Exhibit 4.2
Name: Xxxxxxxxx Venture Capital, L.L.C.
---------------------------------
SUBSCRIPTION AGREEMENT
Affinity International Travel Systems, Inc.
000 Xxxxxx Xxxxxx Xxxxx
Xxxxx 000 X
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Gentlemen:
The undersigned understands that Affinity International Travel Systems, Inc., a
Nevada corporation (the "Company"), is offering for sale up to 1,142,857 shares
of its Common Stock, $0.001 par value per share (the "Common Stock"), at $0.35
per share.
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 an exemption for transactions by an
issuer not involving a public offering and Rule 504 of Regulation D under the
Securities Act, and 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 the offering is being made only to "accredited
investors" (as defined in Rule 501 of Regulation D under the Securities Act).
1. Subscription. Subject to the terms and conditions of this Agreement, the
undersigned hereby irrevocably subscribes for that number of shares of Common
Stock set forth in Appendix A at a price per share of $0.35, 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.
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 at such times and place as the Company shall designate by
notice to the undersigned. 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 $0.35
per share for the Common Stock, less the amount necessary to satisfy all costs
and expenses, including reasonable attorney and professional fees, travel,
lodging and other transportation
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expenses, of the undersigned incurred in connection with this subscription, to
the Company via certified check, personal check, or wire transfer to the account
designated by the Company.
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) Other Representations and Agreements.
(i) Use of Proceeds. The Company agrees that it, or a wholly owned
subsidiary of the Company, shall only use the proceeds received from this
subscription for directly related operating expenses of the Company or any
wholly owned subsidiary of the Company, but in no event shall the proceeds from
this subscription be used for present or future compensation, whether regular or
special, of any officer or director of the Company.
(ii) Right of First Refusal - Future Financing. For eighteen (18)
months from and after the date hereof, in the event that the Company desires to
engage in any private placement of securities or other financing efforts
utilizing securities of the Company, the Company shall first offer to the
undersigned the ability to participate in all or part of such private placement
or financing. The undersigned shall accept or reject the offer within five
business (5) days of receipt of the offer. Such response shall be made in
writing via certified mail, return receipt requested, or via overnight mail. In
the event that the undersigned agrees to provide such future financing, the
undersigned shall be required to provide such financing at a discounted
commission rate of five percent (5%).
(iii) Registration Rights. The undersigned shall be entitled to
unlimited "piggyback" registration rights in connection with all registrations
of securities by the Company under the Securities Act of 1933 or in connection
with any demand registration of any shareholder of the Company (except for
registrations on Form S-8 or Form S-4). The Company will bear all registration
expenses (exclusive of underwriting discounts and commissions) of all piggyback
registrations by the undersigned. The undersigned shall also have the right to
participate pro-rata in any registered offering by the Company.
(iv) Price Stability. From and after the date hereof, in the event
that the Company in any non-public offering sells any common stock at a price
per share that is less than that which is paid by the undersigned herein, then
for no additional consideration, the Company shall immediately transfer to the
undersigned that number of unrestricted shares of common stock of the Company
equal to the difference between (1) the number of shares which would have been
subscribed to at the lesser price per share of such subsequently sold securities
and (2) the number of the shares subscribed to herein.
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(v) Co-Sale Rights. The Company shall, and shall cause its officers
and directors (collectively with the Company the "Shareholders") to, grant to
the undersigned a right of co-sale (on a pro-rata basis) such that upon notice
to the undersigned of any non-public sale or disposition of shares of the
Company by such Shareholders and/or the Company, the undersigned, upon written
notice to the Company and/or the selling Shareholders, shall be entitled to
participate, pro-rata as determined by each party's percentage ownership in the
Company, in such sale of shares of the Company on the same terms and conditions
as the Company and/or the selling Shareholders.
In the event the Company or a Shareholder sells any shares in
contravention of the co-sale rights of the undersigned under this Agreement (a
"Prohibited Transfer"), the undersigned, in addition to such other remedies as
may be available at law, in equity or hereunder, shall have the "put" option
provided below, and the Company and the Shareholders shall be bound by the
applicable provisions of such option.
In the event of a Prohibited Transfer, the undersigned shall have
the right to sell to the Company the number of shares equal to the number of
shares the undersigned would have been entitled to transfer to the purchaser
hereunder had the Prohibited Transfer been effected pursuant to and in
compliance with the terms hereof. Such sale shall be made on the following terms
and conditions:
(1) The price per share at which the shares are to be sold to
the Company shall be equal to the price per share paid by the purchaser to the
Shareholder or the Company in the Prohibited Transfer. The Company shall also
reimburse the undersigned for any and all fees and expenses, including legal
fees and expense, incurred pursuant to the exercise or the attempted exercise of
the undersigned's rights hereunder.
(2) Within ninety (90) days after the later of the dates on
which the undersigned either (A) received notice of the Prohibited Transfer or
(B) otherwise became aware of the Prohibited Transfer, the undersigned shall, if
exercising the option created hereby, deliver to the Company the certificate or
certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
(3) The Company shall, upon receipt of the certificate or
certificates for the shares to be sold by the undersigned pursuant to this
Subsection, pay the aggregate purchase price therefore and the amount of
reimbursable fees and expense in cash or by other means acceptable to the
undersigned.
(v) Marketability. 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 and Rule
15c-2(11) promulgated under the Securities Exchange Act of 1934, 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.
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(vi) Stock Splits. In order to induce the undersigned to enter into
this subscription agreement and to facilitate the closing of the transaction
contemplated hereby, the Company represents and warrants to the undersigned that
from and after the date hereof, the Company will not engage in any manner of
reverse split.
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 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 his 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.
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(g) Investment Intent. The undersigned is acquiring the Common Stock
solely for his own beneficial account, for investment purposes, and not
with a view to, or for immediate resale in connection with, any
distribution of the Common Stock. The undersigned has not offered or sold
any portion of its shares of Common Stock and has no present intention of
dividing his shares of Common Stock with others or of reselling his shares
of 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: (A) 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 (B) 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) Warrant Subscription Agreement. On or prior to the date hereof,
the Company and the undersigned shall have enter into a Warrant
Subscription Agreement on mutually acceptable terms.
8. Obligations Irrevocable. The obligations of the undersigned hereunder
shall be irrevocable, except with the consent of the Company, until 3:00 p.m.
EST, December 4, 1998.
9. 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
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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.
10. 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.
11. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason of this Agreement shall
be assignable by either the Company or the undersigned without the prior written
consent of the other party.
12. 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.
13. 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.
14. 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.
15. 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:
(1) If to the Company, to it at the following address:
000 Xxxxxx Xxxxxx Xxxxx
Xxxxx 000 X
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
FAX: (000) 000-0000
(2) If to the undersigned:
Xxxxxxxxx Venture Capital, L.L.C.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
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with a copy, which shall not constitute notice, to:
Locke, Purnell, Rain, Xxxxxxx
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
FAX: (000) 000-0000
and
Xxxxxx X. Xxxxxxxxx, Xx.
0000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxx 00000
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
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 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.
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IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 2nd day of December, 1998.
Name: Xxxxxxxxx Venture Capital, LLC
/s/ Xxxxxx X. Xxxxxxxxx, Xx.
----------------------------
XXXXXX X. XXXXXXXXX, XX.
Managing Member
Accepted as of
December 2, 1998
AFFINITY INTERNATIONAL
TRAVEL SYSTEMS, INC.
By: /s/ Xxxxxx 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
------------------------------------- ---------------------------
1,142,857 $400,000.00 less the amount necessary to
satisfy all outstanding expenses
incurred in connection with this
subscription
--------------------------------------------------------------------------------
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APPENDIX B
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 2nd day of December, 1998.
XXXXXXXXX VENTURE CAPITAL, LLC
BY: /s/ Xxxxxx X. Xxxxxxxxx, Xx.
----------------------------------------
Xxxxxx X. Xxxxxxxxx, Xx.
Managing Member
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