EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
This Subscription Agreement is made by and between Avenue Group, Inc.
(the "Seller" or the "Company") and Xxxxx Xxxxxxxxxxx Trust, located at 000 Xxxx
Xxxxxx, Xxxxx 000 Xxxxxxxx, Xxx Xxxx, 00000 (the "Purchaser"), as of this ___
day of April, 2003 (the "Execution Date") who is subscribing hereby to purchase
two convertible promissory notes from the Seller, in the original principal
amount of Three Hundred Thousand Dollars ($300,000.00) (the "Three Hundred
Thousand Dollar Note") and One Million Dollars ($1,000,000.00) (the "One Million
Dollar Note"), respectively (collectively, the "Notes"), payable as follows: (i)
the Three Hundred Thousand Dollar Note shall be payable as of the date hereof
(the "Initial Payment"), and (ii) the One Million Dollar Note shall be payable
within thirty (30) days of the date hereof (the "Final Payment") (the Initial
Payment and Final Payment shall be collectively referred to herein as the
"Purchase Price").
Purchaser acknowledges and understands that the sale of the Notes and
the common stock which may be issued upon the conversion thereof (collectively,
the "Securities") is not covered by an effective Registration Statement pursuant
to the United States Securities Act of 1933, as amended (the "Act"). The
Securities have been offered and sold by the Company in reliance upon an
exemption from the registration requirements of the Act pursuant to Section 4920
thereof. Accordingly, the reoffer and resale of the Notes by the undersigned
will be restricted pursuant to the Act.
In consideration of the Seller's agreement to sell the Notes as
provided for herein, the Purchaser agrees and represents as follows:
A. SUBSCRIPTION
The Purchaser hereby subscribes to purchase the Notes for the Purchase Price
(the "Subscription"). Payment of the Purchase Price shall be as follows: (i)
simultaneously with the execution of this Subscription Agreement, the Purchaser
is paying and delivering to the Seller the Initial Payment as payment for the
Three Hundred Thousand Dollar Note and (ii) Thirty (30) days from the date
hereof, Purchaser shall pay and deliver to the Seller the Final Payment as
payment for the One Million Dollar Note. The Initial Payment and the Final
Payment shall be payable by check or wire transfer (the "Payment"). Upon
delivery of the executed Subscription Agreement to the Seller, the Purchaser's
commitment to pay the entire Purchase Price is irrevocable and cannot be
withdrawn. In connection with the foregoing, Purchaser understands that until
and unless the entire Purchase Price has been paid, Purchaser may not elect to
convert into common stock of the Company all or any portion of the Three Hundred
Thousand Dollar Note. Notwithstanding the foregoing, the determination to accept
or reject this Subscription shall be in the sole discretion of the Seller and
without any input from any Purchaser or any representative, agent or advisor of
the Purchaser.
B. REPRESENTATIONS AND WARRANTIES
1. The Purchaser understands that the Securities are being offered and
sold by the Seller under an exemption from registration provided for under
section 4(2) of the Act, that this Subscription was unsolicited, and except for
the Exhibits hereto and as set forth in subsection (b) below, no other offering
literature or prospectus have been provided, that this transaction has not been
scrutinized by the SEC or by and any administrative agency charged with
administration of the securities laws of any state (except some states where the
transaction might be registered). As a material inducement to the Seller in
connection with its consideration as to whether to enter into this Subscription
Agreement, the Purchaser hereby represents and warrants to, and agrees with the
Seller as follows:
(a) The Securities are being purchased for the Purchaser's own
account, for investment purposes only, and not for the account of any other
person, and not with a view to reoffer, distribute, assign, or resell to others
or to fractionalization in whole or in part and that the offering and sale of
the Securities is intended to be exempt from registration under the Act. In
furtherance thereof, the Purchaser represents, warrants, and agrees as follows:
(i) no other person has or will have a direct or indirect beneficial interest in
such Securities and the Purchaser will not sell, hypothecate, or otherwise
transfer the Securities except in accordance with the Act and applicable state
securities laws or unless, in the opinion of counsel for the Seller, an
exemption from the registration requirements of the Act and such laws is
available; (ii) the Company is under no obligation to register the Securities on
behalf of the Purchaser or to assist the Purchaser in complying with any
exemption from registration; (iii) the Purchaser's Subscription is not as a
result of any general solicitation or public advertisement by the Company; and
(iv) Purchaser is not an "affiliate" of the Company as such term is defined
under Regulation 501(b) of the Act and accordingly, does not directly or
indirectly through one or more intermediaries, control or is controlled by, or
is under common control with the Company.
(b) The Purchaser has been furnished with, acknowledges receipt of
and has carefully read the Company's Confidential Offering Memorandum dated
November 22, 2002 (the "Offering Memorandum") which an affiliate of the
Purchaser participated in and the following documents, which the Company has
filed with the SEC:
(i) Form 10-KSB Report for the Year Ended December 31, 2002
(the "Form 10-KSB Report");
(ii) Form 8-K/A Report filed March 14, 2002;
(iii) Form 8-K Report filed January 18, 2002;
(iv) Form 8-K Report filed February 12, 2002;
(v) Form 8-K Report filed February 25, 2002;
(vi) Form 10-QSB Report for the Quarter Ended March 31, 2002;
(vii) Form 8-K Report filed May 2, 2002;
(viii) Form 10-QSB Report for the Quarter Ended June 30, 2002;
(ix) Form 8-K Report filed October 17, 2002;
(x) Form 8-K Report filed November 13, 2002;
(xi) Form 10-QSB Report for the Quarter Ended September 30,
2002;
(xii) Form 8-K Report filed November 25, 2002; and
(xiii) Form 8-K Report filed December 20,2002.
Items (i) through (xiii) are collectively referred to as the "Disclosure
Documents."
(c) In evaluating the suitability of an investment in the Company,
the Purchaser has not relied upon any representations or other information
(whether oral or written) from the Company or any of its agents other than as
set forth in the Disclosure Documents and no oral or written representations
have been made or oral or written information furnished to the Purchaser or his
advisors, if any, in connection with the offering of the Securities which were
in any way inconsistent with the Disclosure Documents or this Subscription
Agreement.
(d) The Purchaser recognizes the Company (i) has only been
organized since 1999 and that it has little financial or operating history, (ii)
has never been profitable and does not expect to be profitable in the
foreseeable future, (iii) has extremely limited financial resources and will be
dependant on proceeds from the sale of the Securities and other financings for
its working capital for the foreseeable future, and (iv) that investment in the
Company involves substantial risks.
(e) The Purchaser has carefully considered and has, to the extent
the Purchaser believes such discussion necessary, discussed with the Purchaser's
professional legal, tax and financial advisers the suitability of an investment
in the Company for the Purchaser's particular tax and financial situation and
the Purchaser has determined that the Notes are a suitable investment for the
Purchaser.
(f) All information which the Purchaser has provided to the Seller
concerning the Purchaser and the Purchaser's financial position set forth in the
Investor's Questionnaire, attached hereto as Appendix "1" is correct and
complete as the date set forth therein, and if there should be any change in
such information prior to the Purchaser's acceptance as a security holder of the
Company the Purchaser will immediately provide such information to the Seller
and will promptly send confirmation of such information to the Seller.
(g) If this Subscription Agreement is executed and delivered on
behalf of a partnership, corporation, trust, or estate, (i) the person executing
this Subscription Agreement on behalf of the Purchaser has been duly authorized
and is duly qualified (A) to execute and deliver this Subscription Agreement and
all other instruments executed and delivered on behalf of such partnership,
corporation, trust, or estate in connection with the purchase of the Securities
and (B) to purchase and hold the Securities, and (ii) the signature of the
person executing this Subscription Agreement on behalf of the Purchaser is
binding upon such partnership, corporation, trust, or estate, and (iii) such
entity has not been formed for the specific purpose of acquiring the Securities.
(h) The Purchaser has had the opportunity to consult with advisors,
and recognizes that the Seller' counsel, accountants and other advisors have not
represented and do not represent the Purchaser's interest in an investment in
the Company.
(i) The Purchaser acknowledges and agrees that it is purchasing the
Securities from the Seller without the involvement of the Company and that,
except for the information contained in the Disclosure Documents has not
received any information concerning the Company.
2. 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 Seller and shall survive thereafter. If such
representations and warranties shall not be true and accurate in any respect,
the Purchaser will, prior to such acceptance, give written notice of such fact
to the Seller specifying which representations and warranties are not true and
accurate and the reasons therefore.
3. The Purchaser shall indemnify and hold harmless the Company and its
officers, employees, registered representatives, directors, or control persons
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 Purchaser to the Seller concerning himself or his
financial position in connection with the offering or sale of the Securities
which is not remedied by timely notice to the Company as provided above, against
losses, liabilities and expenses for which the Company or any of its officers,
employees, registered representatives, directors, or control persons of any such
entity have not otherwise been reimbursed (including attorneys' fees, judgments,
fines and amounts paid in settlement) as actually and reasonably incurred by
such person or entity in connection with such action, suit, or proceeding.
4. Representations of the Seller
The Seller hereby represents and warrants to, and agree with the
Purchaser as follows:
(a) The Seller has full power authority to enter into this
Agreement and to perform its obligations hereunder. This Agreement constitutes a
valid and legally binding obligation of the Seller, enforceable in accordance
with its terms and conditions except to the extent the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting the enforcement of creditors' rights or by general equitable
principles.
(b) The Seller is the legal and beneficial owner of the
Securities and upon consummation of the transactions contemplated hereby shall
deliver good title to the Securities to the Purchaser free and clear of ay liens
or encumbrances, save and except any restrictive legends required by the state
and federal securities laws.
(c) The Seller represents and warrants to the Purchaser that
it does not possess any material non-public information regarding the Company,
except as set forth in the Disclosure Documents which have been delivered to the
Purchaser.
C. INVESTOR INFORMATION
The Seller will only accept this subscription from the Purchaser if the
Purchaser meets certain suitability standards as an "accredited investor" as
such term is defined under Rule 501 (a) of the Act. Therefore, the Seller needs
to have you complete, sign and return with this Subscription Agreement and the
Investor's Questionnaire attached hereto and made a part hereof as Appendix "1".
D. UNDERSTANDINGS
1. The Purchaser understands, acknowledges and agrees with the Seller
as follows:
(a) This subscription may be rejected, in whole or in part, by
the Seller in its sole discretion.
(b) This subscription is and shall be irrevocable, except that
the Purchaser shall have no obligations hereunder in the event that this
subscription is rejected for any reason.
(c) No federal or state agency has made any finding or
determination as to the fairness of this offering for investment, nor any
recommendation or endorsement of the Securities.
(d) Currently, there is only a limited public market for the
Company's common stock and there is no certainty that a more active market will
ever develop. There can be no assurance that the Purchaser will be able to sell
or dispose of the Securities. Moreover, no assignment, sale, transfer, exchange
or other disposition of the Securities can be made other than in accordance with
all applicable securities laws. It is
understood that in order not to jeopardize his exempt status of this Sale under
the Act, the transferee may at a minimum be required to fulfill the investor
suitability requirements established in the Questionnaire.
(e) There can be no assurance as to the federal or state tax
results of an investment in the Securities.
(f) Any information which the Purchaser has received
concerning the Company which is not contained in the Disclosure Documents and is
not otherwise available to the public shall be deemed to be confidential and
nonpublic, and all such information shall be kept in confidence by the Purchaser
and shall neither be used by the Purchaser to the Purchaser's personal benefit
(other than in connection with his subscription for the Securities) nor
disclosed to any third party for any reason; provided, 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 these provisions); 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 they may have with the Company).
(g) The Purchaser has such knowledge and experience in
financial and business matters such that the Purchaser is capable of evaluating
the merits and risks of investment in the Company and of making an informed
investment decision.
(h) The Purchaser has had prior personal or business
relationships with the Company or its officers or directors or by reason of the
Purchaser's business or financial experience and has the capacity to protect the
Purchaser's own interest in connection with this transaction.
2. The representations, warranties, understandings, acknowledgments and
agreements of Purchaser in this Agreement and in the Investor's Questionnaire
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.
E. MISCELLANEOUS
1. All pronouns and any variations thereof used herein shall be deemed
to refer to the masculine, feminine, singular, or plural as the identity of the
person or persons may require.
2. Neither this Subscription Agreement nor any provisions hereof shall
be waived, modified, changed, discharged, terminated, revoked, or canceled
except by an instrument in writing signed by the party against whom any change,
discharge, or termination is sought.
3. Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed to the other
party at the address of such party set forth in the Investor's Questionnaire, as
amended from time to time, or, in the case of the Purchaser, at the address
provided in this Subscription Agreement, or to such other address furnished by
notice given in accordance with this Article E.
4. Failure of the Seller to exercise any right or remedy under this
Subscription Agreement or any other agreement between the Seller and the
Purchaser, or otherwise, or delay by the Seller in exercising such right or
remedy, will not operate as a waiver thereof. No waiver by the Seller will be
effective unless and until it is in writing and signed by the Seller.
5. This Subscription Agreement shall be enforced, governed and
construed in all respects in accordance 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 and shall be binding upon the Purchaser,
the Purchaser's heirs, estate,
legal representatives, successors and assigns and shall inure to the benefit of
the Seller and their successors and assigns. The parties hereto further agree to
submit any dispute with respect to this Subscription Agreement or the
Purchaser's purchase of the Securities to the State Courts of California located
in Los Angeles County who shall have exclusive jurisdiction over such matters.
6. In the event that any provision of this Subscription 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.
7. This Subscription Agreement along with the Appendix and Exhibits
hereto constitutes the entire agreement among the parties hereto with respect to
the subject matter hereof and supersedes any and all prior or contemporaneous
representations, warranties, agreements and understandings in connection
therewith. Except as otherwise provided in this Section E. 7, this Subscription
Agreement may be amended only by a writing executed by all parties hereto. No
party shall be liable or bound to the other in any manner by any warranties,
representations or covenant except as specifically set forth herein.
8 Title to the Notes shall be taken as follows (circle one):
(a) Husband and Wife, as Community Property;
(b) Joint Tenants;
(c) Tenants in Common;
(d) Separate Property;
(e) Other (e.g., corporation, partnership, custodian trustee,
etc.):
________________________________________________
9. 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 hereto. Nothing in this Agreement, express or implied, is intended to
confer upon any party, other than the parties hereto, and their respective
successors and assigns, any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided herein.
10. 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 instrument.
11. The titles of the paragraphs and subparagraphs of this Agreement
are for convenience and are not to be considered in construing this Agreement.
12. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or if
deposited the United States Post Office, be registered or certified mail, or via
facsimile with confirmation sent to the Seller at the address and facsimile
number shown below and to the Purchaser at its address or facsimile number
hereinafter shown below its signature or at such other address as such party may
designate by ten (10) days advance written notice to the other party.
SELLER
Avenue Group, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx Xxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx
PURCHASER (at the address set forth above)
13. The warranties and representations of the Seller contained in or
made pursuant to this Agreement shall survive the executions and delivery of
this Agreement and the Closing hereunder.
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
This page constitutes the Signature Page for the Subscription
Agreement. The Purchaser represents to you that (a) the information contained
herein is complete and accurate on the date hereof and may be relied upon by you
and (b) the Purchaser will notify you immediately of any change in any of such
information occurring prior to the acceptance of the subscription and will
promptly send you written confirmation of such change. The Purchaser hereby
certifies that he has read and understands this Subscription Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Subscription
Agreement this _15__ day of APRIL, 2003.
SELLER
/s/ Xxxxxxxx Herzog____________
Avenue Group, Inc.
By: Xxxxxxxx Xxxxxx
Its: Executive Vice President
PURCHASER
/s/ Jeshayahu Boymelgreen
(Signature)
By: Jeshayahu Boymelgreen
Its: Trustee
(Title of Authorized Signatory if
Purchaser is a corporation, partnership
or other entity)
137177336
-----------------------------------------
Tax Identification Number or
Social Security Number
`
Address of Purchaser:
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxx Xxxx, 00000
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS
THE SECURITIES ARE REGISTERED UNDER THE ACT OR AN EXEMPTION THERE FROM IS
AVAILABLE.
