SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement") is made and entered into
as of July 10, 2003 by and between Valesc Holdings Inc., a Delaware corporation
(the "Company"), and Xxxxxx Xxxxx (the "Subscriber").
WHEREAS, Subscriber is the owner of 622,365 shares of common stock, par
value $.0001 per share, of the Company (the "Common Stock");
WHEREAS, Subscriber desires to exchange the Common Stock for shares of
the Company's Series B Convertible Preferred stock, and the Company has agreed
to such exchange.
NOW, THEREFORE, the parties hereby agree as follows:
1. Agreement to Issue the Preferred Stock. The Company agrees to issue
to the Subscriber, and the Subscriber acknowledges receipt from the Company, at
the Closing (as defined below), of a total of 6,224 shares of its Series B
Convertible Preferred stock (the "Shares") in exchange for delivery by the
Subscriber to the Company of certificate(s) representing the Common Stock, duly
executed for transfer to the Company.
2. Closing. The issuance of the Shares will take place at the offices
of Xxxxx & Associates, P.C., 00 Xxxx 00xx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx
00000-0000, at 10:00 a.m. E.S.T., on the date first set forth above, or at such
other time and place as the Company and the Subscriber mutually agree (which
time and place are referred to herein as the "Closing"). At the Closing, the
Company will deliver stock certificates to the Subscriber representing the
Shares executed by the Company or its Transfer Agent. It shall be a condition to
the closing that Consents to Transfer, in the forms attached hereto as Exhibits
B and C, shall have been executed and delivered to the Company.
3. Representations, Warranties and Certain Covenants of Subscriber.
The Subscriber hereby represents and warrants to the Company that:
(a) Disclosure of Risks. Subscriber 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. By virtue of his
position as President of a subsidiary of the Company, 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 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 Shares 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 Shares,
(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 Shares 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 Shares 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 Shares sold hereunder.
The Subscriber understands that no public market now exists for the
Shares and that it is uncertain whether a public market will ever exist
for the Shares.
(e) Authorization. If the Subscriber is a corporation, partnership, trust
or estate, the person executing this Agreement on behalf of the
Subscriber has reached the age of 21 and been duly authorized and is
duly qualified to execute and deliver this Agreement and all other
instruments executed and delivered on behalf of such entity; the
Subscriber is duly organized, validly existing, and in good standing in
its jurisdiction of organization and has all the requisite power and
authority to invest in the Shares as provided herein; and an investment
in the Shares, to Subscriber's knowledge, does not result in any
violation of, or conflict with any term of the charter, bylaws,
partnership agreement, trust instrument or other governing document of
the Subscriber or any other instrument to which it is bound or any law
or regulation applicable to it.
(f) Purchase for Own Account. The Shares 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.
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(g) Accredited Investor Status. Subscriber is an "accredited investor"
within the meaning of Regulation D promulgated under the Securities
Act.
(h) 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 Shares, 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.
(i) Legend. It is understood that the certificates evidencing the Shares
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.
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.
(j) No Reliance on Oral Statements. Subscriber, in purchasing the Shares,
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.
(k) Transferee Undertaking. In connection with any disposition of all or
any portion of the Shares permitted under this Agreement, the
Subscriber shall obtain an undertaking from each offeree or purchaser
of the Shares pursuant to which the offeree or purchaser shall
represent and warrant the following:
(i) purchaser understands that the Shares have not been
registered under the Securities Act and that, if in the future
it decides to offer, sell, pledge or otherwise transfer such
Shares, such Shares may be offered, sold, pledged or otherwise
transferred only (A) to a person whom the seller reasonably
believes is a qualified
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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 Shares 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 Shares for its
own account or for the account of a qualified institutional
buyer.
(l) 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.
(m) Investment Letter. Subscriber shall have completed and delivered
an Investment Letter as of the date of the Closing in the form
attached hereto as Exhibit A.
(n) Terms of Preferred Stock. Subscriber has reviewed and understands
the terms of the Company's Series B Convertible Preferred stock as
set forth in the Certificate of Designations attached hereto as
Exhibit D.
4. Indemnification. The Subscriber acknowledges that he or she
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,
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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.
5. 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 Shares acquired
pursuant hereto shall be allowed only in accordance with applicable law.
6. 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.
7. Acceptance of Subscription. Execution of this Agreement by the
Subscriber constitutes an offer by the Subscriber to subscribe for the number of
Shares 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.
8. 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.
(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.
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(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 business day after
deposit with an express overnight courier for deliveries within the U.S., or
(iv) three 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 Holdings Inc., 00000 Xxxxxxx Xxxx, Xxxxx 000,
Xxxxxxx, XX 00000, with a copy to Xxxxx & Associates, P.C., 00 Xxxx 00xx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, XX 00000-0000, Attention: Xxxxxxx Xxxxx, Esq. or, in the
case of the Subscriber, to the address listed in the Company's records, or at
such other address or facsimile number as such other party may designate by
giving 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.
(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
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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 3 ABOVE ARE UNTRUE OR INACCURATE.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Subscriber has executed this Agreement as of
the date first written above.
Restricted Securities Subscribed 6,224 Shares of Series B Convertible
Preferred Stock
------------------------------------
SUBSCRIBER
------------------------------
Xxxxxx Xxxxx
Subscription Accepted and Agreed as of the date first written above by:
VALESC HOLDINGS INC.
By:___________________________________
Name:
Title:
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Exhibit A
INVESTMENT LETTER
Xxxxxx Xxxxx
0000 Xxxxx Xxxx
Xxxxxxx, XX 00000
July 10, 2003
Valesc Holdings Inc.
00000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
Dear Sirs:
The undersigned hereby accepts 6,224 shares of Valesc Holdings Inc.
("Valesc") Series B Convertible Preferred 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.
In connection with the foregoing, the undersigned represents that:
(i) the Shares 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 Shares;
(ii) the Shares 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 Shares 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 Shares 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
Shares 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 Shares be pledged as security for a loan,
9
foreclosure or threatened foreclosure of such a loan, would not be such a change
in the circumstances as to justify sale of the Shares. The undersigned
understands that it is the view of the SEC that if there is an intention, at the
time the Shares are acquired, to resell them to the public after the passing of
some more or less definitive time period, the Shares were not truly acquired for
investment. The undersigned further understands that the foregoing is not
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 Shares have
not been registered under the Securities Act of 1933, as amended, and that none
of the Shares 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 Shares 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 Shares being purchased involve a high degree of risk. It is
the best judgment of the undersigned that the Shares 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 Shares 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 Shares 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
Shares 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
10
Exhibit B
---------
Consent to Transfer
-------------------
In connection with the Shareholders Agreement dated May 21,
2002, as amended (the "Shareholders Agreement"), by and among Valesc Holdings
Inc. (the "Company") and the signatories thereto (together with the Company, the
"Parties"), the Parties hereby consent to the transfer by Xxxxx Xxxxx and Xxxxxx
Xxxxx of all shares of common stock of the Company owned by them as of the date
hereof, notwithstanding any provision to the contrary in the Shareholders
Agreement.
Dated: July 10, 2003
VALESC HOLDINGS INC.
By: _________________________________
Name:
Title:
-------------------------------------
Xxxxx Xxxxx
-------------------------------------
Xxxxxx Xxxxx
-------------------------------------
Xxxxxx Xxxxx
-------------------------------------
Xxxxxx Xxxxx
-------------------------------------
Xxxxxxx Xxxxxx
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Exhibit C
---------
Consent to Transfer
-------------------
In connection with the Shareholders Agreement dated September
18, 2002 (the "Shareholders Agreement"), by and among Valesc Holdings Inc. (the
"Company") and the signatories thereto (together with the Company, the
"Parties"), the Parties hereby consent to the transfer by Xxxxx Xxxxx and Xxxxxx
Xxxxx of all shares of common stock of the Company owned by them as of the date
hereof, notwithstanding any provision to the contrary in the Shareholders
Agreement.
Dated: July 10, 2003
VALESC HOLDINGS INC.
By: _________________________________
Name:
Title:
-------------------------------------
Xxxxx Xxxxx
-------------------------------------
Xxxxxx Xxxxx
-------------------------------------
Xxxxxx and Xxxxx Xxxxxxx
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Exhibit D
---------
Certificate of Designations
---------------------------
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