Exhibit 4.12
Name: Xxxxxxxxx Venture Capital, L.L.C.
---------------------------------
SUBSCRIPTION AGREEMENT
Affinity International Travel Systems, Inc.
000 Xxxxxx Xxxxxx Xxxxx
Xxxxx 0000X
St. Petersburg, Florida 33701
Gentlemen:
The undersigned understands that Affinity International Travel Systems, Inc., a
Nevada corporation (the "Company"), is offering for sale up to 2,142,857 shares
of its Common Stock, $0.001 par value per share (the "Common Stock") for the
Purchase Price set forth in Section 4 hereof.
The undersigned further understands that the offering is being made without
registration of the Common Stock under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance on the exemption contained in Rule 504 of
Regulation D under the Securities Act for transactions by an issuer not
involving a public offering and the undersigned further understands that the
undersigned is purchasing the Common Stock without being furnished any
prospectus setting forth all of the information that would be required to be
furnished under the Securities Act, and understands further that this offering
is being made only to "accredited investors" (as defined in Rule 501 of
Regulation D under the Securities Act).
These securities have not been registered with or approved by the Securities
Division of the Attorney General's Office in Delaware. They are offered and sold
pursuant to the Accredited Investor exemption provided by Section 503 of the
Securities Rules and Regulations of the State of Delaware. Sales may only be
made to accredited investors. Resale or disposal of these securities within
Delaware may only be made pursuant to an exemption or an effective registration
statement.
1. Subscription. Subject to the terms and conditions of this Subscription
Agreement (this "Agreement"), the undersigned hereby irrevocably subscribes for
that number of shares of Common Stock set forth in Appendix A, which is payable
as described in Section 4.
2. Acceptance of Subscription and Issuance of Shares. It is understood and
agreed that the Company has the right to accept or reject this subscription, in
whole or in part, and that this subscription is accepted by the Company only
when it is signed by a duly authorized officer of the Company and delivered to
the undersigned at the Closing referred to in Section 3.
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3. The Closing. The closing of the purchase and sale of the Common Stock
(the "Closing") shall take place at the offices of the Company or such other
mutually acceptable place on or before December 20, 1999 or at such time and
place as the Company and the undersigned shall mutually agree upon. The Company
may, at its option, elect to close the purchase and sale of the shares in one or
more Closings.
4. Payment for Shares. The undersigned shall make payment in the amount of
Two Hundred Fifty Thousand and 10/100 Dollars ($250,000.10) (the "Purchase
Price"), for the Common Stock, less the costs, expenses, fees and commissions
set forth on the attached Appendix B. The Purchase Price shall be paid to the
Company via certified check, personal check, or wire transfer to the account
designated by the Company. The Purchase Price, less any and all deductions
therefrom as provided for herein, shall be paid in full to the Company not later
than Friday, December 24, 1999.
5. Representations of the Company. As of the date of the Closing (the
"Closing Date"), the Company represents as follows:
(a) Valid Issuance. The Common Stock, when issued and paid for, will
represent validly authorized, duly issued and fully paid and
non-assessable shares of the Company, and the issuance thereof will
not conflict with the Certificate of Incorporation or Bylaws of the
Company nor with any outstanding warrant, option, call, preemptive
right or commitment of any type relating to the Company's capital
stock.
(b) No Transfer Restrictions. Upon issuance to the undersigned, the
Common Stock will be free from any and all restrictions on transfer,
including pursuant to Rule 144 of the Securities Act except as
agreed to by and between the undersigned and the Company herein;
provided, however, that the undersigned must be in full compliance
with all requirements of Rule 504 of Regulation D under the
Securities Act, Rule 144 of the Securities Act and all state
securities laws.
(c) Other Representations and Agreements.
i) Marketability. Prior to becoming a fully reporting company
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company shall maintain adequate current
public information in satisfaction of the requirements for
resales of restricted stock pursuant to Rule 144 promulgated
under the Securities Act of 1933, as amended, and Rule
15c-2(11) promulgated under the Exchange Act, including, but
not limited to, the publication over a nationally recognized
reporting service or newswire of annual audited financial
statements and semi-annual interim unaudited balance sheets
and income statements, it being understood that the Company
does not currently have audited financial
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statements for the year ended June 30, 1998. After the Company
becomes a fully reporting company, the Company shall file all
reports required under the Exchange Act.
6. Representations and Warranties of the Undersigned. The undersigned
hereby represents and warrants to the Company and to each officer, director, and
agent of the Company that:
(a) Authority. The undersigned has all requisite authority to enter into
this Agreement and to perform all the obligations required to be
performed by the undersigned hereunder.
(b) Access to Information. The undersigned is familiar with the business
and financial condition, properties, operations and prospects of the
Company. The undersigned has been furnished copies of the financial
statements of the Company and all other documents requested by it
and has had an opportunity to discuss the Company's business and
financial condition, properties, operations and prospects with the
Company's management. The undersigned has also had an opportunity to
ask questions of officers of the Company, which questions were
answered to his satisfaction. The undersigned understands that such
discussions were intended to describe certain aspects of the
Company's business and financial condition, properties, operations
and prospects, but were not a thorough or exhaustive description.
(c) Representations and Warranties as of Closing. The undersigned
understands that, unless it notifies the Company in writing to the
contrary at or before the Closing, all the undersigned's
representations and warranties contained in this Agreement will be
deemed to have been reaffirmed and confirmed as of the Closing,
taking into account all information received by the undersigned.
(d) Risk Factors. The undersigned understands that the purchase of the
Common Stock involves substantial risks.
(e) Knowledge, Skill and Experience. The undersigned has such knowledge,
skill and experience in business, financial and investment matters
so that is capable of evaluating the merits and risks of an
investment in Common Stock. To the extent necessary, the undersigned
has retained, at its own expense, and relied upon, appropriate
professional advice regarding the investment, tax and legal merits
and consequences of this Agreement and owning Common Stock.
(f) Accredited Investor. The undersigned is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. The undersigned has
completed an Accredited Investor Questionnaire, a copy of which is
attached hereto as Appendix C
(g) Investment Intent. The undersigned is acquiring the Common Stock
solely for its own beneficial account, for investment purposes, and
not with a view to, or for
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immediate resale in connection with, any improper distribution of
the Common Stock. The undersigned understands that the Common Stock
has not been registered under the Securities Act or any State
Securities Laws by reason of specific exemptions under the
provisions thereof which depend in part upon the investment intent
of the undersigned and of the other representations made by the
undersigned in this Agreement. The undersigned understands that the
Company is relying upon the representations and agreements contained
in this Agreement (and any supplemental information) for the purpose
of determining whether this transaction meets the requirements for
such exemptions.
(h) Stock Transfer Restrictions. The undersigned agrees: (i) that it
will not sell, assign, pledge, give, transfer or otherwise dispose
of the Common Stock or any interest therein, or make any offer or
attempt to do any of the foregoing, except pursuant to a
registration of the Common Stock under the Securities Act and all
applicable State Securities Laws or in a transaction which is exempt
from the registration provisions of the Securities Act and all
applicable State Securities Laws; and (ii) that the Company and any
transfer agent for the Common Stock shall not be required to give
effect to any purported transfer of any of the Common Stock except
upon compliance with the foregoing provisions.
7. Conditions to Obligations of the Undersigned and the Company. The
obligations of the undersigned to purchase and pay for the number of shares of
Common Stock specified herein and of the Company to sell the Common Stock are
subject to the satisfaction at or before the Closing of the following condition
precedent:
(a) Representations and Warranties. The representations and warranties
of the Company contained in Section 5 and of the undersigned
contained in Section 6 shall be true and correct on and as of the
Closing in all respects with the same effect as though such
representations and warranties had been made on and as of the
Closing.
(b) Escrow Agreement. On or prior to the date hereof, the Company and
the undersigned shall have entered into an escrow agreement on
mutually acceptable terms whereby the undersigned agrees to place
certain shares of common stock of the Company into escrow for the
purpose of satisfying certain obligations of the Company to the
undersigned pursuant to several previous agreements by and between
the undersigned and the Company.
8. Additional Agreements.
(a) Lock-Up Agreement. Without the prior written consent of the Company,
which consent shall not be unreasonably withheld, the undersigned
agrees not to sell any of the shares of Common Stock in a
transaction on the public markets, whether through registration,
sale pursuant to Rule 144 of the Securities Act, or otherwise, for a
period of ninety (90) days following the Closing Date. It is
acknowledged that any breach of this provision will cause
irreparable harm to the Company for
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which there will be no adequate remedy at law and the Company shall
be entitled, in addition to other remedies at law or in equity, to
specific performance of this provision by the undersigned. In the
event that the undersigned sells, transfers, assigns or otherwise
disposes of any of the Common Stock in a non-public transaction, the
purchaser or transferee of such Common Stock must agree to be bound
by the provisions of this paragraph and must attest to such
agreement in writing, a copy of which must be provided to the
Company upon request.
(b) Amendment of Previous Agreements. On the Closing Date, the Company
shall amend those certain Warrant Subscription Agreements and that
certain First Amended and Restated Consulting Agreement listed on
Appendix D attached hereto and made a part hereof (collectively the
"SVC Agreements") such that all warrants granted to the undersigned
or any affiliate, assignee or transferee of the undersigned under
the SVC Agreements (the "Warrants") will be amended to include the
following terms: (i) all Warrants shall be immediately exercisable,
(ii) upon exercise of the Warrants, the purchase price for the
shares of common stock of Borrower underlying the Warrants shall be
$0.50 per share; and (iii) upon exercise of the Warrants, payment
for the shares of common stock underlying the Warrants may be made
through "cashless exercise", as defined hereinbelow.
For purposes of this Section, the term "cashless exercise" means
that at any time following the Closing Date, the undersigned, in
lieu of any cash payment required hereunder for the exercise of the
warrant, shall have the right to exercise the warrant in whole or in
part by surrendering the warrant in exchange for the number of
shares of the Company's common stock equal to (x) the number of
shares as to which the warrant is being exercised multiplied by (y)
a fraction, the numerator of which is the Market Price (as defined
below) of the common stock less the aggregate exercise price of the
warrant being exercised, and the denominator of which is the Market
Price. The term "Market Price" means the average of the closing sale
price per share of the common stock on the principal stock exchange
or market on which the common stock is then quoted or traded on each
of the ten (10) consecutive trading days preceding the date on which
written notice of election to exercise the warrants has been given
to the Company. If the undersigned opts for a cashless exercise of
the warrant, no other consideration shall be paid to the Company,
other than surrendering the warrant itself, nor will there be paid
any commission or other remuneration to any other person or entity
by the undersigned. In the event that the undersigned is not
permitted to "tack" the holding period of the warrant to the holding
period of the common stock received upon the cashless exercise for
purposes of satisfaction of the holding period requirements of Rules
144(d)(3)(ii) and 144(k) under the Securities Act for whatever
reason and there is no presently filed registration statement
effective as to the shares received or to be received through the
cashless exercise of the warrant granted herein, the Company shall,
upon receipt of the written request of the warrant holder, promptly
prepare and file a registration statement with the SEC with respect
to all of the warrant shares purchased by the undersigned.
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(c) Shareholders' Meetings. For so long as the undersigned or any
affiliate or assignee of the undersigned is a shareholder of the
Company, the Company shall notice and hold a general meeting of the
shareholders of the Company not less than once every calendar year
for the purpose of electing directors of the Company.
(d) Board of Director Observer Rights. For so long as the undersigned is
a shareholder of the Company, the Company shall grant to the
undersigned "observer rights" to the Board of Directors of the
Company such that the undersigned, or the appointed designee of the
undersigned, shall be entitled to receive all written materials
prepared by, presented to or considered by the Board of Directors of
the Company in connection with any general or special meeting of the
directors of the Company, including, but not limited to, all minutes
of the meetings of directors, officer's employment contracts,
proposals to sell or offers to purchase a material amount of the
assets of the Company, or proposals to sell or offers to purchase
any equity security of the Company. The Company shall send such
written materials to the undersigned at least three (3) business
days prior to the date of any such general or special meeting of the
directors.
(e) Acknowledgement of Additional Consideration for Reduction of Warrant
Exercise Price. The Company acknowledges that the undersigned, or
persons acting exclusively on behalf of the undersigned, has
contributed substantial time and effort to the management and
affairs of the Company, both at the principal place of business of
the Company and elsewhere, has negotiated substantially more
favorable payment terms from creditors and vendors of the Company,
has assisted in the strategic acquisition of synergistic businesses
and business partners, has been and will continue to be instrumental
in the raising of significant investment capital, intends to remain
substantially involved in negotiating the terms and conditions and
the closing of investments in the Company, has provided continued
funding for the operations of the Company, and has foregone
enforcement of the contractual obligations of the Company pursuant
to the SVC Agreements referred to in Section 8(b) hereinabove in
order to improve the Company's cash-flow position.
Because of these significant contributions to the Company, the
Company's Board of Directors, in their good faith business judgment,
have determined that it is in the best interest of the Company and
its shareholders, and is fair and equitable to the undersigned, to
reduce the exercise price of the Warrants and to issue those certain
shares of common stock of the Company as set forth hereinabove.
9. Obligations Irrevocable. The obligations of the undersigned hereunder
shall be irrevocable, except with the consent of the Company, until 5:00 p.m.
EDT, December 20, 1999.
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10. Equitable Remedies. Each party hereto acknowledges that a refusal
without just cause by such party to consummate the transactions contemplated
hereby will cause irreparable harm to the other party, for which there may be no
adequate remedy at law. A party not in default at the time of such refusal shall
be entitled, in addition to other remedies at law or in equity, to specific
performance of this Agreement by the party that so refused or failed to
consummate the transactions contemplated hereby. In any action to enforce the
terms of this Agreement, the successful party shall be entitled to recover its
reasonable attorneys' fees, all costs and expenses from the party who refused or
failed to perform this Agreement.
11. Waiver, Amendment. Neither this Agreement nor any provisions of this
Agreement shall be modified, changed, discharged or terminated except by an
instrument in writing, signed by the party against whom any waiver, change,
discharge or termination is sought.
12. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason of this Agreement shall
be assignable by the Company without the prior written consent of the
undersigned. The undersigned may assign, transfer, pledge, encumber, mortgage or
otherwise alienate any of the rights afforded to it hereunder and the Company
shall be bound by the terms hereof to such assignee or transferee; provided,
however, that any assignment, transfer, or other alienation of any right
hereunder by the undersigned shall be in compliance with all federal and state
securities laws.
13. Expenses. The Company shall pay all actual expenses incurred in
connection with this Agreement and the transactions contemplated hereby,
including, but not limited to, any and all legal, travel, lodging, meals and
other related transaction expenses of the undersigned and, upon request,
submission of appropriate invoices and receipts. In any action to enforce the
terms of this Agreement, the successful party shall be entitled to recover its
reasonable costs and expenses, including reasonable attorneys' fees, from the
party who refused or failed to perform this Agreement.
14. Applicable Law. This Agreement shall be governed by and construed in
accordance with the federal laws of the United State of America and the laws of
the State of Nevada.
15. Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
17. Notices. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid:
(a) If to the Company, to it at the following address:
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000 Xxxxxx Xxxxxx Xxxxx
Xxxxx 0000X
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
FAX: (000) 000-0000
with a copy, which shall not constitute notice, to
Xxxxx Xxxxxxx Freed & Gesmer
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
(b) If to the undersigned:
Xxxxxxxxx Venture Capital, L.L.C.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
and
Xxxxxx X. Xxxxxxxxx, Xx.
0000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxx 00000
with a copy, which shall not constitute notice, to:
Xxxxx Liddell & Xxxx, LLP
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
FAX: (000) 000-0000
or at such other address as either party shall have specified by notice in
writing to the other.
16. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties and their respective successors and
permitted assigns.
17. Survival. All representations contained in this Agreement shall
survive the closing of the issuance and sale of the shares of Common Stock.
18. Notification of Changes. The undersigned hereby covenants and agrees
to notify the Company upon the occurrence of any event before the closing of the
purchase of the
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Common Stock pursuant to this Agreement which would cause any representation,
warranty, or covenant of the undersigned contained in this Agreement to be false
or incorrect.
[The immediately following page contains the signatures of the parties]
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 20th day of December, 1999.
Name: Xxxxxxxxx Venture Capital, L.L.C.
BY: /s/ Xxxxxx X. Xxxxxxxxx, Xx.
----------------------------
XXXXXX X. XXXXXXXXX, XX.
Managing Member
Accepted as of
December 20, 1999
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
By: /s/ X.X. Xxxxxxxx
-------------------------
XXXXXX X. XXXXXXXX
President and
Chief Executive Officer
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APPENDIX A
CONSIDERATION TO BE DELIVERED
-------------------------------------------------------------------------------
Shares of Common Stock to be Acquired Aggregate Amount to Be Paid
------------------------------------- At Closing
----------
714,286 $250,000.10 less the amount of all
costs, expenses, fees and other charges
set forth on Appendix B hereto
-------------------------------------------------------------------------------
00
XXXXXXXX X
COSTS AND EXPENSES
See attached.
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APPENDIX C
ACCREDITED INVESTOR CERTIFICATE
The undersigned Investor hereby certifies that it is an Accredited
Investor as that term is defined in Regulation D adopted pursuant to the
Securities Act of 1933. The specific category(s) of Accredited Investor
applicable to the undersigned is checked below.
___ a. any natural person whose individual net worth,
or joint net worth with that person's spouse, at the time of
his purchase exceeds $1,000,000;
___ b. any natural person who had an individual income
in excess of $200,000 in each of the two most recent years
or joint income with that person's spouse in excess of
$300,000 and has a reasonable expectation of reaching the
same income level in the current year;
___ c. any bank as defined in section 3(a)(2) of the
Securities Act of 1933, as amended (the "Act"), or any
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; any broker or dealer
registered pursuant to section 15 of the Securities Exchange
Act of 1934; any insurance company as defined in section
2(13) of the Act; any investment company registered under
the Investment Company Act of 1940 (the "1940 Act") or a
business development company as defined in section 2(a)(48)
of the 1940 Act; any 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; any plan established and maintained by a state, its
political subdivisions for the benefit of its employees, if
such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974 ("ERISA"), if the
investment decision is made by a plan fiduciary, as defined
in section 3(21) of ERISA, which is either a bank, savings
and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000; or, if a self-directed
plan,
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with investment decisions made solely by persons that
are accredited investors;
___ d. any private business development company as
defined in section 202(a)(22) of the Investment Advisers Act
of 1940;
___ e. any organization described in section 501(c)(3)
of the Internal Revenue Code, corporation, Massachusetts or
similar business trust, or partnership, not formed for the
specific purpose of acquiring the securities offered, with
total assets in excess of $5,000,000;
___ f. any director, executive officer, or general
partner of the Company;
X g. any entity in which all of the equity owners
are accredited investors; or
___ h. any trust, with total assets in excess of
$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 section
230.506(b)(2)(ii) of Regulation D under the Act.
IN WITNESS WHEREOF, the undersigned has executed this Accredited Investor
Certificate as of the 20th day of December, 1999.
XXXXXXXXX VENTURE CAPITAL, LLC
BY: /s/ Xxxxxx X. Xxxxxxxxx, Xx.
----------------------------
Xxxxxx X. Xxxxxxxxx, Xx.
Managing Member
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APPENDIX D
SVC AGREEMENTS
1. Warrant Subscription Agreement by and between Xxxxxxxxx Venture Capital,
L.L.C. and Affinity International Travel Systems, Inc. dated April 23, 1999.
2. Warrant Subscription Agreement by and between Xxxxxxxxx Venture Capital,
L.L.C. and Affinity International Travel Systems, Inc. dated June 10, 1999
3. Consulting Agreement by and between Xxxxxxxxx Venture Capital, L.L.C. and
Affinity International Travel Systems, Inc. (as amended and restated) dated June
1, 1999
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