NAME OF SUBSCRIBER: RMH CONSULTING CORP.
To: URBAN COOL NETWORK, INC.
URBAN COOL NETWORK, INC.
SUBSCRIPTION AGREEMENT AND INVESTMENT REPRESENTATION
SECTION 1
1.1 Subscription. The undersigned consultant (the "Consultant"), intending
to be legally bound, hereby irrevocably subscribes for and agrees to purchase
150,000 shares of common stock, $.01 par value (the "Common Stock"), of Urban
Cool Network, Inc., a Delaware corporation (the "Company"), in consideration of
services to be performed for the Company by the Consultant pursuant to a
consulting agreement between the Consultant and the Company of even date
herewith (the "Consulting Agreement"). Such number of shares of Common Stock
subscribed for hereunder shall be adjusted as hereinafter provided
(collectively, the "Shares").
SECTION 2
2.1 Closing
The closing (the "Closing") of the purchase and sale of the shares of
Common Stock, following the acceptance by the Company of the Consultant's
subscription, as evidenced by the Company's execution of this Subscription
Agreement, shall take place at the offices of Xxxxxxxxx, Xxxxxxx & Xxxxxxx,
P.C., at 000 Xxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000 or such other place as
is mutually agreed to by the Company and the Consultant simultaneously with the
execution of this Agreement.
SECTION 3.
3.1 Investor Representations and Warranties.
The Consultant hereby acknowledges, represents and warrants to, and agrees
with, the Company and its affiliates as follows:
(a) The Consultant is acquiring the Shares for its own account as
principal, not as a nominee or agent, for investment purposes only, and not with
a view to, or for, resale, distribution or fractionalization thereof in whole or
in part and no other person has a direct or indirect beneficial interest in such
Shares. Further, the Consultant does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Shares for which the Consultant is subscribing.
(b) The Consultant has full power and authority to enter into this
Agreement, the execution and delivery of this Agreement have been duly
authorized and this Agreement constitutes a valid and legally binding obligation
of the Consultant.
(c) The Consultant acknowledges its understanding that the offering and
sale of the Shares is intended to be exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act") by virtue of Section
4(2) of the Securities Act and/or the provisions of Regulation D promulgated
thereunder ("Regulation D"). In furtherance thereof, the Consultant represents
and warrants to and agrees with the Company and its affiliates as follows:
(i) The Consultant realizes that the basis for the exemption may not
be present if, notwithstanding such representations, the Consultant has in
mind merely acquiring Shares for a fixed or determinable period in the
future, or for a market rise, or for sale if the market does not rise. The
Consultant does not have any such intention;
(ii) The Consultant has the financial ability to bear the economic
risk of its investment, has adequate means for providing for its current
needs and personal contingencies and has no need for liquidity with
respect to its investment in the Company; and
(iii) The Consultant has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks
of the prospective investment in the Shares. The Consultant also
represents it has not been organized for the purpose of acquiring the
Shares.
(d) The information in the Accredited Investor Questionnaire (the
"Accredited Investor Questionnaire") is accurate and true in all respects and
the Consultant is an "accredited investor," as that term is defined in Rule 501
of Regulation D.
(e) The Consultant:
(i) Has been provided an opportunity for a reasonable period of time
prior to the date hereof to obtain additional information concerning the
Company to the extent the Company possesses such information or can
acquire it without unreasonable effort or expense;
(ii) Has been given the opportunity for a reasonable period of time
prior to the date hereof to ask questions of, and receive answers from,
the Company or its representatives concerning the terms and conditions of
the offering of the Shares and other matters pertaining to this
investment; and
2
(iii) Has determined that the Shares are a suitable investment for the
Consultant and that at this time the Consultant could bear a complete loss
of such investment.
(f) The Consultant is not relying on the Company, or its affiliates with
respect to economic considerations involved in this investment. The Consultant
is capable of evaluating the merits and risks of an investment in the Shares.
(g) The Consultant represents, warrants and agrees that he will not sell
or otherwise transfer the Shares without registration under the Securities Act
or an exemption therefrom and fully understands and agrees that he must bear the
economic risk of its purchase because, among other reasons, the Shares have not
been registered under the Securities Act or under the securities laws of any
state and, therefore, cannot be resold, pledged, assigned or otherwise disposed
of unless they are subsequently registered under the Securities Act and under
the applicable securities laws of such states or an exemption from such
registration is available. In particular, the Consultant is aware that the
Shares are "restricted securities," as such term is defined in Rule 144
promulgated under the Securities Act ("Rule 144"), and they may not be sold
pursuant to Rule 144 unless all of the conditions of Rule 144 are met. The
Consultant also understands that, except as otherwise provided herein and in the
certificates for the Shares, the Company is under no obligation to register the
Shares on its behalf or to assist it in complying with any exemption from
registration under the Securities Act or applicable state securities laws. The
Consultant further understands that sales or transfers of the Shares are further
restricted by state securities laws and the provisions of this Agreement.
(h) No representations or warranties have been made to the Consultant by
the Company, or any officer, employee, agent, affiliate or subsidiary of the
Company, other than the representations of the Company contained herein and in
the Consulting Agreement.
(i) Any information which the Consultant has heretofore furnished to the
Company with respect to its financial position and business experience is
correct and complete as of the date of this Agreement and if there should be any
material change in such information he will immediately furnish such revised or
corrected information to the Company.
(j) The Consultant understands and agrees that the certificates for the
Shares shall bear the following legend until (i) such securities shall have been
registered under the Securities Act and effectively been disposed of in
accordance with a registration statement that has been declared effective; or
(ii) in the opinion of counsel for the Company such securities may be sold
without registration under the Securities Act as well as any applicable "Blue
Sky" or state securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT TO A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME
3
EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii)
PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN
OPINION OF COUNSEL TO THE CORPORATION, OR OTHER COUNSEL REASONABLY
ACCEPTABLE TO THE CORPORATION, THAT THE PROPOSED DISPOSITION IS CONSISTENT
WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY
APPLICABLE "BLUE SKY" OR SIMILAR SECURITIES LAW."
(k) The Consultant understands that an investment in the Shares is a
speculative investment which involves a high degree of risk and the potential
loss of its entire investment.
(l) The Consultant's overall commitment to investments which are not
readily marketable is not disproportionate to the Consultant's net worth, and an
investment in the Shares will not cause such overall commitment to become
excessive.
(m) The foregoing representations, warranties and agreements shall survive
the Closing.
(n) The Consultant represents that neither the Consultant nor any
affiliate of the Consultant within the last 12 months has purchased any
securities pursuant to Section 4(2) under the Act or Regulation D promulgated
thereunder of any company which consummated an initial public offering of its
securities during such period.
(o) The Consultant agrees not to sell the Shares to a member of the NASD
prior to the consummation of an initial public offering of the Company's
securities.
SECTION 4.
4.1 Piggyback Registration.
If at any time commencing on the date hereof and expiring five (5) years
thereafter, the Company proposes to register any of its securities under the
Securities Act (other than in connection with a transaction contemplated by Rule
145(a) promulgated under the Securities Act or pursuant to Form S-8 or successor
forms) it will give written notice by regular mail and by registered or
certified mail, at least thirty (30) days prior to the filing of each such
registration statement, to the Consultant of its intention to do so. Upon the
written request of the Consultant given within ten (10) days after receipt of
any such notice of its desire to include any Common Stock in such proposed
registration statement, the Company shall afford the Consultant the opportunity
to have any such Common Stock registered under such registration statement.
Notwithstanding the provisions of this Section 4.1, the Company shall have
the right at any time after it shall have given written notice pursuant to this
Section 4.1 (irrespective of
4
whether a written request for inclusion of any such securities shall have been
made) to elect not to file any such proposed registration statement, or to
withdraw the same after the filing but prior to the effective date thereof.
4.2 Demand and Mandatory Registration.
(a) The Company agrees to register the Shares in connection with the
registration statement which the Company files in connection with the Company's
initial public offering.
(b) At any time during the five-year period commencing 12 months after the
issuance of the Shares, if the Company is subject to the reporting requirements
of Section 13 or Section 15(g) under the Exchange Act of 1934, as amended (the
"Exchange Act"), the Consultant shall have the right (which right is in addition
to the registration rights under Section 4.1 hereof), exercisable by written
notice to the Company, to have the Company prepare and file with the Securities
and Exchange Commission (the "Commission"), on one occasion, a registration
statement and such other documents, including a prospectus, as may be necessary
in the opinion of both counsel for the Company and counsel for the Underwriter,
if any, and the Consultant, in order to comply with the provisions of the
Securities Act, so as to permit a public offering and sale of its Common Stock
for twenty-four (24) consecutive months by the Consultant.
4.3 Covenants of the Company With Respect to Registration.
In connection with any registration under Sections 4.1 or 4.2 hereof, the
Company covenants and agrees as follows:
(a) The Company shall use its best efforts to cause any registration
statement to be declared effective at the earliest possible time, and shall
furnish the Consultant such number of prospectuses as shall reasonably be
requested.
(b) The Company shall pay all costs (excluding transfer taxes, if any,
fees and expenses of Consultant's counsel, if any, and any underwriting or
selling commissions), fees and expenses in connection with all registration
statements filed pursuant to Sections 4.1 or 4.2 hereof including, without
limitation, the Company's legal and accounting fees, printing expenses and blue
sky fees and expenses.
(c) The Company will take all necessary action which may be required in
qualifying or registering the Common Stock included in the registration
statement for offering and sale under the securities or blue sky laws of such
states as are requested by the Consultant, provided that the Company shall not
be obligated to qualify as a foreign corporation to do business under the laws
of any such jurisdiction.
(d) The Company shall indemnify the Consultant and each person, if any,
who controls the Consultant within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), against any and all loss,
5
claim, damage, expense or liability (including all expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
any of them may become subject under the Securities Act, the Exchange Act or any
other statute, common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained (x) in such
registration statement (as from time to time amended and supplemented), (y) in
any post-effective amendment or amendments or (z) in any application or other
document or written communication (in this Section 4 collectively called an
"application") executed by the Company or based upon written information
furnished by the Company filed in any jurisdiction in order to qualify the
Common Stock under the securities laws thereof or filed with the Securities and
Exchange Commission, any state securities commission or agency, the NASD, NASDAQ
or any securities exchange or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading, unless such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company by the Consultant expressly for use in such registration statement, any
amendment or supplement thereto or any application, as the case may be. If any
action is brought against the Consultant or any controlling person of the
Consultant in respect of which indemnity may be sought against the Company
pursuant to this Section 4, the Consultant or such controlling person shall
within thirty (30) days after the receipt thereby of a summons or complaint
notify the Company in writing of the institution of such action and the Company
shall assume the defense of such action, including the employment and payment of
reasonable fees and expenses of counsel (reasonably satisfactory to the
Consultant or such controlling person) but the failure to give such notice shall
not affect such indemnified person's right to indemnification hereunder except
to the extent that the Company's defense of such action was materially adversely
affected thereby. The Consultant or such controlling person shall have the right
to employ its or their own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of the Consultant or such controlling
person unless (i) the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action, (ii) the
Company shall not have employed counsel to have charge of the defense of such
action or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to the Company (in which case the Company
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the fees and expenses of
not more than one additional firm of attorneys for the Consultant and/or such
controlling person shall be borne by the Company. Except as expressly provided
above, in the event that the Company shall not previously have assumed the
defense of any such action or claim, the Company shall not thereafter be liable
to the Consultant or such controlling person in investigating, preparing or
defending any such action or claim. The Company agrees promptly to notify the
Consultant of the commencement of any litigation or proceedings against the
Company or any of its officers, directors or controlling persons in connection
with the offering and sale of the Common Stock or in connection with such
registration statement.
(e) The Consultant of the Common Stock to be sold pursuant to a
registration statement, and its successors and assigns, shall severally, and not
jointly, indemnify the Company, its officers and directors and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act, against all loss, claim, damage
6
or expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Securities Act, the Exchange Act or otherwise,
arising from written information furnished by or on behalf of the Consultant, or
their successors or assigns, for specific inclusion in such registration
statement.
(f) The Company shall furnish to the Consultant and to each underwriter,
if any, a signed counterpart, addressed to the Consultant or underwriter, if
any, of (i) an opinion of counsel to the Company, dated the effective date of
such registration statement (and, if such registration includes an underwritten
public offering, an opinion dated the date of the closing under the underwriting
agreement), and (ii) a "cold comfort" letter dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, a letter dated the date of the closing under the underwriting
agreement) signed by the independent public auditors who have issued a report on
the Company's financial statements included in such registration statement, in
each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities.
(g) Notwithstanding the foregoing, if the Company commences an initial
public offering of the Common Stock at a price less than $10.00 per share, then
the Company shall issue to the Consultant the number of additional shares of
Common Stock equal to $1,500,000, (ii) divided by the price per share of such
offering, (iii) less the number of shares issued in Section 4(g).
SECTION 5.
5.1 Indemnity. The Consultant agrees to indemnify and hold harmless the
Company, its officers and directors, employees and its affiliates and each other
person, if any, who controls any thereof, against any loss, liability, claim,
damage and expense whatsoever (including, but not limited to, any and all
expenses whatsoever 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 Consultant to comply with any covenant or agreement made by the
Consultant herein or in any other document furnished by the Consultant to any of
the foregoing in connection with this transaction.
5.2 Modification. Neither this Agreement nor any provisions hereof shall
be modified, discharged or terminated except by an instrument in writing signed
by the party against whom any waiver, change, discharge or termination is
sought.
5.3 Notices. Any notice, demand or other communication which any party
hereto may be required, or may elect, to give to anyone interested hereunder
shall be sufficiently given if (a) deposited, postage prepaid, in a United
States mail letter box, by regular mail and registered or certified mail, return
receipt requested, addressed to such address as may be given herein, or (b)
7
delivered personally at such address.
5.4 Counterparts. This Agreement may be executed through the use of
separate signature pages or in any number of counterparts, and each of such
counterparts shall, for all purposes, constitute one agreement binding on all
parties, notwithstanding that all parties are not signatories to the same
counterpart.
5.5 Binding Effect. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and assigns. If the
Consultant is more than one person, the obligation of the Consultant shall be
joint and several and the agreements, representations, warranties and
acknowledgments herein contained shall be deemed to be made by and be binding
upon each such person and its heirs, executors, administrators and successors.
5.6 Entire Agreement. This Agreement and the documents referenced herein
contain the entire agreement of the parties and there are no representations,
covenants or other agreements except as stated or referred to herein and
therein.
5.7 Assignability. This Agreement is assignable by the Consultant only in
accordance with Section 3.1(g).
5.8 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of law principles.
IN WITNESS WHEREOF, the Consultant has executed this Agreement on the day
of , 1999.
RMH CONSULTING CORP.
By: /s/ X. Xxxxxxxxxx
------------------------------------
Name:
Title:
URBAN COOL NETWORK, INC.
By: /s/ Xxxxx X. Xxxxx, III
------------------------------------
Name: Xxxxx X. Xxxxx, III
Title: Chief Executive Officer
