SUBSCRIPTION AGREEMENT
PURCHASE OF CONVERTIBLE NOTE
ARTWORK AND BEYOND, INC.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY FOREIGN SECURITIES LAWS AND ARE BEING OFFERED AND
SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS.
THE NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THE NOTE ARE SUBJECT
TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO REGISTRATION OR AN
EXEMPTION THEREFROM. THE NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THE NOTE HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY
OR ADEQUACY OF THE OFFERING MATERIALS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
As of April 18, 2002
Artwork and Beyond, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Re: PURCHASE OF CONVERTIBLE PROMISSORY NOTE
---------------------------------------
Gentlemen/Ladies:
The undersigned ("the Investor" or "Undersigned"), an "accredited
investor" as hereinafter defined, wishes to purchase a Convertible Promissory
Note (the "Note") of Artwork and Beyond, Inc., a Delaware corporation with a
principal office located at 000 Xxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000, XXX
(the "Company"). The Note is convertible into shares of common stock of the
Company (the "Underlying Security" and, together with the Note, the
"Securities"). The Note sold hereunder is part of a private offering
("Offering") of up to an aggregate of five hundred thousand dollars $500,000. As
used herein the term "Subscribers" shall refer to all the subscribers in the
Offering.
1. SUBSCRIPTION. Subject to the terms and conditions hereof, the
Investor hereby irrevocably subscribes for and commits to purchase from the
Company the Note in the principal amount set forth opposite his/her name on the
signature page. The Investor's check in exchange for the Note has been delivered
concurrently with this Agreement, or a wire transfer has been delivered to the
order of the Company.
The proceeds from this Offering are to be utilized to defray the costs
of opening and promoting the Artwork and Beyond Superstore and for working
capital.
2. DISCLOSURE DOCUMENTS. The undersigned acknowledges that the
undersigned has received and reviewed the following documents ("Disclosure
Documents") and acknowledges the risks involved therein and as set forth in
paragraph 3(f) hereof:
1) Excerpts from Amendment No. 3 to the Registration
Statement form SB-2, including Additional Risk Factors
filed as of March ___, 2002
2) Statement of Additional Risks
3) Form of Convertible Promissory Note
4) Artwork and Beyond Superstore Description.
3. INVESTOR REPRESENTATIONS AND WARRANTIES.
(a) INVESTMENT INTENT. The Investor represents that the
Investor will be acquiring the Note for investment and
not with a view to, or for sale in connection with, any
distribution thereof nor with any present intention to
sell the Note. The undersigned will not offer or
transfer the Securities except pursuant to either an
effective registration statement pursuant to the
Securities Act of 1933 (the "Securities Act") of the
Underlying Security, or an exemption from such
requirements as set forth in an opinion of counsel. The
Securities shall contain a legend to such effect and be
subject to a stop transfer order. No other person has a
direct or indirect beneficial interest in the
Securities. Except as set forth herein, the Company has
no obligation to register the Underlying Security under
the Securities Act, or to assist the undersigned in
complying with an exemption from registration under the
Securities Act.
(b) EXPERIENCE. The Investor represents and warrants that
the Investor has such knowledge and experience in
financial and business matters that the Investor is and
will be capable of evaluating the risks and merits of an
investment in the Note to be purchased hereby and that
the Investor is able to bear the economic risks,
including total loss, of investing in the Note.
(c) NO REVIEW. The Investor understands that no federal or
foreign agency has passed upon the Note or made any
findings or determination as to the fairness of this
investment.
(d) APPROVALS REQUIRED. No approval, authorization, consent,
order or other action of, or filing with, any person,
firm or corporation or any court, administrative agency
or other governmental authority is required in
connection with the execution and delivery of this
Agreement by the Investor or the consummation of the
transactions described herein, except as disclosed
herein and, except to the extent that the Investor or
the Company is required to file reports in accordance
with relevant regulations under Federal securities laws.
(e) ACCURACY OF INFORMATION. All information furnished in
the Subscription Agreement completed by the undersigned
is true and correct in all respects.
(f) ACKNOWLEDGEMENT OF RISKS. The Investor acknowledges the
existence of the risks set forth in the Disclosure
Documents attached hereto and, specifically,
acknowledges that the Company has minimal business, that
the Company plans to commit the proceeds of this
Offering to the costs of opening and promoting the
Artwork and Beyond Superstore and that there is no
assurance that the Artwork and Beyond Superstore will be
profitable.
(g) ACCREDITED INVESTOR. The Investor further represents
that the Investor is an Accredited Investor within the
meaning of Regulation D because the Investor is one of
the types of persons listed below as indicated by
Investor's check of the appropriate category. (Please
check the appropriate paragraph(s)).
(1) Any bank as defined in section 3(a)(2) of 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 or a business development
company as defined in section 2(a)(48) of that 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, or any
agency or instrumentality of a state or 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 if the investment decision is made by a
plan fiduciary, as defined in section 3(21) of such Act, which
is either a bank, savings and loan association, insurance
company, or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by
persons that are accredited investors;
(2) Any private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940;
(3) 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;
(4) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any
director, executive officer, or general partner of a general
partner of that issuer;
(5) 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;
(6) 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 in each of
those years and has a reasonable expectation of reaching the
same income level in the current year;
(7) 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 ss.230.506(b)(2)(ii); and
(8) Any entity in which all of the equity owners are accredited
investors.
(h) REPRESENTATIONS AND WARRANTIES. The foregoing
representations and warranties are true as of the date of this Subscription
Agreement and shall be true as of the date the Company executes and delivers the
Note to the Investor. If such representation and warranties shall not be true in
any respect prior to such date, the Investor will give prompt written notice of
such fact to the Company.
4. FURTHER ACKNOWLEDGMENTS. The Investor further acknowledges that:
(a) ACCESS TO INFORMATION. The Investor has received a copy of
the Disclosure Documents and has carefully reviewed the Disclosure Documents.
The Investor has had the opportunity to ask questions and receive answers from
representatives of the Company. The Company has made available to the Investor
all doc uments requested and has provided answers to all of the Investor's
questions relating to an investment in the Company. In evaluating the Investor's
decision to purchase the Note subscribed for, the Investor has relied solely
upon information contained in the Disclosure Documents and independent
investigations made by the Investor.
(b) SUITABILITY OF INVESTMENT. The Investor, upon review of
the Disclosure Documents and careful consideration of the risks involved in the
purchase of the Note, understands and acknowledges that this investment is of a
speculative nature involving a risk of loss of all or a portion of the
undersigned's investment, and that:
(i) The Note is being sold in reliance on the
exemption from the registration provisions of the Securities
Act, pursuant to Section 4(2) of the Securities Act as
contained in Regulation D promulgated by the Securities and
Exchange Commission thereunder and the Securities will be a
Restricted Securities as defined in Rule 144 under the
Securities Act and will be saleable only pursuant to a
Registration Statement or an exemption from the registration
requirements under the Securities Act. Except as provided
herein, the Company has no obligation to register the
Underlying Security pursuant to the Securities Act.
Consequently, transfer may be limited.
(ii) The Note is being offered to the Investor only
because the Investor has represented that the Investor is an
accredited investor (as defined in Regulation D under the
Securities Act), and the information being supplied to the
Investor would not be adequate to comply with the disclosure
provided in connection with a registration statement or with
information required to be provided under the Securities Act
to an unaccredited investor under Regulation D.
(iii) The Investor has determined that the Note is a
suitable investment for the Investor.
(iv) Each Note or certificate for the Underlying
Security shall be imprinted with a legend substantially in the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. SUCH
SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH
RESPECT THERETO UNDER SAID ACT, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
5. SUBSCRIPTION ACCEPTANCE.
(a) This subscription may be accepted or rejected in whole or
in part by the Company, in its sole discretion.
(b) This subscription is and shall be irrevocable except that
(i) the Investor's execution and delivery of this Subscription Agreement will
not constitute an agreement between the Company and the Investor until this
Subscription Agreement is accepted on behalf of the Company and, if not so
accepted, the Investor's subscription and obligations hereunder will terminate
and (ii) the Investor can, at any time prior to acceptance of this Subscription
Agreement, request in writing that the Investor be released from the obligations
hereunder (and the Company may, but need not, in its discretion, elect to
release the Investor from the subscription and from such obligations).
6. SECURITIES REGISTRATION.
(a) DEFINITIONS. As used in this Section, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission, or any other Federal agency at the time administering the Securities
Act.
"Person" shall mean and include an individual, a
corporation, a partnership, a trust, an unincorporated organization and a
government or any department, agency or political subdivision thereof.
"Holder" shall mean the undersigned or permitted
transferees of the Underlying Security (other than pursuant to a permitted
public sale).
"Registration Expenses" shall mean expenses in
preparing and filing the registration statement referred to hereinafter but
shall not include expenses of Holder's counsel or any commissions or discounts.
"Registration Period" shall refer to the period
beginning after the effective date of any registration statement relating to the
Underlying Securities and ending one (1) year thereafter, provided the
Registration Period shall be deemed expired with respect to any Holder who may
sell his/her/its Shares under Rule 144, without regard to the volume limitation
of such Rule.
"Registration Statement" shall mean any registration
statement filed under the Securities Act of 1933 and any amendments to such
registration statement.
"Securities Act" shall mean the Securities Act of
1933, as amended.
"Transfer" shall include any disposition of any
Restricted Securities or of any interest therein which would constitute a sale
thereof within the meaning of the Securities Act.
(b) REQUIRED REGISTRATION.
(i) The Company presently has a Registration
Statement pending with the Commission for the sale of shares
of its common stock. The Company shall include the resale of
the Underlying Securities held by the Investor in the first
amendment to the Registration Statement filed by the Company
after the sale of the Notes.
(ii) REGISTRATION EXPENSES. The Company will pay all
Registration Expenses for the Required Registration.
(c) COVENANTS OF THE COMPANY. In connection with the
Registration Statement to be filed herein, the Company shall:
(i) furnish to each seller of the Underlying
Securities such number of copies of such Registration
Statement or supplement thereto (in each case including all
exhibits), including a preliminary and final prospectus, in
conformity with the requirements of the Securities Act;
(ii) use its best efforts to register or qualify the
Underlying Securities covered by such Registration Statement
under the securities or blue sky laws of such jurisdictions as
may be reasonably requested by the Investor or the securities
of the Company initially proposed to be registered are
qualified; and
(iii) during the Registration Period the Company
shall keep the Registration Statement current. Moreover, the
Company shall notify each seller of the Underlying Securities
covered by such Registration Statement, at any time when a
prospectus relating thereto covered by such Registration
Statement is required to be delivered under the Securities Act
or the happening of any event as a result of which the
Registration Statement, the prospectus or any document
incorporated therein by reference, 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 and at the request of such
seller, prepare and furnish to such seller a post-effective
amendment or supplement to the Registration Statement or the
related prospectus or any document incorporated therein by
reference or file any other required document so that, as
thereafter delivered to the purchasers of such shares, such
prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading;
(d) TRANSFER RIGHTS. The rights and the obligations of the
Investors under this Agreement, including the rights to cause the Company to
register the Underlying Securities and the restrictions on the transferability
of the Securities, shall be deemed to be automatically assigned with the
transfer of the Securities, other than a transfer pursuant to an effective
Registration Statement.
(f) The Investor will execute such documents requested by the
Company evidencing compliance with law or as customarily given upon
registration.
7. TAX CONSEQUENCES. No effort has been made by the Company to provide
any advice as to the federal income tax consequences of the investment by the
Investor in the Shares. The Investor has been advised to seek independent advice
as to the tax consequences of an investment in the Shares.
8. SURVIVAL AND INDEMNIFICATION.
(a) The Investor agrees that the representations contained
herein shall survive the purchase of the Shares and that the Investor will
indemnify and hold harmless the Company from and against loss, damage or
liability arising from a claim of or action instituted by a third party
including any governmental or regulatory body investigation, or proceeding
arising from a breach of any representation or material misrepresentation of the
Investor contained herein.
(b) The Company agrees that the representations contained
herein shall survive the purchase of the Shares hereby and that it will
indemnify and hold harmless the Investor from and against loss, damage or
liability arising from a claim of or action instituted by a third party
including any governmental or regulatory body investigation, or proceeding
arising from a breach of any representation or material misrepresentation of the
Company contained herein.
(c) The indemnities provided herein shall not be deemed
exclusive remedies but are in addition to all other rights and remedies
available to either or both of the parties pursuant to this Agreement.
9. MISCELLANEOUS.
(a) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges shall
be enforceable to the fullest extent permitted by law.
(b) ENTIRE AGREEMENT. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter. This
Agreement may only be modified in writing signed by the undersigned and the
Company.
(c) CONSTRUCTION AND ENFORCEMENT. This Agreement shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Florida applicable to agreements made
and to be performed entirely within such State.
(d) NOTICES. Copies of all notices or other communications to
be given or made hereunder will be transmitted to the Investor at the address
listed in Section 4.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement as of the day and year first above written AND HAS COMPLETED SECTION
3(G).
Principal Amount of Note $___________________________
INVESTOR
------------------------------
Name:
Address:
Social Security or Tax
Identification Number:
Phone:
------------------------------------------
Signature of Authorized Representative
------------------------------------------
Name Title
The foregoing subscription is hereby accepted by Artwork and
Beyond, Inc. as of March __, 2002.
ARTWORK AND BEYOND, INC.
(a [New York] corporation)
By:
-----------------------
Name:
Title:
Witness:
------------------------------
Name:
Title:
{acceptance page}
STATEMENT OF ADDITIONAL RISKS
AN INVESTMENT IN THE SECUITIES IS SPECULATIVE AND INVOLVES A HIGH
DEGREE OF RISK AND INCLUDES THE POSSIBILITY OF A TOTAL LOSS OF ONE'S INVESTMENT.
ONLY THOSE PERSONS WHO ARE ABLE TO BEAR THE FINANCIAL RISKS SHOULD CONSIDER
PURCHASING THE UNITS. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, AMONG
OTHER THINGS, THE RISK FACTORS SET FORTH BELOW AS WELL AS THOSE SET FORTH IN THE
REGISTRATION STATEMEMNT EXCERPT BEFORE A DECISION IS MADE TO PURCHASE ANY
SHARES.
VIABILITY OF SUPERSTORE
-----------------------
The proceeds of this Offering are earmarked and may be used only to
defray the costs of opening and marketing a retail art and framing "Superstore",
as described in the Superstore Description attached hereto, and for working
capital related thereto. There is no requirement that a particular amount of
Securities be sold. In the event that the Company does not receive sufficient
proceeds, the Company may not be able to open the "Superstore". Even if the
Company receives sufficient proceeds, there is no assurance that that the
Company will be able to open the "Superstore", as described, or to operate the
business properly. The Company will not pay any brokerage or other fees in
connection with the sale of the Notes. It believes that expenses and filing fees
will not exceed $25,000. If all of the Notes are sold, the Company will receive
proceeds in the amount of $475,000, which will be used to defray the costs of
opening and marketing the "Superstore" and for working capital related thereto.
POSSIBLE ILLIQUIDITY
--------------------
The offer and sale of the Convertible Notes has not been registered
under the Securities Act or the securities laws of any jurisdiction in reliance
on exemptions from registration. The Securities may not be resold unless the
resale is subsequently registered under the Securities Act and the applicable
state securities laws or, in the opinion of counsel to the Company, an exemption
from registration is available. Further, the market for the Company's shares is
extremely limited and there is no assurance that an active market will develop
in the future. As a result, an investor must be prepared to continue to bear the
economic risk of his investment for an indefinite period of time.
