SUBSCRIPTION SUPPLEMENT AND REGISTRATION RIGHTS AGREEMENT
This Subscription Supplement and Registration Rights Agreement (the
"Subscription Supplement"), containing terms applicable to the Subscription
Document, has been incorporated by reference into the Subscription Document
accompanying the Confidential Offering Memorandum of Jenkon International, Inc.
Each investor should therefore carefully review this Subscription Supplement
before signing the Subscription Document. Terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Memorandum (as defined
below).
1. SUBSCRIPTION FOR SHARES. I subscribe for the number of Shares of
Series A Preferred Stock (the "Shares") of Jenkon International, Inc., a
Delaware corporation (the "Company"), set forth in the Subscription Document,
priced at $2.00 per Share.
2. REVIEW OF MEMORANDUM. I HAVE CAREFULLY REVIEWED THE CONFIDENTIAL
OFFERING MEMORANDUM IN CONNECTION WITH THE OFFERING OF SHARES AND ANY
SUPPLEMENT(S) THERETO PROVIDED BY THE COMPANY (COLLECTIVELY THE "MEMORANDUM").
I HAVE BEEN FURNISHED WITH AND HAVE CAREFULLY READ THE DOCUMENTS REFERENCED IN
THIS MEMORANDUM AND I AM A SUITABLE INVESTOR AS DESCRIBED IN THE MEMORANDUM.
3. IRREVOCABILITY OF SUBSCRIPTION. I agree to pay for the Shares in the
manner set forth in the Subscription Document. I agree that his subscription is
and shall be irrevocable, but my obligations hereunder will terminate if this
subscription is not accepted by the Company.
4. ILLIQUID INVESTMENT. I understand that investment in the Shares is an
ILLIQUID INVESTMENT. In particular, I recognize that:
(a) I must bear the economic risk of investment in the Shares for an
indefinite period of time, since neither the Shares nor the Common Stock into
which the Shares may be converted have been registered under the Securities Act
of 1933 (the "Securities Act") and therefore cannot be sold unless either they
are subsequently registered under the Securities Act or an exemption from such
registration is available and a favorable opinion of counsel for the Company to
that effect is obtained (if requested by the Company);
(b) No established market will exist and it is possible that no
public market for the Series A Preferred Stock and Common Stock will develop as
a result of the offering contemplated by this Memorandum.
5. CONSENT TO LEGENDS. I consent to the affixing by the Company of such
legends on certificates representing the Shares and Common Stock as any
applicable federal or state securities law may require from time to time.
6. SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES. I represent and warrant
to the Company that:
(a) The financial information provided in the Subscription Document
is complete, true and correct;
(b) I and my investment advisors, if any, have CAREFULLY REVIEWED AND
UNDERSTAND the risks of, and other considerations relating to, a purchase of
Shares, including, but not limited to, the risks set forth under "RISK FACTORS"
in the Memorandum;
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(c) I and my investment advisors, if any, have been afforded the
opportunity to obtain any information necessary to verify the accuracy of any
representations or information set forth in the Memorandum and have had all
inquiries to the Company answered, and have been furnished all requested
materials, relating to the Company and the offering and sale of the Shares and
anything else set forth in the Memorandum;
(d) Neither I nor my investment advisors, if any, have been furnished
any offering literature by the Company or any of its affiliates, associates or
agents other than the Memorandum, and the documents referenced therein;
(e) I am acquiring the Shares for which I am subscribing for my own
account, as principal, for investment and not with a view to the resale or
distribution of all or any part of the Shares or the Common Stock underlying the
Shares;
(f) The undersigned, if a corporation, partnership, trust or other
form of business entity, (i) is authorized and otherwise duly qualified to
purchase and hold the Shares, (ii) has obtained such additional tax and other
advice that it has deemed necessary, (iii) has its principal place of business
at its address set forth in this Subscription Document, and (iv) has not been
formed for the specific purpose of acquiring the Shares (although this may not
necessarily disqualify the subscriber as a purchaser). The persons executing
the Subscription Document, as well as all other documents related to the
Offering of Shares contemplated by the Memorandum (the "Offering"), represent
that they are duly authorized to execute all such documents on behalf of the
entity. (If the undersigned is one of the aforementioned entities, it agrees to
supply any additional written information that may be required.);
(g) All of the information which I have furnished to the Company or
which is set forth in the Subscription Document (including this Subscription
Supplement) is correct and complete as of the date of the Subscription Document.
If any material change in this information should occur prior to my subscription
being accepted, I will immediately furnish the revised or corrected information;
(h) I further agree to be bound by all of the terms and conditions of
the Offering described in the Memorandum; and
(i) I am the only person with a direct or indirect interest in the
Shares subscribed for by the Subscription Document.
7. CERTIFICATION OF INFORMATION. I certify, to the best of my
information and belief, that the above information that I have supplied is true
and correct in all material respects.
8. INDEMNIFICATION OF COMPANY. I agree to indemnify and hold harmless
the Company, The Boston Group, L.P. and their respective officers, directors,
agents, attorneys, accountants and affiliates from and against all damages,
losses, costs and expenses (including reasonable attorneys' fees) that they may
incur by reason of the failure of the undersigned to fulfill any of the terms or
conditions of this Subscription Supplement or the Subscription Document, or by
reason of any breach of the representations and warranties made by the
undersigned herein or in the undersigned's related Subscription Document, or in
any document provided by the undersigned to the Company.
9. NONTRANSFERABILITY OF SUBSCRIPTION. This subscription is not
transferable or assignable by me without the written consent of the Company.
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10. SUBSCRIBERS' JOINT AND SEVERAL LIABILITY. If more than one person is
executing the Subscription Document, the obligations of each shall be joint and
several and the representations and warranties contained in this Subscription
Supplement and related Subscription Document shall be deemed to be made by, and
be binding upon, each of these persons and his or her heirs, executors,
administrators, successors and assigns.
11. SUCCESSORS AND ASSIGNS. This subscription, upon acceptance by the
Company, shall be binding upon my heirs, executors, administrators, successors
and assigns.
12. GOVERNING LAW. This Subscription Supplement and related Subscription
Document shall be construed in accordance with and governed in all respects by
the laws of the State of California.
13. REGISTRATION RIGHTS. I acknowledge and agree that I will have the
following registration rights with respect to the Common Stock underlying the
Shares purchased by me in the Offering:
(a) At any time commencing on the earlier of (i) eighteen (18) months
from the date of the final closing of the Offering, or (ii) the day following
the date on which the Company completes a Public Offering, and expiring three
(3) years thereafter, holders ("Holders") representing a "Majority of the
Registerable Securities" (as defined in subparagraph (f) below) shall have the
right (which right is in addition to the registration rights under Paragraph
13(b) hereof), exercisable by written notice to the Company, to have the Company
prepare, file and use its best efforts to have declared effective by the
Securities and Exchange Commission (the "Commission"), on one occasion, a
registration statement and such other documents, including a prospectus, as may
be necessary in the opinion of both counsel for the Company and counsel for the
Holders, if any, in order to comply with the provisions of the Securities Act,
so as to permit a public offering and sale of their respective shares of
Registerable Securities (as defined in subparagraph (e) below) for twelve (12)
consecutive months thereafter by such Holders and any other Holders who notify
the Company within ten (10) days after receiving notice from the Company of such
registration request of their desire to include their Registerable Securities in
such registration.
The Company covenants and agrees to give written notice of any
registration request under this Paragraph 13(a) by any Holder or Holders to all
other registered Holders of Registerable Securities within ten (10) days from
the date of the receipt of any such registration request at the address of such
Holders reflected in the Company's stock records.
(b) If at any time the Company proposes to register any of its
securities under the Securities Act (other than in connection with a merger,
acquisition or exchange offer or pursuant to Form S-8 or successor form) it will
give written notice by registered mail, at least thirty (30) days prior to the
filing of each such registration statement to the Holder(s) of the Registerable
Securities of its intention to do so. Upon the written request of any Holder of
Registerable Securities given within fifteen (15) days after receipt of any such
notice of his, her, its or their desire to include any Registerable Securities
in such proposed registration statement, the Company shall afford such Holder(s)
of the Registerable Securities the opportunity to have such Holder's
Registerable Securities registered under such registration. The "piggyback"
registration rights described in this Paragraph 13(b) shall terminate at such
time as the Registerable Securities are saleable in one or more transactions
pursuant to Rule 144 of the Securities Act. Any sales of Registerable
Securities pursuant to such registration statement shall be effected through the
underwriter of such registered offering, if any, and the Holders thereof shall
compensate the underwriter in accordance with its customary compensation
practices.
Notwithstanding anything to the contrary contained in the provisions
of this Paragraph 13(b), the Company shall have the right at any time after it
shall have given written notice pursuant to this Paragraph 13(b)(irrespective of
whether a written request for inclusion of any such Registerable Securities
shall have
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been made) to elect not to file any such proposed registration statement, or to
withdraw the same after the filing but prior to the effective date thereof.
(c) The Company shall indemnify and hold harmless the Holders of
Registerable Securities from and against any and all losses, claims, damages and
liabilities caused by any untrue statement of a material fact contained in any
registration statement filed by the Company under the Securities Act by reason
of this Paragraph 13, any post-effective amendment to such registration
statement, or any prospectus included therein, or caused by any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission based
upon information furnished or required to be furnished in writing to the Company
by a Holder (or the authorized representatives or agents of the Holder)
expressly for use therein, which indemnification shall include each person, if
any, who controls the Holder within the meaning of the Securities Act and each
officer, director, employee and agent of the Holder; provided, however, that the
indemnification in this Paragraph 13(c) with respect to any prospectus shall
not inure to the benefit of the Holder (or to the benefit of any person
controlling the Holder) on account of any such loss, claim, damage or liability
arising from the sale of Registerable Securities by such Holder, if a copy of a
subsequent prospectus correcting the untrue statement or omission in such
earlier prospectus was provided to such Holder by the Company prior to the
subject sale and the subsequent prospectus was not delivered or sent by the
Holder to the purchaser of such securities prior to such sale; and provided
further, that the Company shall not be obligated to so indemnify the Holder or
any other person referred to above unless the Holder or other person, as the
case may be, shall at the same time indemnify the Company, its directors, each
officer signing the registration statement and each person, if any, who controls
the Company within the meaning of the Securities Act, from and against any and
all losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in any registration statement or any prospectus required
to be filed or furnished in connection with such public offering or caused any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, insofar as such losses,
claims, damages or liabilities are caused by any untrue statement or omission
based upon information furnished in writing to the Company by the Holder
expressly for use therein.
If for any reason the indemnification provided for in the preceding
subparagraph is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, claim, damage, liability or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and the indemnifying party,
but also the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations.
(d) All expenses, filing fees and other costs incurred by the Company
in connection with any registration of securities pursuant to this Paragraph 13
(exclusive of underwriting discounts and selling commissions applicable to any
sale of registered securities and any fees and costs of legal counsel engaged by
the Holders) shall be borne by the Company.
In the case of each registration effected by the Company pursuant to
the provisions of this Paragraph 13, the Company will (i) furnish to the Holders
of the Registerable Securities such numbers of copies of a prospectus, including
a preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as such Holders may reasonably request in order to
facilitate the disposition of the Registerable Securities owned by them, and
(ii) notify each Holder of Registerable Securities covered by such registration
statement at any time when a prospectus relating thereto is required to be
delivered under the Securities Act of the happening of any event as a result of
which the prospectus included
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in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing.
(e) For purposes hereof, the term "Registerable Securities"
means the shares of Common Stock into which the Shares sold in the Offering are
convertible.
(f) For purposes hereof, the term "Majority of Registerable
Securities" means Holders in excess of fifty percent (50%) of the then
outstanding or Registerable Securities that (i) are not held by the Company, an
affiliate, officer, employee or agent thereof or any of their respective
affiliates, members of their family, persons acting as nominees or in
conjunction therewith or (ii) have not been resold to the public pursuant to a
registration statement filed with the Commission under the Securities Act.
14. LOCK-UP BY UNDERWRITER. Notwithstanding anything to the contrary
contained in the Memorandum or in Paragraph 13 hereof, I acknowledge and agree
that, in the event of an initial public offering by the Company, I will not
sell, pledge, assign or otherwise transfer or hypothecate any Shares, shares of
Common Stock or other equity securities of the Company (other than those
acquired in the public market in the Company's initial public offering or
thereafter) during the twelve (12) month period following the effective date of
such initial public offering without the prior written consent of the
underwriter of such initial public offering. Any sales of Common Stock
permitted by the underwriter during such period shall be made through such
underwriter who shall be paid its customary commissions and/or discounts.
15. REDEMPTION RIGHTS. I acknowledge and agree that I have such rights,
if any, to have the Company redeem the Shares purchased by me pursuant to the
Offering as are set forth in the Company's Certificate of Incorporation or
Certificate of Designation, Preferences and Rights of Series A Preferred Stock,
which shall be in lieu of any demand registration rights described in Section 13
above.
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