UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF1934
For the quarterly period ended SEPTEMBER 30, 1999
Commission file number 0-20193
AMERICOMM RESOURCES CORPORATION
(Exact name of small business issuer as specified in its charter)
DELAWARE 73-1238709
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
15 E. 5TH STREET, SUITE 4000, TULSA, OK 74103-4346
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (918) 587-8093
Indicate by check mark whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the preceding
12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Common Stock, $.001 Par Value - 14,212,923 shares as of September 30, 1999.
<PAGE>
AMERICOMM RESOURCES CORPORATION
INDEX TO FORM 10-QSB
PART 1 - FINANCIAL INFORMATION
Balance Sheet at September 30, 1999 (Unaudited)
Statement of Income for the three months and nine months ended
September 30, 1999 and September 30, 1998 (Unaudited)
Statement of Cash Flows for the three months and nine months
ended September 30, 1999 and September 30, 1998 (Unaudited)
Notes to Financial Statements
Plan of Operation
PART II - OTHER INFORMATION
Changes in Securities
Other Information
Exhibits and Reports on Form 8-K
Signatures
<TABLE>
PART I - FINANCIAL INFORMATION
AMERICOMM RESOURCES CORPORATION
BALANCE SHEET
(Amounts in thousands, except per share data)
<CAPTION>
SEPTEMBER 30, 1999
__________________
<S> <C>
ASSETS
Current assets
Cash and cash equivalents $ 94,164
Prepaid expenses 3,244
__________________
Total Current Assets 97,408
__________________
Investments in prospects 689,383
Property & equip. net of accum. Dep. Of $2,614 11,942
Deposits 3,244
__________________
Total property & equipment 704,569
TOTAL ASSETS $ 801,977
__________________
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
<S> <C>
Current liabilities
Notes payable - Related party 171,831
Accrued Payroll & Payroll Tax 37,902
Payroll taxes payable 1
__________________
Total current liabilities 209,734
Stockholder's equity (deficiency)
Common stock, $.001 par value;
Authorized 50,000,000 shares
14,212,923 shares issued, of which
132 shares are held in Treasury 14,205
Capital in excess of par value 2,166,203
Retained earnings (663,318)
Net income (loss) (924,847)
_________________
Total Stockholhers' Equity 592,243
TOTAL LIABILITIES & EQUITY $ 801,977
_________________
<FN>
See accountants' report and accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
AMERICOMM RESOURCES CORPORATION
STATEMENT OF INCOME
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999 AND 1998
(Amounts in thousands, except per share data)
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1999 1998
_____________ _____________
<S> <C> <C>
Revenues
Income $ 0 $ 0
_____________ _____________
Total Income 0 0
_____________ _____________
Costs and expenses
General & administrative
Expenses 131,834 102,384
_____________ _____________
Total costs and expenses 131,834 102,384
_____________ _____________
Other (income) & expenses
Interest income (98) (5,483)
Interest expense 0 985
Disposal of assets 793,266 0
_____________ _____________
Total other (income) &
expenses 793,013 (4,498)
_____________ _____________
Net Income (Loss) $ (924,847) $ (97,886)
Net Income (Loss)
per common share $ 0 $ 0
Weighted average number
Of common shares
Outstanding 14,212,923 13,879,589
<FN>
See accountants' report and accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
AMERICOMM RESOURCES CORPORATION
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999 AND 1998
(Amounts in thousands)
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1999 1998
_____________ _____________
<S> <C> <C>
Cash Flow From Operating Activities
Operations
Net income (loss) $ (924,847) $ (97,886)
Adjustments to reconcile
Net loss to net cash
provided by operating
activities
Depreciation expense 1,575 2,183
Disposal of assets 793,266 0
Changes in operating assets
and liabilities
Accounts payable 0 (11,492)
Prepaid expenses 0 (350)
Deposits 0 (3,244)
Accrued Payroll & Payroll Tax 37,902 0
Accruals (2,683) 556
_____________ _____________
Net cash provided (used)
by operating activities (94,787) (110,233)
_____________ _____________
Cash Flows From Investing
Activities
Cash payments for investments
In prospects (157,105) (451,188)
Cash payments for furniture
& fixtures 0 (14,555)
_____________ _____________
Net cash provided (used)
By investing activities (157,105) (465,743)
_____________ _____________
Cash Flows From Financing Activities
Proceeds from issuance of
common stock 100,000 680,999
Proceeds from note payable
related party 171,831 0
_____________ _____________
Net cash provided (used)
by financing activities 271,831 680,999
_____________ _____________
Net Increase (Decrease) In
Cash & Cash Equivalents 19,939 105,023
Cash and Cash Equivalents
beginning of quarter 74,225 103,168
______________ _____________
Cash and Cash Equivalents
end of quarter $ 94,164 $ 208,191
<FN>
See accountants' report and accompanying notes to financial statements.
</TABLE>
<PAGE>
AMERICOMM RESOURCES CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
In the opinion of management the accompanying unaudited financial statements
contain all adjustments, all of which were of a normal recurring nature,
necessary to summarize fairly the Registrant's financial position and
results of operations. The results of operations for the nine months
ended September 30, 1999 may not be indicative of the results that may be
expected for the year ending December 31, 1999. These statements should be
read in conjunction with the financial statements and notes thereto included
in the Registrant's Form 10-KSB for its fiscal year ended December 31, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Mining and oil and gas properties - The Company uses the successful efforts
method of accounting for its mining and oil and gas activities. Costs
incurred are deferred until exploration and completion results are evaluated.
At such time, costs of activities with economically recoverable reserves are
capitalized as proven properties, and costs of unsuccessful or uneconomical
development work are expensed.
Cash and cash equivalents - The Company defines cash and cash equivalents to
be cash on hand, cash in checking accounts, certificates of deposit, cash in
money market accounts and certain investments with maturities of three months
or less from the date of purchase.
3. INCOME TAXES:
As of December 31, 1998, the Company has tax net operating loss carryforwards
totaling approximately $603,000. If not used, these carryforwards will
expire in the years 2000 to 2013.
AMERICOMM RESOURCES CORPORATION
PLAN OF OPERATION
All statements other than statements of historical fact contained herein are
forward-looking statements. The forward-looking statements were prepared on
the basis of certain assumptions which relate, among other things, to costs
expected to be incurred in the acquisition, exploration and development of
the Company's properties. Even if the assumptions on which the projections
are based prove accurate and appropriate, the actual results of the Company's
operations in the future may vary widely from the financial projections due
to unforeseen engineering, mechanical or technological difficulties in
drilling wells, general economic conditions, increased competition, changes
in government regulation or intervention in the oil and gas or mining
industries, and other risks described in the Company's filings with the
Securities and Exchange Commission. Accordingly, the actual results of
the Company's operations in the future may vary widely from the forward-
looking statements included herein.
As of December 31, 1998, the Registrant had approximately $74,000 in cash.
In March 1999, the Registrant borrowed $105,000 from Albert E. Whitehead
Living Trust pursuant to a promissory note due March 15, 2000 which bears
interest at the rate of 10% per annum (the "AEW Note"). The proceeds of
this loan were used to pay lease rentals on the Cheyenne River Prospect.
Mr. Whitehead also paid the Registrant's day-to-day operating expenses
from April through September 1999 including, without limitation, the monthly
office lease payments and the salary of the Registrant's secretary. Amounts
paid by Mr. Whitehead were added to the principal of the AEW Note which was
$171,831.00 as of September 30, 1999. In September 1999 the Registrant
received $100,000 in new working capital through a private placement, under
Section 4(2) of the Securities Act of 1933, of 333,333 shares of its Common
Stock to one accredited investor.
As of September 30, 1999, the Registrant had approximately $94,166 cash on
hand, which amount is expected to be sufficient to fund the Registrant's
operating expenses for six months. In addition to the salaries of Mr.
Bradley and his secretary, the Registrant's'material commitments consist
of office lease payments of $3,244 per month, which payments have been
guaranteed by Mr. Whitehead, and lease rental payments on the Cheyenne
River Prospect of approximately $138,000 per year which are do in March
2000. Pending receipt of additional capital by the Registrant,
Mr. Bradley has agreed to suspend payment of his salary. The Company has
recorded an accrued liability of $37,902.00 as of September 30, 1999
which reflects the amount of such suspended payments as of such date.
If the Registrant is not successful raising additional capital by March 15,
2000 the Registrant's continued operation would depend on its ability to
sublet its office space, the continued cooperation and support of Messrs.
Whitehead and Bradley and its ability to raise additional capital or
locate an industry partner to pay the annual lease rentals on, and the
costs of exploring its Cheyenne River Prospect. Under the terms of the
agreement governing the Cheyenne River Prospect, as amended, if the
Registrant is unable to finance the cost of the first well on the Cheyenne
River Prospect by May 15, 2000, the Registrant will be required to seek a
buyer for the prospect. In such event, assuming the parties are successful
in locating a buyer for the prospect, the Registrant would recover its costs
in acquiring the prospect and would receive 50% of any profits from the sale
of the prospect in excess of such costs. Given the present environment for
selling oil and gas prospects, there can be no assurance that a sale could
be effected on advantageous terms.
The Registrant has been actively engaged in discussions with numerous
sources of additional financing for the Registrant and parties which may
be interested in acquiring an interest in the Registrant's properties.
In March 1999, the Registrant engaged Oak Creek Capital, Inc., on a non-
exclusive basis, to assist the Registrant in locating an industry partner
to participate in the Cheyenne River Prospect. This engagement has since
expired. There can be no assurance that the Registrant will be successful
in locating industry partners to pay the costs of exploring its properties
or in raising the additional capital required to continue its operations.
In July the Registrant notified the lessors of 94 of the claims in its
Jessup gold exploration property in Nevada that it was canceling its
Lease Agreement with them. In August 1999, the Registrant transferred
its interest in the Verlee and Pancake Summit properties in Nevada to
third parties by quitclaim deed in exchange for a 1% net smelter
interest in those properties. In August the Registrant dropped the
remainder of its gold exploration properties and will concentrate its
activities on its Cheyenne River Prospect which consists of 102,000
acres of oil and gas exploration leases in the Powder River Basin in
Wyoming. As a result of the cancellation of the leases on the Jessup
Property and the transfer of its interests in the Verlee and Pancake
Summit Prospects and dropping its other gold exploration properties,
the Registrant wrote off $793,266.37 of its assets as of September 30,
1999.
The Registrant funded its operations during 1998 through amounts received
from Echo Bay Exploration Inc. ("Echo Bay") a subsidiary of Echo Bay Mines
LTD., Denver, Colorado pursuant to a Heads of Agreement covering exploration
of its Churchill County, Nevada property (the "Jessup Property") and by
borrowing from, and stock issuances to, directors of the Registrant. In
September 1997, the Registrant borrowed $20,000 from the Albert E. Whitehead
Living Trust pursuant to the terms of a 6% Convertible Note due September 23,
1998. In November 1997, Echo Bay elected to continue its work program
during 1998 and paid an additional $100,000 to the Registrant. In March
1998, the Registrant raised an additional $275,000 through the issuance of
1,375,000 shares of Common Stock to Mr. Whitehead and agreed to use
substantially all of the proceeds of this issuance to fund its acquisition
of oil and gas leases on the Cheyenne River Prospect. On April 1, 1998, the
Albert E. Whitehead Living Trust converted its note into shares of Common
Stock of the Registrant at a purchase price of $0.15 per share. In June
1998, Messrs. Whitehead and Plewes, directors of the Registrant purchased
an aggregate of 533,332 shares of Common Stock upon exercise of previously
issued stock options at an exercise price of $0.68 per share, which provided
$362,499 in additional working capital to the Registrant. The shares
of Common Stock and the 6% Convertible Note described above were issued in
reliance on the exemption from registration set forth in Section 4(2) of
the Securities Act of 1933. The shares of Common Stock issued upon
conversion of the 6% Convertible Note were issued in reliance upon Section
3(a)(9) of the Securities Act of 1933.
Exploration for oil and gas, is highly speculative and involves greater
risks than many other businesses. Oil and gas drilling and development
is frequently marked by unprofitable efforts, not only from unproductive
prospects, but also from producing prospects which do not produce
sufficient amounts to return a profit on the amount expended. Accordingly,
there can be no assurance that the Registrant will be able to discover,
develop or produce sufficient reserves to recover the expenses incurred in
connection with the exploration of its properties, to fund additional
exploration or to achieve profitability.
The Registrant does not expect any significant change in the number of its
employees during 1999. If the Registrant is successful in raising additional
capital, it will employ part-time or temporary persons and consultants in
situations where special expertise is required.
Year 2000 Issues
The Registrant relies on standard office computer hardware and software
equipment to run its operations. The Registrant has contacted the suppliers
of the hardware and software utilized by the Registrant and has been
verbally assured that the hardware and software is Year 2000 compliant.
As the Registrant is not actively engaged in drilling or mining operations,
the Registrant is not currently dependent on any additional computer hardware
or software at this time. If the Registrant is successful in raising the
additional capital necessary to explore its properties, the Registrant will
seek to retain consultants to perform such exploration and intends to
inquire, prior to retaining such consultants, as to the consultant's Year
2000 readiness. Although the Registrant does not rely on computer hardware
or software for its limited operations at this time, given the pervasive
nature of the Year 2000 issues, there can be no assurance that the
Registrant will not be adversely affected by the failure of third parties
to be Year 2000 compliant.
PART II. OTHER INFORMATION
Item #2 Changes in Securities
Information relating to recent sales of securities that were
not registered under the Securities Act of 1933 is set forth
in Part I, Item 2. Plan of Operation and is incorporated
herein by reference.
Item #5 Other Information - NONE
Item #6 Exhibits and Reports on Form 8-K
(a) Exhibits
(1) Promissory note dated March 15, 1999 issued to Albert E.
Whitehead Living Trust. Filed herewith
(2) Subscription Agreement dated June 20, 1999 between
Americomm Resources Corporation and Louis Marx, Jr.
Filed herewith
(b) Reports on Form 8-K. The Registrant has not filed, during
the quarter for which this report is filed, a Form 8-K.
(c) 27-Financial Data Schedule
AMERICOMM RESOURCES CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AMERICOMM RESOURCES CORPORATION
Registrant
November 15, 1999 Thomas R. Bradley
Thomas R. Bradley, President/CEO
November 15, 1999 Thomas R. Bradley
Thomas R. Bradley
Principal Financial and Accounting
Officer
Americomm Resources Corporation
15 E. 5th Street, Suite 4000
Tulsa, Oklahoma 74103-4346
PROMISSORY NOTE
Maker: Americomm Resources Corporation
15 E. 5th Street, Suite 4000
Tulsa, OK 74103-4346
Date of Note: March 15, 1999
Maturity Date: March 15, 2000
Amount of Note: $105,000 + 10% interest at Maturity
Date + additional amounts of accrued
Corporate operating expenses paid by
A. E. Whitehead
This note, drawn in favor of Albert E. Whitehead Living Trust, Albert E.
Whitehead, Trustee, in the amount of $105,000 plus 10% interest, is due
and payable March 15, 2000. At his option, A. E. Whitehead may elect
to extend the maturity date or otherwise modify the payment terms. A. E.
Whitehead further agrees to pay certain corporate operating expenses to be
added to the original amount of this note under the same terms.
The proceeds of this loan were used by Americomm Resources Corporation to
pay rentals on Federal leases due April 1, 1999, for its Cheyenne River
Prospect in Wyoming and ongoing operating expenses added to the original
amount of the note.
AMERICOMM RESOURCES CORPORATION
Thomas R. Bradley, President & CEO
Albert E. Whitehead, Trustee
Albert E. Whitehead Living Trust
June 20, 1999
Americomm Resources Corporation
First Place Tower
Suite 4000
15 East 5th Street
Tulsa, Oklahoma 74103-4346
Gentlemen:
1. Subscription: The undersigned, intending to be legally bound,
irrevocably applies to purchase, in accordance with the terms and
subject to the conditions of this Subscription Agreement, from
Americomm Resources Corporation, a corporation organized under the
laws of the State of Delaware (the "Company"), the number of shares
(the "Shares") of common stock, par value $.001 per share (the
"Common Stock") set forth in Section 15 below, at a purchase price
of $0.30 per Share.
The Shares are being offered by the Company in connection with an
offering (the "Offering") of 1,000,000 Shares. The Offering is more
particularly described the Company's letter dated June 20, 1999
(the "Offering Letter") and the documents delivered therewith
(collectively, the "Disclosure Documents").
2. Payment: Simultaneously with the execution and deliver of this
Subscription Agreement, the undersigned is delivering to the Company,
an amount (the "Purchase Price") equal to the number of Shares
purchased hereunder multiplied by the purchase price of $0.30 per share.
Payment of the Purchase Price is being made by delivery to the Company
of a personal check payable to the order of the Company or by the wire
transfer of the Purchase Price or by other means satisfactory to the
Company.
3. Acceptance: The undersigned understands and agrees that the Company,
in its sole discretion, reserves the right to accept or reject any
subscription for Shares, in whole or in part, and to withdraw its offer
to sell the Shares at any time before the issuance thereof. A subscription
shall be deemed accepted by the Company when the Company either
deposits a signed copy of this Agreement or other notice of acceptance
in the United States mail, delivers such notice by hand or transmits
such notice by facsimile to the undersigned. No subscriptions will be
accepted by the Company after the close of business on August 1, 1999,
unless the Company extends the Offering beyond such date. If the
undersigned's subscription is not accepted, the Purchase Price delivered
under Section 2 above will be returned promptly to the undersigned.
4. Delivery of Certificates for Shares: The Company intends to accept
subscriptions for Shares on a "rolling basis," there being no minimum
number of Shares required to be purchased by others in order to make this
subscription effective. As soon as practicable after receipt of the
Purchase Price, the Company will deliver to the investor a certificate
or certificates representing the Shares registered in the name of the
investor or in the name of such nominee as the investor shall have
requested.
5. Representations and Warranties of the Purchaser: In order to induce
the Company to sell the Shares to the undersigned, the undersigned hereby
represents, warrants and covenants to the Company as follows:
(a) The undersigned is acquiring the Shares solely for the account
of the undersigned, for investment purposes only and not with a view
to, or for, subdivision, resale, distribution, or fractionalization
thereof, or for the account, in whole or in part, of others. No other
person has or will have a direct or indirect beneficial interest in the
Shares. The undersigned recognizes the restrictions on the transferability
of the Shares, and is able to bear the substantial economic risk of an
investment in the Shares, including a complete loss thereof, for an
indefinite period of time. The undersigned has no need for liquidity
in this investment and has no reason to anticipate any change in
circumstances, financial or otherwise, or other particular occasion or
event which might cause or require the undersigned to attempt to sell or
transfer any of the Shares.
(b) The undersigned understands that the sale of the Shares to the
undersigned 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 applicable state securities laws. The
undersigned will not sell, hypothecate or otherwise transfer any or all
of the Shares other than in accordance with the following provisions:
(i) pursuant to a registration statement under the Securities
Act which has become effective, and a prospectus related thereto which
is current, with respect to the securities to be disposed of, and if
required, a registration statement under applicable state securities
laws; or
(ii) pursuant to a specific exemption from registration under
the Securities Act and applicable state securities laws, buy only upon
the undersigned first having delivered to the Company a favorable
reasoned written opinion of counsel for the undersigned, reasonably
satisfactory in form and substance to the Company, to the effect that
the proposed sale or transfer is exempt from registration under the
Securities Act and any applicable state securities laws.
(c) The undersigned understands that the Shares are not registered
under the Securities Act or applicable state securities laws and such
securities must be held indefinitely, unless the subsequent disposition
thereof is registered under the Securities Act and applicable state
securities laws or an exemption from such registration is available.
Except as provided in Section 7 hereof, the Company has not undertaken
to register the Shares pursuant to the Securities Act and, except as
provided therein, will have no obligation to effect on behalf of the
undersigned any registration under the Securities Act or to assist the
undersigned in complying with any exemption from registration under
the Securities Act or any state securities laws. The undersigned
understands that the exemption from registration afforded by certain
rules and regulations under the Securities Act depends upon the
satisfaction of various conditions and that, if applicable, such
rules and regulations may afford the basis for sales of the Shares only
in limited amounts.
(d) The undersigned acknowledges that the certificates representing
the Shares, and any substitutions or replacements thereof, shall bear
a legend in substantially the following form:
"The Shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
hypothecated or otherwise transferred or disposed of in the absence
of such registration, unless an exemption from the requirement of
such registration is available under the circumstances at the time
obtaining and demonstrated by opinion of counsel satisfactory to
the Company."
(e) The undersigned further represents and warrants that in order
to make an informed decision in connection with the purchase of the Shares:
(i) the undersigned has reviewed the merits and risks of an
investment in the Shares with tax and legal counsel and with an investment
advisor to the extent deemed advisable by the undersigned;
(ii) the undersigned recognizes that an investment in the
Shares involves a number of significant risks, including, without
limitation, those set forth in the Offering Letter and the Disclosure
Documents; the undersigned, or the undersigned's agent or attorney, has
such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of an investment in the Shares;
and
(iii) the undersigned, or the undersigned's agent or attorney,
(A) has been provided with sufficient information with respect to the
business of the Company and has carefully reviewed the same including,
without limitation, the Company's Offering Letter and the Disclosure
Documents; (B) has been provided with such additional information with
respect to the Company as the undersigned or the undersigned's agent or
attorney has requested; and (C) has had the opportunity to discuss such
information with members of the management of the Company and any questions
that the undersigned had with respect thereto have been answered to the
full satisfaction of the undersigned.
(f) The undersigned is not relying on the Company with respect to the
economic, tax and other considerations to the undersigned relating to this
investment. With respect to such considerations, the undersigned has
relied on the advice of his own qualified advisors to the extent the
undersigned has deemed appropriate.
(g) The undesigned represents and warrants that the undersigned is an
"accredited investor" as that term is defined in Rule 501 promulgated
under the Securities Act. Set forth below is a list of the definitions
included in such rule. Please confirm your representation by placing
your initials in the box set forth next to the definition which applies
to you:
[] (i) The undersigned is either a bank as defined in Section 3(a)
(2) of the Securities Act, or a 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; or a
broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934; or an insurance company as defined in Section
2(13) of the Securities Act; or an investment company registered
under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of the Act; or a Small
Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; or 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 benefits of its
employees if such plan has total assets in excess of $5,000,000;
or an employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such
Act, which is either a bank, savings and loan association, insurance
company, or registered investment advisor, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed
plan, with investment decisions made solely by persons that are
accredited investors; or
[] (ii) The undersigned is a private business development company as
defined in Section 202(a)(22) of the Investment Advisers Act of 1940;
or
[] (iii) The undersigned is an organization described in Section 501
(c)(3) of the Internal Revenue Code, or a corporation, Massachusetts
or similar business trust or partnership, not formed for the specific
purpose of acquiring the securities offered hereby, with total assets
in excess of $5,000,000; or
[] (iv) The undersigned is a director or executive officer of the
Company; or
[LM] (v) The undersigned is a natural person whose individual net
worth, or joint net worth with that person's spouse, at the time
of the purchase, exceeds $1,000,000; or
[] (vi) The undersigned is a natural person who had individual
income in excess of $200,000 in each of the two most recent years
or joint income with that person's spouse in excess of $300,000 in
each of those years and has a reasonable expectation of reaching
the same income level in the current year; or
[] (vii) The undersigned is a trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the
securities offered hereby, whose purchase is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) promulgated
under the Securities Act; or
[] (viii) The undersigned is a corporation or other entity all of whose
shareholders or other equity owners are themselves accredited
investors by virtue of this subparagraph or by subparagraphs (i),
(ii), (iii), (iv), (v), (vi) or (vii) above.
For purposes hereof, "individual income" means adjusted gross income as
reported for federal income tax purposes, less any income attributable
to a spouse or to property owned by a spouse, increased by the following
amounts (but not including any amounts attributable to a spouse or to
property owned by a spouse): (i) the amount of any interest income
received which is tax-exempt under Section 103 of the Internal Revenue
Code of 1986, as amended (the "Code"), (ii) the amount of losses claimed
as a limited partner in a limited partnership (as reported on Schedule
E of Form 1040), (iii) any deduction claimed for depletion under Section
611 et seq. of the Code, and (iv) any amount by which income from long-
term capital gains has been reduced in arriving at adjusted gross income
pursuant to the provisions of Section 1202 of the Code. For purposes
hereof, "net worth" means the excess of total assets at fair market value,
including home and personal property, over total liabilities, including
mortgage.
(h) No oral or written representations have been made or oral or
written information furnished to the undersigned or the undersigned's
advisors in connection with the Offering which were in any way
inconsistent with the information provided to the undersigned. The
undersigned acknowledges that the Offering Letter and the Disclosure
Documents replace and supersede any and all information delivered prior
to delivery of the Offering Letter and the Disclosure Documents.
(i) The undersigned is not subscribing to purchase the Shares as a
result of or subsequent to any advertisement, article, notice or other
communication published in any newpaper, magazine or similar media or
broadcast over television or radio, or presented at any seminar or meeting,
or any solicitation of a subscription by a person not previously known to
the undersigned in connection with investments in securities generally.
(j) If the undersigned is a corporation, partnership, trust or other
entitiy (i) it is duly authorized and empowered to execute, deliver and
perform this Subscription Agreement and to purchase the Shares, and has
duly taken all requisite action in connection therewith; (ii) the person
signing this Subscription Agreement on behalf of the undersigned has been
duly authorized by the undersigned to do so; (iii) this Subscription
Agreement is a valid and binding legal obligation of the undersigned,
enforceable against the undersigned in accordance with its terms; and (iv)
the execution, delivery and performance of this Subscription Agreement
and the purchase of the Shares do not and will not conflict with, violate
or constitute a default under any applicable law or regulation, the
undersigned's certificate of incorporation, by-laws, partnership agreement
or any agreement or arrangement to which the undersigned is a party or by
which it may be bound.
(k) If the undersigned is acting in a fiduciary capacity in
purchasing the Sahres, the fiduciary represents and warrants that he or
she has authority to execute this Subscription Agreement on behalf of the
person or persons for whom the Shares are being purchased, that such
persons have been given the Offering Letter and the Disclosure Documents
and this Subscription Agreement and have confirmed to the fiduciary that
they have reviewed the same, and that the representations and warranties
contained in this Subscription Agreement (and in any other written
statement or document delivered to the Company) shall be deemed to have
been made on behalf of such person or persons.
(l) All information which the undersigned has furnished and is
furnishing to the Company, including, without limitation, the representation
as to the undersigned's status as and "Accredited Investor" within the
meaning of Rule 501 promulgated under the Securities Act and all other
representations contained in this Subscription Agreement, are correct and
complete as of the date of this Subscription Agreement, and if there
should be any material change in such information prior to the undersigned's
receipt of the Shares, the undersigned will immediately furnish such
revised or corrected information to the Company. The undersigned is
executing and delivering this Subscription Agreement with full awareness
of its implications and in recognition of the fact that the Company is
relying on the undersigned's representations and warranties in selling
Shares to the undersigned, and that the Company and other investors may
be damaged if such representations or warranties are incorrect.
(m) The undersigned agrees, within five days after receipt of a
request from the Company, to provide such information and to execute and
deliver such documents as may reasonably be necessary to comply with any
and all laws and ordinances to which the Company is subject.
6. Representations, Warranties and Covenants of the Company: The Company
hereby represents, warrants and covenants to the undersigned as follows:
(a) Organization and Qualification: The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all corporate power and authority to own and lease
its properties and to conduct its business as presently conducted. The
Company is duly qualified to transact business as a foreign corporation in
each jurisdiction in the United States in which the conduct of its business
as presently conducted or its ownership or leasing of property makes such
qualification necessary and the failure so to qualify would have a materially
adverse effect on the business or financial condition of the Company.
(b) Authorization and Validity of this Subscription Agreement: The
execution, delivery and performance by the Company of this Subscription
Agreement, including the offer, issuance, sale and delivery of the Shares,
are within the Company's corporate power, have been duly authorized by all
necessary corporate action, do not require approval of any governmental
body, agency or official and do not, and will not, conflict with, violate
or contravene, or consitute a default under, any applicable law or
regulation, the Certificate of Incorporation or By-Laws of the Company
or any agreement, judgment, injunction, order, decree or instrument
binding upon the Company, or result in the creation or imposition of any
material lien, claim or encumberance on any asset of the Company. This
Subscription Agreement is a valid and binding legal obligation of the
Company, enforceable against it in accordance with its terms.
(c) Authorization and Issuance of the Shares: The Shares have been
duly authorized and, upon the issuance thereof and payment therefor in
the manner provided herein will be duly authorized, validly issued, fully-
paid and nonassessable.
(d) Consents: No consent, approval, qualification, order or
authorization of, or filing with, any governmental authority is required in
connection with the Company's valid execution, delivery or performance of
this Agreement; or the offer, sale or issuance of the Shares by the
Company to the undersigned; or the consummation of any other transaction
contemplated on the part of the Company or the undersigned hereby, except
any such consents, approvals, qualifications, orders, authorizations, or
filings as shall have been disclosed in the Offering Letter or the
Disclosure Documents or obtained or made by the Company prior to the
issuance of the Shares and such post-issuance notices, reports or similar
filings required by applicable law in the ordinary course in connection
with the offering and sale of securities.
(e) Compliance with Regulation D: The Company agrees to file five
copies of a Form D with the Securities and Exchange Commission within
fifteen days of the date of the first issuance of Shares and to file,
on a timely basis, any amendments or supplements to such Form D as may
be required under Regulation D promulgated under the Securities Act of
1933, as amended. The Company also agrees to comply with the filing
requirements of state securities laws applicable to the offering of
securities to the undersigned.
7. Registration Rights:
(a) Definitions: For purposes of this Section 7, the following
terms shall have the following respective meanings:
(i) "Commission" shall mean the United States Securities and
Exchange Commission or any other Federal agency at the time administering
the Securities Act.
(ii) The term "holder or holders of Registrable Stock" shall
mean the holders of Shares issued in this Offering.
(iii) The terms "register," "registered" and "registration" refer
to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act, and
the declaration or ordering of effectiveness of such registration statement
or document by the Commission.
(iv) The term "Registration Period" shall mean the period
commencing on the ninetieth day following the date of the first issuance
of Shares in this offering and ending on the seventh anniversary of such
date.
(v) The term "Registrable Stock" means (A) the Shares issued to
the undersigned in this Offering, and (B) any common stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to or in exchange for or in replacement of, such Common Stock
of the Company; provided, however, that shares of Registrable Stock shall
cease to be Registrable Stock if they are sold or transferred pursuant to
a registered public offering or other transaction which does not result in
restrictions on resale being imposed on the transfer by virtue of Federal
or state securities laws; and provided further that Registrable Stock shall
cease to be Registrable Stock if the holder could sell or transfer all
such securities held by him in one transaction pursuant to Rule 144
promulgated under the Securities Act.
(vi) "Securities Act" shall mean the United States Securities Act
of 1933, as amended, or any similar Federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in
effect at the time.
(b) Demand Registration
(i) Upon the written request of any holder or holders ("Initiating
Holders") of at least 350,000 shares (adjusted as provided in Section 7(a)
of Registrable Stock (the "Initiating Number"), which request shall be given
during the Registration Period, shall state the intended method of
disposition by such Initiating Holders and shall request that the Company
effect the registration of all or part of the Registrable Stock under the
Securities Act, the Company shall promptly give written notice of such
requested registration to all other holders, if any, of Registrable Stock.
If, after the expiration of thirty days from the mailing of such notice
to holders of Registrable Stock, the Company shall have received written
requests to register a minimum of 350,000 shares of Registrable Stock,
which requests shall state the intended method of disposition of such
securities by such holders, the Company shall use all reasonable efforts
to prepare and file with the Commission a post-effective amendment to a
registration statement, a new registration statement, if then required,
and such other documents, including an amended or supplemented prospectus,
as may be necessary to permit a public offering and sale of such Registrable
Stock in the United States in compliance with the provisions of the
Securities Act, all to the extent requisite to permit the disposition
(in accordance with the intended methods thereof as aforesaid) by the
holders of the Registrable Stock so to be registered. If such sale of
Registrable Stock is to be pursuant to an underwritten offering, the
underwriter shall be selected by the Initiating Holders and shall be
reasonably acceptable to the Company. If the underwriter selected
determines that the number of shares so to be included is required to be
limited due to market conditions or otherwise, the holders of Registrable
Stock proposing to sell their shares in such underwritten registration
shall share pro rata (according to the number of shares requested to be
registered) in the number of shares being underwritten (as determined by
such underwriter) and registered for their account. The Company shall
only be required to effect one registration pursuant to this Section 7(b).
(ii) The Company shall not be required to effect any registration
under this Section 7(b) within nine months after the completion of any
public offering of its securities pursuant to which the holders of
Registrable Stock were afforded the right to register as many shares of
their Registrable Stock as requested nor within six months after any other
public offering by the Company.
(iii) The Company shall have the right to include in any
registration statement or post-effective amendment filed pursuant to this
Section 7(b) other securities of the Company then proposed to be distributed,
except that, to the extent consistent with the rights of other holders of
the Company's securities, if and to the extent that the underwriter or
underwriters acting with respect of such public offering reasonably
determine that the inclusion of such other securities may substantially
prejudice or hinder the offering of Registrable Stock, the number of such
other securities shall be reduced or eliminated prior to any reduction in
the number of shares of Registrable Stock so to be registered.
(iv) If the registration under this paragraph (b) is effected
on a Form S-3 (or any successor form therto), and the effectiveness of
such registration statement can be maintained without significant
additional expense to the Company, then the Company agrees to maintain the
effectiveness of such registration statement for a period of one year
after its initial effective date.
(c) Incidental Registration:
(i) If, during the Registration Period, the Company proposes
to register shares of Common Stock or securities convertible into or
exercisable for Common Stock under the Securities Act (other than pursuant
to a registration statement on Form S-4 or S-8 or any successor form, or
filed in connection with an exchange offer or an offering of securities
solely to the existing shareholders or employees of the Company), whether
for sale for its own account or for the account of any other person holding
registration rights with respect to the securities of the Company, then the
Company shall give written notice of such proposed filing to the holders
of Registrable Stock at least twenty days before the anticipated filing
date, and such notice shall offer the holders of Registrable Stock the
opportunity to register such number of shares of Registrable Stock as the
holders of Registrable Stock may request. The Company shall use its best
efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the holders of Registrable Stock to
include such securities in such offering on the same terms and conditions
as any similar securities of the Company included therein; provided,
however, that if the managing underwriter or underwriters of such offering
delivers an opinion to the holders of Registrable Stock that the total
amount or kind of securities which it or the Company, and any other persons
or entities, intend to include in such offering is such as to materially
and adversely affect the success of such offering, then the amount or kind
of securities to be offered for the accounts of each of the holders of
Common Stock or securities convertible into or exercisable for Common Stock
proposed to be registered (other than the Company and any persons exercising
demand registration rights) shall be reduced or limited in proportion to
their respective values to the extent necessary to reduce the total amount
of securities to be included in such offering to the amount recommended by
such managing underwriter. For purposes fo this Section 7(c), value
shall mean principal amount with respect to debt securities and the proposed
offering price per share with respect to equity securities. Notwithstanding
the foregoing, if, at any time after giving written notice of its intention
to register Common Stock or other securities convertible into or exercisable
for Common Stock and prior to the effectiveness of the registration
statement filed in connection with such registration, the Company determines
for any reason either not to effect such registration or to delay such
registration, the Company may, at its election, by delivery or written
notice to the holders of Registrable Stock, (i) in the case of a determination
not to effect registration, relieve itself of its obligations to register
any Registrable Stock in connection with such registration, or (ii) in the
case of determination to delay the registration, delay the registration of
such Registrable Stock for the same period as the delay in the registration
of such other shares of Common Stock or other securities convertible into
or exercisable for Common Stock.
(d) Obligations of the Company: Whenever required under this Section
7 to effect the registration of any Registrable Stock, the Company shall,
as expeditiously as is reasonalby possible:
(i) Prepare and file with the Commission a registration
statement with respect to such Registrable Stock and use its best efforts
to cause such registration statement to become effective.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statements.
(iii) Furnish to the holders of Registrable Stock such numbers
of copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other documents as the
shareholders may reasonably request in order to facilitate the disposition
of Registrable Stock owned by the holders of Registrable Stock.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue
sky laws of such jurisdictions as shall be reasonably requested by the
holders of Registrable Stock, provided that the Company shall not be
required in connnection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process in any
such states or jurisdictions. Anything in this Agreement to the contrary
nothwithstanding with respect to the bearing of expenses, if any
jurisdiction in which the securities shall be qualified shall require that
expenses incurred in connection with the qualification of the securities
in the jurisdiction be borne by selling shareholders, then such expenses
shall be payable by the holder or holders of Registrable Stock pro rata
to the extent required by such jurisdiction.
(v) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such offering.
The holders of Registrable Stock shall also enter into and perform their
obligations under such an agreement.
(vi) Notify the holders of Registrable Stock, at any time when
a prospectus relating to Registrable Stock covered by such registration
statement is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therin not
misleading in the light of the circumstances then existing.
(vii) Furnish to the holders of Registrable Stock, on the date
that shares of Registrable Stock are delivered to the underwriters for sale
in connection with a registration pursuant to this Section 7, if such
securities are being sold by underwriters, or, on the date that the
registration statement with respect to such securities becomes effective,
(i) an opinion, dated such date, of counsel representing the Company for the
purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the holders of Registrable Stock and (ii) a
letter dated such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, and to the holders of
Registrable Stock.
(e) Furnish Information: The holders of Registrable Stock shall
furnish to the Company, such reasonable information regarding the holders
of Registrable Stock, the Registrable Stock, and the intended method of
disposition of such securities as shall be required to effect the
registration of Registrable Stock as to which the holders of Registrable
Stock have requested registration.
(f) Expenses of Registration: All expenses incident to the Company's
performance of or compliance with this Section 7 including, without
limitation, all registration and filing fees, fees and expenses of complying
with State securities or blue sky laws, printing expenses and fees and
disbursements of counsel for the Company and of independent public
accountants (including the expense of any special audit), but excluding
underwriting commissions and discounts and the fees and disbursements of
counsel for the holders of Registrable Stock, shall be borne by the
Company. The holders of Registrable Stock shall bear their own pro rata
share (calculated according to the number of their shares as a fraction
of the total number of shares covered by such registration statement) of
all underwriting commissions and discounts incurred in connection with
any offering of Registrable Stock with respect to a registration pursuant
to this Section 7, as well as their expenses if they have counsel separate
from counsel for the Company.
(g) Idemnification and Contribution: In the event any shares of
Registrable Stock are included in a registration statement under Section
7(b) or Section 7(c) hereof:
(i) To the extent permitted by law, the Company will indemnify
and hold harmless the holders of Registrable Stock, any underwriter (as
defined in the Securities Act), any other person or entity selling
securities in such registration statement, and each director and officer
of, and person, if any, who controls such underwriter or such person or
entity within the meaning fo the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following
statements, ommissions or violations (collectively a "Violation"): (x) any
untrue statement or alleged untrue statement of a material fact contained
in such registration statement, including any preliminary prospectus or
final prospectus contained therin or any amendments or supplements thereto,
(y) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein
not misleading, or (z) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any
rule or regulations promulgated under the Securities Act, the Exchange Act
or any state securities law; provided, however, that the indemnity
agreement contained in this subsection (i) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or
action to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by, or
which results from the bad faith or gross negligence of, the holder or
holders of Registrable Stock, any underwriter for holder or holders of
Registrable Stock or controlling person of the holder or holders of
Registrable Stock.
(ii) To the extent permiteed by law, the holder or holders of
Registrable Stock will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the registration
statement, each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter, any other person or
entity selling securities in such registration statement, and each
director and officer of, and person, if any, who controls such underwriter
or such other person or entity, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, or underwriter or controlling person, or
such other person or entity or director, officer or controlling person
may become subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished by the holder or holders of Registrable Stock
expressly for use in connection with such registration or results from
the bad faith or gross negligence of the holder or holders of Registrable
Stock, or any underwriter for the holder or holders of Registrable Stock;
provided, however, that the indemnity agreement contained in this subsection
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of the holder or holders of Registrable Stock, which consent shall
not be unreasonably withheld.
(iii) Promptly after receipt by an indemnified party under this
Section 7(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying
party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties. An indemnified party shall have the right to
retain its own counsel, however, but the fees and expenses of such counsel
shall be at the expense of the indemnified party, unless (x) the employment
of such counsel has been specifically authorized in writing by the
indemnifying party, (y) the indemnifying party has failed timely to assume
the defense and employ counsel, or (z) the named parties to any such action
(including any impleaded parties) include both the indemnified party and
the indemnifying party, and the indemnified party shall have been advised
by such counsel that there may be one or more legal defenses available to
it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have
the right to assume the defense of such action on behalf of such indemnified
party, it being understood, however, that the indemnifying party shall not,
in connection with any one such action or separate substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys for all indemnified parties).
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial to
its ability to defend such action, shall relieve such indemnifying party
of any liability to the indemnified party under this Section 7(g), but the
omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 7(g).
(iv) If the indemnification provided for in subsection (i) and
(ii) of this Section 7(g) is unavailable or insufficient to hold harmless
an indemnified party under such subsection in respect of any losses, claims,
damages or liabilities or action in respect thereof or referred to therein,
then each indemnifying party shall in lieu of indemnifying such indemnified
party contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or actions in
such proportion as is appropriate to reflect the relative fault of the
Company, on the one hand, and the holder or holders of Registrable Stock,
on the other, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or actions as well
as any other relevent equitable considerations, including the failure to
give the notice required under such subsections. The relative fault shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact relates to information supplied
by the Company on the one hand, or the holder or holders of Registrable
Stock, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Company and the holder or holders of Registrable Stock
agree that it would not be just and equitable if contribution pursuant to
this Section 7(g)(iv) were determined by pro rata allocation or by any other
method of allocation which did not take account of the equitable
considerations referred to above in this subsection. No person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of the
Securities Act), shall be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation.
(v) The obligations of the Company and the holder or holders
of Registrable Stock under this Section 7(g) shall survive the completion
of any offering of Registrable Stock in a registration statement under
this Section 7.
(h) Successors and Assigns: The agreement of the Company in this
Section 7 shall inure to the benefit of and be enforceable by any holder
or holders at the time of any Registrable Stock, whether so expressed
or not, provided that the termination of registration rights in respect
of any shares of Registrable Stock by reason of the operation of Section
7(b) shall be binding upon any transferee of such shares, and, in the
event such termination applies to only a portion of the shares of
Registrable Stock at the time held by any holder thereof, in the absence
of contrary agreement between such holder and any transferee of such shares,
upon the transfer of less than all of the shares by such holder after
such termination, such termination shall apply pro rata to the shares so
transferred and the shares retained by such holder, or any subsequent
transferee. Upon the request of any such holder, the Company will confirm
in writing to any transferee of such holder's Registrable Stock the
Company's continuing obligation to afford such transferee the benefits of
the Company's agreements contained in this Section 7, but no failure of the
Company to confirm such obligations shall in any way impair such transferee's
rights under this Section 7.
8. Governing Law: This Subscription Agreement has been made in, and shall
be construed in accordance with, the laws of the State of New York
applicable to contracts made and to be fully performed therein.
9. Severability: Each provision of this Subscription Agreement is intended
to be severable from every other provision, and the invalidity or illegality
of any provision shall not affect the validity or legality of the remaining
provisions of this Subscription Agreement.
10. Assignability: This Subscription Agreement is not transferable or
assignable by the undersigned.
11. Backup Withholding: The undersigned verifies under penalties of perjury,
that (i) the Taxpayer identification Number set forth in Section 15 is his
or its correct taxpayer identification number, and (ii) that the
undersigned is not subject to backup withholding either:
(a) because the undersigned has not been notified that the
undersigned is subject to backup withholding as a result of a failure to
report all interest or dividends; or
(b) because the Internal Revenue Service has notified the
undersigned that the undersigned is no longer subject to backup
withholding.**
12. Modification: Neither this Subscription Agreement nor any of its
provisions shall be waived, modified, discharged or terminated except
by an instrument in writing signed by the party against whom any such
waiver, modification, discharge or termination is sought.
13. Notices: Any notice, demand or other communication which any party
to this Subscription Agreement 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 box,
stamped registered or certified mail, return receipt requested, addressed
to such address as may be listed on the books and records of the Company;
or
(b) delivered personally at such address.
14. Entire Agreement: This Subscription Agreement contains the entire
understanding and agreement of the parties with respect to the subject
matter hereof and supersedes all negotiations, representations and other
agreements made by and between such parties with respect hereto.
_________________________________
** You must cross out item (ii) above if you have been notified by the
IRS that you are subject to backup withholding because of underreporting
interest or dividends on your tax return and if you have not received a
notice from the IRS advising you that backup withholding has terminated.
ALL STATES
THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN STATES AND ARE BEING
OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SHARES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. THE SHARES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY
STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY
OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS
OFFERING OR THE ACCURACY OR ADEQUACY OF ANY INFORMATION PROVIDED TO
THE UNDERSIGNED IN CONNECTION WITH AN INVESTMENT IN THE SHARES. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The undersigned has read the paragraph appearing under the heading
"ALL STATES" above.
15. General Information:
(a) Name of Purchaser: Louis Marx, Jr.
(b) Number of Shares to be
Purchased at $0.30 per Share: 333,333
(c) Address: 667 Madison Avenue
New York, NY 10021
(d) Telephone Number: 212-758-8500
(e) Social Security or Tax
Identification No.: 073 32 0878
(f) Date and jurisdiction of
organization if purchaser
is a business entity:
(g) Date and governing
jurisdiction if
purchaser is a trust:
(h) Trustees:
Name Address Telephone No.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
The undersigned acknowledges agreement to the foregoing and agrees
to the purchase of the Shares
Louis Marx, Jr.
Agreed to and accepted
this 20th day of September, 1999
AMERICOMM RESOURCES CORPORATION
By: A. E. Whitehead
Chairman
<TABLE> <S> <C>
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