Rev-97c
SUBSCRIPTION AGREEMENT for $750,000 in CASH
THE QUARTZ GROUP, INC.
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇
FAX Number (▇▇▇) ▇▇▇-▇▇▇▇
SUBSCRIPTION AGREEMENT
Common Stock, Class E Common Stock Purchase Warrants
and Limited Recourse $750,000 Promissory Note
THE QUARTZ GROUP, INC.
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FAX No. (▇▇▇) ▇▇▇-▇▇▇▇
1. SUBSCRIPTION. The undersigned, an accredited investor within
the meaning of Regulation D promulgated under the Securities Act of 1933
(herein called the "Accredited Investor"), hereby subscribes for the purchase
of Seven Million (7,000,000) shares (the "Shares") of common stock ("Common
Stock"), Six Million (6,000,000) Class E Common Stock Purchase Warrants
exercisable at $0.25 per share expiring on September 30, 2002 ("Class F
Warrants") and a non-interest bearing Limited Recourse Promissory Note in the
principal amount of $750,000, all to be issued by THE QUARTZ GROUP, INC., a
Colorado corporation ("the "Company") for the account of the Accredited
Investor upon the terms and conditions set forth in this Subscription
Agreement. The subscription price shall be Seven Hundred Fifty Thousand
Dollars ($750,000) in United States funds, payable in cash upon acceptance of
this subscription by the Company. The form of Class E Warrants and Limited
Recourse Promissory Note offered hereby are each attached Exhibits to this
Subscription Agreement and are incorporated by reference herein. The
Investor acknowledges that the liability of the Company to pay the obligations
represented by the Limited Recourse Promissory Note is limited to proceeds
realized by the Company, if any, from the exercise of the Class E Warrants and
the exercise of any other common stock purchase warrants issued and sold by
the Company on or prior to September 30, 1997 which remain outstanding as of
September 30, 1997.
Investors in this Offering should review, among other information available
from the Company, the summary of certain risk factors described in Section 3
of this Subscription Agreement before making an investment decision.
2. DESCRIPTION OF OFFERINGS.
2.1. THE OFFERINGS. The Company is concurrently offering (i) to the
Accredited Investor for the sum of $750,000, the Shares, Class E Warrants and
Limited Recourse Promissory Note described above, (ii) to two other accredited
investors for the total sum of $50,000, a total of 1,000,000 shares of common
stock, and (iii) to one other accredited investor for a total sum of $100,000,
a total of 1,000,000 shares of common stock and 500,000 Class F Warrants
exercisable into common stock at $.50 per share expiring on September 30, 2002
(herein collectively called the "Offerings"). The Offerings are being made on
a "best efforts" to a limited number of accredited investors in a private
placement offering of securities in accordance with Rule 505 of Regulation D
under the U.S. Securities Act of 1933, as amended (the "Securities Act").
Prospective investors should note that the classes of securities and
consideration per share being paid in the separate offerings included in the
Offerings are not proportionate to each other.
The Offerings will expire at the earlier of receipt and acceptance of
subscriptions to a total of $900,000 in subscriptions or on September 30, 1997
unless extended by the Company for an additional period not exceeding 30 days.
The Company reserves the right to terminate the Offerings at any earlier date.
2.2. The Accredited Investor acknowledges that an investment in the
securities offered hereby is speculative, involves a high degree of risk, and
should not be purchased by persons who cannot afford the loss of their entire
investment, and represents that the Accredited Investor has relied only on the
information contained herein or otherwise provided in writing by duly
authorized representatives of the Company. The Accredited Investor
acknowledges receipt of the Company's current Business Plan. The Accredited
Investor has carefully read and reviewed this Subscription Agreement and all
of the Company's filings during the last two fiscal years with the Securities
and Exchange Commission which are incorporated by reference herein (including,
without limitation, the Company's Annual Report on Form 10-KSB for the fiscal
year ended June 30, 1995, its interim quarterly Reports on Form 10-QSB for the
Quarters ended September 30, 1996, December 31, 1996 and March 31, 1997, and
its Current Report on Form 8-K dated as of June 2, 1997, and has asked such
questions of management of the Company and received such additional
information as he, she or it deems necessary in order for the Accredited
Investor to make an informed decision with respect to an investment in the
Company's securities. The Accredited Investor represents and warrants that
he, she or it has received complete and satisfactory answers to all such
inquiries. The Accredited Investor is not relying on oral or written
representations or assurances from the Company or any representatives of the
Company, other than as set forth in this Agreement, the Company's current
Business Plan, reports filed by the Company with the Securities and Exchange
Commission and any documents in writing signed by ▇▇▇▇▇ ▇. ▇▇▇▇▇ as the
President of the Company.
The Company further agrees to make available to the Accredited Investor
the opportunity to ask questions of, and receive written answers from, ▇▇▇▇▇
▇. ▇▇▇▇▇ as the President of the Company concerning the terms and conditions
of this Offering, the business and financial status of the Company and any
other relevant matters, and to obtain any additional written information, to
the extent that the Company possesses such information or can acquire it
without unreasonable effort or expense, necessary to verify the accuracy of
the information set forth in the documents furnished to the Accredited
Investor in connection with this Offering.
2.3. SECURITIES LAW MATTERS. The Accredited Investor acknowledges
that the Shares have not been, and will not be, registered under the
Securities Act or qualified under applicable state securities laws. The
Company will rely on the representations of the accredited investors in the
Offerings for an exemption from registration under Rule 505 of the Securities
Act of 1933 (the "Securities Act") as to the securities issued pursuant to the
Offerings and any shares of common stock issued upon exercise of warrants
included in the Offerings. The transferability thereof will be restricted by
the registration or qualification provisions of the Securities Act and may be
further restricted by state laws separate and apart from the provisions of the
Securities Act.
2.4. OTHER.
2.4.1. This Subscription Agreement may be executed in one or more
counterparts and transmitted by facsimile telephonic transmission, each of
which shall be deemed to constitute an original and shall become effective
when one or more counterparts have been signed by each of the parties hereto
and delivered or transmitted by facsimile telephonic transmission to the other
party.
Subscription Agreement -2-
2.4.2. This Agreement may be executed in one or more counterparts
and it is not necessary that the signatures of all parties appear on the same
counterpart, but such counterparts together shall constitute but one and the
same agreement. The headings of the sections of this Agreement have been
inserted for convenience of reference only, and shall not be deemed to be a
part of this Agreement.
2.3.3. The Accredited Investor and the Company agree this Agreement
shall be governed by and construed in accordance with the laws of the State of
California. Any dispute arising out of or relating to this Agreement and the
transactions contemplated herein or the breach of this Agreement or such
transactions shall be resolved by arbitration pursuant to the Rules of the
American Arbitration Association then in effect and shall take place in the
County of Orange, State of California. Any litigation, including litigation
arising out of or concerning such arbitration, shall be conducted exclusively
in the trials courts of general jurisdiction for the County of Orange, State
of California. All parties hereby consent to the jurisdiction of such court
for all such litigation.
2.3.4. Time shall be of the essence of this Agreement.
3. CERTAIN RISK FACTORS. The securities being offered hereby are
speculative and subject to a high degree of risk of loss of the investment.
Persons who cannot afford to lose their investment should not purchase the
securities offered hereby. Prospective investors should consider carefully,
among other factors described herein, the following matters:
HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; DEFICIENCY IN
STOCKHOLDERS' EQUITY; DEFICIT IN WORKING CAPITAL; AUDITOR'S QUALIFICATION;
PROPOSED JOINT VENTURE
The Company commenced operations in September 1987, was required to seek
the protection of Chapter 11 of the U.S. Bankruptcy Act in 1992, and has not
operated on a profitable basis. Net losses before extraordinary items were
$1,121,000 and $372,000 for the fiscal years ended June 30, 1996 and 1995,
respectively, and $604,000 for the nine months ended March 31, 1997. At March
31, 1997, the Company had an accumulated deficit from operations since its
inception of $3,331,000 and a $701,000 deficiency in its stockholders' equity.
Excluding the effect of commitment and continent liabilities, if any, total
liabilities at March 31, 1997 were $946,000 and there were also redeemable
Series A preferred stock outstanding of $136,000 which require mandatory
redemption from future net income, if any.
At March 31, 1997, the Company had limited cash resources of $26,000 and
a deficiency in working capital of $386,000; included in current liabilities,
however, is a contingent liability of $169,000 due the Company's former
President under a settlement agreement that is required to be paid only from
5% of proceeds realized from subsequent financings by the Company. There can
be no assurance that the Company will obtain additional financing.
THE REPORT OF ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇, PC, ON THE FINANCIAL
STATEMENTS OF THE COMPANY FOR THE FISCAL YEAR ENDED JUNE 30, 1996 CONTAINS A
PARAGRAPH EXPRESSING SUBSTANTIAL DOUBT CONCERNING THE ABILITY OF THE COMPANY
TO CONTINUE AS A GOING CONCERN. Management's plan to address these matters
has been to dispose of its software media duplication and distribution
business and close all operations in Colorado. The Company, now
headquartered in Santa Ana, California, is focusing its available resources
and personnel on the development of a quartz glass business and sale of quartz
glass products. Initial sales have been obtained, with manufacturing
temporarily being contracted to third parties.
Subscription Agreement -3-
The Company has negotiated a joint venture agreement to acquire a
minority interest in a quartz glass manufacturing business based in Northern
California, but will be unable to participate in that venture unless it
receives proceeds from the sale of all securities included in the Offerings.
Historical operations of the business in Northern California have not been
profitable and the proposed joint venture will be largely dependent upon
increases in sales stimulated by the participation of a foreign company, which
future sales increases have not been committed. There can be no assurance
that the Company will be able to successfully complete its minority
participation in the joint venture or that, if completed, that the joint
venture will become profitable. In addition, since the Company will own only
a minority equity position in the joint venture if it is able to complete the
proposed transaction, the Company may have only a limited influence in control
of the business operations and policies of the joint venture. Further
information in writing as to the proposed joint venture may be obtained on a
confidential basis by the Accredited Investor from the President of the
Company.
Although increases in revenues are required for the Company to absorb
existing overhead, in view of historical losses from operations, negative
working capital and the Company's debt service obligations, the Company has
not been able to invest significantly in sales and marketing and accordingly
has generally limited these activities to telemarketing and selected trade
shows. Results of operations in the future will be influenced by numerous
factors, including the ability of the Company to successfully expand its
products and services and/or to negotiate the acquisition of another business
enterprise, the development and implementation of sales and marketing
programs, competitive factors and the ability of the Company to control costs.
As a result of these factors, the forecast of future business operations is
subject to numerous uncertainties. There can be no assurance that revenue
growth or profitability on a quarterly or annual basis will be attained. The
Company therefore is subject to all the risks incident to a business with a
limited history of operations including, among others, the possibility of
unforeseen expenses, difficulties, complications and delays, and it may be
difficult or impossible to obtain additional financing if required for the
Company's business.
DEPENDENCE ON GENERATING ADDITIONAL REVENUES. The Company's core business is
highly competitive and the Company is a recent entry to a mature market.
Improved cash flows will be dependent, among other factors, on increasing
sales, and there can be no assurance that sales levels will increase.
NEED FOR ADDITIONAL FINANCING. Management anticipates the Company will be
required to seek additional equity financing in the future, in addition to the
proceeds of this Offering, to sustain its operations, to support the
introduction of new products or services and/or to finance the acquisition of
another business if a suitable acquisition candidate is identified. The
Company's actual future capital requirements will depend on numerous factors,
including, but not limited to, the Company's progress in generating increased
revenues, the cost of marketing and advertising programs, management's ability
to control costs, inventory requirements, competing technological and market
developments. If the Company generates revenue increases, it may require
additional working capital to support increases in manufacturing capacity and
for additional capital required to finance receivable and inventory increases.
No assurance can be given that additional financing will be forthcoming or, if
available, would be sufficient to satisfy the Company's future operating
requirements. The Company has no commitment to obtain additional funds and
there can be no assurance it will be successful in the event management
determines the Company should initiate efforts to obtain additional financing.
Because of the Company's limited capital, it also may undertake
additional equity offerings whenever conditions are favorable, even if it does
not have an immediate need for additional capital at
Subscription Agreement -4-
that time. There can be no assurance that the Company will be able to obtain
additional financing when needed, or that any such financing, if available,
will be obtainable on reasonable terms. Any such additional financing may
result in significant dilution to existing stockholders. If adequate funds
are not available, the Company may be required to accept unfavorable
alternatives, including the delay, reduction or elimination of product
introductions and expansion, marketing and advertising and other operating
expenses.
DEPENDENCE ON KEY PERSONNEL. The success of the Company is substantially
dependent on the services of its officers, key employees and professional
consultants. The Company is dependent in particular upon the services of
▇▇▇▇▇ ▇. ▇▇▇▇▇, its President and Chief Executive Officer. The Company also
relies, and for the foreseeable future will rely, on independent advisors and
consultants to provide certain services to the Company. There can be no
assurance that such services will continue to be available to the Company on a
timely basis when needed, or that the Company could find qualified
replacements. The Company's operations therefore are dependent upon a limited
number of key employees and consultants and the loss of the services of these
or other key personnel could have a material adverse effect upon the Company.
The Company does not maintain key man insurance on the lives of its executive
officers and key consultants.
CONFLICTS OF INTEREST. The Company in the past has engaged in a number of
material transactions with its directors and executive officers and/or their
affiliates, and may engage in such transactions in the future. All such
transactions have been in the past, and will be in the future, approved by a
majority of the Company's disinterested directors.
DILUTIVE EFFECT OF OUTSTANDING SECURITIES OR SECURITIES TO BE ISSUED; POSSIBLE
RISK OF MARKET OVERHANG. The Company has reserved shares of its Common Stock
for issuance upon exercise of outstanding warrants and upon exercise of
conversion rights for outstanding shares of convertible preferred stock.
Additional shares will be reserved for the Common Stock and warrants to be
issued in the Offerings. The 9,000,000 shares of Common Stock proposed to be
issued in the Offerings is more than the total number of shares of Common
Stock currently outstanding (approximately 6,800,000 shares), and warrants
included in the Offerings cover an additional 6,500,000 shares. In addition,
it is anticipated that the Company may issue additional Common Stock, warrants
or other securities convertible or exercisable into Common Stock in connection
with management's plan to seek the acquire additional assets and/or for future
equity financings. Exercise of warrants, the conversion of preferred stock or
the future issuance of equity securities could involve significant dilution to
holders of the Company's Common Stock. Holders of convertible securities and
warrants are likely to exercise them when, in all likelihood, the Company
could obtain additional capital on terms more favorable than those provided by
the convertible securities or warrants.
Shares issued upon exercise of warrants or conversion rights or future
issuance of securities, as well as the shares of Common Stock to be issued in
the Offerings and restricted shares previously issued by the Company in
private placement transactions, may become available for public sale under the
provisions of Rule 504 and/or Rule 144 of the Securities Act of 1933 or if the
Company elects to register its securities under the Securities Act of 1933.
As such, there may be a significant market overhang with respect to the
Company's Common Stock in the public market from time to time in the future,
and the existence thereof may have a depressive effect upon the market price
for the Company's Common Stock and securities convertible into Common Stock.
VOLATILITY OF MARKET PRICE FOR COMMON STOCK: The Company's Common Stock is
publicly traded in the over-the-counter market and quoted on the NASD
Electronic Bulletin Board under
Subscription Agreement -5-
the trading symbol "QGRP". There has been significant volatility in the
market price of securities relating to the computer industry generally and for
the Company's Common Stock specifically. Factors such as announcements by the
Company, the Company's liquidity problems, the terms of securities offerings,
quarterly variations in operating results, trading volume, general market
trends, announcements of technological innovations or new commercial products,
announcements by competitors and general market conditions may have a
significant effect on the market price of the Company's Common Stock.
UNCERTAINTY OF PROJECTIONS. Certain projections may be provided on a
confidential basis to prospective investors in the Offerings with respect to
the Company's future operations. There may be material differences between
projected and actual results because events and circumstances frequently do
not occur as expected. No representation or warranty is given that actual
future results will be as projected.
COMPETITION. The business in which the Company is engaged is characterized by
intense competition, especially as to price. The Company competes with much
larger, well-established companies that have greater financial, technical,
manufacturing, marketing and research and development resources as well as a
wide variety of companies comparable in size to the Company.
NO SIGNIFICANT PROPRIETARY RIGHTS. The Company does not hold any patents or
significant proprietary rights as to any of its products. Accordingly, the
Company relies upon trade secrets to protect limited proprietary information
and customer data. There can be no assurance that trade secrecy obligations
will be honored or that others have or will not independently develop similar
or superior information.
UNDETERMINED EFFECT OF BLANK CHECK PREFERRED STOCK AND AUTHORIZED COMMON
STOCK; POSSIBLE CHANGE IN CONTROL: The Company's articles of incorporation
authorize the issuance of up to 50 million shares of "blank check preferred
stock" with such rights, preferences, privileges and limitations as may be
determined from time to time by the Board of Directors, and up to 50 million
shares of Common Stock. Accordingly, the Board has the power without prior
shareholder approval to issue additional shares of common stock and/or one or
more series of preferred stock with such rates of dividends, redemption
provisions, liquidation preferences, voting rights, conversion privileges and
any other characteristics as the Board may deem necessary. Any such
additional issuances of common stock and/or preferred stock may result in
substantial and material dilution to existing holders of the Company's
securities. In addition, the existence of a substantial amount of authorized
and unissued common stock and blank check preferred stock could discourage,
delay or prevent a takeover of the Company if any such transaction were to be
proposed. In view of the Company's current financial condition, the
acquisition of another business by the Company or additional financing
transactions may involve the issuance of additional equity securities that
could be significantly dilutive to the interests of current stockholders
and/or may result in a change in control of the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
By its acceptance of any subscription from the Accredited Investor
hereunder, the Company represents and warrants to the Accredited Investor as
follows:
4.1. The Company is duly incorporated and validly existing as a
corporation in good standing under the laws of the State of Colorado with
corporate power to enter into this Agreement and to conduct its business as
presently conducted.
Subscription Agreement -6-
4.2. The securities of the Company covered by this Subscription
Agreement, when issued and delivered upon receipt of the subscription price,
will each be duly and validly authorized and issued, fully paid and
nonassessable securities of the Company and will not subject the holders
thereof to personal liability by reason of being such holders.
4.3. This Agreement, upon its acceptance by the Company, has been duly
authorized, executed and delivered by the Company and is a valid and binding
agreement enforceable in accordance with its terms, subject only to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general application to or affecting creditors' rights
generally and to general principles of equity. The Company has full power and
authority necessary to enter into this Agreement and to perform its
obligations hereunder.
4.4. The execution and delivery of this Agreement, and the consummation
of the transactions contemplated herein, do not and will not conflict with or
result in a breach by the Company of any of the terms or provisions of, or
constitute a default under, its articles of incorporation, its by-laws, any
action of its directors or shareholders, or any indenture, mortgage, deed of
trust or other agreement or instrument to which it is a party or by which it
or any of its properties or assets are bound, or any existing applicable law,
rule or regulation or any applicable decree, judgment or order of any court,
regulatory body, administrative agency or other governmental body having
jurisdiction over the undersigned or any of its properties or assets.
5. REPRESENTATIONS AND WARRANTIES OF THE ACCREDITED INVESTOR. In
connection with this Agreement and the transactions contemplated herein, the
Accredited Investor represents and warrants to the Company as follows:
5.1. The Accredited Investor has relied only on the information
provided in writing referenced in this Agreement or provided in writing by the
President of the Company in response to inquiries of the Accredited Investor.
The Accredited Investor has carefully read and reviewed this Subscription
Agreement and all other documentation provided by the Company in connection
with this Offering, and has asked such questions of management of the Company
and received from them such information as the Accredited Investor deems
necessary in order for the Accredited Investor to make an informed decision
with respect to the purchase of the securities offered hereby.
5.2. The Accredited Investor has sufficient knowledge and experience of
financial and business matters so that he, she or it is able to evaluate the
relative merits and risks of purchasing the securities offered hereby. The
Accredited Investor has not received any general solicitation or advertising
regarding this Offering. The Accredited Investor is aware that an investment
in the Shares is a speculative investment, may not be liquid due to the
matters described in Section 3 above, and involves a high degree of risk of
loss. The Accredited Investor has had substantial experience in previous
private and public purchases of speculative securities.
5.3. The Accredited Investor's commitment in direct participation in
investments in restricted securities is reasonable in relation to his, her or
its net worth. The investment of the Accredited Investor in the securities
offered hereby will in no event exceed 10% of the net worth of the Accredited
Investor. The Accredited Investor has the means to provide for his or her
personal needs, possesses the ability to bear the economic risk hereunder
indefinitely, and can afford a complete loss of his, her or its investment.
The Accredited Investor realizes that the securities offered hereby must not
be purchased unless the Accredited Investor has liquid assets sufficient to
assure that this investment will cause no undue financial
Subscription Agreement -7-
difficulties and the Accredited Investor can provide for current financial
needs and possible personal contingencies from other funds. The Accredited
Investor understands that the transfer of the securities comprising the Shares
will be prohibited absent full compliance with the Securities Act of 1933 and
applicable state securities laws.
5.4. The Accredited Investor acknowledges that he, she or it is
acquiring the securities offered hereby for his, her or its own account, for
investment purposes only, and not with a view to resale or other distribution
thereof, nor with the intention of selling, transferring or otherwise
disposing of all or any part of such securities based upon any particular
event or circumstance, except selling, transferring or disposing of them upon
full compliance with all applicable provisions of the Securities Act and any
applicable state securities laws. The Accredited Investor further understands
and agrees that the securities may be sold only if they are subsequently
registered under the Securities Act and qualified under any applicable state
securities laws or, in the opinion of counsel satisfactory to the Company, an
exemption from such registration and qualification is available. In the event
the Accredited Investor becomes eligible under Rule 144 promulgated under the
Securities Act to resell Common Stock sold hereunder or issued upon exercise
of the Class E Warrants sold hereunder, the Accredited Investor acknowledges
that he, she or it is familiar with the provisions of Rule 144, has consulted
with his, her or its own counsel as to the same, and recognizes that any
routine sales of securities made in reliance upon Rule 144 can be made only in
the amounts set forth in and pursuant to the other terms and conditions,
including applicable holding periods, volume limitations and current reporting
obligations of the Company, set forth in Rule 144. The undersigned
understands that a restrictive legend will be placed on the securities offered
hereby referencing the Securities Act.
5.5. The undersigned has full power and authority necessary to enter
into this Agreement and to perform his, her or its obligations hereunder. All
information which the Accredited Investor has provided to the Company or its
representatives concerning the Accredited Investor's financial position and
knowledge of investment matters is correct and complete as of the date set
forth on the signature page below.
5.6. The Accredited Investor has reviewed carefully the definition of
Accredited Investor set forth below and is an Accredited Investor within that
definition.
Except as provided in this Subscription Agreement, the current Business Plan
and in any other written information, if any, furnished by the President the
Company expressly for the purposes of this Offering, the Accredited Investor
warrants that no other representations, statements or inducements were made to
the Accredited Investor to purchase the securities offered hereby. The
Accredited Investor acknowledges that projections so provided, if any, are
based upon certain assumptions as to future sales, expenses and operations of
the Company, and there can be no guarantee or assurance that future the
Company operations will attain the levels included in any such projections.
Subscription Agreement -8-
DEFINITION OF ACCREDITED INVESTOR
The term "Accredited Investor" is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act as follows:
(1) Certain banks, savings and loan institutions, broker-dealers, investment
companies and other entities including an employee benefit plan within
the meaning of Title I of the Employee Retirement Income Security Act of
1974 with total assets in excess of $5,000,000;
(2) Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
Shares, with total assets in excess of $5,000,000;
(4) Any director, executive officer, or general partner of the issuer of the
securities being offered or sold, or any director, executive officer, or
general partner of a general partner of that issuer;
(5) Any natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of his purchase exceeds $1,000,000;
(6) Any natural person who had an individual income in excess of $200,000
or, with that person's spouse a joint income in excess of $300,000, in
each of the two most recent years and who reasonably expects an income
in excess of $200,000 (or joint income with that person's spouse in
excess of $300,000) in the current year;
(7) Any trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person as described in Section
230.506(b)(2)(ii) of Regulation D, i.e. a person having such knowledge
and experience in financial and business matters that he is capable of
evaluating the merits and risks of the prospective investment; or
(8) Any entity in which all of the equity owners are accredited investors
under any of the paragraphs above.
In calculating "net worth," the value of a principal residence must be valued
at cost or at a written appraised value used by an institutional lender to
make a loan secured by the property, in either case net of current
encumbrances on the property.
Subscription Agreement -9-
SIGNATURE PAGE
THE UNDERSIGNED SUBSCRIBER IS AN ACCREDITED INVESTOR BY REASON OF PARAGRAPH(S)
5 SET FORTH IN THE DEFINITION ABOVE.
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The undersigned hereby agrees to purchase Seven Million (7,000,000) Shares of
Common Stock, Six Million (6,000,000) Class E Common Stock Purchase Warrants,
and $750,000 in principal amount of non-interest bearing Limited Recourse
Promissory Notes to be issued by THE QUARTZ GROUP, INC., a Colorado
corporation ("the "Company") in accordance with this Subscription Agreement,
and is tendering herewith a check therefor in the amount of $750,000 payable
to the account of THE QUARTZ GROUP, INC.
Very truly yours,
DATE: 9/20/ , 1997
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/s/ ▇▇▇▇ ▇. ▇▇▇▇
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[Signature(s) and Title if a Corporation, Partnership or Trust]
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[Please print name as it should appear on your certificates]
ADDRESS:
▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ TELEPHONE NUMBER: (▇▇▇) ▇▇▇-▇▇▇▇
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FAX NUMBER: (▇▇▇) ▇▇▇-▇▇▇▇
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SOCIAL SECURITY OR
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STATE IN WHICH REGISTERED TO VOTE, if an Individual: N.Y.
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ACCEPTED:
THE QUARTZ GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ DATE: Sept. 20, 1997
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Title: President
----------------------- Rev 97c
Subscription Agreement -10-