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EXHIBIT 4.2
CONFIDENTIAL CONFIDENTIAL
SERIES "A" PREFERRED STOCK AND WARRANT
SUBSCRIPTION AGREEMENT
1ST NET TECHNOLOGIES, INC.
CONVERTIBLE, PARTICIPATING, NON-VOTING, CUMULATIVE
SERIES "A" PREFERRED STOCK
AND COMMON STOCK PURCHASE WARRANTS
200,000 UNITS
$ 5.00 PER UNIT
(MINIMUM SUBSCRIPTION OF 1,000 UNITS )
1st Net Technologies, Inc.
00000 Xxxx Xxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: President
This Subscription Agreement (this "Agreement") is made by and among 1st
Net Technologies, Inc., a Colorado corporation (the "Company"), and the
undersigned prospective purchaser who is subscribing hereby for the Company's
units (the "Units"), each consisting of two shares of Series A Preferred Stock
and one Common Stock Purchase Warrant, pursuant to that certain Confidential
Private Placement Memorandum (the "Memorandum") of the Company dated September
30, 1998 (together with all exhibits, supplements and amendments thereto
collectively, the "Memorandum"), distributed to a limited number of selected
persons in connection with the offering (the "Offering") of such Units.
In consideration of the Company's agreement to sell the Units to the
undersigned and to admit the undersigned as a shareholder of the Company (a
"Shareholder") upon the terms and conditions set forth herein and in the
Memorandum and to cause the Units to be issued to the undersigned upon the terms
and conditions summarized in the Memorandum, the undersigned agrees and
represents as follows:
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A. SUBSCRIPTION
1. The undersigned hereby subscribes for and agrees to purchase the
number of Units indicated on the signature page hereto at a purchase price of
$5.00 per Unit. Simultaneously with the execution of this Agreement, the
undersigned is paying the amount set forth on the signature page below (the
"Payment") in full payment for the Units subscribed for hereby, in the form of a
cashier's check personal checks, business checks, or money order payable to "1st
Net Technologies, Inc."
2. The undersigned understands that the Payment will be held by the
Company until the subscription is accepted or rejected and, if rejected, the
Payment will not earn interest from the date of receipt until the date of its
return to the prospective investor. The Payment (or, in the case of rejection of
a portion of the undersigned's subscription, the part of the Payment relating to
such rejected portion) will be returned promptly, without interest, on the basis
described in the Memorandum, if the undersigned's subscription is rejected in
whole or in part. Any interest earned on the Payment will be paid to the Company
to the extent the undersigned's subscription is accepted by the Company. The
Payment will be transferred to the Company's bank account on the date on which
the undersigned becomes a Shareholder.
3. The undersigned hereby acknowledges receipt of a copy of the
Memorandum and accepts and agrees to be bound by the Memorandum and this
Agreement upon the acceptance by the Company of the undersigned's subscription
for Units.
B. PURCHASER'S REPRESENTATIONS AND WARRANTIES
The undersigned hereby represents and warrants to, and agrees with, the
Company as follows:
1. The Units are being purchased for his own account not for the
account of any other person, and not with a view to distribution, assignment or
resale to others, or to fractionalization in whole or in part. No other person
has or will have a direct or indirect beneficial interest in the Units. The
undersigned will not sell, hypothecate or otherwise transfer the shares or
warrants comprising the Units unless (a) the Units are registered under the
Securities Act of 1933, as amended (the "Act"), and any applicable state
securities law, or (b) in the opinion of counsel, with which counsel to the
Company agrees, an exemption from the registration requirements of the Act and
such state laws is available.
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2. The undersigned has been furnished with and has carefully read
the Memorandum, and is familiar with and understands the terms of the Offering.
In evaluating the suitability of an investment in the Company, the undersigned
has not relied upon any representations or other information (whether oral or
written) from the Company or any other person or entity whatsoever other than as
set forth in the Memorandum. With respect to tax and other economic
considerations involved in this investment, the undersigned is not relying on
the Company. The undersigned has carefully considered and has, to the extent the
undersigned believes such discussion necessary, discussed with the undersigned's
professional legal, tax, accounting and financial advisors the suitability of an
investment in the Company for the undersigned's particular tax and financial
situation and has determined that the Units being subscribed for by the
undersigned are a suitable investment for the undersigned.
3. The Company has made available to the undersigned all documents
and information that the undersigned has requested relating to an investment in
the Company.
4. The undersigned has been fully informed to its complete
satisfaction concerning the organizational aspects, business, operations,
finances and all other matters the undersigned considered significant for the
purpose of making an investment decision with respect to the Company. The
undersigned recognizes that investment in the Company involves substantial
risks, including loss of the entire amount of such investment, and has taken
into account and understands all of the risk factors related to the purchase of
the Units including, but not limited to, those set forth under the caption "Risk
Factors" in the Memorandum.
5. If this Agreement is executed and delivered on behalf of a
partnership, corporation, trust or estate or retirement plan: (i) such
partnership, corporation, trust or estate or retirement plan has been duly
authorized and is duly qualified (a) to executive and deliver this Agreement and
all other instruments executed and delivered on behalf of such partnership,
corporation, trust or estate or retirement plan or by use of a power of attorney
in connection with the purchase of the Units, (b) to delegate authority pursuant
to a power of attorney, and (c) to purchase and hold such Units; (ii) the
signature of the party signing on behalf of such partnership, corporation, trust
or estate or retirement plan has been duly authorized and is binding upon such
partnership, corporation, trust or estate or retirement plan; and (iii) such
partnership, corporation or trust has not been formed for the specific purpose
of acquiring the Units, unless each beneficial owner of such entity is an
accredited investor ("Accredited Investor") within the meaning of Rule 501(a) of
Regulation D promulgated under the Act ("Regulation D") or is a "qualified
person" ("Qualified Person") as such term is defined under California
Corporations Code Section 25102(n)(2)(E) ("25102(n)") and has submitted
information substantiating such qualification and residency in the State of
California.
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6. The undersigned is either an Accredited Investor or a Qualified
Person resident in the State of California who, either alone or with his
purchaser representative, has such knowledge and experience in financial or
business matters that he is sufficiently capable of evaluating the merits and
risks of this proposed investment. If a Qualified Person, (i) the investor's
subscription in the Units hereby does not exceed the investor's net worth (i.e.,
total assets in excess of total liabilities, exclusive of his or her home, home
furnishings and automobiles) either alone or together with his or her spouse and
(ii) the undersigned's net worth, together with his or her spouse, is at least
(a) $500,000 or (b) $250,000 and annual income in the preceding tax year of at
least $100,000 (and reasonably anticipated similar income in the present year.
The undersigned's net worth or annual income is such that the loss of the
undersigned's entire investment, or its unavailability, will not result in
serious harm or detriment to the undersigned.
7. The undersigned shall indemnify and hold harmless the Company
and any officer, director or control person of any such entity who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of or arising from any actual or alleged
misrepresentation or misstatement of facts or omission to represent or state
facts made by the undersigned to the Company concerning the undersigned or the
undersigned's financial position in connection with the Offering or sale of any
of the Units including, without limitation, any such misrepresentation,
misstatement or omission contained in the Questionnaire submitted by the
undersigned, against losses, liabilities and expenses for which the Company, or
any officer, director or control person of any such entity, has not otherwise
been reimbursed (including attorneys' fees, judgments, fines and amounts paid in
settlement) actually and reasonably incurred by such person or entity in
connection with such action, suit or proceeding.
C. UNDERSTANDINGS
The undersigned understands, acknowledges and agrees with the Company as
follows:
1. This Subscription may be rejected, in whole or in part, by the
Company in its sole and absolute discretion, at any time, notwithstanding prior
receipt by the undersigned of notice of acceptance of the undersigned's
Subscription.
2. This Subscription is and shall be irrevocable, except that the
undersigned shall have no obligations hereunder in the event that this
Subscription is rejected in full or part for any reason.
3. No Federal or state agency has made any finding or determination
as to the accuracy or adequacy of the Memorandum or as to the fairness of the
terms of this Offering for investment, nor any recommendation or endorsement of
the Units.
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4. The offer and sale of the Units is intended to be exempt from
registration under the Act by virtue of section 4(2) of the Act and the
provisions of Regulation D. Except as set forth in Section D below, the Company
is under no obligation to register the Units on behalf of the undersigned or to
assist the undersigned in complying with any exemption from registration.
5. There is no public or other market for the Units or the Common
Stock of the Company and no public or other market is expected to develop in the
foreseeable future. There can be no assurance that the undersigned will be able
to sell or dispose of the shares of Series A Preferred Stock or the Warrants
subscribed for hereby or the Common Stock into which such shares and warrants
may be converted. In order not to jeopardize the Offering's exempt status under
section 4(2) of the Act and Regulation D, the transferee will be required to
fulfill the investor suitability requirements thereunder.
6. All assumptions, projections, estimates and forecasts set forth
in the Memorandum have been included therein for purposes of illustration only,
and no assurance is given that actual results will correspond with the results
contemplated by the various assumptions set forth therein.
7. The undersigned acknowledges that the information contained in
the Memorandum is confidential and non-public and agrees that all such
information shall be kept in confidence by the undersigned and neither used by
the undersigned to the undersigned's personal benefit (other than in connection
with this Subscription) nor disclosed to any third party for any reason;
provided, however, that this obligation shall not apply to any such information
which (i) is part of the public knowledge or literature and readily accessible
at the date hereof; (ii) becomes part of the public knowledge or literature and
readily accessible by publication (except as a result of a breach of this
provision); or (iii) is received from third parties (except third parties who
disclose such information in violation of any confidentiality agreements
including, without limitation, any Subscription Agreement that they may have
entered into with the Company).
8. The Units are being issued in reliance upon the truth and
accuracy of the representations made herein and the information contained in the
Questionnaire.
9. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR
OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED. THE UNITS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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10. THE UNITS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
11. FOR CALIFORNIA RESIDENTS ONLY, IT IS UNLAWFUL TO CONSUMMATE A
SALE OR TRANSFER OF THE UNITS, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES.
12. FOR FLORIDA RESIDENTS ONLY, THE UNITS HAVE NOT BEEN REGISTERED
UNDER THE FLORIDA SECURITIES ACT AND WILL BE OFFERED AND SOLD PURSUANT TO AN
EXEMPTION UNDER SECTION 517.061 OF SUCH ACT. ALL FLORIDA RESIDENTS SHALL HAVE
THE PRIVILEGE OF VOIDING THE PURCHASE OF ANY UNITS WITHIN THREE DAYS AFTER THE
FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT
OF THE ISSUER OR AN ESCROW AGENT, OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF
THAT ESCROW AGENT, OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE
IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER.
D. MISCELLANEOUS
1. Capitalized terms used in this Agreement, if not otherwise
defined herein, shall have the respective meanings attributed to such terms in
the Memorandum. All pronouns and any variations thereof used herein shall be
deemed to refer to the masculine, feminine, impersonal, singular or plural as
the identity of the person or persons may require.
2. Neither this Agreement nor any provisions hereof shall be
waived, modified, changed, discharged, terminated, revoked or cancelled except
by an instrument in writing signed by the party against whom any change,
discharge or termination is sought.
3. Failure of the Company to exercise any right or remedy under
this Agreement or any other agreement between the company and the undersigned,
or delay by the Company in exercising such right or remedy, will not operate as
a waiver thereof. No waiver by the Company will be effective unless and until it
is in writing and signed by an authorized officer of the Company.
4. This Agreement shall be enforced, governed and construed in all
respects in accordance
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with the laws of the State of California, as such laws are applied by California
courts to agreements entered into and to be performed in California by and
between residents of California, and shall be binding upon the undersigned, the
undersigned's heirs, estate, legal representatives, successors and assigns and
shall inure to the benefit of the Company, its successors and assigns. If any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.
E. EXECUTION OF AGREEMENT BY POWER OF ATTORNEY
THE UNDERSIGNED ACKNOWLEDGES THAT THE UNDERSIGNED HAS SIGNED THIS
AGREEMENT ON THE UNDERSIGNED'S OWN BEHALF, AND NOT BY POWER OF ATTORNEY, UNLESS
SUCH POWER OF ATTORNEY EXPRESSLY PROVIDES FOR THE FURTHER DELEGATION OF SUCH
POWER OF ATTORNEY BY THE HOLDER THEREOF, AND IN SUCH EVENT, THE UNDERSIGNED
REPRESENTS THAT ATTACHED HERETO IS A TRUE AND COMPLETE COPY OF SUCH POWER OF
ATTORNEY.
F. SIGNATURE
The signature page to this Agreement is contained as part of the
applicable Subscription Package, entitled "Prospective Investor Signature Page."
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