SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement") is made and entered into
as of June 30, 2003 by and between Valesc Inc., a Delaware corporation (the
"Company"), Xxxxxx Xxxxx, an individual residing at 00 Xxxxxxxx Xxxxxx, Xxx. 0,
Xxxxx Xxxx, XX 00000 (the "Subscriber").
WHEREAS, the Company desires to issue to the Subscriber, and the
Subscriber desires to acquire from the Company, the Company's common stock and
attached option on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
1. Agreement to Purchase and Sell the Common Stock and Attached
Stock Options. Pursuant to resolutions adopted by the Board of Directors of the
Company dated June 23, 2003 the Company agreed to issue to the Subscriber, and
the Subscriber agrees to accept from the Company, 49,201 shares of its common
stock (the "Securities"), $.0001 par value per share (the "Shares"), in
cancellation of $34,440.50 in unpaid salary (the "Purchase Price").
2. Representations, Warranties and Certain Covenants of Subscriber.
The Subscriber hereby represents and warrants to the Company that:
(a) Disclosure of Risks. Subscriber, as an officer and director, is aware
that the Company's financial condition is not stable: (i) the Company
has received a "going concern" opinion from its independent auditor
with respect to its last fiscal year and the Company may receive a
subsequent "going concern" opinion to be issued in the Company's next
audited financial statements; (ii) there is no assurance that the
Company will be able to successfully commercialize any services or
products thereby resulting in profits; and (iii) an investment in the
Company involves a high degree of risk and should not be made unless
the Subscriber is prepared to, and can afford to, lose the entire
investment.
(b) Investment Experience and Access to Information. Subscriber (i) has
sufficient knowledge, sophistication and experience in business and
finance to capably evaluate information concerning an investment in the
Company, (ii) has had an opportunity to ask detailed questions and
receive satisfactory answers from other representatives of the Company,
(iii) has had adequate opportunity to request and review any and all
documents and other information, including the Company's publicly
available filings with the Securities and Exchange Commission, relevant
to Subscriber's consideration of investment in the Company, (iv) has
otherwise obtained sufficient information from the Company to evaluate
the merits and risks of an investment in the Company; (v) has
independently considered and discussed such prospective investment with
the Subscriber's business, legal, tax and financial advisers as to the
suitability of such investment with respect to the Subscriber's
particular financial situation, and (vi) on the basis of the foregoing,
the Subscriber has determined that investment in the Securities is a
suitable investment.
(c) Dilution and Additional Indebtedness. Subscriber acknowledges that (i)
the Company may make additional offerings of equity securities in the
future which may cause Subscriber and other stockholders to experience
dilution of their respective percentage
ownership of the Company, and any such securities subsequently offered
may have rights, preferences or privileges senior to those of the
holders of the Securities, (ii) the Company may determine that it is
necessary to incur additional indebtedness to finance its operations,
which could restrict the Company's operations, and (iii) there can be
no assurance that additional equity or debt financing will not be
required, and if so required, that it will be available on terms
favorable to the Company, if at all.
(d) Restricted Securities. Subscriber understands that the Securities are
characterized as "restricted securities" under the Securities Act of
1933, as amended (the "Securities Act"), inasmuch as they are being
acquired from the Company in a transaction not involving a public
offering and that under the Securities Act and applicable regulations
thereunder the Securities may be resold without registration under the
Securities Act only in certain limited circumstances. In this
connection, the Subscriber represents that it is familiar with Rule
144, as presently in effect, promulgated by the SEC under the
Securities Act and understands the resale limitations imposed thereby
and by the Securities Act. The Subscriber understands that the Company
is under no obligation to register any of the Securities sold
hereunder. The Subscriber understands that no public market now exists
for the Securities and that it is uncertain whether a public market
will ever exist for the Securities.
(e) Purchase for Own Account. The Securities to be granted to the
Subscriber hereunder will be acquired for investment for the
Subscriber's own account, not as a nominee or agent, and not with a
view to the public resale or distribution thereof, and the Subscriber
has no present intention of selling, granting any participation in, or
otherwise distributing the same.
(f) Accredited Investor Status. Subscriber is an "accredited investor"
within the meaning of Regulation D promulgated under the Securities
Act.
(g) Further Limitations on Disposition. Without in any way limiting the
representations set forth above, the Subscriber further agrees not to
make any disposition of all or any portion of the Securities, except:
(i) pursuant to a registration statement under the Securities Act
covering such disposition; or
(ii) pursuant to an exemption from registration under the
Securities Act, including, without limitation, Rule 144, Rule 144A or
Regulation S thereunder.
(h) Legend. It is understood that the certificates evidencing the
Securities will bear the legend set forth below:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE, OR UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THESE SECURITIES ARE RESTRICTED AND
MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
2
The legend set forth above shall be removed by the Company from any
stock certificate evidencing common stock upon delivery to the Company
of an opinion by counsel reasonably satisfactory to the Company that a
registration statement under applicable securities laws is at that time
in effect with respect to the legended security or that such security
can be freely transferred in a public sale without such a registration
statement being in effect and that such transfer will not jeopardize
the exemption or exemptions from registration pursuant to which the
Company issued the common stock.
(i) No Reliance on Oral Statements. Subscriber, in purchasing the
Securities, is not relying on any oral representations, promises or
statements made by the Company, or any officer, director, employee,
agent or attorney of the Company.
(j) Transferee Undertaking. In connection with any disposition of all or
any portion of the Securities permitted under this Agreement, the
Subscriber shall obtain an undertaking from each offeree or purchaser
of the Securities pursuant to which the offeree or purchaser shall
represent and warrant the following:
(i) purchaser understands that the Securities have not been
registered under the Securities Act and that, if in the future
it decides to offer, sell, pledge or otherwise transfer such
Securities, such Securities may be offered, sold, pledged or
otherwise transferred only (A) to a person whom the seller
reasonably believes is a qualified institutional buyer in a
transaction meeting the requirements of Rule 144A, (B) in an
offshore transaction pursuant to and in compliance with
Regulation S, (C) pursuant to an exemption from registration
under the Securities Act provided by Rule 144, if available,
or (D) pursuant to a registration statement under the
Securities Act covering such disposition, in all cases in
accordance with all applicable securities laws of any state of
the United States.
(ii) purchaser understands that the Securities will contain a
legend to the following effect unless the Company determines
such legend is not necessary under applicable laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED, AND SUCH SECURITIES MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER SUCH ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (2) IN AN OFFSHORE TRANSACTION PURSUANT TO
REGULATION S UNDER SUCH ACT, OR (3) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT PROVIDED BY RULE 144, IF
AVAILABLE, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES."
(iii) If the offeree or transferee is a qualified
institutional buyer as defined in Rule 144A of the Securities
Act, that it is aware that the sale to it is being made in
reliance on Rule 144A and it is acquiring the Securities for
its own account or for the account of a qualified
institutional buyer.
3
(k) Survival. The foregoing representations and warranties are true and
accurate as of the date hereof, shall be true and accurate as of the
date of the acceptance hereof by the Company and shall survive
thereafter, including after any termination of this Agreement. If such
representations and warranties shall not be true and accurate in any
respect, the Subscriber will, prior to such acceptance, given written
notice of such fact to the Company specifying which representations and
warranties are not true and accurate and the reasons therefor.
Subscriber shall complete, sign and deliver an investment letter in the
form attached hereto as Exhibit A.
3. Indemnification. The Subscriber acknowledges that he understands
the meaning and legal consequences of the representations and warranties
contained herein, and the Subscriber hereby agrees to indemnify and hold
harmless the Company, and each person, if any, who controls the Company, within
the meaning of Section 15 of the Securities Act and all representatives and
agents of the Company, including, but not limited to, counsel to the Company,
against any and all loss, liability, claim, damage and expense whatsoever
(including, but not limited to, any and all expenses reasonably incurred in
investigating, preparing or defending against any litigation commenced or
threatened or any claim whatsoever) arising out of or based upon any false
representation or warranty or breach or failure by the Subscriber to comply with
any covenant or agreement made by the Subscriber herein or in any other document
furnished by the Subscriber to any of the foregoing in connection with this
transaction.
4. Conditions.
(a) Subscriber's ownership interest in the Company shall be governed
solely in accordance with Delaware General Corporation Law, the Company's
Certificate of Incorporation and the Company's By-laws, each as in effect and as
may be amended from time-to-time.
(b) The Subscriber agrees not to transfer or assign this Agreement,
or any of its interest herein or in the Company, and further agrees, except as
provided herein, that the assignment and transferability of the Securities
acquired pursuant hereto shall be allowed only in accordance with applicable
law.
5. Revocation. The Subscriber agrees that he or she will not cancel,
terminate, or revoke this Agreement or any agreement made hereunder and that
this Agreement shall survive the death or disability of the Subscriber.
6. Acceptance of Subscription. Execution of this Agreement by the
Subscriber constitutes an offer by the Subscriber to subscribe for the number of
Securities specified on the signature page hereto. If this offer is rejected for
any reason, the Subscriber's subscription documents shall be returned to the
Subscriber as promptly as practicable and the Company and the Subscriber shall
have no further obligations to each other, other than the obligation of the
Company to return the Subscriber's funds to such Subscriber.
7. General Provisions.
(a) Investigation. It shall be no defense to an action for breach of
this Agreement that the Subscriber or its agents have (or have not) made
investigations into the affairs of the Company or that the Company could not
have known of the misrepresentation or breach of warranty.
4
(b) Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
(c) Governing Law; Jurisdiction. This Agreement and the enforcement
thereof shall be governed by and construed under the internal laws of the State
of New York. The parties hereto consent to the non-exclusive jurisdiction of any
New York State or Federal court sitting in the City of New York and any
appellate court from any thereof in any action or proceeding arising out of or
relating to this Agreement.
(d) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
(e) Headings. The headings and captions used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
(f) Notices. Any and all notices required or permitted to be given to
a party pursuant to the provisions of this Agreement will be in writing and will
be effective and deemed to provide such party sufficient notice under this
Agreement on the earliest of the following: (i) at the time of personal
delivery, if delivery is in person; (ii) at the time of transmission by
facsimile, addressed to the other party at its facsimile number specified herein
(or hereafter modified by subsequent notice to the parties hereto), with
confirmation of receipt made by both telephone and printed confirmation sheet
verifying successful transmission of the facsimile; (iii) one (1) business day
after deposit with an express overnight courier for deliveries within the U.S.,
or (iv) three (3) business days after deposit in mail by certified mail (return
receipt requested) or equivalent for deliveries within the U.S.
All notices not delivered personally or by facsimile will be sent with postage
and/or other charges prepaid and properly addressed to the party to be notified
at the address or facsimile number indicated for such party, in the case of the
Company, Xxxxxx X. Xxxxx, Valesc Inc., 0000 Xxxx Xxxx, Xxxxx 000X, Xxxxx, XX
00000, with a copy to Xxxxx & Associates, P.C., 00 Xxxx 00xx Xxxxxx, Xxxxx 0000,
Xxx Xxxx, XX 00000, Attention: Xxxxxxx X. Xxxxx, Esq. or, in the case of the
Subscriber, to the address listed at the front of this document, or at such
other address or facsimile number as such other party may designate by giving
ten (10) days advance written notice by one of the indicated means of notice
herein to the other parties hereto. Notices by facsimile shall be machine
verified as received.
Any party hereto (and such party's permitted assigns) may by notice so given
change its address for future notices hereunder. Notice shall conclusively be
deemed to have been given in the manner set forth above.
(g) Costs, Expenses. Each party hereto shall bear its own costs in
connection with the preparation, execution and delivery of this Agreement.
5
(h) No Finder's Fees. Each party represents that it neither is nor
will be, obligated for any finder's or broker's fee or commission in connection
with this transaction.
(i) Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Subscriber. No delay or omission
to exercise any right, power, or remedy accruing to the Subscriber, upon any
breach, default or noncompliance of the Company under this Agreement shall
impair any such right, power, or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. All remedies, either under this Agreement, by law, or otherwise
afforded to the Subscriber, shall be cumulative and not alternative.
(j) Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
(k) Entire Agreement. This Agreement, together with all exhibits and
schedules hereto, constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings duties or
obligations between the parties with respect to the subject matter hereof.
(l) Further Assurances. From and after the date of this Agreement,
upon the request of the Subscriber or the Company, the Company and the
Subscriber shall execute and deliver such instruments, documents or other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
DO NOT SIGN THIS SUBSCRIPTION AGREEMENT IF ANY OF THE REPRESENTATIONS AND
WARRANTIES SET FORTH IN SECTION 2 ABOVE ARE UNTRUE OR INACCURATE.
[Signature Page Follows]
6
IN WITNESS WHEREOF, the Subscriber has executed this Agreement as of
the date first written above.
Restricted Securities to be 49,201 Shares of Common Stock
Received
----------------------------------------------
-----------------------------------
Total Consideration $234,440.50 in Cancelled Claim
for Unpaid Salary in this Amount
-----------------------------------
SUBSCRIBER
------------------------------
Xxxxxx Xxxxx
Subscription Accepted and Agreed as of the date first written above by:
VALESC INC.
By:
-------------------------------------------
Name:
Title:
7
Exhibit A
---------
INVESTMENT LETTER
Xxxxxx Xxxxx
00 Xxxxxxxx Xxxxxx, Xxx. 0
Xxxxx Xxxx, XX 00000
June 30, 2003
Valesc Inc.
0000 Xxxx Xxxx, Xxxxx 000X
Xxxxx, XX 00000
Dear Sirs:
The undersigned hereby accepts 49,201 shares of Valesc Inc. ("Valesc"),
$.0001 par value per share common stock (the "Shares"), pursuant to a
Subscription Agreement dated the date hereof (the "Subscription Agreement"), and
Valesc hereby delivers the Shares pursuant to the Subscription Agreement (the
"Securities").
In connection with the foregoing, the undersigned represents that:
(i) the Securities are being purchased for investment, not for resale
or distribution and not for the purpose of effecting or causing to be effected,
a public offering of any of the Securities;
(ii) the Securities will not be sold, transferred, assigned or
disposed of, except in accordance with the Securities Act of 1933, as amended,
and the Rules and Regulations of the Securities and Exchange Commission ("SEC")
promulgated thereunder; and
(iii) the Securities are being purchased for the sole account of the
undersigned and no other understanding exists with regard to the disposition,
sale, transfer or assignment of the Securities other than that set forth herein.
The undersigned has been advised and understands that it is the view of
the SEC that the foregoing investment representation would be inaccurate if it
merely meant that the present intention of the undersigned was to hold the
Securities for the long term capital gains period of the tax statutes, or for a
deferred sale, or for a market rise, or for sale if the market declines, or for
sale after a fixed period in the future or for sale only if the issuer fails to
operate profitably. The undersigned further understands that, in the view of the
SEC, a change in the market value of Valesc's common stock, a change in the
condition of Valesc, a change in the conditions within the industry in which
Valesc is engaged or, should the Securities be pledged as security for a loan,
foreclosure or threatened foreclosure of such a loan, would not be such a change
in the circumstances as to justify sale of the Securities. The undersigned
understands that it is the view of the SEC that if there is an intention, at the
time the Securities are acquired, to resell them to the public after the passing
of some more or less definitive time period, the Securities were not truly
acquired for investment. The undersigned further understands that the foregoing
is not
8
intended to be a complete listing of the views held by the SEC relating to the
foregoing investment representation.
The undersigned acknowledges it has been advised that the Securities
have not been registered under the Securities Act of 1933, as amended, and that
none of the Securities may be sold, transferred, assigned or disposed of, except
in accordance with such Act and the Rules and Regulations of the SEC promulgated
thereunder. The undersigned hereby consents that the face of the Securities to
be issued and delivered to it shall contain a restrictive legend as set forth in
the Subscription Agreement.
The undersigned understands that Valesc is in its initial developmental
stage and that the Securities being purchased involve a high degree of risk. It
is the best judgment of the undersigned that the Securities being purchased
hereby are securities of the kind which the undersigned wishes to purchase and
hold for investment and that the nature and amount of the Securities being
acquired are consistent with the investment program of the undersigned. The
undersigned represents and warrants that the present and anticipated financial
position of the undersigned permits the undersigned to hold the Securities for
investment, as aforesaid.
The undersigned hereby acknowledges that neither Valesc nor any persons
or parties associated with Valesc has made any representation or warranties of
any kind, nature or description in connection with the sale or offer of the
Securities other than those set forth in the Subscription Agreement. The
undersigned is also relying on its investigation of Valesc and its prospects and
represents that Valesc has answered all its questions and made available all
information requested.
Very truly yours,
---------------------
Xxxxxx Xxxxx
9
