IMPORTANT: PLEASE READ CAREFULLY BEFORE SIGNING; SIGNIFICANT REPRESENTATIONS
ARE CALLED FOR HEREIN.
CONSUMER NET MARKETPLACE, INC.
SUBSCRIPTION AGREEMENT
Consumer Net Marketplace, Inc.
1900 Los Angeles Street, Second Floor
Simi Valley, California 93065
Attention: Fredrick Rice, President
1. SUBSCRIPTION. The undersigned desires to purchase the number of
shares of Series 1 Class A Common Stock, no par value (the "Common Stock"), of
Consumer Net Marketplace, Inc., a California corporation (the "Corporation"), as
provided in SECTION 2 hereof.
The undersigned agrees to be bound by all of the terms and provisions
of the offering of the Common Stock as described herein, and acknowledges that
the Corporation will be relying on the information and representations with
respect to it set forth herein in determining whether an investment in the
Common Stock is suitable for it and whether the undersigned otherwise qualifies
to purchase the Common Stock. The undersigned represents and warrants that such
information is true and correct as of the date of this Subscription Agreement.
2. AMOUNT AND PRICE; ADVERTISING PROGRAM. The maximum number of shares
of Common Stock which may be subscribed for by the undersigned pursuant to this
Subscription Agreement is 1,000,000 shares at a purchase price of $2.00 per
share. The purchase price of the Common Stock subscribed for hereunder shall be
payable from time to time by the undersigned in the form of outdoor advertising
space as follows:
The undersigned will supply remnant space on certain of the
undersigned's outdoor advertising display faces on a space available
preemptable basis to the extent ordered by the Corporation in writing.
Such remnant space shall be valued for purposes of this Subscription
Agreement at fifty percent (50%) of the negotiated rate for outdoor
advertising space in the market where the remnant space is available
(excluding any production costs). The undersigned will be deemed to have
purchased and paid for shares of Common Stock immediately upon the
undersigned's provision of any remnant outdoor advertising space to the
Corporation. From time to time, the undersigned may submit written
requests for stock certificates representing shares of Common Stock that
have been purchased under this Subscription Agreement. The Corporation
shall promptly prepare and deliver stock certificates representing shares
of Common Stock that have been
purchased under this Subscription Agreement upon receipt of written request
from the undersigned.
In the event the Corporation fails to make complete and timely payment
of any and all amounts due to the undersigned for outdoor advertising space
purchased from the undersigned for cash, the undersigned's subscription for
the shares of Common Stock hereunder may be revoked solely at the option of
the undersigned, in which case this Subscription Agreement shall be null
and void and of no further effect; provided, however, that such revocation
shall not apply to any shares which have already been purchased pursuant to
this Subscription Agreement through the undersigned's provision of remnant
outdoor advertising space as provided for above.
3. RISK FACTORS. THE UNDERSIGNED ACKNOWLEDGES THAT AN INVESTMENT IN THE
CORPORATION INVOLVES A HIGH DEGREE OF RISK WHICH MAY RESULT IN THE LOSS OF THE
ENTIRE AMOUNT OF MY INVESTMENT. There can be no assurance that the Corporation
will be profitable. The undersigned understands that the Corporation is still
in the development stage, does not have a significant operating history and has
incurred losses to date. The undersigned has such knowledge and experience in
financial and business matters that the undersigned is capable of determining
and evaluating the merits and risks of an investment in the Corporation.
4. REPRESENTATIONS AND WARRANTIES. The undersigned represents and
warrants to the Corporation that:
(a) The undersigned is an "accredited investor" within the meaning of
Regulation D promulgated by the Securities and Exchange Commission pursuant
to the Securities Act of 1933, as amended (the "Securities Act") insofar as
the undersigned is a corporation, not formed for the specific purpose of
acquiring the securities offered, with total assets in excess of
$5,000,000.
(b) The undersigned has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks
of an investment in the Corporation.
(c) The undersigned has the ability to bear the economic risks of
Investor's prospective investment, and is able, without materially
impairing its financial condition, to hold the Common Stock for an
indefinite period of time and to suffer complete loss on its investment
(d) The undersigned is not acting on the basis of any promotional
sales materials, or representations and warranties by any person or
contained in any document, except for this Agreement and the business plan
and financial information provided to it and any other documents or
information furnished by the Corporation upon request by it or its
advisors, including, but not limited to a preliminary draft of the
Company's registration statement on Form S-1 that the Company has indicated
it
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proposes to file in substantially the same form with the United States
Securities and Exchange Commission.
(e) The securities for which the undersigned is subscribing will be
acquired for its own account for investment purposes only and not with a
view to, or for resale in connection with, any distribution of securities
within the meaning of the Securities Act, and the undersigned does not now
have any reason to anticipate any change in circumstances or other
particular occasion or event which would cause it to sell or transfer such
securities.
(f) The address and federal employer identification number set forth
herein are true and correct. The undersigned represents and warrants that
its principal place of business is within the state set forth on the
signature page hereof. The Common Stock subscribed for has been offered
and will be purchased in such state.
(g) The undersigned understands that no Commissioner of Securities of
any state or other jurisdiction has made any finding or determination
relating to the fairness of an investment in the Common Stock, that no
Commissioner of Securities of any state or other jurisdiction has endorsed
the Common Stock, and that the undersigned must bear the economic risk of
an investment in the Common Stock for an indefinite period of time because
the Common Stock has not been registered under any securities laws and
therefore cannot be sold without registration under applicable securities
laws or an exemption from such registration is available.
(h) The execution and delivery of this Subscription Agreement and the
purchase of the Common Stock hereunder is within the undersigned's power
and authority, and has been duly authorized by all necessary action.
(i) The information provided to the Corporation herein is true and
correct in all respects as of the date hereof. The undersigned agrees to
notify the Corporation immediately if any of the statements made herein
shall become untrue.
5. RESTRICTIONS ON TRANSFER. The undersigned understands that it must
bear the economic risk of the purchase of the Common Stock for an indefinite
period of time, because (a) the Common Stock has not been registered under the
Securities Act and applicable state securities laws; (b) the Common Stock may
therefore not be sold, transferred, pledged or otherwise disposed of unless the
shares are subsequently so registered or, in the opinion of counsel for or
satisfactory to the Corporation, registration under the Securities Act or any
applicable state securities laws is not required; (c) except as provided in
SECTION 6 below, the Corporation neither has an obligation to register the
Common Stock nor has it agreed to do so, nor has it contemplated doing so in the
future; and (d) the Corporation is under no obligation to perfect any exemption
for resale of the Common Stock.
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6. REGISTRATION RIGHTS.
(a) After the Corporation's initial registered public offering, the
Corporation shall use its best efforts to comply with the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Securities Exchange
Act"). If, at any time or from time to time, the Corporation shall determine to
register any of its securities, either for its own account or the account of a
security holder or holders, other than a registration relating solely to
employee benefit plans on Form S-8 or similar forms which may be promulgated in
the future or a registration on Form S-4 or similar forms which may be
promulgated in the future relating solely to a Securities and Exchange
Commission Rule 145 or similar transaction, the Corporation will (i) promptly
give to the undersigned written notice thereof and (ii) include in such
registration (and any related qualification under Blue Sky laws or other
compliance), and in any underwriting involved therein, all Registrable
Securities of the undersigned as specified in a written request or requests made
within thirty (30) days after receipt of such written notice from the
Corporation. For the purposes of this Subscription Agreement, the term
"Registrable Securities" shall mean all shares of Common Stock purchased under
this Subscription Agreement owned by the undersigned and other securities issued
or issuable with respect to such Common Stock by way of a stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or reorganization; provided, however, that a Registrable
Security will cease to be a Registrable Security when (i) a registration
statement covering such Registrable Security has been declared effective by the
Securities and Exchange Commission (the "Commission") and it has been disposed
of pursuant to such effective registration statement or (ii) it is eligible to
be sold under circumstances in which all of the applicable conditions of Rule
144 (or any similar provisions then in force) under the Securities Act are met.
(b) If the registration of which the Corporation gives notice is for
a registered public offering involving an underwriting, the Corporation shall so
indicate in the notice given pursuant to SECTION 6(a). In such event the right
of the undersigned to registration pursuant to this SECTION 6 shall be
conditioned upon the undersigned agreeing to participate in such underwriting
and in the inclusion of the undersigned's Registrable Securities in the
underwriting to the extent provided herein. The undersigned shall (together
with the Corporation and the other holders distributing their securities through
such underwriting) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the
Corporation or by other holders exercising any demand registration rights.
Notwithstanding any other provision of this SECTION 6, if the underwriter
determines that marketing factors require a limitation of the number of shares
to be underwritten, the underwriter may exclude some of the Registrable
Securities or other securities from such registration and underwriting and the
securities to be included in the registration and underwriting shall be
allocated PRO RATA among the undersigned and the other holders based on the
number of Registrable Securities and other securities initially included in such
registration and underwriting. If the undersigned disapproves of the terms of
any such underwriting, the undersigned may elect to withdraw therefrom by
written notice to the Corporation and the underwriter. Any securities excluded
or withdrawn from such underwriting shall be withdrawn from such registration.
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(c) The Corporation will indemnify the undersigned, each of its
officers and directors and partners, and each person controlling the undersigned
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
SECTION 6, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in any litigation, commenced
or threatened, arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Corporation of any rule or regulation promulgated under the
Securities Act applicable to the Corporation and relating to action or inaction
required of the Corporation in connection with any such registration,
qualification or compliance, and will reimburse the undersigned, each of its
officers and directors and partners, and each person controlling the
undersigned, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Corporation will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with
written information furnished to the Corporation by an instrument duly executed
by the undersigned or underwriter and stated to be specifically for use therein.
7. INDEMNIFICATION. The undersigned understands the meaning and legal
consequences of its representations and warranties set forth in Paragraph 4 and
5 hereof and elsewhere herein and the undersigned acknowledges that the
Corporation has relied upon such representations and warranties, and the
undersigned agrees to indemnify and hold harmless the Corporation, and its
officers, directors, employees, agents and representatives from and against any
and all claims, demands, losses, damages, expenses or liabilities (including
attorneys' fees) due to or arising out of a breach of any such representations
or warranties.
8. REPRESENTATIONS AND WARRANTIES OF CORPORATION. The Corporation hereby
represents and warrants to the undersigned that the following is true and
correct on the date hereof and on the date of the issuance of the Common Stock:
8.1 ORGANIZATION. The Corporation is a corporation duly organized
and validly existing under, and by virtue of, the laws of the State of
California and is in good standing under such laws. The Corporation has all
requisite corporate power to own and operate its properties and assets, and to
carry on its business as presently conducted and as proposed to be conducted.
The Corporation is qualified to do business as foreign corporation in any
jurisdiction in which failure to qualify would have a material adverse effect on
the Corporation's business.
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8.2 AUTHORITY. The Corporation has all requisite legal and corporate
power and authority to execute and deliver this Agreement, to sell and issue the
shares of Common Stock, and to carry out and perform its obligations under the
terms of this Agreement.
8.3 NO VIOLATION. The execution, delivery and performance of and
compliance with this Agreement and the issuance of the Common Stock have not
resulted and will not result in any violation of, or conflict with, or
constitute a default under any terms of its Articles of Incorporation or Bylaws,
or in any material respect of any term or provision of any mortgage, indenture,
contract, agreement, instrument, judgment or decree foregoing, or result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Corporation.
8.4 BINDING OBLIGATION. All corporate action on the part of the
Corporation, its officers, directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement, the
authorization, sale, issuance and delivery of the Common Stock and the
performance of the Corporation's obligations hereunder has been taken. This
Agreement shall constitute the valid and binding obligations of the Corporation,
enforceable against the Corporation in accordance with its terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies. No consent, approval, order or authorization of or
designation, declaration or filing with any state or federal governmental
authority on the part of the Corporation is required in connection with the
valid execution and delivery of this Agreement, or the offer, sale or issuance
of the Common Stock, or the consummation of any other transaction contemplated
hereby, except qualification (or taking such action as may be necessary to
secure an exemption from qualification, if available) under applicable Blue Sky
laws, or the offer and sale of the Common Stock, which filing and qualification,
if required, will be accomplished in a timely manner prior to or promptly upon
the issuance of the Common Stock.
8.5 CAPITALIZATION. After the filing of the Company's proposed
Amended and Restated Articles of Incorporation, the authorized capital stock of
the Corporation shall consist of 50,000,000 shares of Common Stock and 1,000,000
shares of Series 1 Class B Common Stock, of which 6,462,500 shares of Common
Stock and 75,000 shares of Series 1 Class B Common Stock will be issued and
outstanding prior to the issuance of the shares contemplated hereby. All such
issued and outstanding shares will be, and all currently issued and outstanding
shares are, duly authorized, validly issued, fully paid and nonassessable. The
Corporation has reserved for issuance up to 2,500,000 shares of Common Stock
issuable upon exercise of options granted or available for grant under the
Corporation's stock option plans. Except as set in this Section 8.5, there are
no options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the capital stock or other securities of the Corporation, nor any agreements
or understandings with respect thereto. The Corporation is not a party or
subject to any agreement or understanding, and, to the Corporation's knowledge,
there is no agreement or understanding between any persons or
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entities, which affects or relates to the voting or giving of consents with
respect to any security or by a director of the Corporation.
8.6 ISSUANCE OF COMMON STOCK. The Common Stock, when issued, sold
and delivered in compliance with the provision of this Agreement, will be duly
and validly issued and will be fully paid and nonassessable and free and clear
of all liens, pledges, charges, security interests, encumbrances, title
retention agreements, preemptive rights, options or restrictions of any kind;
PROVIDED, HOWEVER, that the Common Stock will be subject to restrictions on
transfer under state or federal securities laws. There are no outstanding rights
of first refusal or preemptive rights applicable to the Common Stock.
8.7 PRIOR EXCEPTIONS FROM REGISTRATION. All offers and sales of the
Corporation's capital stock to the date hereof (i) were exempt from the
registration requirements of Section 5 of the Securities Act and (ii) were in
all material respects made in compliance with all applicable state securities
laws.
8.8 FINANCIAL STATEMENTS. The Corporation has delivered to the
undersigned the Corporation's balance sheet and related statements of income and
loss for the year-ended December 31, 1997 (the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved, are in accordance with the books and records of the Corporation, and
fairly present the financial condition and operating results of the Corporation
for the periods indicated. Except as set forth in the Financial Statements, the
Corporation does not have any liabilities, absolute, contingent or otherwise,
except for liabilities and obligations incurred in the ordinary course of
business since January 1, 1998.
8.9 INSURANCE. The Corporation has in full force and effect fire,
casualty and liability insurance policies with recognized insurers with such
coverages as are sufficient in amount to allow replacement of the tangible
properties of the Corporation that might be damaged or destroyed, subject to
usual and customary deductibles.
8.10 EXEMPT TRANSACTION. Based in part upon the accuracy of the
undersigned's representations herein, the offer, sale and issuance of the Common
Stock to be issued in conformity with the terms of this Agreement constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act.
8.11 FULL DISCLOSURE. No statement by the Corporation contained in
this Agreement or in any certificate furnished or to be furnished to the
undersigned and none of the other information or documents furnished to the
undersigned by the Corporation or its agents in connection with the sale of the
Common Stock, when taken as a whole, contains or will contain any untrue
statement of material fact or omits or will omit to state a material fact
necessary in order to make the statement contained herein or therein not
misleading in light of the circumstances under which they were made.
8.12 BROKER FEES. The Corporation has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or
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any similar charges in connection with this Agreement or any transaction
contemplated hereby.
8.13 INDEMNIFICATION. The Corporation understands the meaning and
legal consequences of its representations and warranties set forth in this
Section 8 and elsewhere herein and it acknowledges that the undersigned has
relied upon such representations and warranties, and it agrees to indemnify and
hold harmless the undersigned, and its officers, directors, employees agents and
representatives from and against any and all claims, demands, losses, damages,
expenses or liabilities (including attorneys' fees) due to or arising out of a
breach of any such representations or warranties.
8.14 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Corporation, the
Corporation agrees to:
(a) Use its best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act at all times after the effective date of the first registration
under the Securities Act filed by the Corporation for an offering of its
securities to the general public;
(b) Use its best efforts to then file with the Commission in a
timely manner all reports and other documents required of the Corporation under
the Securities Exchange Act at any time after it has become subject to such
reporting requirements;
(c) So long as the undersigned owns any Common Stock, to furnish
to the undersigned forthwith upon request a written statement by the Corporation
as to its compliance with the reporting requirements of said Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by the Corporation for an offering of its securities to the general
public) and of the Securities Act and the Securities Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Corporation, and such other reports and
documents of the Corporation as the undersigned may reasonably request in
availing itself of any rule or regulation of the Commission allowing the
undersigned to sell such Common Stock without registration.
8.15 BROADCAST PROPERTIES. The Corporation does not own or have an
official position or ownership interest in any broadcast station or other mass
media entity regulated by the FCC pursuant to the Communications Act of 1934, as
amended, including but not limited to a cable television system or newspaper
property.
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9. ACCEPTANCE; REVOCATION. The Corporation hereby acknowledges and
agrees that it is not entitled to reject this subscription or otherwise withdraw
from, terminate or revoke this Subscription Agreement following the time at
which the undersigned begins placing the Corporation's advertising on the remant
space.
10. GENERAL. This Agreement is governed by the laws of the State of
Arizona. This Agreement sets forth the entire understanding of the parties
hereto concerning the subject matter herein. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, and their respective
successors, personal representatives and assigns. In the event any provision of
this Subscription Agreement is held to be unenforceable or invalid by any court
of competent jurisdiction, the validity and enforceability of the remaining
provisions shall not be affected thereby.
11. TERMINATION. This Subscription Agreement shall lapse and be of no
further force or effect with respect to shares of Common Stock not purchased and
paid for by the undersigned pursuant to the terms of SECTION 2 of this Agreement
prior to December 31, 1999.
THE SECURITIES SUBSCRIBED FOR HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES ACT AND MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF ABSENT SUCH REGISTRATION OR AN
EXEMPTION THEREFROM.
THE FOLLOWING SIGNATURE PAGE SHOULD BE DULY EXECUTED BY THE PURCHASER AND THE
ENTIRE EXECUTED SUBSCRIPTION AGREEMENT SHOULD BE DELIVERED TO CONSUMER NET
MARKETPLACE, INC., ATTN: FREDRICK RICE, AT 1900 LOS ANGELES STREET, SECOND
FLOOR, SIMI VALLEY, CALIFORNIA 93065.
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SIGNATURE PAGE FOR SUBSCRIPTION AGREEMENT FOR
CONSUMER MARKETPLACE, INC.
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The undersigned hereby subscribes for up to 1,000,000 shares of Common
Stock at a price of $2.00 per share payable from time to time by the undersigned
in the form of outdoor advertising space pursuant to the terms set forth in the
above subscription agreement.
The undersigned represents that it has read the above Subscription
Agreement and the representations therein made by it are true and correct.
IN WITNESS WHEREOF, this Subscription Agreement has been executed by the
undersigned as of October __, 1998, at _____________________________________
(location).
ELLER MEDIA COMPANY
By:
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Name:
------------------------
Title:
------------------------
Address:
EIN:
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SUBSCRIPTION ACCEPTED AND AGREED TO BY:
CONSUMER NET MARKETPLACE, INC.
By:
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Fredrick Rice, President
Date:
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