated below.
Dated: December 10, 2003
SURFNET MEDIA GROUP, INC.
/s/ Xxxxx X. Xxxxxx
By:_________________________
Xxxxx X. Xxxxxx
Chief Executive Officer
7
Appendix I
Investor Questionnaire
INVESTOR QUESTIONNAIRE
Each of the Subscribers in connection with the acquisition of securities of
SurfNet Media Group, Inc., a Delaware corporation (the Company") pursuant to
that certain Fee Arrangement Agreement ("Agreement") dated December 10, 2003,
hereby makes the following representations and warranties:
Each of the Subscribers understands that the Company is relying on this
information in determining to offer securities to the undersigned in a manner
exempt from the registration requirements of the Securities Act of 1933, as
amended ("Act") and applicable state securities laws.
Accredited Investor
Each of the Subscribers represents and warrants that the Subscribers fall within
the category (or categories) marked. PLEASE INDICATE EACH CATEGORY OF ACCREDITED
INVESTOR THAT YOU, THE SUBSCRIBERS, SATISFY, BY PLACING YOUR INITIALS ON THE
APPROPRIATE LINE BELOW.
_____ Category 1. A bank, as defined in Section 3(a)(2) of the Act, whether
acting in its individual or fiduciary capacity; or
_____ Category 2. A savings and loan association or other institution as defined
in Section 3(a) (5) (A) of the Act, whether acting in its individual or
fiduciary capacity; or
_____ Category 3. A broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934; or
_____ Category 4. An insurance company as defined in Section 2(13) of the Act;
or
_____ Category 5. An investment company registered under the Investment Company
Act of 1940; or
_____ Category 6. A business development company as defined in Section 2(a) (48)
of the Investment Company Act of 1940; or
_____ Category 7. A small business investment company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; or
8
_____ Category 8. A plan established and maintained by a state, its political
subdivision or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, with assets in excess of
US$5,000,000; or
_____ Category 9. An employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974 in which the investment decision is made
by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a
bank, savings and loan association, insurance company or registered investment
advisor, or an employee benefit plan with total assets in excess of US$5,000,000
or, if a self-directed plan, the investment decisions are made solely by persons
who are accredited investors; or
_____ Category 10. A private business development company as defined in Section
202(a) (22) or the Investment Advisors Act of 1940; or
_____ Category 11. An organization described in Section 501(c)(3) of the
Internal Revenue Code, a corporation, a Massachusetts or similar business trust,
or a partnership, not formed for the specific purpose of acquiring the Shares,
with total assets in excess of US$5,000,000; or
_____ Category 12. A director, executive officer or general partner of the
Company; or
_____ Category 13. A natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of this purchase exceeds
US$1,000,000; or
_____ Category 14. A natural person who had an individual income in excess of
US$200,000 in each of the two most recent years or joint income with that
person's spouse in excess of US$300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year; or
_____ Category 15. A trust, with total assets in excess of US$5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in SEC Rule
506(b)(2)(ii); or
_____ Category 16. An entity in which all of the equity owners are accredited
investors.
Non-Accredited Investor
_____ Category 17. Either alone or with his purchaser representative, the
Subscriber has such knowledge and experience in business and financial matters
that he is capable of evaluating the merits and risks of an investment in the
shares.
9
Restricted Securities
Each of the Subscribers acknowledges that the Company has hereby disclosed to
the Subscriber in writing:
(a) The securities that the Subscribers is acquiring have not been registered
under the Act, or the securities laws of any state of the United States,
and such securities must be held indefinitely unless a transfer of them is
subsequently registered under the Act or an exemption from such
registration is available.
(b) The Company will make a notation in its records of the above described
restrictions on transfer and of the legend described below.
Legend
Each of he Subscribers agrees that all of the securities shall have endorsed
thereon a legend to the following effect:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED
FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE,
DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE
BOOKS OF THE CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES
UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE SECURITIES LAWS OR
COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT
THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF
SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO
VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY
PROPOSED TRANSFER OR ASSIGNMENT."
10
IN WITNESS WHEREOF, the undersigned has executed this questionnaire as of
September 18, 2003. XXXXXXXX X. XXXXX, P.C.
By:_________________________
Xxxxxxxx X. Xxxxx
Tax Identification Number: _________________________
Address: 0000 X. Xxxxxx Xx.,
Xxxxx X
Xxxxxxx, XX 00000
XXXXXXX XXXXXXX, P.C.
By: _________________________
Xxxxxxx X. XxXxxxx
Tax Identification Number: _________________________
Address: 0000 X. Xxxxxx Xx.,
Xxxxx X
Xxxxxxx, XX 00000
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Appendix II
Client Acknowledgment and Consent
CLIENT ACKNOWLEDGMENT AND CONSENT
The Company hereby acknowledges and consents as follows, with respect to the
engagement described in the attached retainer agreement letter:
1. Xxxxx & XxXxxxx, P.L.C. is not representing or otherwise looking out for the
Company's interests regarding the Fee Arrangement Agreement dated December 10,
2003 ("Agreement") and specifically regarding the portion of the Agreement
involving payment of Shares for fees.
2. The nature of the Xxxxx & XxXxxxx, P.L.C.'s conflicting interest in the
Agreement includes that Xxxxx & XxXxxxx, P.L.C. is a provider of services, and
the Company is a buyer of such services. In addition, the conflict between
seller and buyer in a equity-for-fees agreement is such that while Xxxxx &
XxXxxxx, P.L.C. believes that the terms of the Agreement are fair and reasonable
both to the Company and to the Subscribers, it is always possible that the Xxxxx
& XxXxxxx, P.L.C.'s judgment or the Company's judgment will be incorrect or that
their judgments will be affected by their own interests.
3. The reasonably foreseeable risks known to each of the Subscribers are as
follows. There is the possibility that the Shares transferred to the Subscriber
have a value, or will appreciate in value, beyond the value of comparable cash
payments. The risks to the Company also include the possibility, which is
normally not likely to occur, that the Subscriber's status as a shareholder in
the Company could create a conflict of interest between the Subscriber and the
Company, depending on unknown events in the future. The risks to the Subscriber
inherent in the agreement include the possibility that the Company will fail to
reach its financial objectives and that the investment will have no value or
less value than cash payments would have. The benefits to the Company in the
agreement include the possibility that the Company will receive legal services
on favorable economic terms and that the Company will be able to devote its cash
resources to needs other than legal services. The benefits to the Subscriber
include the possibility that the Company will achieve its financial objectives
and that the Subscriber's investment will appreciate in value and the
possibility that the current value of the stock is higher than the Subscriber or
the Company believe it is.
Dated: December 10, 2003
SURFNET MEDIA GROUP, INC.
By:_________________________
Xxxxx X. Xxxxxx
Chief Executive Officer
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