Exhibit 10.1
SUBSCRIPTION AGREEMENT
PRIVATE PLACEMENT OF UP TO
FIVE HUNDRED THOUSAND DOLLARS ($500,000) BRIDGE LOAN
HOW TO SUBSCRIBE
The minimum investment which must be made by any subscriber is $50,000
in the form of a Note (individually, the "Note" and collectively, the "Notes")
of REIT Americas, Inc. (the "Company"). Subscribers can purchase additional
Notes in excess of the minimum amount of $50,000. Any qualified subscriber who
wishes to purchase a Note should deliver the following items to the Company, at
0000 X. Xxxx Xxxx, Xxxxx 000, Xxxxxx, XX 00000, Attention: Xxxxx Xxxxxxx.
(1) one dated and executed copy of the Subscription Agreement with all
blanks properly completed; and
(2) a check payable to the order of "REIT Americas, Inc." in the amount
being subscribed for.
THE NOTE BEING SUBSCRIBED FOR PURSUANT TO THIS SUBSCRIPTION AGREEMENT HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE. THE NOTE MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE NOTE UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND SUCH STATE LAWS AS MAY BE APPLICABLE, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
ADDITIONAL RESTRICTIONS ON TRANSFER OF THE NOTE ARE SET FORTH IN THIS
SUBSCRIPTION AGREEMENT.
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (the "Agreement") between REIT Americas, Inc., a
Maryland corporation (the "Company"), and the purchaser identified on the
signature page hereto (the "Subscriber").
BACKGROUND
Subscriber desires to loan, and the Company desires to accept a loan,
up to that amount of loan as set forth in a Promissory Note of even date
herewith between the Subscriber and the Company (the "Note") and as set forth on
the signature page hereto, upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and for the other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto, intending
to be legally bound, agree as follows:
1. SUBSCRIPTION FOR NOTE; WARRANTS.
(a) Subscriber hereby subscribes for and agrees to loan up to
that amount set forth on the signature page hereto and as contained in the Note
(the "Purchase Price") on the terms and conditions described herein and as set
forth in the form of Note attached hereto as Exhibit C. The Note shall carry an
interest rate of 8% per annum and the interest should be paid quarterly on each
of April 1st, July 1st, October 1st and January 1st until the Maturity Date (as
hereinafter defined), and a final balloon payment of outstanding principal and
all accrued and unpaid interest on the date that is the earlier of (i) September
30, 2006 or (ii) the closing of a funding under an S-11 Registration Statement
in excess of $2,000,000 (the "Maturity Date"). All other terms shall be as
specified on the Note attached as Exhibit C hereto.
(b) Subscriber encloses herewith a check payable to the order
of "REIT Americas, Inc." in an amount equal to the Purchase Price.
(c) The Company shall deliver a Warrant to Subscriber
simultaneously with the execution of this Agreement in the form of warrant
attached hereto as Exhibit D. One Warrant will be issued for each one dollar of
the face amount of the Note. The exercise price of the Warrant shall be $.10 per
share and shall have a term that expires on July 30, 2008. The Company shall
also cause to be delivered a Registration Rights Agreement, from the Parent, to
the Subscriber substantially in the form of Exhibit E hereto.
(d) By executing this Subscription Agreement, the Subscriber
acknowledges that the Subscriber has been informed of various matters relating
to the Company, including but not limited to, the Risk Factors described herein.
2. REPRESENTATIONS AND WARRANTIES AS TO SUITABILITY STANDARDS.
Subscriber hereby represents and warrants that:
(a) Subscriber has such knowledge and experience in financial
and business matters that Subscriber is capable of evaluating the merits and
risks of the prospective investment in the Company and of protecting his own
interests in connection therewith;
(b) Subscriber is acquiring the Note for Subscriber's own
account, not on behalf of other persons, and for investment and not with a view
to resale or distribution;
(c) Subscriber can bear the economic risk of losing
Subscriber's entire investment;
(d) Subscriber's overall commitment to investments which are
not readily marketable is not disproportionate to Subscriber's net worth,
Subscriber's investment in the Note will not cause such overall commitment to
become excessive, and the investment is suitable for Subscriber when viewed in
light of Subscriber's other securities holdings and Subscriber's financial
situation and needs;
(e) Subscriber has adequate means of providing for
Subscriber's current needs and personal contingencies;
(f) Subscriber recognizes that the Company is newly formed and
that any investment in the Company involves substantial risk, and Subscriber has
evaluated and fully understands all risks in Subscriber's decision to purchase
Note hereunder, including, without limitation, the Risk Factors set forth on
Exhibit "A" attached hereto;
(g) Subscriber understands that the offer and sale of the
Securities have not been submitted to, reviewed by, nor have the merits of this
investment been endorsed or approved by any state or federal agency, commission,
authority or self regulatory organization;
(h) Subscriber understands the business in which the Company
is engaged;
(i) If Subscriber is an individual, Subscriber is at least 18
years of age and a bona fide resident and domiciliary (not a temporary or
transient resident) of the state or country indicated on the signature page
hereof and Subscriber has no present intention of becoming a resident of any
other state or jurisdiction;
(j) If Subscriber is not an individual, Subscriber is
domiciled in the state or country indicated on the signature page hereof, has no
present intention of becoming domiciled in any other state or jurisdiction and
is an "Institutional Investor" as defined under the "blue sky" or securities
laws or regulations of the state in which it is domiciled; and;
(k) Subscriber otherwise meets any special suitability
standards applicable to Subscriber's state or country of residence or domicile.
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(l) Subscriber is an "Accredited Investor" as such term is
defined in Rule 501 of Regulation D under the Securities Act of 1993, as amended
(the "Securities Act"), which definition is set forth on Exhibit "B" attached
hereto.
(m) All of the written information pertaining to the
Subscriber which the Subscriber has heretofore furnished to the Company, and all
information pertaining to the Subscriber which is set forth in this Subscription
Agreement, is correct and complete as of the date hereof and, if there should be
any material change in such information hereafter, the Subscriber shall promptly
furnish such revised or corrected information to the Company. Subscriber
otherwise meets any special suitability standards applicable to the Subscriber's
state of residence.
(n) Subscriber acknowledges that Xxxxxx Xxxxx Securities, Inc.
is the placement agent with respect to the sale of securities hereunder and that
Xxxxxx Xxxxx Securities, Inc. will be compensated as follows: (i) Xxxxxx Xxxxx
Securities, Inc. shall be paid eight percent (8%) of the total proceeds
resulting from the sale of the Notes, payable at each closing from subscription
proceeds, and (ii) the Company will pay Xxxxxx Xxxxx Securities, Inc. a
non-accountable expense allowance in the amount of three percent (3%) of the
total proceeds resulting from the sale of the Notes. In addition, the Company
has engaged the services of Xxxxxx Xxxxx Securities, Inc. as a financial
consultant for a period of twelve months with compensation equal to 100,000
shares of Series A Preferred Stock of the Company, which convert into common
stock of the Company at a ratio of ten shares of common stock for each share of
preferred stock.
3. TRANSFER RESTRICTIONS.
(a) Subscriber represents that he understands that the sale or
transfer of the Securities (being the Note and Warrant issued hereunder) are
severely restricted and that:
(i) The Securities have not been registered under the
Securities Act or the laws of any other jurisdiction by reason of a specific
exemption or exemptions from registration under the Securities Act and
applicable state securities laws, and that the Company's reliance on such
exemptions is predicated on the accuracy and completeness of the Subscriber's
representations, warranties, acknowledgments and agreements herein. The
Securities cannot be sold or transferred by Subscriber unless subsequently
registered under applicable law or an exemption from registration is available.
The Company is not required to register the Securities or to make any exemption
from registration available;
(ii) The right to sell or transfer any of the
Securities will be restricted as described in this Subscription Agreement which
include restrictions against sale or transfer in violation of applicable
securities laws, the requirement that an opinion of counsel be furnished that
any proposed sale or transfer will not violate such laws and other restrictions
and requirements; and
(iii) There will be no public market for the
Securities and Subscriber may not be able to sell or otherwise transfer the
Securities. Accordingly, the Subscriber must bear the economic risk of
Subscriber's investment for an indefinite period of time.
(b) Subscriber agrees that he will not offer to sell, sell or
transfer the Securities or any part thereof or interest therein without
registration under the Securities Act and applicable state securities laws or
without providing to the Company an opinion of counsel acceptable to the Company
that such offer,
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sale or transfer is exempt from registration under the Securities Act and under
applicable state securities laws.
(c) The Subscriber acknowledges that the Securities will bear
the following legend:
"The Securities have not been registered under the
Securities Act of 1933, as amended, or the securities laws of
any state. The Securities may not be offered, sold,
transferred, pledged or otherwise disposed of without an
effective registration statement under the Securities Act of
1933, as amended, and under any applicable state securities
laws or an opinion of counsel for the Company that the
proposed transaction will be exempt from such registration."
Subscriber further acknowledges that the Company reserves the
right to place a stop order against the Securities and to refuse to effect any
transfers thereof in the absence of an effective registration statement with
respect to the Securities or in the absence of an opinion of counsel to the
Company that such transfer is exempt from registration under the Securities Act
and under applicable state securities laws.
4. SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES.
Subscriber represents and warrants that:
(a) Subscriber has received, has carefully read and
understands the Company's Business Plan;
(b) Subscriber has been furnished with all additional
documents and information which Subscriber has requested;
(c) Subscriber has had the opportunity to ask questions of and
received answers from the Company concerning the Company, the Note and the
Warrants and to obtain any additional information necessary to verify the
accuracy of the information furnished;
(d) Subscriber has relied only on the foregoing information
and documents in determining to make this subscription;
(e) The Executive Summary and other information furnished by
the Company do not constitute investment, accounting, legal or tax advice and
Subscriber is relying on professional advisers for such advice;
(f) All documents, records and books pertaining to
Subscriber's investment have been made available for inspection by Subscriber
and by Subscriber's attorney, and/or Subscriber's accountant and/or Subscriber's
Subscriber representative, and the relevant books and records of the Company
will be available upon reasonable notice, for inspection by investors during
reasonable business hours at the Company's principal place of business;
(g) Subscriber and Subscriber's advisors (which advisors do
not include the Company or its principals, representatives or counsel) have such
knowledge and experience in legal, financial and business matters as to be
capable of evaluating the merits and risks of investing in the Company and of
making an informed investment decision;
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(h) Subscriber understands, acknowledges and agrees that the
Company is relying solely upon the representations and warranties made herein in
determining to sell Subscriber the Note;
(i) The Subscriber has not paid or given any commission or
other remuneration in connection with the purchase of the Note. The Subscriber
has not received any public media advertisements and has not been solicited by
any form of mass mailing solicitation; and
(j) THE SUBSCRIBER ACKNOWLEDGES THAT THE COMMON STOCK OF THE
COMPANY IS NOT CURRENTLY LISTED OR QUOTED ON THE OTC BULLETIN BOARD, NASDAQ OR
ANY OTHER EXCHANGE AND THAT THE COMPANY WILL USE ITS REASONABLE EFFORTS TO
BECOME SO LISTED AFTER THE DATE HEREOF. THE COMPANY MAKES NO ASSURANCE THAT IT
WILL BECOME LISTED OR QUOTED ON ANY EXCHANGE. AS A RESULT, THERE CAN BE NO
ASSURANCE THAT THE COMMON STOCK UNDERLYING THE WARRANTS BEING DELIVERED TO
SUBSCRIBER PURSUANT TO THIS AGREEMENT WILL EVER BE REGISTERED UNDER THE
REGISTRATION RIGHTS AGREEMENT.
(k) The Subscriber understands the meaning and legal
consequences of the foregoing representations and warranties. The Subscriber
certifies that each of the foregoing representations and warranties is true and
correct as of the date hereof and shall survive the execution hereof and the
purchase of the Note.
5. SUBSCRIPTION IRREVOCABLE BY SUBSCRIBER BUT SUBJECT TO
ACCEPTANCE OR REJECTION BY THE COMPANY.
(a) This Subscription Agreement is not, and shall not be,
revocable by Subscriber.
(b) The Company, in its sole discretion, has the right to
terminate or withdraw the offering at any time, to accept or reject
subscriptions in other than the order in which they were received, to reject any
subscription in whole or in part, to allot to Subscriber less than the amount of
Note subscribed for, and to return without interest the amount paid by
Subscriber.
(c) The Subscriber understands and agrees that this
Subscription Agreement 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 completion, execution and delivery of this
Subscription Agreement.
(d) In the event of rejection of this subscription in whole
(but not in part), or in the event the sale of the Note subscribed for by the
Subscriber is not consummated by the Company for any reason (in which event this
Subscription Agreement shall be deemed to be rejected), this Subscription
Agreement and any other agreement entered into between the Subscriber and the
Company relating to this subscription shall thereafter have no force or effect
and the Company shall promptly cause to be returned to the Subscriber the
Purchase Price remitted by the Subscriber, without interest thereon or deduction
therefrom. In the event that this subscription is accepted in part, the Company
shall promptly cause to be returned to the Subscriber that portion of the
Purchase Price remitted by the Subscriber which represents payment for the Note
for which this subscription was not accepted, without interest thereon or
deduction therefrom.
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6. INDEMNIFICATION AND HOLD HARMLESS.
The Subscriber agrees that if the Subscriber breaches any
agreement, representation or warranty the Subscriber has made in this
Subscription Agreement, the Subscriber agrees to indemnify and hold harmless the
Company and its directors, officers, employees, shareholders, financial
advisors, attorneys and accountants against any claim, liability, loss, damage
or expense (including, without limitation, attorneys' fees and other costs of
investigating and litigating claims) caused, directly or indirectly, by the
Subscriber's breach.
7. MISCELLANEOUS.
(a) This Subscription Agreement states the entire
understanding between the parties with respect to the subject matter hereof, and
supersedes all prior oral and written communications and agreements, and all
contemporaneous oral communications and agreements, with respect to the subject
matter hereof. The Company's Executive Summary is not part of this Subscription
Agreement and is subject to change as circumstances require.
(b) This Subscription Agreement, upon acceptance by the
Company, shall bind, benefit, and be enforceable by and against each party
hereto and its successors, assigns, heirs administrators and executors. This
Subscription Agreement in not transferable or assignable by the Subscriber. The
agreements, representations and warranties contained herein shall be deemed to
be made by and be binding upon the Subscriber and such Subscriber's heirs,
executors, administrators, other personal representatives, and their respective
successors and permitted assigns.
(c) If any provision of this Subscription Agreement is
construed to be invalid, illegal or unenforceable, then the remaining provisions
hereof shall not be affected thereby and shall be enforceable without regard
thereto.
(d) Article and section headings in this Subscription
Agreement are for convenience of reference only, do not constitute a part of
this Subscription Agreement, and shall not affect its interpretation.
(e) Words used in this Subscription Agreement shall be
construed to be of such number and gender as the context requires or permits.
Unless a particular context clearly provides otherwise, the words "hereof" and
"hereunder" and similar references refer to this Subscription Agreement in its
entirety and not to any specific Section or subsection.
(f) THIS SUBSCRIPTION AGREEMENT IS MADE UNDER, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE,
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
(g) Any notice, demand or other communication which any party
hereto may be required, or may elect, to give to anyone interested hereunder
shall be sufficiently given if (a) deposited, postage prepaid, in a United
States mail letter box, registered or certified mail, return receipt requested,
addressed to such address as may be given herein, or (b) delivered personally at
such address. Notices to the Company shall be addressed to the Company at 0000
X. Xxxx Xxxx, Xxxxx 000, Xxxxxx, XX 00000, Attention: Xxxxx Xxxxxxx
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(h) This Subscription Agreement may be executed through the
use of separate signature pages or in any number of counterparts, and each of
such counterparts shall, for all purposes, constitute one agreement binding on
all parties, notwithstanding that all parties are not signatories to the same
counterpart.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Subscription Agreement on the date set forth below.
Print Name of Subscriber(s)
/s/ XXX XXXXXXX, XX. Subscription: I hereby subscribe for, and
--------------------------- agree to purchase a Note for a Purchase
Signature(s) Price of $200,000.00.
Residence/Domicile:
Street Number and Street
City/State/Zip Code
---------------------
Country
Telephone Number
Social Security/Taxpayer
Identification Number(s)
The Company hereby accepts the foregoing subscription for $200,000.00
of a Note as of March 1, 2006.
By: /s/ XXXX X. XXXXXX
------------------------------------
Xxxx X. Xxxxxx
Corporate Secretary
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EXHIBIT "A"
RISK FACTORS
AN INVESTMENT IN THE NOTES OFFERED HEREBY IS HIGHLY SPECULATIVE AND
INVOLVES A HIGH DEGREE OF RISK. AN INVESTMENT SHOULD BE MADE ONLY BY INVESTORS
WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. EACH PROSPECTIVE INVESTOR,
PRIOR TO MAKING AN INVESTMENT DECISION, SHOULD CAREFULLY CONSIDER THE FOLLOWING
RISK FACTORS IN ADDITION TO, AND IN CONJUNCTION WITH, ALL OF THE OTHER
INFORMATION PROVIDED IN THE SUBSCRIPTION AGREEMENT AND THE EXECUTIVE SUMMARY.
THE RISK FACTORS REFLECTED BELOW AND ELSEWHERE IN THE SUBSCRIPTION AGREEMENT ARE
NOT INTENDED TO BE AN EXHAUSTIVE LIST OF ALL RISKS INVOLVED, BUT MERELY A
REPRESENTATIVE LISTING OF CERTAIN OF THOSE RISKS CURRENTLY CONTEMPLATED BY THE
COMPANY.
Risks Inherent
in this
Company: WE ARE A START-UP ENTITY WITH NO EXISTING
SALES, AND AN UNSUCCESSFUL OPERATIONAL AND
FINANCIAL HISTORY. We have no sales or
assets and an unsuccessful operating and
financial history. There can be no
assurances that we will be able to develop
its business plan and investment objectives
of the Company. There can be no assurance
that we will be successful in meeting these
challenges and addressing such risks and the
failure to do so could have a materially
adverse effect on our business, results of
operations and financial condition.
REVENUE RAISED FROM THIS PRIVATE PLACEMENT
MAY NOT BE SUFFICIENT CAPITAL TO DEVELOP
THIS BUSINESS. The funds being raised
pursuant to this Subscription may are not
sufficient capital to complete our business
plan. There can be no assurances that we
will be successful in raising all of funding
sought in this Offering, or otherwise be
able to obtain any future funding, in which
event we may not be able to survive and
develop in accordance with our business plan
and the prospective investor could lose
his/her/its entire investment.
ANTICIPATED OPERATING LOSSES. We will incur
substantial costs to develop, create and
market its business; therefore operating
losses are anticipated to occur and continue
until we develop a broadly diverse
portfolio. Any evaluation of our business
and its prospects must be made in light of
the risks and uncertainties frequently
encountered by companies in a start up
phase. There can be no assurance that
management will be able to handle these
risks and uncertainties successfully, and
such a result could have a material adverse
affect upon the business and financial
results.
DEPENDENCE ON MANAGEMENT. The development of
the Company's business and operations is
dependent upon the efforts and talents of
its managers. The loss of the services of
one or more of the key managers could have a
material adverse effect on our business and
financial results. We do not currently
maintain key-man insurance on any of its key
members.
LACK OF CONTROL. You will have no
opportunity to evaluate the
prospective assets or other factors involved
in making the selection of assets to include
in our portfolio. You are dependent upon
management making such decisions. If
management is not successful in acquiring
appropriate assets for our portfolio, it
could have a material adverse effect on our
business and operations.
MARKET CONDITIONS. Changes in the real
estate market could substantially affect the
values of the properties and other assets in
the portfolio and thus the value of your
investment of the Company.
LACK OF ASSET IDENTIFICATION. We have not
identified the assets or properties we
desire to acquire. Therefore, you have no
opportunity to review the value of the
assets or properties. In the start-up phase
we will not have adequate amounts of capital
to diversify our portfolio; thereby
increasing the risk of factors negatively
affecting the value of our assets, and our
business and financial condition.
Additionally, the capital raised hereunder
will not be sufficient to allow the Company
to acquire any real estate, and as a result
the success of your investment is directly
tied to our ability to raise additional
capital in the future.
DISCRETIONARY USE OF YOUR FUNDS. You have no
control or discretion over how the Company
spends the money you invest, and you must
trust the judgment of the Company and its
managers on how they spend your money. There
can be no guarantee or assurances that the
Company will spend the money in a manner
that produces a rate of return or increases
in shareholder value.
CONFLICTS OF INTEREST. Conflicts of interest
may exist between you and the Company in
that the Company is managed by an Advisor
whose interest may not always be the same as
the company or the shareholders.
RAPID GROWTH. If the Company is successful
in developing its business plan, the
anticipated future growth of the business
could place a significant strain on our
managerial, operational and financial
resources. As we grow, we may be unable to
manage our growth effectively and thus our
business and financial results could suffer.
LIMITED LIABILITY OF MANAGEMENT. The Company
has adopted provisions to its Articles of
Incorporation and Bylaws which limit the
liability of Officers and Directors and
provides for indemnification by the Company
of Officers and Directors to the full extent
permitted by Maryland law, which provides
that officers and directors shall have no
personal liability to the Company or its
Members for monetary damages for breach of
fiduciary duties as directors, except for a
breach of their duty of loyalty, acts or
omissions not in good faith or which involve
intentional misconduct or knowing violation
of law, unlawful payment of dividends or
unit Stock purchases or redemptions, or any
transaction from which a director derives an
improper personal benefit. Such provisions
substantially limit the investors' ability
to hold officers and directors liable for
breaches of
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fiduciary duty, and may require the Company
to indemnify its officers and directors.
ACCESS TO CAPITAL. We have very limited
access to capital. There can be no
assurances that we will have the necessary
and appropriate levels of capital to operate
or grow its business. We will require
substantial additional capital in connection
with the expansion of its business and the
development of its business, and no
assurance can be given that we will be able
to obtain any additional capital. The
failure to obtain additional financing could
have a material adverse effect on our
business and its financial condition and
results of operations.
EXPERTISE. Our business requires much
expertise in a wide variety of functions.
There can be no assurance that we will be
able to maintain consultants and employees
with the requisite levels of expertise or
that the we will be able to attract and keep
such employees in the future.
Risks Related to the
Nature of the
Proposed Business:
WE ARE SUBJECT TO GOVERNMENT REGULATION AND
LEGAL UNCERTAINTIES.
The healthcare and medical diagnostic
industry is highly regulated at all levels.
Such laws could result in substantial
compliance costs and negatively interfere
with the conduct, growth and financial
performance of the business. The products
offered by us are subject to certain federal
and state government regulations. Our
ability to provide such products is and will
continue to be affected by such regulations.
The implementation of unfavorable
regulations or unfavorable interpretations
of existing regulations by courts or
regulatory bodies, could require us to incur
significant compliance costs, cause the
development of the affected markets to
become impractical and otherwise adversely
affect our financial performance and ability
to continue as a going concern.
IF WE USE ANY FUNDS TO LOAN MONEY ON
COMMERCIAL REAL ESTATE, WE MAY HAVE
DIFFICULTY PROTECTING OUR RIGHTS' AS A
SECURED LENDER. There may be times we use
capital to loan money secured by real
estate, as opposed to outright purchases of
real estate. In such event, although we
believe that our loan documents will enable
us to enforce our legal remedies against our
borrowers, the rights' of the borrowers and
other secured lenders may limit our
practical realization of those benefits. For
example:
o We may use a Land Trust, which may
permit quicker non-judicial
foreclosure of defaulting borrowers
than does a conventional mortgage,
as a security device. A defaulting
borrower may attempt to challenge,
judicially, the use of our Land
Trust, in this manner.
o Unforeseen environmental hazards
may subject us to unexpected
liability and procedural delays in
exercising our rights' and
remedies.
o Rights' of senior or junior secured
parties in the same property can
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create procedural hurdles for us
when we foreclose our collateral.
o If we need to conduct a judicial
foreclosure, such process is often
subject to delays and protracted
litigation. The value of the
collateral may deteriorate and
decrease during any delays
resulting from foreclosure
activities.
o The borrowers right of redemption
during foreclosure proceedings can
deter the sale of our collateral
and can for all practical purposes
require us to manage the property
in the interim.
o In the event that we are successful
in foreclosure proceedings, we may
not be able to pursue deficiency
judgments after we foreclose on the
collateral.
o Federal bankruptcy laws can prevent
us from pursuing our remedies at
any point in the foreclosure
process.
WE MAY BECOME LIABLE FOR UNFORESEEN
ENVIRONMENTAL OBLIGATIONS. As the owner of
the real property, under applicable
environmental laws, we may be fully liable
for costs involved in cleaning up any
contamination of hazardous materials located
on or underneath the real property. Even
though we may be entitled to indemnification
from the person who caused the
contamination, there is no assurance that
the responsible person would be able to
indemnify us to the full extent of our
liability. Furthermore, we would still have
operating, administrative and court expenses
associated with this process for which we
may not be entitled to indemnification.
COMPETITION. We face intense competition
from other companies that are much larger,
have much greater cash available, have much
greater marketing resources, and much larger
number of employees and consultants to
compete against us. These may include other
REITS, banks, insurance companies, and
pension funds. This may allow our
competitors to devote much greater resources
to the promotion and development of their
business.
There can be no assurance that we will be
successful in its endeavors against
competitors who wish to challenge our
attempts to build our business and develop
market share. We may not be able to compete
effectively against current or future
competitors and the competitive pressures we
face may cause our business and financial
results to suffer. We expect that
competition within our markets will increase
and we may not be able to keep up with the
competition or successfully manage
strategies to compete effectively against
current or future competitors.
ABILITY TO IMPLEMENT THE COMPANY'S GROWTH
STRATEGY. Our growth strategy is dependent
upon our ability to attract sufficient
financing to fund the development of its
marketing plan, and to attract and maintain
key employees. Implementation of this
strategy will depend in large part on the
Company's ability to: (i) widely promote its
business concept; (ii) obtain adequate
financing on favorable terms to fund this
growth strategy; (iii) retain attorneys and
consultants with high levels of expertise;
(iv) hire, train and retain skilled managers
and employees; and
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(v) develop a corporate infrastructure and
internal systems to manage the growth. Our
failure with respect to any or all of these
factors could impair its ability to
successfully implement its growth strategy,
which could have a material adverse effect
on our results of operations and financial
condition.
ABILITY TO REACT TO MARKET CHANGES. Our
success is partially dependent upon its
ability to develop its market and its
ability, or lack thereof, to change its
business model as may be necessary to
changing market and conditions. Our ability
to successfully implement its business model
as well as its ability to modify or change
its business model to fit the needs of a
changing market place are critical factors
to our success Company, and its inability to
do this can have a material adverse affect
on our business and financial condition.
Risks Related to
the Offering: NO LIQUID PUBLIC MARKET FOR SECURITIES. The
securities offered hereunder are not
publicly traded on any exchange market.
There is no regular and established public
trading market for the securities being
offered hereby, and therefore the ability to
liquefy your holdings may be unattainable.
MANAGEMENT CONTROL. Upon completion of this
offering, current management of the Company
will have absolute control of the Company.
Investors in this offering as a group will
have no ability to remove, control or direct
such management, nor will the investors have
any voting rights in the Company.
USE OF PROCEEDS. Our management will have
broad discretion on how to utilize the net
proceeds generated from this offering and
the timing of any expenditures. Investors
may not agree with the way our management
decides to spend these proceeds. Investors
have no discretion on how we spend the money
raised from an investor. The use of proceeds
from this Offering will be for working
capital purposes and establishment of
infrastructure and marketing mechanisms.
None of the proceeds will be utilized to
acquire any assets. Some of the proceeds may
be used for deposits on real estate
contracts, which deposits will be at risk
unless we can obtain additional financing.
A-5
EXHIBIT "B"
ACCREDITED INVESTOR
An Accredited Investor is one who meets one of the following criteria:
1. An individual whose net worth or joint net worth (i.e., total assets in
excess of total liabilities) with a spouse (including homes,
furnishings, etc.) exceeds $1,000,000.
2. An individual who had gross income in excess of $200,000 in 2003 and
2004 and expects the same in 2005.
3. An individual whose joint gross income with a spouse exceeded $300,000
in 2003 and 2004 and expects the same in 2005.
4. A corporation, partnership, trust or other business entity, which has
total assets in excess of $5,000,000 and which has not been formed for
the specific purpose of acquiring the Notes offered hereby.
5. A corporation, partnership, trust or other business entity that does
not qualify as an "Accredited Investor" under the Securities Act of
1933, Rule 501(a)(1) but whose individual owners are Accredited
Investors; in other words, their individual owners meet the Accredited
Investor criteria of numbers 1, 2 or 3 above.
EXHIBIT C
PROMISSORY NOTE
B-2
EXHIBIT D
WARRANT
B-3
EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
B-4
