EXHIBIT 10.11
To: XXXXXXX.XXX, INC.
XXXXXXX.XXX, INC.
REGULATION S SUBSCRIPTION AGREEMENT AND INVESTMENT REPRESENTATION
SECTION 1.
1.1 Subscription.
(a) The undersigned, intending to be legally bound, hereby
irrevocably subscribes for and agrees to purchase ____________ Units (hereafter
defined) to be issued by Xxxxxxx.xxx, Inc., a Utah corporation (the "Company")
in an offshore transaction negotiated outside the U.S. and to be consummated and
closed outside the U.S. A "Unit" shall consist of the following:
(1) one share of Common Stock (a "Purchased Share");
(2) one Class A Warrant, as further described in the Class A
Warrant Agreement attached hereto as Exhibit A,
entitling the undersigned to purchase one share of
Common Stock at an exercise price of $0.45 per share,
expiring one year after the date hereof (a "Class A
Warrant"); and
(3) one Class B Warrant, as further described in the Class B
Warrant Agreement attached hereto as Exhibit B,
entitling the undersigned to purchase one share of
Common Stock at an exercise price of $0.75 per share,
expiring three (3) years after the date hereof (a "Class
B Warrant, and together with the Class A Warrant, the
"Warrants").
(b) For purposes of this Subscription Agreement:
(1) "Common Stock" means the common stock of the Company.
(2) "Securities" means the Purchased Shares, the Warrants
and the Warrant Shares.
(3) "Warrant Shares" means the shares of Common Stock
issuable upon due exercise of the Warrants.
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1.2 Purchase of Units.
The undersigned understands and acknowledges that the purchase price
to be remitted to the Company in exchange for the Units shall be ____________
dollars ($______) or $0.20 per Unit. The Company shall deliver the Purchased
Shares and the Warrants to the undersigned promptly after the acceptance of this
Subscription Agreement by the Company.
1.3 Acceptance or Rejection.
(a) The undersigned understands and agrees that the Company reserves
the right to reject this subscription for the Units if, in its reasonable
judgment, it deems such action in the best interest of the Company, at any time
prior to the Closing, notwithstanding prior receipt by the undersigned of notice
of acceptance of the undersigned's subscription.
(b) The undersigned understands and agrees that its subscription for
the Units is irrevocable.
(c) In the event the sale of the Units subscribed for by the
undersigned is not consummated by the Company for any reason (in which event
this Subscription Agreement shall be deemed to be rejected), this Subscription
Agreement and any other agreement entered into between the undersigned and the
Company relating to this subscription shall thereafter have no force or effect
and the Company shall promptly return or cause to be returned to the undersigned
the purchase price remitted to the Company by the undersigned, without interest
thereon or deduction therefrom, in exchange for the Units.
SECTION 2.
2.1 Closing
The closing (the "Closing") of the purchase and sale of the Units,
shall occur simultaneously with the acceptance by the Company of the
undersigned's subscription, as evidenced by the Company's execution of this
Subscription Agreement.
SECTION 3.
3.1 Investor Representations and Warranties.
The undersigned hereby acknowledges, represents and warrants to, and
agrees with, the Company and its affiliates as follows:
(a) The undersigned is acquiring the Securities for his 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 Securities or any portion thereof. Further, the undersigned
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 the Securities for which the undersigned is subscribing
or any part of the Securities.
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(b) The undersigned has full power and authority to enter into this
Agreement, the execution and delivery of this Agreement has been duly
authorized, if applicable, and this Agreement constitutes a valid and legally
binding obligation of the undersigned.
(c) The undersigned is not subscribing for the Securities as a
result of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio, or presented at any seminar or meeting, or any
solicitation of a subscription by person previously not known to the undersigned
in connection with investment securities generally.
(d) The undersigned understands that the Company is under no
obligation to register the Securities under the Securities Act, or to assist the
undersigned in complying with the Securities Act or the securities laws of any
state of the United States or of any foreign jurisdiction.
(e) The undersigned is (i) experienced in making investments of the
kind described in this Agreement and the related documents, (ii) able, by reason
of the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iii) able to afford the entire loss of its
investment in the Securities.
(f) The undersigned acknowledges his understanding that the offering
and sale of the Purchased Shares, Warrants and the issuance of the Warrant
Shares upon due exercise of the Warrants is intended to be exempt from
registration under the Securities Act. In furtherance thereof, in addition to
the other representations and warranties of the undersigned made herein, the
undersigned further represents and warrants to and agrees with the Company and
its affiliates as follows:
(i) The undersigned realizes that the basis for the exemption may
not be present if, notwithstanding such representations, the
undersigned has in mind merely acquiring the Securities for a
fixed or determinable period in the future, or for a market
rise, or for sale if the market does not rise. The undersigned
does not have any such intention;
(ii) The undersigned has the financial ability to bear the economic
risk of his investment, has adequate means for providing for
his current needs and personal contingencies and has no need
for liquidity with respect to his investment in the Company;
and
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(iii) The undersigned 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 Securities. The
undersigned also represents it has not been organized for the
purpose of acquiring the Securities; and
(iv) The undersigned has been provided an opportunity for a
reasonable period of time prior to the date hereof to obtain
additional information concerning the offering of the
Securities, the Company and all other information to the
extent the Company possesses such information or can acquire
it without unreasonable effort or expense.
(v) The undersigned has carefully reviewed all of the Company's
filings under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
(g) The undersigned is not relying on the Company, or its affiliates
or agents with respect to economic considerations involved in this investment.
The undersigned has relied solely on its own advisors.
(h) No representations or warranties have been made to the
undersigned 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 subscribing for Units the undersigned is not relying
upon any representations other than those contained herein.
(ii) Compliance with Local Laws. Any resale of the Securities during
the `distribution compliance period' as defined in Rule 902(f) to Regulation S
shall only be made in compliance with exemptions from registration afforded by
Regulation S. Further, any such sale of the Securities in any jurisdiction
outside of the United States will be made in compliance with the securities laws
of such jurisdiction. The Investor will not offer to sell or sell the Securities
in any jurisdiction unless the Investor obtains all required consents, if any.
(j) Regulation S Exemption. The undersigned understands that the
Securities are being offered and sold in reliance on an exemption from the
registration requirements of United States federal and state securities laws
under Regulation S promulgated under the Securities Act and that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Investor set forth herein
in order to determine the applicability of such exemptions and the suitability
of the Investor to acquire the Securities. In this regard, the undersigned
represents, warrants and agrees that:
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11. The undersigned is not a U.S. Person (as defined
below) and is an affiliate (as defined in Rule
501(b) under the Securities Act) of the Company
and is not acquiring the Securities for the
account or benefit of a U.S. Person. A U.S. Person
means any one of the following:
o any natural person resident in the United States
of America;
o any partnership or corporation organized or
incorporated under the laws of the United States
of America;
o any estate of which any executor or administrator
is a U.S. person;
o any trust of which any trustee is a U.S. person;
o any agency or branch of a foreign entity located
in the United States of America;
o any non-discretionary account or similar account
(other than an estate or trust) held by a dealer
or other fiduciary for the benefit or account of a
U.S. person;
o any discretionary account or similar account
(other than an estate or trust) held by a dealer
or other fiduciary organized, incorporated or (if
an individual) resident in the United States of
America; and
o any partnership or corporation if:
(A) organized or incorporated under the laws of
any foreign jurisdiction; and
(B) formed by a U.S. person principally for the
purpose of investing in securities not registered under
the Securities Act, unless it is organized or
incorporated, and owned, by accredited investors (as
defined in Rule 501(a) under the Securities Act) who are
not natural persons, estates or trusts.
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12. At the time of the origination of contact
concerning this Agreement and the date of the
execution and delivery of this Agreement, the
undersigned was outside of the United States.
13. The undersigned will not, during the period
commencing on the date of issuance of the
Purchased Shares or Warrants and ending on the
first anniversary of such date, or such shorter
period as may be permitted by Regulation S or
other applicable securities law (the "Restricted
Period"), offer, sell, pledge or otherwise
transfer the Purchased Shares or the Warrants in
the United States, or to a U.S. Person for the
account or for the benefit of a U.S. Person, or
otherwise in a manner that is not in compliance
with Regulation S.
14. The undersigned will, after expiration of the
Restricted Period, offer, sell, pledge or
otherwise transfer the Purchased Shares or
Warrants only pursuant to registration under the
Securities Act or an available exemption therefrom
and, in accordance with all applicable state and
foreign securities laws.
15. The undersigned was not in the United States,
engaged in, and prior to the expiration of the
Restricted Period will not engage in, any short
selling of or any hedging transaction with respect
to the Securities, including without limitation,
any put, call or other option transaction, option
writing or equity swap.
16. Neither the undersigned nor or any person acting
on his behalf has engaged, nor will engage, in any
directed selling efforts to a U.S. Person with
respect to the Securities and the Investor and any
person acting on his behalf have complied and will
comply with the "offering restrictions"
requirements of Regulation S under the Securities
Act.
17. The transactions contemplated by this Agreement
have not been pre-arranged with a buyer located in
the United States or with a U.S. Person, and are
not part of a plan or scheme to evade the
registration requirements of the Securities Act.
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18. Neither the undersigned nor any person acting on
his behalf has undertaken or carried out any
activity for the purpose of, or that could
reasonably be expected to have the effect of,
conditioning the market in the United States, its
territories or possessions, for any of the
Securities. The undersigned agrees not to cause
any advertisement of the Securities to be
published in any newspaper or periodical or posted
in any public place and not to issue any circular
relating to the Securities, except such
advertisements that include the statements
required by Regulation S under the Securities Act,
and only offshore and not in the U.S. or its
territories, and only in compliance with any local
applicable securities laws.
19. Each certificate representing the Securities shall
be endorsed with the following legends, in
addition to any other legend required to be placed
thereon by applicable federal or state securities
laws:
(A) "THE SECURITIESARE BEING OFFERED TO INVESTORS
WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE
SECURITIES ACT")) AND WITHOUT REGISTRATION WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER
THE SECURITIES ACT IN RELIANCE UPON REGULATION S
PROMULGATED UNDER THE SECURITIES ACT."
(B) "TRANSFER OF THESE SECURITIES IS PROHIBITED,
EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION
S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR
PURSUANT TO AVAILABLE EXEMPTION FROM REGISTRATION.
HEDGING TRANSACTIONS MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT."
20. The undersigned consents to the Company making a
notation on its records or giving instructions to
any transfer agent of the Company in order to
implement the restrictions on transfer of the
Securities set forth in this Section 2.
(k) The undersigned is an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the Securities
Act by reason of Rule 501(a)(3).
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(l) The undersigned understands that an investment in the Securities
is a speculative investment which involves a high degree of risk and the
potential loss of his entire investment.
(m) The undersigned's overall commitment to investments which are
not readily marketable is not disproportionate to the undersigned's net worth,
and an investment in the Securities will not cause such overall commitment to
become excessive.
(n) The undersigned has received all documents, records, books and
other information pertaining to the undersigned's investment in the Company that
has been requested by the undersigned. The undersigned has reviewed or received
copies of all reports and other documents filed by the Company with the
Securities and Exchange Commission, including without limitation, the Current
Reports on Form 8-K filed by the Company on each of December 17, 2004, December
21, 2004 and December 30, 2004 (the "SEC Documents").
(o) The undersigned represents and warrants to the Company that all
information that the undersigned has provided to the Company, including, without
limitation, the information in the Investor Questionnaire attached hereto or
previously provided to the Company (the "Investor Questionnaire"), is correct
and complete as of the date hereof.
(p) Other than as set forth herein, the undersigned is not relying
upon any other information, representation or warranty by the Company or any
officer, director, stockholder, agent or representative of the Company in
determining to invest in the Securities. The undersigned has consulted, to the
extent deemed appropriate by the undersigned, with the undersigned's own
advisers as to the financial, tax, legal and related matters concerning an
investment in the Securities and on that basis believes that his or its
investment in the Securities is suitable and appropriate for the undersigned.
(q) The undersigned is aware that no federal or state agency has (i)
made any finding or determination as to the fairness of this investment, (ii)
made any recommendation or endorsement of the Securities or the Company, or
(iii) guaranteed or insured any investment in the Securities or any investment
made by the Company.
(p) The undersigned understands that the price of the Securities
offered hereby bear no relation to the assets, book value or net worth of the
Company and were determined arbitrarily by the Company. The undersigned further
understands that there is a substantial risk of further dilution on his or its
investment in the Company.
SECTION 4.
The Company represents and warrants to the undersigned as follows:
4.1 Organization of the Company. The Company is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Utah, and has all requisite power and authority to own, lease and operate its
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properties and to carry on its business as now being conducted. The Company is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a material adverse effect on the business,
operations, properties, prospects or condition (financial or otherwise) of the
Company.
4.2 Authority. (a) The Company has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement and to
issue the Securities; (b) the execution and delivery of this Agreement by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors or
stockholders is required; and (c) this Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
4.3 Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of 50,000,000 shares of Common Stock, of which as
of the date hereof 36,601,254 shares are issued and outstanding. All of such
outstanding shares have been, or upon issuance will be, validly issued and are
fully paid and nonassessable.
4.4 SEC Documents. To the best of Company's knowledge, the Company
has not provided to the undersigned any information that, according to
applicable law, rule or regulation, should have been disclosed publicly prior to
the date hereof by the Company, but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
other federal, state and local laws, rules and regulations applicable to such
SEC Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form and
substance in all material respects with applicable accounting requirements and
the published rules and regulations of the Securities and Exchange Commission
(the "SEC") or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (a) as may be otherwise indicated in such financial statements or the
notes thereto or (b) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position of the Company as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
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4.5 Exemption from Registration; Valid Issuances. The sale and
issuance of the Securities, in accordance with the terms and on the bases of the
representations and warranties of the undersigned set forth herein, may and
shall be properly issued by the Company to the undersigned pursuant to Section
4(2), Regulation D and/or any applicable state law. When issued and paid for as
herein provided, the Securities shall be duly and validly issued, fully paid,
and nonassessable. Neither the sales of the Securities pursuant to, nor the
Company's performance of its obligations under, this Agreement shall (a) result
in the creation or imposition of any liens, charges, claims or other
encumbrances upon the Securities or any of the assets of the Company, or (b)
entitle the other holders of the Common Stock of the Company to preemptive or
other rights to subscribe to or acquire the Common Stock or other securities of
the Company. The Securities shall not subject the undersigned to personal
liability by reason of the ownership thereof.
4.6 No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor any person acting
on its or their behalf (a) has conducted or will conduct any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or general
advertising with respect to any of the Securities, or (b) made any offers or
sales of any security or solicited any offers to buy any security under any
circumstances that would require registration of the Common Stock under the
Securities Act.
4.7 No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the
Securities, do not and will not (a) result in a violation of the Certificate or
By-Laws of the Company or (b) conflict with, or constitute a material default
(or an event that with notice or lapse of time or both would become a material
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture, instrument
or any "lock-up" or similar provision of any underwriting or similar agreement
to which the Company is a party, or (c) result in a violation of any federal,
state, local or foreign law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations)applicable to the
Company or by which any property or asset of the Company is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a material adverse effect on the business, operations, properties,
prospects or condition (financial or otherwise) of the Company) nor is the
Company otherwise in violation of, conflict with or in default under any of the
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foregoing. The business of the Company is not being conducted in violation of
any law, ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do not and will not have a
material adverse effect on the business, operations, properties, prospects or
condition (financial or otherwise) of the Company. The Company is not required
under federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Common Stock in
accordance with the terms hereof (other than any SEC, NASD or state securities
filings that may be required to be made by the Company subsequent to the
Closing, any registration statement that may be filed pursuant hereto, and any
shareholder approval required by the rules applicable to companies whose common
stock trades on the Over The Counter Bulletin Board); provided that, for
purposes of the representation made in this sentence, the Company is assuming
and relying upon the accuracy of the relevant representations and agreements of
the undersigned herein.
4.8 No Undisclosed Liabilities. The Company has no liabilities or
obligations that are material, individually or in the aggregate, and that are
not disclosed in the SEC Documents or otherwise publicly announced, other than
those incurred in the ordinary course of the Company's businesses and which,
individually or in the aggregate, do not or would not have a material adverse
effect on the Company.
4.9 No Undisclosed Events or Circumstances. No event or circumstance
has occurred or exists with respect to the Company or its businesses,
properties, prospects, operations or financial condition, that, under applicable
law, rule or regulation, requires public disclosure or announcement prior to the
date hereof by the Company but which has not been so publicly announced or
disclosed in the SEC Documents.
4.10 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act,
other than the private offering which the Company is conducting in the United
States contemporaneously with this offering.
4.11 Litigation and Other Proceedings. Except as may be set forth in
the SEC Documents, there are no lawsuits or proceedings pending or to the best
knowledge of the Company threatened, against the Company, nor has the Company
received any written or oral notice of any such action, suit, proceeding or
investigation, which would have a material adverse effect on the business,
operations, properties, prospects or condition (financial or otherwise) of the
Company. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, so far as is known by the
Company, requested of any court, arbitrator or governmental agency which would
have a material adverse effect on the business, operations, properties,
prospects or condition (financial or otherwise) of the Company.
4.12 Certain Transactions. Except as set forth in the SEC Documents
filed at least ten days prior to the date hereof and except for arm's length
transactions pursuant to which the Company makes payments in the ordinary course
of business upon terms no less favorable than the Company could obtain from
third parties, none of the officers, directors, or employees of the Company is
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presently a party to any transaction with the Company or any of its subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
4.13 No Misleading or Untrue Communication. The Company, any person
representing the Company, and, to the knowledge of the Company, any other person
selling or offering to sell the Securities, if any, in connection with the
transactions contemplated by this Agreement, have not made, at any time, any
written or oral communication in connection with the offer or sale of the same
which contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
SECTION 5.
5.1 Indemnity. The undersigned agrees to indemnify and hold harmless
the Company, its officers and directors, employees and its affiliates and their
respective successors and assigns 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 undersigned to
comply with any covenant or agreement made by the undersigned herein or in any
other document furnished by the undersigned 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, registered or certified mail, return receipt
requested, addressed to such address as may be given herein, or (b) 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 by facsimile, 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. Signatures may be facsimiles.
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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 undersigned is more than one person, the obligation of the
undersigned 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 his 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 not transferable or assignable
by the undersigned.
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.
5.9 Pronouns. The use herein of the masculine pronouns "him" or
"his" or similar terms shall be deemed to include the feminine and neuter
genders as well and the use herein of the singular pronoun shall be deemed to
include the plural as well.
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IN WITNESS WHEREOF, the undersigned has executed this Agreement on the day
of ________________, 2005.
Amount of Investment:
$____________________
INDIVIDUAL INVESTOR:
_____________________
Name:
PARTNERSHIP, CORPORATION, TRUST,
CUSTODIAL ACCOUNT, OTHER INVESTOR
_____________________
(Print Name of Entity)
By:
------------------
Name:
Title:
Address:
Taxpayer Identification Number:_____________
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ACCEPTANCE OF SUBSCRIPTION
(to be filed out only by the Company)
The Company hereby accepts the above application for subscription for Units on
behalf of the Company.
XXXXXXX.XXX, INC. Dated: ______ ___, 2005
By:
------------------
Name:
Title:
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XXXXXXX.XXX, INC.
INVESTOR QUESTIONNAIRE
A.
General Information
1. Print Full Name of Investor: Individual:
____________________________________
First, Middle, Last
Partnership, Corporation, Trust,
Custodial Account, Other:
____________________________________
Name of Entity
2. Address for Notices: ____________________________________
____________________________________
____________________________________
3. Name of Primary Contact Person: ____________________________________
Title:
4. Telephone Number: ____________________________________
5. E-Mail Address: ____________________________________
6. Facsimile Number: ____________________________________
7. Permanent Address: ____________________________________
(if different from
Address for Notices above)
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8. Authorized Signatory: ____________________________________
Title: ____________________________________
Telephone Number: ____________________________________
Facsimile Number: ____________________________________
9. U.S. Investors Only:
U.S. Taxpayer Identification
or Social Security Number: ____________________________________
B. Accredited Investor Status
The Investor represents and warrants that the Investor is an "accredited
investor" within the meaning of Rule 501 of Regulation D under the Securities
Act of 1933, as amended (the "Securities Act"), and has checked the box or boxes
below which are next to the categories under which the Investor qualifies as an
accredited investor:
FOR INDIVIDUALS:
|_| A natural person with individual net worth (or joint net worth with
spouse) in excess of $1 million. For purposes of this item, "net worth"
means the excess of total assets at fair market value, including home,
home furnishings and automobiles (and including property owned by a
spouse), over total liabilities.
|_| A natural person with individual income (without including any income of
the Investor's spouse) in excess of $200,000, or joint income with spouse
of $300,000, in each of the two most recent years and who reasonably
expects to reach the same income level in the current year.
FOR ENTITIES:
|_| A bank as defined in Section 3(a)(2) of the Securities Act or any savings
and loan association or other institution as defined in Section 3(a)(5)(A)
of the Securities Act, whether acting in its individual or fiduciary
capacity.
|_| An insurance company as defined in Section 2(13) of the Securities Act.
17
|_| A broker-dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934.
|_| An investment company registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"). If an Investor has checked this
box, please contact _______ for additional information that will be
required.
|_| A business development company as defined in Section 2(a)(48) of the
Investment Company Act.
|_| A small business investment company licensed by the Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958.
|_| A private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940. If an Investor has checked this box,
please contact ______ for additional information that will be required.
|_| An organization described in Section 501(c)(3) of the Internal Revenue
Code, a corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the Units,
with total assets in excess of $5 million.
|_| A trust with total assets in excess of $5 million not formed for the
specific purpose of acquiring the Units, whose purchase is directed by a
person with such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an
investment in the Company and the purchase of the Units.
|_| An employee benefit plan within the meaning of ERISA if the decision to
invest in the Units 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 million or, if a
self-directed plan, with investment decisions made solely by persons that
are accredited investors.
|_| A plan established and maintained by a state, its political subdivisions,
or any agency or instrumentality of a state or its political subdivisions,
for the benefit of its employees, if the plan has total assets in excess
of $5 million.
18
|_| An entity, including a grantor trust, in which all of the equity owners
are accredited investors as determined under any of the foregoing
paragraphs (for this purpose, a beneficiary of a trust is not an equity
owner, but the grantor of a grantor trust is an equity owner).
C. Supplemental Data for Entities
1. If the Investor is not a natural person, furnish the following supplemental
data (natural persons may skip this Section C of the Investor Questionnaire):
Legal form of entity (trust, corporation, partnership, etc.):___________________
Jurisdiction of organization: ________________________________________________
2. Was the Investor organized for the specific purpose of acquiring the Units?
|_| Yes |_| No
If the answer to the above question is "Yes," please contact _______,
________, at _______ or ________ for additional information that will be
required.
3. Are shareholders, partners or other holders of equity or beneficial interest
in the Investor able to decide individually whether to participate, or the
extent of their participation, in the Investor's investment in the Company
(i.e., can shareholders, partners or other holders of equity or beneficial
interest in the Investor determine whether their capital will form part of the
capital invested by the Investor in the Company)?
|_| Yes |_| No
If the answer to the above question is "Yes," please contact _____ for
additional information that will be required.
4(a). Please indicate whether or not the Investor is, or is acting on behalf of,
(i) an employee benefit plan within the meaning of Section 3(3) of ERISA,
whether or not such plan is subject to ERISA, or (ii) an entity which is deemed
to hold the assets of any such employee benefit plan pursuant to 29 C.F.R. ss.
2510.3-101. For example, a plan which is maintained by a foreign corporation,
governmental entity or church, a Xxxxx plan covering no common-law employees and
an individual retirement account are employee benefit plans within the meaning
of Section 3(3) of ERISA but generally are not subject to ERISA (collectively,
"Non-ERISA Plans"). In general, a foreign or US entity which is not an operating
19
company and which is not publicly traded or registered as an investment company
under the Investment Company Act of 1940, as amended, and in which 25% or more
of the value of any class of equity interest is held by employee pension or
welfare plans (including an entity which is deemed to hold the assets of any
such plan), would be deemed to hold the assets of one or more employee benefit
plans pursuant to 29 C.F.R. ss. 2510.3-101. However, if only Non-ERISA Plans
were invested in such an entity, the entity generally would not be subject to
ERISA. For purposes of determining whether this 25% threshold has been met or
exceeded, the value of any equity interest held by a person (other than such a
plan or entity) who has discretionary authority or control with respect to the
assets of the entity, or any person who provides investment advice for a fee
(direct or indirect) with respect to such assets, or any affiliate of such a
person, is disregarded.
|_| Yes |_| No
4(b). If the Investor is, or is acting on behalf of, such an employee benefit
plan, or is an entity deemed to hold the assets of any such plan or plans,
please indicate whether or not the Investor is subject to ERISA.
|_| Yes |_| No
4(c.) If the Investor answered "Yes" to question 4.(b) and the Investor is
investing the assets of an insurance company general account, please indicate
what percentage of the Investor's assets the purchase of the Units is subject to
ERISA.________%.
5. Does the amount of the Investor's subscription for the Units in the Company
exceed 40% of the total assets (on a consolidated basis with its subsidiaries)
of the Investor?
|_| Yes |_| No
If the question above was answered "Yes," please contact ________ for
additional information that will be required.
6(a). Is the Investor a private investment company which is not registered under
the Investment Company Act, in reliance on Section 3(c)(1) or Section 3(c)(7)
thereof?
|_| Yes |_| No
6(b). If the question above was answered "Yes," was the Investor formed prior to
April 30, 1996?
|_| Yes |_| No
If the questions set forth in (a) and (b) above were both answered "Yes,"
please contact ________ for additional information that will be required.
20
7(a). Is the Investor a grantor trust, a partnership or an S-Corporation for US
federal income tax purposes?
|_| Yes |_| No
7(b). If the question above was answered "Yes," please indicate whether or not:
(i) more than 50 percent of the value of the ownership interest of any
beneficial owner in the Investor is (or may at any time during the term of
the Company be) attributable to the Investor's (direct or indirect) interest
in the Company; or
|_| Yes |_| No
(ii) it is a principal purpose of the Investor's participation in the Company
to permit the Partnership to satisfy the 100 partner limitation contained in
US Treasury Regulation Section 1.7704-1(h)(3).
|_| Yes |_| No
If either question above was answered "Yes," please contact _______ for
additional information that will be required.
8. If the Investor's tax year ends on a date other than December 31, please
indicate such date below:
-------------------------------------
(Date)
D. Related Parties
2. To the best of the Investor's knowledge, does the Investor control, or is the
Investor controlled by or under common control with, any other investor in the
Company?
|_| Yes |_| No
If the answer above was answered "Yes", please identify such
related investor(s) below.
Name(s) of related investor(s):
________________________________
2. Will any other person or persons have a beneficial interest in the Units to
be acquired hereunder (other than as a shareholder, partner, or other beneficial
owner of equity interest in the Investor)?
|_| Yes |_| No
21
If either question above was answered "Yes", please contact
______ for additional information that will be required.
The Investor understands that the foregoing information will be relied upon by
the Company for the purpose of determining the eligibility of the Investor to
purchase the Units. The Investor agrees to notify the Company immediately if any
representation or warranty contained in this Subscription Agreement, including
this Investor Questionnaire, becomes untrue at any time. The Investor agrees to
provide, if requested, any additional information that may reasonably be
required to substantiate the Investor's status as an accredited investor or to
otherwise determine the eligibility of the Investor to purchase the Units. The
Investor agrees to indemnify and hold harmless the Company and each officer,
director, shareholder, agent and representative of the Company and their
respective affiliates and successors and assigns from and against any loss,
damage or liability due to or arising out of a breach of any representation,
warranty or agreement of the Investor contained herein.
INDIVIDUAL:
------------------------------------
(Signature)
------------------------------------
(Print Name)
PARTNERSHIP, CORPORATION, TRUST,
CUSTODIAL ACCOUNT, OTHER:
-----------------------------------
(Name of Entity)
By:
--------------------------------
(Signature)
--------------------------------
(Print Name and Title)
22
Annex 1
DEFINITION OF "INVESTMENTS"
The term "investments" means:
8) Securities, other than securities of an issuer that controls, is
controlled by, or is under common control with, the Investor that owns
such securities, unless the issuer of such securities is:
(i) An investment company or a company that would be
an investment company but for the exclusions or
exemptions provided by the Investment Company Act,
or a commodity pool; or
(ii) a Public Company (as defined below);
(iii) A company with shareholders' equity of not less
than $50 million (determined in accordance with
generally accepted accounting principles) as
reflected on the company's most recent financial
statements, provided that such financial
statements present the information as of a date
within 16 months preceding the date on which the
Investor acquires Units;
9) Real estate held for investment purposes;
10) Commodity Shares (as defined below) held for investment purposes;
11) Physical Commodities (as defined below) held for investment purposes;
12) To the extent not securities, Financial Contracts (as defined below)
entered into for investment purposes;
13) In the case of an Investor that is a company that would be an investment
company but for the exclusions provided by Section 3(c)(1) or 3(c)(7) of
the Investment Company Act, or a commodity pool, any amounts payable to
such Investor pursuant to a firm agreement or similar binding commitment
pursuant to which a person has agreed to acquire an interest in, or make
capital contributions to, the Investor upon the demand of the Investor;
and
14) Cash and cash equivalents held for investment purposes.
24
Real Estate that is used by the owner or a Related Person (as defined
below) of the owner for personal purposes, or as a place of business, or
in connection with the conduct of the trade or business of such owner or a
Related Person of the owner, will NOT be considered Real Estate held for
investment purposes, provided that real estate owned by an Investor who is
engaged primarily in the business of investing, trading or developing real
estate in connection with such business may be deemed to be held for
investment purposes. However, residential real estate will not be deemed
to be used for personal purposes if deductions with respect to such real
estate are not disallowed by section 280A of the Internal Revenue Code of
1986, as amended.
A Commodity Interest or Physical Commodity owned, or a Financial Contract
entered into, by the Investor who is engaged primarily in the business of
investing, reinvesting, or trading in Commodity Shares, Physical
Commodities or Financial Contracts in connection with such business may be
deemed to be held for investment purposes.
"Commodity Shares" means commodity futures contracts, options on commodity
futures contracts, and options on physical commodities traded on or
subject to the rules of:
(iii) Any contract market designated for trading such
transactions under the Commodity Exchange Act and
the rules thereunder; or
(iv) Any board of trade or exchange outside the United
States, as contemplated in Part 30 of the rules
under the Commodity Exchange Act.
"Public Company" means a company that:
(iii) files reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended;
or
(iv) has a class of securities that are listed on a
Designated Offshore Securities Market, as defined
by Regulation S of the Securities Act.
"Financial Contract" means any arrangement that:
(iv) takes the form of an individually negotiated
contract, agreement, or option to buy, sell, lend,
swap, or repurchase, or other similar individually
negotiated transaction commonly entered into by
participants in the financial markets;
(v) is in respect of securities, commodities,
currencies, interest or other rates, other
measures of value, or any other financial or
economic interest similar in purpose or function
to any of the foregoing; and
-ii-
(vi) is entered into in response to a request from a
counter party for a quotation, or is otherwise
entered into and structured to accommodate the
objectives of the counterparty to such
arrangement.
"Physical Commodities" means any physical commodity with respect to which
a Commodity Interest is traded on a market specified in the definition of
Commodity Shares above.
"Related Person" means a person who is related to the Investor as a
sibling, spouse or former spouse, or is a direct lineal descendant or
ancestor by birth or adoption of the Investor, or is a spouse of such
descendant or ancestor, provided that, in the case of a Family Company, a
Related Person includes any owner of the Family Company and any person who
is a Related Person of such an owner. "Family Company" means a company
that is owned directly or indirectly by or for two or more natural persons
who are related as siblings or spouse (including former spouses), or
direct lineal descendants by birth or adoption, spouses of such persons,
the estates of such persons, or foundations, charitable organizations or
trusts established for the benefit of such persons.
For purposes of determining the amount of investments owned by a company,
there may be included investments owned by majority-owned subsidiaries of
the company and investments owned by a company ("Parent Company") of which
the company is a majority-owned subsidiary, or by a majority-owned
subsidiary of the company and other majority-owned subsidiaries of the
Parent Company.
In determining whether a natural person is a qualified purchaser, there
may be included in the amount of such person's investments any investment
held jointly with such person's spouse, or investments in which such
person shares with such person's spouse a community property or similar
shared ownership interest. In determining whether spouses who are making a
joint investment in the Partnership are qualified purchasers, there may be
included in the amount of each spouse's investments any investments owned
by the other spouse (whether or not such investments are held jointly).
There shall be deducted from the amount of any such investments any
amounts specified by paragraph 2(a) of Annex 2 incurred by such spouse.
In determining whether a natural person is a qualified purchaser, there
may be included in the amount of such person's investments any investments
held in an individual retirement account or similar account the
investments of which are directed by and held for the benefit of such
person.
-iii-
Annex 2
VALUATIONS OF INVESTMENTS
The general rule for determining the value of investments in order to ascertain
whether a person is a qualified purchaser is that the value of the aggregate
amount of investments owned and invested on a discretionary basis by such person
shall be their fair market value on the most recent practicable date or their
cost. This general rule is subject to the following provisos:
3) In the case of Commodity Shares, the amount of investments shall be the
value of the initial margin or option premium deposited in connection with
such Commodity Shares; and
4) In each case, there shall be deducted from the amount of investments owned
by such person the following amounts:
(i) The amount of any outstanding indebtedness
incurred to acquire the investments owned by such
person.
(ii) A Family Company, in addition to the amounts
specified in paragraph (a) above, shall have
deducted from the value of such Family Company's
investments any outstanding indebtedness incurred
by an owner of the Family Company to acquire such
investments.
-iv-
